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fresh commitment 2012

Sustainability Report 2012 Sustainability Report

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AES Philippines

Mission

We are a global company with an empowered team. We safely and reliably provide competitive energy to support socio-economic development in the Philippines.

Values AES people work round the clock each day to provide affordable and sustainable power. The actions that we each take are guided by these core values: • Put safety first. We will always put safety first – for our people, contractors and communities. • Act with integrity. We are honest, trustworthy and dependable. Integrity is at the core of all we do – how we conduct ourselves and how we interact with one another and all of our stakeholders. • Honor commitments. We honor our commitments to our customers, teammates, communities, owners, suppliers and partners, and we want our businesses, on the whole, to make a positive contribution to society. • Strive for excellence. We strive to be the best in all that we do and to perform at world-class levels. • Have fun through work. We work because work can be fun, fulfilling and exciting. We enjoy our work and appreciate the fun of being part of a team that is making a difference. And when it stops being that way, we will change what or how we do things.

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About

Our Report

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ES Philippines’ entry into the Philippine market demonstrates our firm commitment to continuously develop the Philippine energy sector by finding efficient and sustainable energy solutions. Currently, the Philippines has one of the highest energy rates in the region and yet, the coverage of electrification is still not 100% on a sitio level. It is our goal to bring a reliable and affordable power supply to the people, thereby improving their lives and helping steer the country on the road to national development. As this is the first Sustainability Report to be filed by AES Philippines, we chose as our theme, “fresh”. The Company decided to use the Global Reporting Initiative (GRI) Framework for this Sustainability Report. Measuring our Company’s performance against the GRI Framework has given us a fresh perspective on the way we operate and will shape the way we do business as we move forward. This Sustainability Report outlines our Company’s performance during the period of January 1 to December 31, 2012. The Company’s financial performance for 2012, disclosed here, is an audited Annual Report covering the same period in compliance with the regulations of the Securities and Exchange Commission and the Bureau of Internal Revenue. As this is the first Sustainability Report for AES Philippines, the data that has been gathered will form the baseline study against which our succeeding Sustainability Reports will be compared. Starting with this report, we commit to disclosing our sustainability performance annually.

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This publication was developed to conform to the Global Reporting Initiative (GRI) Guidelines with A+ level application using the Electric Utilities Sector Supplement. For our initial Sustainability Report, we report on 90 key result areas of AES Philippines, specifically our Company Corporate Head Office, the Masinloc Power Partners Co. Ltd. which operates the Masinloc Power Plant located in Masinloc, Zambales. Financial disclosures conform to the audited annual report but limit themselves to the economic performance of the three above-mentioned entities. In terms of our environmental performance, majority of the indicators come from our Masinloc power plant because this is where we generate significant impacts on our resources, specifically through our water consumption and emissions; the remaining fraction of environmental data, such as information on indirect energy consumption, is generated from the head office. The community relations group reports on the community impacts of the power plant and our stakeholder engagement practices. Labor and human rights indicators cover employees, occupational health and safety includes and contractors and in the future we hope to expand our coverage to our suppliers. In terms of product responsibility, we only report on the production of electricity. Our business does not encompass the transmission and distribution of electricity, thus we do not include here any sustainability information from the National Grid Corporation of the Philippines and the electric cooperatives, distribution utilities, and industrial accounts responsible for delivering our

product to end users, such as households. Our parent company in the United States has its own sustainability programs and the information we report here are independent of their initiatives. In this report, we disclose the Company’s Philippine operations only and our sustainability programs that have an impact on our regular and contractual employees, suppliers/contractors, business partners, local government and the people of Masinloc, Zambales, our host community. As our first step in determining the coverage of our first report, the AES Philippines’ Leadership Team was convened to identify which sustainability aspects were material to our business. It began with a rapid assessment to identify indicators that are applicable and relevant to our operations and are currently being monitored by existing management systems. Focal persons from each of the AES Philippines departments were then selected to form a Sustainability Technical Working Group (STWG). As the core group for gathering and consolidating data from their respective departments, the STWG tested the initial selection of indicators according to a set number of questions that allowed us to rank them according to their contribution to our triple bottom-line goals and objectives. Reassessment and validation with the data owners were part of this review. To ensure stakeholder inclusivity, a two-phased approach was undertaken by the STWG with guidance from the University of Asia and the Pacific’s Center for Corporate Social Responsibility. First, we conducted a workshop

where we reviewed our list of stakeholder groups from our original Stakeholder Management Plan, ranked them and tested their rankings against several thresholds, after which we decided on a more inclusive score. We then agreed to develop two modes of engagement to better capture the inputs of this broader, more diverse set. Our next step was a series of stakeholder consultations conducted at the AES Philippines Masinloc Power Plant and municipal town hall, where we held sustainability briefings followed by interviews with employees, suppliers, contractors, representatives of the local government units at the barangay, municipal, and provincial levels, regulatory agencies, fisher folks, and other community members. Through these interviews, we were able to identify their concerns and issues and consolidate them with the initial list of material indicators identified at management and STWG levels. This guided our final selection of indicators for inclusion in the report. Briefly, the topics considered by internal and external stakeholders as material and must be reported on are: economic contributions of the company at the local level, especially in terms of local taxes and local hiring and coordination with the local government; empowerment and education of the community in terms of using the Energy Benefits Fund of host communities; continuous enhancement of operational performance; stability and reliability of electricity supply, and efficiency initiatives; the sustainability of our coal as a primary material and how we manage the impacts of

our operations; biodiversity monitoring; transparency in procedures on local hiring and local purchasing; updates on the community programs, including the Welders’ Training Center; training on emergency response at the community level; and knowledge sharing in terms of developments in the Philippine energy industry— such as the growing emphasis on renewable energy sources and the Retail Competition and Open Access regime—and how they affect the company and our customers. Other aspects that were not raised in the engagements, such as labor practices, occupational health and safety metrics, and good governance, are included here nonetheless to provide our readers with a more comprehensive view of our sustainability practices. We intend to monitor and report on the progress of our performance on these issues in the coming years. We expect our parent company AES Corporation, our employees, customers (electric cooperatives, distribution utilities, and industrial accounts), regulatory agencies, and local government units to be the primary users of this report. Based on our engagements, we understand that our host communities are also very interested in the results of this report and we intend to conduct a briefing and/or publish an abridged layman’s version in the regional language for them. AES Philippines will hold stakeholders’ meeting and provide them a copy of the report. The data measuring techniques used for the calculations made in this report applied the economic parameters of the

Global Risk Management (GRM) Group based in Arlington, VA, USA. GRM sources its data from Bloomberg, Economic Intelligence Unit, Intercontinental Exchange and Kiodex. AES Philippines also subscribes to Equator Principles, World BankIFC and ADB standards, as well as Department of Environment and Natural Resources (DENR) standards for environmental metrics, while our social initiatives are guided by the US Foreign Corrupt Practices Act, the Organisation for Economic Co-operation and Development (OECD) Convention Against Bribery and all international and local laws and conventions on anticorruption and bribery. In line with our commitment to ensure data accuracy and transparency in our reporting, an External Review Committee (ERC) was commissioned to evaluate the economic, environmental and social aspects that are material to our operations. The ERC visited the AES Philippines Power Plant in Masinloc, Zambales, and held consultations with various external and internal stakeholders as part of their external assurance review. The ERC was hosted by the UAP Center for Corporate Social Responsibility. At AES Philippines, we value feedback and open dialogue. We believe that it is through active listening that we are able to improve our operations, products, and services and, as such, serve our customers better. Please send your comments and your feedback on this report to AES Philippines – Corporate Affairs (corporate.affairs@aes.com).

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Message from the

President and CEO

ANDY HORROCKS President and CEO, AES Philippines

“ This year is about moving forward and meeting the expectations of our stakeholders, shareholders and customers in the environmentally responsible and cost-effective production of electricity as well as the exponential growth of the business as a partner of the country. Sustainability is truly the next step.” Dear Stakeholders,

W

e are proud to share with you AES Philippines’ very first sustainability report, making our Company the first subsidiary under the global network of AES to receive an A+ rating. This is the most opportune time for us to begin disclosing our triple bottom-line performance to the public. Our adoption of the Global Reporting Initiative’s (GRI) framework for sustainability, the most widely referenced sustainability framework worldwide, demonstrates our commitment to the values that shape and sustain positive performance. Known for its rigor and emphasis on inclusivity and accountability, the GRI framework raises our proficiency in understanding the ways that we affect everyone and everything around us. We evaluate our performance and practices in a greater effort to increase our accountability, and transform feedback into solutions for attaining sustainability within the next ten years and beyond.

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Sustainability and Success Successful businesses survive for three reasons: they see beyond financial and technical performance but also their impacts on communities, climate, and the environment; they anticipate, identify, and correctly interpret signals; and they focus on innovating for future development. Our adoption of the GRI sustainability framework and protocols better equips AES Philippines to be one of those successful businesses. Earlier I mentioned that this is the most opportune time for us. This is because great changes have taken place in the Philippine energy landscape since our entry in 2008. With rising investor confidence in the country buoyed by the present administration’s commitment to good governance, our Company’s decision to promote sustainability throughout our operations and ensure that positive impacts ripple out to as many Filipinos as possible is an effort towards truly leveraging our assets, experience, and knowledge in the direction of the country’s energy security. AES Philippines has encountered numerous challenges, undergone significant developments, harnessed gains and strengths, and worked towards long-term growth in the last five years, thus earning recognition as a top decile Company and gaining a privileged leadership position. This year is about moving forward and meeting the expectations of our stakeholders, shareholders and customers in the environmentally responsible and cost-effective production of electricity as well as the exponential growth of the business as a partner of the country. Sustainability is truly the next step. The Crucial Role of AES Employees We entered the Philippine market in 2008 with the mandate of contributing to the country’s energy security and to Philippine development by delivering safe, reliable, and low-cost electricity in a sustainable manner – a feat we achieved by prioritizing safety, operational excellence, and integrity while upholding environmental standards and social responsibility. Through the years we have built upon our sustainability efforts and, while it is hardly possible to do everything at once, we succeeded because we did the most important thing first: getting the people with the right skills and the best talents. Together, we were able to create the brand that we envisioned and products that we can be proud of. Our sustainability efforts include active employee participation. Providing our people with opportunities to build capabilities and make significant contributions ensures their continued personal and professional development. This care, training, advancement and empowerment of the employees of AES exemplify the Company’s recognition of human development as an indispensable and integral component of the sustainability goals. Our employee participation activities include: managing and monitoring community development programs to ensure that

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these remain responsive to the actual needs, have enduring impacts, and continue to engage and involve community members; volunteering through time-sharing and resource-sharing efforts; and advancing employees’ professional development in offsite contexts to grant leaders and managers opportunities to harness skills outside of their comfort zones and better equip them for bigger roles. Sustainability: An Eye-Opener and Game-Changer Building the sustainability report is an eye-opener and a game-changer: it grants us new perspectives on the focus of our evaluations and deeper insight into our interaction with our own people, partner communities, financial organizations, and the government. This time-consuming, rigorous, but ultimately extremely useful endeavor has been very much worth it. Doing this, we truly understand the entire fabric of our business. The 2012 sustainability report you have in your hands discusses our strategic management approaches and 2012 performance on aspects of our operations that serve as the pillars of our long-term growth and success: socio-economic impacts, CSR efforts, and current initiatives in the optimum use of resources, biodiversity monitoring, impact mitigation, and strategies for upholding the safety and wellbeing of our people, contractors, and communities. The data here form our baseline information, and we expect to keep on improving our performance and growth with the support of our employees, customers, industry partners, our Masinloc communities, and other stakeholders. Continuous improvements give our people pride in the Company. The Triumph of our Sustainability Technical Working Team Attaining sustainability goals is a huge undertaking that demands unwavering commitment. This is undoubtedly a triumph for our Sustainability Technical Working Group, and I would like to thank the members for this landmark report. The last six months of data gathering, preparation, verification, and refinement—guided by our third-party panel of economic, environmental, and social sustainability experts—gave our sustainability champions in Taguig and Masinloc a great opportunity to contribute to strengthening our Company’s values and performance, which has brought AES Philippines recognition from numerous prestigious award-giving bodies. I am one with AES management and all our stakeholders in saying that we are deeply appreciative of this and, on behalf of the team, I wish to encourage our employees and our partners to continue to support us in this endeavor.

ANDY HORROCKS President and CEO, AES Philippines

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AES Philippines About

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ES Philippines, with its corporate headquarters at 18F Bench Tower, 30th Street corner Rizal Driver, Crescent Park West 5, Bonifacio Global City, Taguig, and its power plant facility in Bgy. Bani, Masinloc, Zambales, is part of the global Company AES Corporation, a publicly listed American corporation that provides reliable and sustainable energy solutions in 29 countries worldwide. AES Philippines refers to all the entities owned by AES Corporation that are operating in the Philippines and has 210 employees. Operating the Masinloc Power Plant is Masinloc Power Partners

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Co. Ltd. (MPPCL), a limited partnership duly organized and existing under the laws of the Philippines. It is 99.95% owned by Masinloc AES Power Company Limited, a limited partnership organized and existing under the laws of the Philippines, as General Partner. The remaining 00.05% is owned by AES Great Britain Holdings, BV, a corporation organized and existing under the laws of the Netherlands, as Limited Partner. Handling the commercial operations of MPPCL is AES Philippines, Inc. No significant structural and ownership change occurred at any of the group entities during the reporting. The change in size relates only to the size of the

business as reflected in our economic bottom line. Net sales of our primary and only product, energy, for 2012 was USD541.4 million. The Company entered the Philippine market in 2008 with its acquisition of Masinloc coal-fired power plant, previously owned by the National Power Corporation. With rehabilitation efforts completed in 2010, the original installed capacity of the power plant was restored, at 660 MW, from 433 MW prior to acquisition, allowing AES Philippines to address significant generation shortfalls due to increased demand in the Luzon grid. The maximum dependable

capacities of the power plant’s two generating units are 315 MW each. AES Philippines distributes its energy output through 10 electric cooperatives, two distribution utilities, and one industrial account. The electric cooperatives (AURELCO in Aurora province, CASURECO II in Camarines Sur, LUELCO in La Union, PELCO I and PRESCO in Pampanga, PANELCO in Pangasinan, SAJELCO in San Jose, TARELCO I in Tarlac, and ZAMECO I and ZAMECO II in Zambales) cover a total of 94 municipalities/cities and 2,018 barangays. AES Philippines also distributes through Meralco with a franchise coverage of 31 cities

and 80 municipalities, including Metro Manila; the provinces of Bulacan, Pampanga, Rizal, Cavite; and parts of Laguna, Quezon, Batangas, and Pampanga. Dagupan Electric Corporation, another distribution utility, distributes in the city of Dagupan and the five municipalities and two barangays in Pangasinan. AES was also contracted at 90% of its capacity or around 554 MW, excluding Meralco non-firm volumes for 2012, which is at 372,968 MWh. Seven percent of the remainder of the capacity was traded in the Wholesale Electricity Spot Market, and 4% was used in the power station. Net energy output for 2012 is 4,331,242.1MWh and total sales were 4,491,813.25MWh.

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AES Philippines

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Our Governance Structure AES Philippines refers to all the entities owned by AES Corporation in the Philippines. MPPCL, a limited partnership duly organized and existing under the laws of the Philippines, operates the Masinloc Power Plant. MPPCL is managed by the General Partner, Masinloc AES Power Company Limited, in accordance with the provisions of MPPCL’s Articles of Limited Partnership. As managing partner, Masinloc AES Power Company Limited is authorized to act on behalf of the Partnership concerning all matters that affect management. The General Partner is the highest governing body of the partnership, while the representative of the General Partner, the President and the Chief Executive Officer of MPPCL, is the highest-ranking officer of the Company. MPPCL is a limited partnership, hence, only the General Partner, through its representative, governs it in accordance with the provisions of its Articles of Limited Partnership. The President and Chief Executive Officer heads MPPCL and under him are five business units: operations and maintenance, projects and engineering, supply chain and facility management, human resources, and corporate communications. As a global Company with

an empowered team, AES Philippines hires as employees those who show exemplary competence in their field of expertise. All positions, including those in the governance bodies, are identified by job descriptions where qualifications and competencies needed for the position are outlined. All applicants pass through the Manpower Sourcing and Selection process to determine the best candidate for the requirement, while the General Partner is a position filled by appointment. Management and employees, whether male or female, enjoy a competitive benefits and compensation package that includes a performance-based annual bonus. Computation for bonuses and salary increments is linked with the business and individual performance and aligned with AES’ globally accepted Performance Management Policy and Compensation Guidelines. Business objectives and goals are embedded on the leaders’ Key Result Areas (KRAs) and Key Performance Indicators (KPIs) for the year. The Company values employee inputs. Management engages a third party consultant to customize, administer, and interpret results of employee engagement surveys. These results are

communicated across all levels of the employees in the organization. It was then followed by a series of focus group discussions (FGDs) to encourage employee participation in programs that will impact them. Focus group discussions are held to hear feedback first hand. Monthly town hall meetings are held to keep open communication lines with employees. These town hall meetings also serve as a venue for management to communicate priorities, goals and objectives. Regular feedback sessions are conducted to hear the inputs of individual employees. In addition, a corporate-wide AES hotline is also available where employees and shareholders can call and give feedback on AES’ systems and procedures. A formal structure was in place as well to handle employee complaints and all leaders are trained to manage the structure. MPPCL follows the AES Conflicts of Interest Policy to ensure that conflicts of interest are avoided. In addition, regular ethics and compliance orientations and trainings are conducted across all employee levels, from top management to rank and file, to assess their level of knowledge on unethical behavior and to inform them of their responsibility to report any unethical or fraudulent

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behavior that they witness. We also adhere to our values of putting safety first, always acting with integrity, honoring our commitments to all our stakeholders, striving for excellence and having fun through work. Guided by this set of values, we are able to

meet our goals competently and effectively. AES’ corporate procedures are adopted in evaluating the Philippines operational performance with respect to economic, environment, and social performance. The

representative of the General Partner, who is the President and Chief Executive Officer of AES, regularly reviews reports and receives updates on the Company’s various initiatives to improve the Company’s economic, environment and social performance.

Our Commitments AES Philippines is committed to maximizing stakeholder value through sustainable operations. The Company adopts the AES Corporate Policy and the Asset Management System that outline the Company’s approach to risk management in operational planning. Our Asset Management System is hinged on the principles of economic, efficient and sustainable operations achieved by viewing our power plant as an entity that is fully integrated with our financial requirements and goals, by carefully monitoring our product life cycle to optimize operations and profit vis-a-vis our contract obligations, leveling risk and benchmarking our performance against the highest standards. We have an active stakeholder management program that allows us to continuously benchmark the quality our product sales and services. Our employees undergo knowledge sharing and training on energy trading concepts and how they affect both the Company and all our customers. To keep ourselves informed of industry

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developments and to share best practices, AES Philippines has membership in various industry associations that work towards advancing public policy and regulation that will improve the power generation industry. These include: • The Philippine Independent Power Producers Association, Inc., an organization of 28 independent power producers all working to provide adequate, reliable, and affordable supply of electricity to Filipino homes and industries. PIPPA’s members have 79.2% (12,949.40MW) of grid-installed capacity and serve millions of Filipinos nationwide; • The Wholesale Electricity Spot Market, established under RA 9136 (Electric Power Industry Reform Act of 2001),which provides for the establishment of an electricity market that reflects the actual cost of electricity and lowers

its price through more efficient production through competition; • The Retail Electricity Suppliers Association, which is composed of 18 licensed and accredited retail electricity suppliers that actively participate in industry generated activities involving open access implementation; and • The Philippine Chamber of Commerce and Industry, which promotes and supports the drive for globally competitive Philippine enterprises in partnership with government, local chambers, and other business organizations. We coordinate with regulatory bodies and participate in public consultations specifically on pending rules and regulations that have an impact on the Company. Ultimately, AES Philippines intends to maintain and build on its solid reputation of having solid technical expertise and fluency in industry regulations, drawing from its global experience.

Fresh Outlook Uncovering Possibilities To others, the old Masinloc Power Plant was an antiquated, worn-down facility that was well past its prime. To us at AES Philippines, the old Masinloc Power Plant represented many possibilities. In it, the Company saw an opportunity to bring in our knowledge to transform the facility into a plant that could help the Philippines address the shortfall in its energy supply and meet its growing requirements in an efficient and sustainable manner. The challenges we faced were two-fold. First, all aspects of our rehabilitation plans had to take into consideration the needs of both our internal and external stakeholders. Second, at the time of acquisition, a spike in the electricity demand caused a strain on the Luzon Grid and led to shortfalls in electricity supply during peak periods, resulting in unplanned generator outages. Thus, most of the rehabilitation work had to be done in shorter outages to assist the Luzon Grid Operator in minimizing blackouts and avoiding electricity supply shortfalls. To mitigate the potentially adverse effects of our rehabilitation program on electrical supply, we had to combine our knowledge and expertise with effective planning and execution. Safety First was our overarching priority in implementing exhaustive improvements across all aspects of plant operations. Extensive planning, careful execution, and a strong commitment from the team paved the way for the gradual implementation of these changes in three phases.

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CHART 1: PLANT REHABILITATION PLAN

Phase 1 • Safety hazard remediation • People safety skill improvements • Preventing repeat equipment damage • Site cleanup

• Environmental system rehabilitation

• Ash collection system rehabilitation • Plant control systems • Coal unloading and reclaiming

Phase 2 • Major Rotating equipment • Electricial system repairs • Boiler gas path

Phase 3 • Turbine and Generator Overhaus • ESP rebuilds with 4 fields • Boiler tube repairs

• Steam and water • Rotating air heaters cycle repairs • Boiler and steam system • Pulverizers safety devices • Demin and waste water • Burners systems • Seawater systems • Operations skills for efficiency improvements

Major improvements resulted in the increased operational outputs and decreased consumption of fuel oil and heat rate; overall plant efficiency increased by 13%. NOTABLE PLANT IMPROVEMENTS AT A GLANCE

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Initial output of plant

Increased to 630MW from 433MW

Each unit’s minimum load

Reduced from 150MW to 75MW

Heat rate

Dropped over 1,500 points

Turbines

Down 500 points

Boilers

Down 500 points

Condenser repair systems

Down 250 points

Steam and water repairs

Down 250 points

AES Philippines

It should also be noted that the remarkable transformation and rehabilitation of the plant would not have been possible without the commitment of each and every AES Philippines employee. Cooperation, teamwork, and a common goal were essential to achieving our task because we realized that before any actual physical rehabilitation could take place, there had to be a transformation in the mindset of the AES employees. Through intensive internal programs, we created a strong culture of excellence and empowerment in our people and the contractors we worked with. Together, we developed new, innovative, and more efficient ways of executing work. We devised strategies to minimize outage time, and found ways to install acoustic leak detection equipment to find boiler tube leaks before extensive collateral damage occurred. Additionally, world-class predictive maintenance programs, such as vibration monitoring systems, were implemented to reduce forced outage rates and predict problems on rotating equipment. Team leaders reviewed operations and maintenance

regularly. Post-execution reviews were done to identify the root cause of every problem and share lessons that would improve safety, planning, and execution. To promote the pursuit of excellence and reward accountability, the Achievement of Excellence Award was created. Employees were invited to nominate the fellow co-workers whose contribution they valued. Over 20 employees were nominated for this award and we saw that the recognition it offered made employees more appreciative of the contribution of their colleagues. At the end of the rehabilitation program, it was clear that the antiquated and worn-out facility that was once the Masinloc Power Plant was a thing of the past—though in a figurative sense. In its place stood a new world-class facility that was poised to operate on a par with the world’s best power plants. While the tangible changes such as the overhauling of equipment and the repair of machines could be counted, it was the immeasurable dedication of our empowered organization that was the driving force that propelled this change.

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A Fresh Start

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GOV’T REG NAL UL O I AT T A O N

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– Power Industry Associations (PIPPA, PEPOA, PHILRECA, RESA) – Consumer Associations (NACI, NASECORE, FDC) – Chambers of Commerce and Industry (JFCCI, AMCHAM, PCCI, - European CC & I, Japanese CC & I) – Civil Society and NGOs – Academe (Private & SUCs e.g. AIM PC, ASoG, UP) – Media*

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These three stakeholder categories continue to be representative of the various groups we have been engaged with over the years. A baseline monitoring study was also conducted in our host communities to allow us to measure, monitor, manage our operations, and to develop strategic and responsive CSR programs.

Executive Legislative Regulatory agencies

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AES Philippines believes that good relationships with key stakeholders form a key pillar in being a responsible business in the Philippines. Post bidding, our Company conducted a comprehensive stakeholder management plan to help us identify and prioritize our stakeholder groups according to our goals and objectives. This was especially crucial given the changing energy landscape at the time, with much of the government’s energy assets being privatized. We saw this as an opportunity to reconnect with the power plant’s individual and institutional stakeholders to generate their support for ensuring sustainable business. The most relevant of these groups were clustered accordingly: national government or regulators; host communities; and groups included in the public voice.

For our first sustainability report, we conducted an updated assessment and ranking of our stakeholders, expanding on our initial list to include our internal stakeholders such as our management team and employees; and additional external stakeholders such as our shareholders, contractors, service providers, and suppliers.

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hrough the rehabilitation of the Masinloc Power Plant, our Company is able to contribute to the country’s economic development as we meet increasing demand in Luzon, where the Philippines’ largest power grid and majority of its economic activities may be found. Because of our vision to be a leader and role model in the energy industry and a trusted steward in the communities where we operate, AES Philippines emphasizes the need for a stakeholder engagement program that shapes our commitment to be a trusted partner in powering sustainable development in the Philippines.

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- Surrounding barangays - Provincial Government of Zambales - Municipal Government of Masinloc

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The AES Philippines Stakeholder Management Plan and Our Priority Stakeholders Research and information gathering through focus group discussions and direct surveys among key stakeholder groups served to build the framework for the AES Philippines Stakeholder Management Plan. The Plan led us to develop key strategies that guide our engagements with the various groups, taking into consideration their interests, concerns, and reasonable expectations while emphasizing that AES Philippines is a trusted partner in Philippine development.. COMMUNITY. We see our host communities as vital to the success of AES Philippines. Using the results of our community engagements and referencing them against the United Nations Millennium Development Goals, we developed a strategic CSR program that seeks to address the challenges faced by the communities in terms of health, education, livelihood, and the environment. We also devised a communication system that ensures regular dialogues with the community residents and local government officials, which include informal methods such as courtesy calls, home visits, phone calls, and update meetings. Our Information, Education, and Communication (IEC) Campaign monitors the concerns of the community, as well as provides the residents with the necessary understanding of the operations of the

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plant, the values of AES, and the Company’s proposed plans for the communities. We also organized a Grievance Group that is empowered to receive and register all community issues and complaints pertinent to our operations. Together with our Community Grievance Procedure, this allows us to address the communities’ concerns transparently, immediately, and more effectively.

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Classrooms

Built

500 Hectares Mangrove Re-planted

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CUSTOMERS. We want to be our customers’ partner of choice in terms of supplying reliable power. We strive to help them become efficient energy providers so that they can contribute to improvements in the Philippine energy industry. Thus, we emphasize transparency in our business transactions and develop innovative and customized power supply packages, performance incentives, and services to motivate them to extend their contracts, in turn allowing us to fulfill our desired portfolio levels. AES Academy offers quarterly training programs on such topics as safety, power quality and reliability, financial management, human resource management, excellent customer service, total quality management, and corporate governance to enhance the operational capabilities of our customers. GOVERNMENT AND REGULATORY AGENCIES. With Masinloc Power Plant being the first thermal power privatization project in the country, AES Philippines enjoyed the strong support of the government and continues

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to maintain excellent working relationship by complying with policies and regulations as well as reportorial requirements set by government. As a partner in national development, we share our technical expertise with government and line agencies on such energyrelated matters as Retail Competition and Open Access, and the Renewable Portfolio standard using its global knowledge and best practices from other countries where AES operates renewable energy plants. INDUSTRY AND BUSINESS. Engagements with members of the key organizations of the energy industry underscore AES Philippines’ role in making contributions to the improvement of the Philippine electricity market. We also promote the agenda for a competitive power market and the development of forward markets to enable merchant plants in securing future short-term contracts from the Wholesale Electricity Spot Market or other merchant plants, helping them mitigate the risk of price movements during a plant’s outage. The Company also customizes

knowledge seminars on topics relevant to industry stakeholders such as seminars on electricity demand under the contestable market category for members of the Philippines Chamber of Commerce and Industry. ACADEME. AES Philippines acknowledges the value of academe in helping business meet its goals and assuring the business of a pipeline of talent. Previous collaborations with academic institutions include a project with the University of Asia and the Pacific to establish the baseline study for our strategic CSR efforts, and a study of the University of the Philippines on the impacts of the Philippine Electric Industry Reform Act and Open Access. The latter provides the energy industry with an updated framework and landscape. MEDIA. AES Philippines recognizes the role of media in delivering the Company’s messages to the broader public. We meet regularly with members of various Philippine media outlets and representatives

(reporters, etc.) because we believe that constant and reliable updates on our commitment to supply safe and reliable energy help strengthen our reputation as a world-class power plant. ORGANIZATIONAL SUPPORT Supervising the implementation, monitoring, and evaluation of the Plan and its programs are the Corporate Communications Team and AES Philippines Foundation. Specifically, the foundation ensures that Company’s CSR programs remain strategically aligned with our vision and mission and help improve our social license to operate, particularly in our host communities. Corporate communications protects the AES brand as we implement our stakeholder engagement programs and monitors community relations and employee communications. The Corporate Affairs Group oversees all communication efforts to ensure consistency and manages critical stakeholder relationships that can have a major impact on the business and our corporate reputation.

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Approaching AES Philippines’ Key Impacts, Risks, and Opportunities Backed by information from extensive audits and assessments of the industry, the Masinloc Power Plant facility, and various economic, environmental, and social impacts of the plant, the AES Philippines Management Team has a comprehensive business plan that underpins its commitment as an investor and contributor to sustainable Philippine development. OPPORTUNITIES AND RISKS AES Philippines is all set to take the advantage of its platform and leverage on the parent company’s global experience in developing and operating power plants. We see the Philippines as one of the core markets for growth given the strong fundamentals of demand-growth coupled with robust collection efficiency. The projected demand-growth is expected to range from 3% to 4% annually based on the projections of the National Grid Corporation of the Philippines in the near term. This translates into ~300MW of additional base load capacity in the grid. Right now, we are in the process of securing permits and conducting studies to assess the overall impacts of the expansion on the environment and stakeholders.

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AES Philippines

We also acknowledge the opportunity brought about by the introduction of Retail Competition and Open Access regime (RCOA) in the Wholesale Electricity Spot Market (WESM). This will open up new avenues for diversification and growth where AES Philippines can benefit from its competitive position. AES Philippines is currently engaged in commercial negotiations with several credit worthy RCOA customers.

heat and low sulfur content to keep the power plant running as efficiently and reliably as possible. Factors such as coal quality and counterparty dependability are considered in optimal purchasing decision.

Sustaining the operations in an integrated environment with various stakeholders presents a variety of assorted risks to be managed under the established guidelines and supervision of our Risk Oversight Committee.

Prolonged disruption of coal supply from our offshore business partners is a primary risk due to inadequate substitute resources available locally. We maintain a diversified portfolio of established coal vendors to mitigate the risk of complete reliance on a single entity. As a matter of policy, we also keep minimum inventory levels at 30 days to guard against business disruption from shortfalls in sea-borne coal supply.

Coal purchasing for the Masinloc plant is driven by the security of supply, quality, and cost. It is critical that the power facility has a continuous and dependable supply of fuel. The AES Global Fuel Committee, which covers the international thermal coal market, is involved in the analysis and discussion for all coal-fired power plants of AES, including Masinloc Power Plant. Purchasing is done through a competitive bidding process where we invite several suppliers to participate. The purchased fuel should be characterized by its high

An imbalance of supply and demand with excess capacity installation can impair the financial viability of our business in the long term. Thus, shareholders have put in place a robust oversight and approval structure to be fully apprised of the investment decisions proposed by the Company. Consenting with or dissenting from any major decision is made in an informed manner by utilizing all available sources of market intelligence. We align all growth opportunities with the AES set objectives by seeking expansion platforms

that leverage our strengths, and by pioneering in technology breakthroughs where we have seasoned global experience and where demand/price indicators are fundamentally supported. Operational inefficiencies and breaches can cause violation of environmental and financial obligations to our stakeholders. We manage operational risks through proactive plant maintenance practices and technology upgrade to aid in efficient and reliable operations of the plant. Our global presence allows us to tap our global resources to service key areas of our operations where necessary, and helps in harnessing the local talent for future sustainability. Cash liquidity levels are also maintained by keeping at least one month operating expense cash reserve and also by keeping commitments of revolver credit lines at an adequate level. To address the risk of our business’ contractual position in a volatile wholesale electricity market, we have a commercial strategy that capitalizes on our Company’s knowledge archive, experience, relationships, and market intelligence to create an optimal contract spotsales mix commensurate with the tolerant level of standard deviation of variable margins. Our sales mix strategy should be supported by the outcomes of reliable merchant-market financial model based on the

market information. In 2012, we endeavored to strike 75:25 mix between contractual obligations and spot market demands. We undertake an integrated risk management program at regular intervals to evaluate the Company’s risk exposure and determine an appropriate hedging strategy and acceptable risk levels. Foreign exchange, inflation, and coal price risks are largely hedged through our commercial contracts via a passthrough mechanism. Cash-flow foreign exchange hedges avoid exposure to local currency net monetary assets. We decide on long-term debt levels based on the probable case of cash flows seen adequately available for debt servicing and residual cash flows being sufficient to meet the return expectation of the shareholders. Our interestrates policy keep the debt obligations insulated from material deviations. We install a maximum floating rate vis-à-vis our total debt. Forceful natural hazards can cause force majeure events by disrupting the generating and transmission ability of the facility. Comprehensive insurance covers are studied, designed, and bought to protect against material natural hazards with well-diversified and reputed major-peril insurers around the world to indemnify the consequent financial loss. Contractual obligations are

also agreed to be relieved in the event of such occurrences disabling the performance of the business. Adequate insurance covers are secured based on an independent risk-based study to assess the probability of maximum loss for each potential hazardous event. Business interruption, machinery breakdown, and commercial general liability are the primary covers procured to guard against the major perils. The management seeks guidance from the AES global insurance team on risk retention levels and also on pricing to benefit from the synergy of a diversified geographical portfolio. We understand that our operations can have significant impact on the surrounding environment that consequently can affect the lives of our immediate and broader stakeholders. The heavy reliance of coal on water can affect the water sources of our surrounding communities. As well, emissions, discharges, and the disposal of solid waste and hazardous waste generated by our day-to-day operations, if unmanaged, can pose a threat to our stakeholders. Water discharge into the sea from the plant has to be controlled for temperature and quality, if not, the discharge can negatively impact the marine life in the foreshore areas. Our Environment, Health, and Safety System allows us

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to operationalize measures that address these EHS sustainability challenges and monitor our performance. Stewardship through mangrove rehabilitation and coastal and watershed management, resource conservation, and impact mitigation provide the Company with an approach that improves its performance while contributing to the national environment programs that support overall development goals. A regular multi-partite monitoring team and our active stakeholder engagement program, with a baseline data established in 2010 covering various socio-economic metrics, feed into our management approaches and specific action plans that support our customers, promote the welfare of our stakeholders, and protect our environment. Where applicable, such as in our community development, the Company strives to go beyond compliance as we position ourselves as our host communities’ active partner in facilitating inclusive growth. We understand the potential of our business to usher countryside development as we partner with local government units and local businesses and suppliers in promoting local employment and offering educational and livelihood programs. We also work closely with our electric cooperatives, distribution

24

AES Philippines

utilities, and industrial customers to develop innovative power supply packages flexible contract options, performance discounts, and customized services that help us fulfill our desired portfolio levels and achieve our partner-of-choice status in terms of supplying reliable power. ORGANIZATION From the outset, our Company sought to identify both the positive and negative impacts of our operations across the triple bottom line. We have an existing Risk Management Policy, and risk management for new and existing customers are vetted by the Global Risk Management (GRM), a market risk philosophy that dictates the governance and framework through which AES measure and manage market risk. It also sets out a common platform for measuring, communicating and managing the market exposures faced by AES. GRM is responsible for the day-to-day management and/or oversight of the foreign exchange, commodity, and enterprise risk management programs and the execution of such strategies at the corporate level. The Company has a Risk Oversight Committee that ensures continuity of operations and comprehensive insurance coverage based on an independent assessment of potential risks and hazards

to the Company’s long-term prospects. Our risk-management system allows us to conduct our business with a view of continuous improvement, impact reduction, transparency, and compliance. We maintain adequate dividend payouts and retention percentage for adequate assurance of sustainability in the event of material financial adversary. The Company maintains competitive advantage by capitalizing on market lessons and protecting our knowledge base and experience with strict confidentiality measures and a competitive retention plan.

engagements, including levels of risk, appropriate due diligence, incorporation of contract compliance in written agreements, and obtaining compliance approval prior to partnerships. Local compliance is also subject to review by the Asia Strategic Business Unit and management through inventory checklist. The General Counsel and Deputy Legal and Compliance Officer are in charge of compliance reviews. All new employees undergo compliance orientation and while regular employees receive quarterly compliance training and updates.

To ensure diligence in compliance with all laws and regulations, a compliance department and a comprehensive corporate compliance program have been put in place to continually monitor the regulatory developments impacting our business, ensuring compliance and raising alerts to avoid disruptive breaches of the applicable regulations. Compliance with local laws and regulations is monitored through a multitiered and cross-functional management structure to ensure completeness of all aspects relevant to the business, including business transactions and relationships. The Company’s Handbook on Contract Compliance Review Process details the guidelines on contracts and

We see sustainability reporting using the GRI framework as a tool for the Company to monitor our performance, manage financial and non-financial risks, and benchmark ourselves against the sustainability performance of similar industry players. As we journey into sustainability, we expect the GRI framework to help us identify gaps for process improvement throughout our value chain. Sustainability will also help enhance the competitive advantage of the Company, especially across our five strategic areas of (1) Leveraging on its Platforms; (2) Financial Excellence; (3) Business Innovation; (4) Stakeholder Management; and (5) People to achieve its vision of being the number one energy Company in the Philippines.

Financial implications of climate change In today’s environment, it is imperative to consider the potential impacts of climate change, especially its financial implications on business operations. AES Philippines has identified two such implications related to climate change: WESM prices and insurance premiums. Increases in temperature cause a surge in the energy demand of the grid, resulting in an upward adjustment to spot prices in WESM. The increase in spot prices can present both an opportunity and exposure. With better generation ability, increased spot prices benefit the business economically, however, it also means an increase in consumer electricity prices. On the other hand, with lower generation ability and high contract positions, higher spot prices maybe financially detrimental to the business with no or little benefit to the consumer. The second factor is the cost of insurance coverage, which is directly linked to the risk posed by natural hazards at the plant location. Change in climate conditions leading to increased risk of earthquakes, tropical cyclones and wildfires can cause economic loss in the form of higher insurance premiums, as well as physical damage to the facility, which the business may have to bear on account of loss sharing (deductible) clauses in the insurance cover. To assess adequate insurance cover, an independent risk-based study to assess the probability of maximum loss for each potential hazardous event (business interruption, machinery breakdown, commercial general liability, and effects of climate change) are the primary covers procured to guard against the major perils. Management seeks guidance from the AES global insurance team on risk retention levels and also on pricing to benefit from the synergy of a diversified geographical portfolio.

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Our Management Approaches to Sustainability

ECONOMIC SUSTAINABILITY AES Philippines seeks to be the number one energy Company in the country with a large, diversified, and balanced portfolio. As our contribution to national development, we endeavor to maintain and further enhance operational efficiency to ensure reliable, clean, low-cost, and sustainable energy generation, and to create relationships with our customers based on trust and credibility. To achieve this goal as well as the long-term goal of business continuity, the Company creates and maintains an optimal portfolio mix of bilateral contracts with credit worthy customers, while minimizing the impact of foreign exchange fluctuations, inflation, and coal prices to preserve values for our shareholders. Plant reliability and improved unit availability are crucial to our economic performance because they allow us to operate at maximum capacity and minimize opportunity losses, enabling better spot

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AES Philippines

market exposure. The plant performs thermal performance and efficiency tests to benchmark itself against its best achievable condition, identify potential sources of losses that can affect performance targets, and ensure safety and compliance with environmental regulations. We maintain efficiency, reliability, and availability targets through best utility practices and benchmarking against top-decile coal plants in the United States. We protect our economic standing by putting in place a rigorous fiscal planning process and a reliable monitoring system. Maintenance of operating performance, adequate cash liquidity, and inventory levels is strictly monitored to ensure continuity of the daily operations. We maintain an adequate dividend payout and retention percentage and retain the interest of our investors on a continual basis to ensure financial sustainability and support future growth prospects. Surplus cash not meant for value-creating business investments are remitted to shareholders upon approval of the majority. For uncontrollable contingencies, the Company maintains a comprehensive insurance cover based on an independent risk-

based study that assesses the probability of maximum loss for each potential hazard such as business interruption, machinery breakdown, and terrorism among others. AES Philippines plans to sustain its strategic market presence through the Masinloc Expansion Project, Battery Storage Project, IPPA privatization, and other strategic ventures that leverage our global experience and existing platform. Focused on the delivery of competitive services and products in our core markets, we leverage our electricity assets, experience, and knowledge to provide efficient, reliable, energy and infrastructure solutions. Customized power supply arrangements and pioneering industry practices such as AES Academy and valueadded services provide us our distinctive market position that we protect following a three-strategy guidepost. The strategy asserts that electricity is not a commodity subjected to price-wars, where value-added marketing is staked on customization of supply arrangement and strong customer engagement, and a long-term contract is an indicator of loyalty that customers award a trusted seller such as AES Philippines.

While the Risk Oversight Committee has the overall responsibility of ensuring business compliance with the laid-out principles of risk management, each business cost center is treated as an independent business unit and held accountable for meeting their budgets and performance targets. An integrated risk management program is in place to evaluate the risk exposure and determine an appropriate hedging strategy and acceptable risk levels. Monthly budget meetings are conducted between budget owners and business leaders. Cash flow levels are monitored monthly and early warnings are set up and flagged through an integrated cash flow model. AES Philippines’s commitment to excellence extends to accelerating growth in our host communities through the implementation of social development programs, which also extend to the franchise areas of our customer electric cooperatives. We place great emphasis on developing sustainable local resources and strive to enhance the share of local participation in our operations through our sourcing strategy and the creation of new skilled workers in the local community. The AES Foundation takes the lead in conceptualizing, implementing, and monitoring the Company’s Corporate Social Responsibilities that cover

health, environment, livelihood and education. We believe that the long-term benefit of these programs will transform our communities into vibrant model communities of sustained development and progress. ENVIRONMENTAL SUSTAINABILITY Determined to be one of the leading providers and suppliers of safe, clean, reliable, low-cost, and sustainable energy to meet the needs of our stakeholders, AES Philippines seeks to attain continuous improved performance by surpassing its targets and benchmarking itself against global standards. Throughout our efforts, AES Philippines is committed to optimizing the use of natural resources and maintaining a clean environment. Our core values make sure that we comply with the highest standards of regulations wherever we operate. Guiding the Company’s environmental sustainability

is an Integrated Environment, Health, and Safety (EHS) System that, ultimately, ensures our Philippine business operations’ compliance with all local, regional, and national environmental standards and regulations. These include the Philippine Clean Air Act, the Philippine Clean Water Act, Ecological Solid Waste Management Act, Toxic Substances and Hazardous and Nuclear Wastes Control Act, the Revised Rules on Prevention, Containment, Abatement, and Control of Oil Marine Pollution, and Department of Energy Circular for Operator of Oil Rigs or Platforms, Power Plants, Tankers and Barges, among others. Enshrined in the Company’s EHS policy are AES Philippines’ commitments to provide a safe workplace and clean environment, where all incidents/accidents can be prevented and that working safely in a pollution-free environment is a condition of employment. The EHS policy serves to inspire all our

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people to strive for, achieve, and maintain a world-class EHS culture. Our Company ensures that the necessary engineering controls, personnel training, procedures, and equipment are provided to mitigate EHS risks. Regulatory bodies govern transportation of hazardous materials and by-products and our strict accreditation procedures ensure that our third-party suppliers comply with all the legal requirements. To further improve the operation’s EHS performance, it will implement an Integrated Environmental, Health and Safety Management System (IMS) that sets EHS goals, objectives and targets; commits to preventing injuries and ill-health; commits to optimizing the use of natural resources; commits to preventing pollution; measures EHS performance; conducts regular EHS audits or assessments to review compliance with applicable EHS legal and Company requirements; abides by the rules and actions set forth by the AES Philippines EHS Committee; and makes IMS adjustments as needed. Quarterly performance reports conducted by a third party measuring the impact of the Company operations are submitted to the Department of Environment

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AES Philippines

and Natural Resources. The Plant Manager certifies a Marine Environmental Monitoring Report and the Plant Pollutions Officer certifies the Multipartite Monitoring Report that measures air quality, noise level, sediments, solid wastes and soil quality. Lastly, an AES Corporate Audit and independent EHS audit is conducted periodically to identify any procedural or executional gaps in the implementation of these standards. We also consider the environment to encompass both our natural surroundings as well as the economic and social conditions that shape the quality of life and standard of living of all our stakeholders. Thus, we strive to conduct all work activities in a manner that promotes personal safety, health, and well-being, while protecting the environment. Environmental management is linked closely with the safety

performance of the Company, putting safety first for its people, contractors, and the community. Management commits to providing all the appropriate human and material resources to ensure that our people have the means to work safely and that the surrounding environment is protected. To ensure that all standards are met and that we are continuously benchmarking the quality of all aspects of our performance, including services and product sales, we commit to regular training of our employees and an active stakeholder management program. Training and education seek to improve our employees’ awareness and understanding of the Philippine energy market, including compliance, trading, and the latest practices and technologies for more environment-friendly operations. Training and monitoring procedures are

outlined in our Integrated Management Systems manual. Local communities, customers, and contractors are also part of our Company’s efforts to promote conservation and stewardship in our area of operation. EHS targets are the responsibility of each and every employee. Adherence to our EHS policy and attendance to regular EHS training are mandatory. Our goal is zero non-compliance and zero violations of laws and regulations in all our operations. While our leaders set EHS-related expectations and monitor EHS performance against these measures, AES Philippines leaders, employees, and contractors are all held accountable for meeting those expectations. Our Projects and Engineering and EHS Manager report directly to the Plant Manager. We foster ownership of all our environment, health, and safety programs and activities, and everyone, no matter what their rank or contract, is empowered to stop work in case of any imminent danger to the environment and human safety. AES Philippines contractors are expected to adhere to the same EHS standards as the AES Philippines employees.

of our people. We foster a Continuous Improvements and Reliability culture by investing in the technical foundation of each of our employees. AES Philippines commits to acquire the best talent to meet our manpower requirements. To recruit, develop and nurture the best talent in the industry, we offer a marketcompetitive employment and benefits package, including medical coverage for all our employees, regardless of employment contract as a way of caring for our people. We provide career growth for employees through our Learning and Development Policy, which is established to provide in-house, external, or on-the-job training through employee mentorship. This equips them for current and future assignments. The Company also supports employees who are willing to progress in their chosen field through the Continuing Education Program. We

recognize that monitoring and addressing employee turnover and retirement are keys to a robust work force. It is the goal of the Company to provide a conducive and open working environment that adheres to labor laws and standards and where each employee will be given a chance to voice his opinion or concerns. We protect and give the highest priority to freedom of association. Our employees are free to form labor unions, but have opted not to. Monthly communication meetings, one-on-one sessions, the AES helpline, and our policy on handling valid and reasonable employee complaints all help to foster open communication between management and employees and guarantee them that raised concerns are addressed promptly. Our no-retaliation policy ensures employees that their opinions and recommendations will be heard objectively, held in confidence, and acted

LABOR AND HUMAN RIGHTS AES Philippines believes that the very success of the Company lies in the continuous development and training

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upon without reprisals or recriminations. Team Leaders, together with the Corporate Human Resources Department ensure monitoring of KPIs and cascading of information on employee development programs. Safety First is a code that we live by every day at AES Philippines. An appointed Health / Safety Team Leader and Environment Team Leaders, together with the Site Safety Committee ensure that safety standards are adhered to at all times. The EHS policy provisions include 100% safety meeting participation rate, the monthly proactive and reactive safety reporting, safety walks, proactive hazard reporting, no lost-time incident, no fatality, and no environment excursion. EHS goals are communicated to all plant personnel during plant-wide communication meetings and through the employee’s annual performance appraisal or key performance indicator.

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AES Philippines

A written Site EHS policy document is posted in many prominent common locations of the plant to serve as a daily reminder that performing our work safely is a responsibility equally shared by all employees. Regular safety sessions conducted by the Plant EHS Team are conducted, during which safety KPIs are discussed, best practices are shared, and 100% attendance of our employees is expected. As a Company, we commit ourselves to complying with all government laws and regulations to protect our people. It is the policy of AES Philippines to uphold human rights and ensure that individuals are given equal opportunities. We comply with the highest ethical standards when it comes to labor and employment. AES Philippines bases its selection, hiring, training and movements strictly on individual competencies and expertise. As stated in our Manpower

Selection and Placement Policy, Team Leaders and Human Resources ensure the screening and selection of candidates according to their credentials. The Company does not discriminate nor does it consider ethnic affiliations, age, and gender as bases for evaluating an individual’s prospective employment. We partner with the local community and college in Zambales so that we can source employees from our host communities. Our vocational-technical training center strives to increase the level of competency and skills to improve hiring rates in the community. Career opportunities are made available to all AES Philippines employees through internal postings, self-improvement and career development program. Our Learning and Development Policy outlines the training-needs analysis procedure, which is a competency-based analysis used in identifying needed trainings for employees. It is the task of Team Leaders to assess the competencies of each individual and to collaborate with Human Resources in identifying the necessary trainings to address gaps. It has been the practice of the Company to ensure that all manpower requirements are made known to the employees to provide opportunity for career advancement.

AES Philippines is committed to conducting business with integrity and upholding the highest ethical standards. Viability and reputation are important factors in the selection and accreditation of our suppliers, vendors, and partners, and see our suppliers’ accreditation and procurement processes as opportunities to advocate for the wider adoption of sustainability and good governance. We expect all parties that we conduct business with to hold themselves to the same ethical standards we observe. A basis for accreditation is compliance with government-mandated policies related to employee welfare and a zero tolerance for child labor. We require business partners to comply with the Company’s policies and the provisions of the Labor Code of the Philippines with respect to the rights and benefits of their employees and sub-contractors, including but not limited to: (i) conditions of employment, (ii) health, safety and social welfare benefits, (iii) employees’ compensation and state insurance fund and (iv) labor relations and all other special laws, such as, but not limited to: (a) antisexual harassment law, (b) gender equality, (c) minimum employable age, (d) prohibition against stipulation of marriage, (e) anti-racial discrimination, (f) anti-child labor policy, (g) special benefits for women and other related laws, rules and

regulations. The management team and Human Resources ensure that these policies are complied with at all times. AES Philippines complies with labor standards, and regulations on working conditions such as standard working hours, salaries, and wages. Standard working hours are identified and no employee is required to work as a penalty. AES ensures that employees are fairly compensated based on their hours worked and compensation levels for employees who work overtime or on holidays are beyond what is stipulated in the Philippine Labor Laws. To protect human rights and address potential violations in the workplace, we have a defined procedure and policy on managing employee discipline and handling employee complaints and grievance. We also strive to identify potential risk for incidents of forced or compulsory labor and undertake measures to eliminate them. Our Human Resources Department and the Plant Manager ensure that erring employees are subjected to due process and forced or unpaid labor is never used as penalty. Team Leaders and/or Managers address the complaints or infractions, make initial investigations, and facilitate due process, while members of senior management review

and provide additional checks to ensure that decisions uphold human rights. Regular orientation on policies and procedures are conducted to promote awareness among our employees of their rights in the workplace. SOCIETY AES Philippines recognizes that we have a corporate and social responsibility to our host communities who we see as both our customers and our partners. It is our vision to be a trusted steward within the communities where we operate. The AES Foundation and our Corporate Communications department take the lead in developing community relations programs that are focused on the health, education, livelihood, and environment needs of our host communities. These programs contribute to the United Nations Millennium Development Goals and support the national programs of the Philippine government. Through a participatory planning process, we involve stakeholders, identify first hand their concerns and, together, map out possible programs and interventions. We believe that the effective implementation of CSR programs requires a multistakeholder engagement. Close collaboration with external stakeholders promotes shared

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accountability and economic feasibility, and harnesses the strength of each stakeholder to accelerate scale and expand reach. We conduct Information and Education Campaigns (IEC) guided by our Stakeholder Management Plan to promote awareness and engagement. IEC activities include regular visits to local government leaders, participation in the local provincial, as well as the municipal and village groups of our host communities. Community discussion sessions in response to IEC issues are undertaken by the Company to properly and regularly communicate our initiatives. Monitoring and evaluation of the impact of our programs help generate wider public support and ensure project sustainability. Through

this inclusive evaluation process, we are able to identify any gaps in program design and implementation to guide us in further improving future projects. As the Philippines is listed as one of the most disaster-prone countries in the world, we have an Emergency Response and Contingency Plan (ERCP) that addresses all potential emergency situations and potential accidents at the workplace and our surrounding communities. Our programs also include providing assistance in the form of goods and manpower for relief operations. In the future, we hope to train members of our host communities as potential first-responders in cases of disaster and emergency. The Plant Manager makes sure that the ERCP is adequate and current, satisfies all applicable company and government requirements, and the Safety and Health team Leader and Environmental Team Leader provide employees with periodic training on emergency preparedness. We revise the ERCP as appropriate to reflect the enhancements suggested by tests and drills and major changes in the operations or the use of materials or equipment. On a broader scale, we believe that our social responsibility extends to ensuring that our actions create positive impact on the greater public

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AES Philippines

by setting ourselves as good examples. We hold ourselves to the highest standards of ethical practice when it comes to corruption, anti-competitive behavior and compliance with both local and international government regulations. AES Philippines and all its employees commit to fully comply with the U.S. Foreign Corrupt Practices Act (FCPA) and all anti-corruption and bribery laws of the Philippines. The General Counsel and the Deputy Legal and Compliance Officer of AES Philippines are in charge of ensuring compliance with the U.S. FCPA Policy and the anti-corruption and bribery laws of the Philippines. As a global and private Company, AES is nonpartisan and makes sure not to be affiliated with any political parties or position. In terms of public policy, it is AES Philippines’ goal is to actively participate and collaborate in the drafting and implementation of proposed laws, rules, protocols, and guidelines that help move the Philippine energy sector forward and enhance the value of the Company. We contribute to the collaborative process by joining industry associations and public consultations. We share our technical expertise by submitting well-researched position papers and studies that draw on our extensive experience and global best practices to relevant authorities

for consideration. The Vice President for Commercial Affairs sets the direction for all public policy matters, while our Regulatory Officers implement said policy direction. PRODUCT RESPONSIBILITY Customer safety is the pillar of AES Philippines’ product responsibility. We make sure that our operations, services, and products comply strictly with all environmental regulations and global standards so that we do not compromise the health and safety of our customers and our host communities as we deliver clean, reliable, affordable, and sustainable energy. AES Philippines makes sure to communicate regularly with our customers on safety, emerging industry issues, and compliance with national regulations among others.

Monthly safety meetings, quarterly safety walks, and annual safety training for employees promote proactive safety behavior among them. In addition, safety seminars, which are done annually through the AES Academy, are given to our Electric Cooperatives customers to enhance their safety culture. We also conduct quarterly visits, regular communication, and satisfaction surveys among our customers. Our Contract Management program and regular engagements shape our product offerings to suit their particular needs, keep them informed of industry issues and regulations, and protect the confidential nature of our engagements. Flexibility and gaps analysis in product offerings are our key success and strategy areas

to widen our customer base and respond to actual needs, allowing us to offer either a Full Service Proposal, wherein all their energy requirements are sourced from AES; or a Slice of Load Offer, where energy demand is sourced from AES as well as the Wholesale Electricity Spot Market. Throughout our business engagements with them, we protect customer data. We are bound by confidentiality agreements in accordance to the regulations of the Energy Regulatory Commission. Our employees, in turn, sign nondisclosure agreements. AES Philippines has 29 Safety Standards developed by our Safety Standards Working Group, which guide our product responsibility and customer safety performance. Our Marketing Policy governs the use of information on our products and services, and strict compliance with it makes sure that all communication materials are timely, relevant, and accurate. The President and CEO is responsible for overseeing the implementation of safety standards. The Vice President for Commercial is in charge of policy direction and works closely with the Director for Markets and Regulatory Officer for the proper implementation of all product responsibility standards, including customer confidentiality.

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Fresh Value W

h When AES Philippines acquired ownership and operations of the Masinloc Power Plant in 2008, we also took on the task of rehabilitating the 10-year old structure to improve its energy production capacity and efficiency. (See sidebar on page 13)

operations via the upgrade of the Distributed Control System (DCS) that covers all aspects of production such as plant monitoring, controlling and automation. Even after factoring operating costs amounting to USD309.4 million of which USD58 million pertains to sourcing local content for our operations, employee wages and benefits of USD10.9 million, and investor payments of USD168.4 million, AES Philippines still recorded an impressive growth of 82% in net income earnings compared to 2011 and the distribution of USD133 million in dividends to our shareholders. The Company posted earnings retention of 30%, a clear indicator of our secure position against possible financial challenges in the future. The Company also paid out USD9 million in the form of various taxes demonstrating our resolve to contribute to the economic development of the host economy.

It was a great challenge, but we chose to see it as an opportunity for value creation and as a starting point for the implementation of more sustainable practices. Thus, as a first step, the Company started a series of operational improvements to optimize the plant’s production capacity and meet the long-term goal of continuous profitability and sustainability. This strategy proved to be an effective one. Prior to the Masinloc Plant’s turnover to AES Philippines, its maximum net generation was 433MW on a nameplate capacity of 600MW. After the implementation of rehabilitation initiatives, the plant safely operated at an output that was 31% higher than its historic average.

As a private corporation and investor in the Philippines, the Company does not receive equity infusion or loans from the government. However, AES Philippines adheres to the government’s Board of Investment (BOI) guidelines related to receiving investment incentives. In 2008, the BOI (under the provisions of the Omnibus Investments Code) granted AES Philippines pioneer status as the new operator of the Masinloc Power Plant and was granted an Income Tax Holiday (ITH) on its registered operations for six years.

Our commitment to further enhancing efficiency of our operations to ensure reliable, clean, low-cost, and sustainable energy generation has translated to profitable growth and value for all our stakeholders. In 2012, AES Philippines generated revenues of USD541 million; this was 14% better than the performance in 2011. The Company exceeded all 2011performance metrics: generation volumes were better by 9%, the average load factor was recorded at 78%, compared to 69% in the previous year. Our average availability factor was an average of 93.6% matching the U.S. standards of top decile performance indicators. These results were achieved by the Company’s strict adherence to maintaining and operating the plant safely and reliably. Aligned with the best utility practices in the world, key initiatives were put in place to ramp up plant operations to levels that would be comparable to the U.S. top decile performance indicators. These initiatives included mechanical enhancements such as the overhaul of the mills, operational improvements on temperature and pressure controls and the management of soot blowing to reduce auxiliary steam for better heat transfer efficiency. The Company also implemented measures to further improve the monitoring of plant

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AES Philippines

600MW

Generation

Capacity

In 2011, the ITH amounted to USD30 million (PhP1.3BN)due to our improved performance and increased revenue; this number increased substantially the following year. In 2012, the ITH amounted to USD52 million (PhP2.2BN). That same year, the Company remitted a total of USD9M to the Philippine government in income tax, property tax, import tax, custom duties, other taxes and licenses. Beyond paying appropriate taxes, AES Philippines views its contribution to national development through corporate stewardship, especially in the local communities that host our operations. In 2012, our community investments, which covered training and development, construction of various public infrastructure (such as the Welders’ Training Center) and other donations, totaled Php27 million or USD638,902.

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Fresh Values: A Snapshot

its resources toward attaining energy security.

2012 Value in Million USD 559.9 541.4 18.5

2012 Value Generated (a) Revenues (b) Other Income Value Distributed (a) Operating cost – Local – Non-Local

2011 Value in Million USD 475.0 473.5 1.5

498.1 309.4 58.3 251.1

394.9 300.8 52.2 248.6

10.9

12.0

168.4

70.7

(b)

Employee wage and benefits

(c)

payments to provides of capital

(d)

payments to governments Income tax Property Tax Import Tax Custom Duties Other Taxes and Licenses

8.8 – 7.5 – 0.5 0.8

10.6 1.7 7.1 – 0.4 1.3

(e)

community investments

0.6

0.8

61.8

80.1

Value Retained

Ensuring long-term electricity availability and reliability The cost of electricity in the Philippines is among the highest in the region, with distribution charges ranging from10% to 16% of total electricity bills. We view strategic partnerships as a key approach to addressing the challenges in the country’s

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AES Philippines

energy access and supply and consequently, the high cost of electricity. Strategic partnerships, along with the diversification of energy supply resources, are an essential driver in lowering the cost of delivering power from generating plants to end consumers.

In 2011, AES Philippines commissioned INDRA Sistemas and the UP College of Engineering to conduct the study Philippine Electricity Market and Policy Assessment to evaluate gaps in the market and identify opportunities for AES Philippines to channel

The results of this study, combined with our past experience and stringent AES global risk management principles, served as the rationale for the following operational and business development plans: •

Exploration of storage solutions as a way of providing ancillary services for grid security, • Preventive maintenance through a rigorous asset management program, and • Strengthening of our contract customer’s portfolio as capacity additions. AES Philippines plans to pursue the development of a strategic portfolio through the Masinloc Expansion Project, Battery Storage Project, and diversification from IPPA privatization.

KPI EFOR EAF CA NCF HEAT RATE NFOM ($/kW-YEAR)

Exploration of storage solutions as a way of providing ancillary services for grid security. • Plans for future partnerships include exploring more sustainable resources such as geothermal energy and forging partnerships with newcomers in the market in a bid to further contribute to energy security. On the operational efficiency level, AES plans the capacity of the plant against a projected long-term electricity demand using the following key performance indicators: • Equivalent Forced Outage Rate (EFOR): Percentage of service hours that the plant had forced outage including partial shutdowns • Equivalent Availability Factor (EAF): Percentage of total hours that the

Actual 3.9% 93.6% 92.7% 78.0% 10,201 44%

plant has operated including partial shutdowns and reserved shutdown Commercial Availability (CA): Percentage of the variable margin captured and associated with the total hours operated.

The table below summarizes the Company’s actual performance in these key performance indicators benchmarked against plan. Overall, the Company was able to exceed its KPIs in ensuring the availability and stability of energy supply. The EFOR at 3.9% shows that the plant stayed within its allotted limit of 4% for forced outage including partial shutdown. The EAF or percentage of hours that the plant continued to operate including partial shutdowns is 93.6%, which exceeded the 92% allotment.

YTD 2012 Budget 4.0% 92.0% 93.0% 73.1% 10,250 59%

Variance 0.1% 1.6% (-0.3%) 4.9% 49% 15%

2012 Sustainability Report

37


Preventive maintenance through rigorous asset management. AES Philippines invested in the Meridium Asset Management System for the efficient and timely diagnostic monitoring of our plant equipment. Equipment operators conduct regular inspections on all plant machinery to detect potential malfunctions and breakages even before they occur. Previously, their inspection readings (comprised of equipment parameters and limit values) were recorded on a log sheet. With the implementation of the Meridium Asset Management Program, equipment operators were given mobile handheld devices for electronic data capture. The mobile handheld device synchronizes the readings of all equipment operators and uploads the information into a centralized data server. Analysts and engineers can view consolidated equipment

readings in the server to monitor asset health and overall qualification of asset performance. A total of 114 equipment operators received training on the Meridium Asset Management Program, all of whom use the mobile devices for inspections of the Turbine Route and the Boiler Route. A Reliability Task Force creates and views the health indicator of every asset to aid the Company in deciding where to focus resources and apply appropriate management interventions. In addition, the Reliability Task Force also develops and conducts an asset management training session that covers the following modules: reliability-centered maintenance, asset strategy management, root cause analysis, asset health indicators, and metrics and scorecard. The Reliability Task Force also provides supplemental one-onone tutorials on the use of the Meridium device. The Reliability Task Force will also take the

lead in developing a Plant System Design Description Manual that will serve as a handy reference guide containing information about the different functional systems of the plant. As part of our contract requirements, Masinloc Plant results showed that we stayed within the 15-day limits of our allowed maximum number of days of unplanned outages for both units. Last year, power outage for both units was pegged at 14.02 days. The average number of hours per unplanned outage during the reporting period was 40.33 hours for unit 1 and 43.84 for unit 2. The average availability factor for 2012 is 93.6%. We conducted a total of 16 tests following procedures provided in the American Society of Mechanical Engineers Performance Test Code for boiler performance and Performance Test Code 6 for turbine performance.

COVERAGE OF TESTING SCOPE DURING THE 2012 POWER OUTAGE PERFORMANCE TEST 1. Develop heat rate curve over the operating load range of the unit. 2. Evaluate the impact of switching to a different coal supplier with lower heating value. 3. Evaluate component losses impacting unit heat rate. 4. Identify best achievable heat rate for the two units. 5. Develop test protocol for future testing.

38

AES Philippines

Preparation for the 2013 power outage started as early as September 2012. The 37-day planned power outage was scheduled to take place in two phases over the period of January to April. Regular meetings were conducted to carefully plan and manage business operations during the scheduled outage. Issues discussed during this meeting covered job hazards, securing necessary safety and permit requirements, drafting labor estimates and task resource requirements. Work schedules were also carefully planned and detailed to reduce excessive cost, improve reactive response and increased probability of outage schedule overrun. Major

maintenance work for the 2013 power outage performance test were identified, which were: replacement of boiler tubes and primary reheater tubes, replacement of t-piece tertiary super heater, replacement of feed water high pressure heater #6, overhaul of boiler circulating water pump 1A and 1C, overhaul circulating water pump 1A, overhaul of turbine valves, and the retrofitting of data acquisition system, operator’s system and engineering work station.

400MW power supply contract with the country’s biggest power distributor, Meralco. This partnership hedged the Company’s commercial position in a volatile wholesale market to an acceptable market risk exposure. In 2012, over 90% of the Company’s sales volumes were sold under bilateral contracts under a fixed energy price formula with a built in indexation mechanism to guard against fuel prices and foreign exchange fluctuations.

Strengthening of our contract customer’s portfolio as capacity additions. At the end of 2012, the Company signed a seven-year

Giving Back: Our Formula for Inclusive Growth The success of AES Philippines is linked to the success of our employees and the residents of the host communities we operate in. We recognize that everyone benefits from growth that is equitably shared. We invest in the economic well-being of our employees and offer a comprehensive compensation and benefits package. The Company organization is segmented into rank and file, managers and executive officers. Our standard entry level minimum wage package is three times

that of the national average set by the Department of Labor and Employment for Masinloc and two times higher than for what is set for Metro Manila. Moreover, our minimum wage package makes no distinction between employees based in Metro Manila or at the plant in Zambales. Employees who fall within this salary bracket include staff and technical officers. We believe that watching over an employee’s economic welfare extends to the years an employee has extended his services.

Current industry practice is to plan for retirement options after a minimum of 10 years in operation. However, we recognized the need for AES to plan ahead. When the Company acquired NAPOCOR in 2008, it absorbed all of the National Power Corporation employees including those approaching retirement. Employees who reach age 65 qualify for our retirement benefit, regardless of number of years of service at AES. (By law, employees must render a minimum five years of service in order to qualify

2012 Sustainability Report

39


for retirement benefits.) The Company has also looked into pre-retirement planning programs to equip retirees and their families with financial planning knowledge that will help them ease into this new phase of their life. Pre-retirement training was done in 2013. We look at our host communities in a similar way. A significant portion of the Company’s activities and 100% of its production takes place at the Masinloc power plant in Zambales. It is also the place that majority of our employees call home for most part of the week. It is but natural for AES Philippines to think of the municipalities of Masinloc and Candelaria as our adopted home and its residents our neighbors and partners. As part of our commitment to give back to our host community, we scout for new talent by informing local residents of openings at the power plant. In terms of hiring policy, all things being equal in terms of competency and potential, preference will be given to local residents.

40

AES Philippines

Currently, 22% of our total workforce resides in Bani, Masinloc, and Zambales, occupying both staff and supervisory positions.

At the end of 2012, 84.26% percent of our non-coal purchases amounting to USD22.2 million were sourced locally.

AES Philippines also employs a sourcing strategy of buying majority of our materials locally. Our suppliers are selected using a twopronged approach: vendor accreditation and awarding of goods and services. The following are the factors that influence supplier’s selection:

In terms of our Corporate Social Responsibility, the AES Philippines Foundation, Inc. took the lead in designing programs that are anchored on four objectives: health, education, livelihood, and environment (HELEN). Through the foundation, we held consultations with the people from the host communities and hear straight from them what kind of development they wished for and how we could contribute positively to their way of life. We sought the assistance of the University of Asia and the Pacific (UAP) to conduct both a qualitative and quantitative study to profile the residents and assess their community needs, demands and absorptive capacity. Five hundred household respondents were asked to fill out a survey questionnaire, while key informant interviews and focus group discussion were also conducted.

• • • •

• •

• • •

Cost Delivery terms Payment terms Adherence to our specifications and work methodology Safety and Environmental requirements Adherence to mandated requirements, ordinances and regulations of government agencies such as local government units (at municipal and village level) Business ethics Financial capabilities and aspects Work performance from their other customers

COMMUNITY PROGRAMS NEEDS: A Community Profile (SO1) Health

Education

Livelihood

Environment

• Population acquiring acute respiratory infection in Masinloc is 152 per 1,000 based on 2009 data • Mortality rate (5 years old) in Masinloc is at 5.92% based on 2009 data • Half of the population in the villages of Taltal, Bani, and Masinloc do not have access to safe drinking water and sanitation • Primary Education Completion Rate is Masinloc is 75%, deficient by 25%. • Survival rate (Grade 1 to 6) is Masinloc is 75%, deficient by 25%. • Elementary achievement rate in Masinloc is 73%, deficient by 28%. *Based on Masinloc DepEd Data for School Year 2010-2011 • Poverty incidence in Masinloc is .2755 and .2854 in Candelaria. The MDG is .277 • More than 15% of the total household population (8,811) in Masinloc live below poverty threshold according to the 2010 data of the Masinloc LGU • Forest cover in Masinloc is 85% • Average catch per unit effort per person per trip in Masinloc is 1.79 kilos. • 50% of the population in the villages of Bani and Taltal representing 9,443 individuals do not have access to safe drinking water; 52 households in the village of Bani do not have sanitary toilets and 97 households in the villages of Taltal do not have toilets.

The results of the study, Highlights of the Community Resource Inventory & Mapping of Strategic Indicators, showed that there was a lack of opportunities for continuing education and subsequently, limited employment opportunities because of the inadequate skills set, while other concerns included environmental management and health.

In partnership with the Masinloc Public Employment Service Office (PESO), a Welder’s Training Center was constructed to encourage the out-ofschool youth of Masinloc and Candelaria to acquire livelihood skills. The Welder’s Training Center is a PhP9.1 million or USD215,334 project that involved the construction and the necessary equipment, tools and training materials.

AES Philippines decided that it was in the area of education and skill development where we could make our biggest contribution. We funneled bulk of our social investments in training and developing the skills of the residents of our host communities.

The Management Council for the Masinloc Training Facility was established, headed by Masinloc Mayor Desiree S. Edora, who serves as chairperson; while a Masinloc PESO Manager, representatives from the provincial PESO, Technical Education and

Skills Development Authority (TESDA), and AES Philippines were appointed as members. In 2012, 34 male trainees completed the required 240 hours of the Shielded Metal Arc Welding (SMAW) program. All 34 trainees passed the TESDA assessment for National Certification II.A graduate from the pioneer batch is already employed as a welder in the power plant. Other welding graduates were also hired during the scheduled outage of AES Philippines in December and by Bataan Thermal Power Plant and the Subic Bay Metropolitan Authority (SBMA). In consultation with the PESO, the Welder’s Training Center has diversified to include skills in other livelihood projects such

2012 Sustainability Report

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ABOUT

USD 40,920 DONATIONS MADE TO VARIOUS CHARITABLE INSTITUTIONS

SOCIAL WELFARE

USD 597

DISASTER RELIEF OPERATIONS

USD 23,667 HEALTH

USD 2,093

EDUCATION

USD 4,033

SAFETY

ENVIRONMENT

USD 9,532 as bag making and cassava making. The latter was a result of the finding that cassava is grown in large quantities as a primary ingredient in producing feeds. However, when the demand for the product is low, the cassava goes to waste. The training benefited 15 members of the Pinagkaisahang Samahang Magsasaka/Mangingisda Multipurpose Cooperative. AES Philippines also established the AES Academy, a pioneering program that provides professional development and capability building to employees of selected distribution utilities and cooperatives in the Philippines. Education modules of the AES Academy involve competency training in safety

42

AES Philippines

training for power distribution utility personnel, financial management and planning in power distribution, corporate governance, customer service, total quality management, human resource and organizational behavior, and power quality and reliability standards. In 2012, the AES Academy recorded 234 attendees. In partnership with the Department of Education, AES Philippines takes part in various initiatives such as the annual Brigada Eskwela, a nationwide program that mobilizes volunteers to conduct minor school repairs and cleanups before the start of each academic year. In 2012, 29 AES employees and 71

USD 998

community volunteers took part in Brigada Eskwela programs in 18 elementary schools, and four secondary schools in Masinloc, Zambales. Aside from providing for the educational needs of students, AES Philippines also provides for their nutritional needs. Child malnutrition has been noted a major factor that inhibits a child from attending and performing well in school.

Our success as a Company is linked to the success of our employees, host communities and the economy we serve. In 2012 we spent $10M on our people, $0.6M as charitable contributions and $58Min sourcing local/national content for the operations that in aggregate equates to 36% of the year’s net income. We also contributed $53M towards the government’s exchequer in the form of various taxes demonstrating our resolve to partner in the economic development of the host economy that in turn will result in sustaining the growing demand for the electricity. However, beyond these numbers we have seen a positive impact of our CSR programs on the community and its residents. Based on our internal assessment, the Company’s operations in Masinloc have spurned a chain

reaction of economic activity in the municipality. In the Philippines, municipalities are divided into income classes according to their average annual income during the last three calendar years. In 2008, when AES first began its operations, Masinloc was categorized as third-class municipality. The following year, Masinloc was re-classified as first-class municipality for having an average annual income of PhP35 million or more during the last calendar year. We believe that the Company’s contribution to tax revenues of the host barangay, municipal, and provincial governments has enabled the local government to improve its facilities in health education and infrastructure. Our local hiring policies, which put a priority on hiring from within our host communities, ensure employment opportunities for

qualified residents. Business with local contractors has boosted the local economy and triggered other businesses and job creation in neighboring communities. The AES Academy allows knowledge sharing with our partner electric cooperatives, enabling them to improve their systems and operations, directly benefitting their own host communities. By working together to enhance efficiency in operations and customer service, we are able to improve the standards of the energy sector as well. The attainment of a better of quality of life may be unquantifiable in numbers, but it is precisely this kind of longterm impact that we consider lasting and invaluable. So while improving the lives of others cannot be assigned an economic value, it is an endeavor that we at AES Philippines commit to do.

All in all, in 2012 the Company invested a total of USD645,200 in CSR programs for host communities and in the franchise areas of its partner-electric cooperatives, with about USD 40,920 in donations made to various charitable institutions.

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Fresh Approach O

ur vision to be a trusted steward in areas where we operate guides our commitment to the environment. We will follow our corporate guidelines to be a top-decile company in the field of environmental sustainability, committed to suitable and proper investments in technologies and practices that push us to be an industry benchmark in environmental performance while protecting the quality of life of our stakeholders. As we participate actively in Philippine development through our contribution to the goal of energy security for all, we seek to prioritize environmental responsibility in our operations and performance. We do this by striving for quality and excellence.

When AES Philippines received the bronze award for Coal Power Project of the Year at the prestigious 2012 Asian Power Awards in Bangkok, Thailand, which recognized the “best of the best� practices in power generation and power supply industries and organizations in Asia, we considered it opportune time to reinvigorate our long-standing approach to environmental responsibility with the Global Reporting Initiative’s framework, the most widely referenced sustainability framework used to screen and identify best-in-class companies.

We have always believed that continuous improvement of our operations and compliance with global standards help protect the environment and our surrounding communities. Since our entry into the Philippine market in 2008, we have upheld and complied with all local, regional, and national environmental laws and regulations, while initiating voluntary environmental programs. We have an Integrated Environment, Health, and Safety (EHS) System that supports our sustainability goals, measures our EHS performance, ensures operational compliance, and provides our employees, contractors, and communities with a safe workplace and a clean environment.

44

AES Philippines

2012 Sustainability Report

45


Measuring for Efficiency and Improvements As this is AES Philippinesâ&#x20AC;&#x2122; first sustainability report, the environmental data presented in this section serve as our baseline data that we seek to improve on in the coming years. We emphasize efficiency in our operations given the context of growth and expansion for the business. We would like to attain an equivalent forced outage factor of <3%, commercial availability factor of >84% and increase thermal

efficiency by >0.4%. Specifically, the Company aims to increase the thermal efficiency by 1.2%, in the coming year, which will lead to less fuel being burned in excess of 15,000 metric tonnes. In five years, we seek to increase thermal efficiency to over 3%, which will lead to lesser fuel burned in excess of 50,000 metric tonnes. Last year, our coal consumption reached

1,667,469.20 metric tons and a total of 687.76 m3 of industrial and automotive diesel oil were used for operations and the use of heavy equipment. The power plant does not use polychlorinated biphenyl in its transformer oil. Using these baseline figures, we aim to monitor our efficiency and compliance. The Company at present does not monitor potential recyclable materials generated by our operations.

In 2012, the total direct energy produced by the power plant was 4,331,242.1 MWh (15,592,471.56 GJ), 7% or 323,647 MWh (1,165,129.20 GJ) of which was consumed for

Non-renewable energy sources

Direct Primary Energy Purchased

Coal (MT)

1,667,469.20

IDO (MT)

387.55

ADO (MT)

286.46

NON-RENEWABLE MATERIALS Coal

1,667,469.20 MT

292.30 m3

46

AES Philippines

Sold

4,331,242.1

4,491,813.25

323,647

13.76

Wholesale Electricity Spot Market MWh

484,218

Total MWh

484,218

4,331,242.1

4,491,813.25

323,647

1,743,184.80

15,592,471.56

16,170,527.70

1,165,129.20

Total GJ

OTHER MATERIALS

Water 643,626 m3

Automotive Diesel Oil (used in operation of heavy equipment and services)

Produced

Total Direct Energy Consumption

Coco Methyl Ester (w/ diesel)

MATERIALS USED FOR 2012 (EN1, EN2)

395.46 m3

customers. Currently, these energy purchases cannot be classified as renewable or nonrenewable as the Renewable Portfolio Standard has yet to take effect.

DIRECT ENERGY CONSUMPTION BY PRIMARY SOURCE, 2012

Biofuel

Industrial Diesel Oil (used in operations, e.g., startups)

station use. A total of 484,218 MWh (1,743,184.80 GJ) was purchased from the Wholesale Electricity Spot Market to augment our Bilateral Contract Quantity and sold directly to

Bulk Chemicals

482.91 m3

In terms of indirect energy consumption, AES produces energy for internal auxiliary consumption, with last yearâ&#x20AC;&#x2122;s figure hitting 1,165.1 Terajoules and savings of 107 Terajoules. The volume of coal consumed for the production of the energy used for the auxiliary load was 124,847 tons or 7.4% of the total volume used in 2012. The energy savings were mainly due to operational changes and process optimization. In 2011, five

mills were required to run our two power plant units during maximum capacity loads to meet output demand. This was because of the frequent breakdown of the mills and the continuous running of all five mills. Operating a mill on standby took time and caused it to derate. The mills were overhauled to reduce the probability of downtime, allowing us to run our two units on four mills. This led to a significant reduction in

auxiliary load in 2012. In terms of business travel, efforts to carpool and the use of videoconferencing and other such technologies reduced the cost of fuel consumption last year by USD8,000 compared to 2011 data. To get the amount, we compared the actual travelrelated fuel cost incurred for 2011 and 2012. Other efficiency initiatives included operational improvements in our temperature and pressure

2012 Sustainability Report

47


controls. Overall startup time also reduced through the optimization of the heatsoaking period. The sootblowing regime was also optimized, especially in areas where fouling appears, which effectively minimized auxiliary steam and energy consumption. Apart from these process improvements and efficiency initiatives, the Company is also looking into the Battery Energy Storage Solution (BESS) for a more efficient use of energy by allowing us to store electricity when production exceeds consumption, and to use these stores of electricity when consumption exceeds production. The BESS will also supply ancillary services to the National Grid Corporation of the Philippines to support its provision of reliable and efficient operation of the grid. Although BESS cannot be classified as renewable energy, the spinning reserve from non-renewable energy sources acting as ancillary providers, i.e., coal and gas-peaking plants, can be freed up and limits the stranded capacity of these technologies. Negotiations with the National Grid Corporation of the Philippines began in 2012, with commercial operation envisioned by the last quarter of 2014. We look forward to reporting on this exciting new product that allows us to operate more efficiently and at more constant levels.

48

AES Philippines

We understand the intensity of our operations’ water use and monitor our consumption, given our EHS policy to optimize the use of natural resources. Water withdrawn is mainly from Lauis River, and water withdrawal remains substantially below the significant withdrawal threshold of 5% of the annual average volume of any given body of water—at approximately 2%. Water withdrawn from Oyon Bay is 0.12% of the total average volume. In 2012, our total water withdrawal from all water sources was 643,626 cubic meters, broken down to 551,752 cubic meters from Lauis and 91,874 cubic meters for domestic use, which is tapped from ground water sources, specifically our Raw Water Intake Facilities, near Lauis. Around 28% of water withdrawn from the river is demineralized for use in our boilers. At present, we do not collect and store rainwater for use in our operations, although we strive to maintain if not decrease these water withdrawal levels. A total of 720,000,000 cubic meters of water from Oyon Bay - West Philippine Sea is being used as recirculating water, but we returned the same volume of water to Oyon Bay. The bay is classified by the Department of Environment and Natural Resources (DENR)

as class SC water for the propagation of fish and other aquatic resources. It was declared a Marine Protected Area in 1994, after the plant was issued an Environmental Compliance Certificate. In view of this, we follow all strict standards and regulations concerning this area of our operations. We make sure that our water discharges comply with the standards of DENR and the Philippine Clean Water Act. Also, the plant’s location with respect to Protected Area Zoning plan falls within zone 1 category, which allows economic and industrial activities. The Company has a wastewater treatment plant that collects wastewater in an effluent storage basin and is pumped into a clarifier system, filtering system, pH adjusting system, and desludging system to make sure that water discharged back into Oyon Bay does not adversely impact the water quality that supports marine life. The plant also has a Discharge Channel that is used to cool the recirculation water before it is released into Oyon Bay. Monitoring is conducted by the MPPCL Multipartite Monitoring Team and analysis of the wastewater is done by our environmental laboratory team using Microwave Digester, atomic absorption spectrometer, and colorimetric method. At present, no water is recycled and reused in our

operations, because the power plant’s original design does not accommodate the recycling and reuse of process water. However, water recycling,

reuse, and rainwater harvesting have been undergoing study in 2013. If feasible, these will be implemented in 2014. There is also a proposed

program to optimize water usage and reduce wastewater, with monitoring reflected in our quarterly Self-Monitoring Reports.

WATER WITHDRAWN BY SOURCE, 2012 Masinloc Data 2012

Water Withdrawn (by Source) Name of Body of Water

Volume (m3)

Processed Water Surface water (River)

Lauis River

551,752

Recirculating Water

Oyon Bay (West Philippine Sea)

720,000,000

Near Lauis River

91,874

Domestic Use (Deep Well/Ground) Total in m3

643,626

DISCHARGE QUALITY PER QUARTER, 2012

Q1

Q2

Q3

Q4

Average

DENR A.O. No. 35 s. 1990 (Class SC)

ND

ND

ND

ND

ND

10

0.00 (ND?)

ND

2.0

3.20

1.30

150

Biochemical oxygen demand (in mg/li)

3.0

3.0

3.0

2.0

2.75

100

Chemical oxygen demand (in mg/li)

3.0

3.0

3.0

2.0

2.75

200

Cadmium (in mg/li)

ND

ND

ND

ND

ND

0.1

Chromium +6 (in mg/li)

ND

ND

ND

ND

ND

0.2

Chromium Total (in mg/li)

ND

ND

ND

ND

ND

-

Lead (in mg/li)

ND

ND

ND

ND

ND

0.5

Oil and grease (in milligram/liter) Total suspended solids (in mg/li)

ND = Nondetectable

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In terms of emissions, we make sure to follow the standards and methodologies indicated in the Philippine Clean Air Act as directed by DENR, specifically the provisions on basic air quality, air quality management system, and pollution from stationary sources. At present, AES Philippines only measures sulfur oxides (SOx), nitrogen oxides (NOx), and particulate matters (PMs) because DENR’s analysis shows that only these three pollutants are relevant to the operations. In the coming years, AES will voluntarily monitor other pollutants. We monitor our average annual greenhouse gas emissions based on the monthly key performance indicator reports. We generate

data from the Continuous Emission Monitoring System that relays the information to an electronic plant historian that stores data in a network server. The data obtained are then used for calculations to obtain the amount of GHG, mainly carbon dioxide, which is the main product of combustion and is always present in stack emissions. The business follows the standards and methodologies indicated in the Republic Act No. 8749 otherwise known as Clean Air Act as directed by the DENR, (specifically Chapter I - General Provisions; Article 1 - Basic Air Quality Policies and Chapter II - Air Quality Management System; Article 1 - General Provisions & Article 3 - Pollution from Stationary Sources) to

compare our emission readings with the limits set by the government, as well as limits set by the World Bank. AES also has its own set of standards and procedure namely: AES Environmental Standard#6AES Compliance Data Quality Assurance & Reporting and AES Environmental Standard#7-AES Response to ENEs and EOEs. Last year’s actual total figure for greenhouse gas emissions was 4,077,297.97 tons of CO2, close to 100% of which derives from the direct energy use of coal and diesel, of which 3,767,6721.83 tons are based on the net delivery of MW produced to customers. Emissions from gasoline were only at33.79 tons of CO2.

TOTAL DIRECT AND INDIRECT GHG EMISSIONS BY IN TON CO2, 2012

Direct Energy (Coal and Diesel)

4,077,264.18

Indirect Energy (Gasoline)

33.79

Total

4,077,297.97

Emission per Unit Output (tons/MWh)

0.94

NOX, SOX, AND SIGNIFICANT AIR EMISSIONS BY WEIGHT, 2012

Site

Masinloc DENR Standards

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AES Philippines

Nitrogen Oxide (mg/NCM) or ppm Unit 1 Unit 2 224.28 251.05 ppm ppm 1500 mg/NCM or 797.28 ppm

Sulfur Dioxide (mg/NCM) or ppm Unit 1 Unit 2 449.29 445.52 ppm ppm 1500 mg/NCM or 537.8 ppm

Particulate Matter (mg/NCM) Unit 1 Unit 2 23.31 3.58 mg/NCM mg/NCM 200 mg/NCM

Total indirect greenhouse gas emissions from fuel (both gasoline and diesel fuels) used in service vehicles and heavy equipment were at 33.79 tons of CO2, while the air-conditioning systems of the power plant generated 264 kilograms of HCFC22(hydrochlorofluorocarbon), which is widely used in numerous industrial applications. A total of 1,583 kilograms of used sulfur hexafluoride (SF6) was generated by our operations last year, specifically the gas insulated switchyard, generator circuit breakers, coal handling breakers, and bus ducts. SF6 is used as insulating gas in closed systems that are safe and unlikely to leak. Approximately 54kilograms of last year’s output were reclaimed and stored as waste in sealed containers for proper disposal. At present, there is no disposal facility in the Philippines for SF6 so that SF6 waste is placed in storage until such time that DENR selects an accredited disposal facility. There are no reported CO2 emissions from the use of SF6. We also make sure to monitor all solid waste materials generated from our operations and use appropriate disposal methods, adhering to laws and regulations such as the Solid Waste Management Act of 2000 and Toxic Substances and Hazardous and Nuclear Wastes Control

Act1990. Last year, we produced95,684.7metric tonnes of unrecycled fly ash and bottom ash that were captured and stored in an on-site ash pond, a facility used for the proper disposal of byproducts of coal power generation; two tonnes of biodegradable materials that were composted; 1.425 tonnes of non-hazardous biodegradable materials that were reused; and 1.2 tonnes of non-hazardous wastes. Hazardous wastes such as 15 tonnes of used oil 4,704 busted electric bulbs, and 109 used batteries were temporarily stored at the Hazardous Waste Storage Building in the facility and then transported by a DENR-accredited third-party transporter/treater. There were no reported instances of significant spills of hazardous materials, such as oil spills, fuel spills, or chemical spills, in 2012. Also, 24.8 metric tons of used oil were treated at a DENR-accredited treater, where they underwent distillation process. The recovered oil is being blended with special fuel oil and reused as fuel for the asphalt manufacturing business of the treater. All impurities recovered as sediments and water are used as materials for the manufacture of asphalt. AES also does not produce use nuclear materials or polychlorinated biphenyls in its processes. We do not use PCBs in the plant hence we have no PCBs to dispose of.

We handle and dispose of the mercury in fluorescent lamps according to national laws and standards, and have secured a certificate of exemption from the Philippine Nuclear Research Institute for our four units Carbon 14 sources (Dust Density Analyzers) with activities of less than 500kBq and two units with 3.66 MBq, respectively. Ultimately, our environmental management system seeks to ensure a pollution-free environment. Through the use of world-class, efficient processes and techniques, materials, products, and services, we will avoid, reduce, and/or control the creation, emission, or discharge of any type of pollutant or waste that may have adverse impacts on our area of operations and our immediate surroundings. We have a Pollution Control Officer tasked with the identification, tracking, assessment, and interpretation of all pertinent to the environment-friendly operations of the business. Training programs for all plant personnel are in place for solid waste management, emergency spill response, emission and effluent management, hazardous waste management and environmental management system. Our EHS policy and manual outline the procedures for performance measurement and monitoring, compliance evaluation, and internal audit.

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Managing Our Impacts We understand that the production of electricity has numerous impacts on the environment, foremost of which is an increase in industrial development that results in the conversion of land for industrial purposes, the attendant increase in population that puts pressure on natural resources, and the potential pollution of air, water, and soil if not properly managed. The transport of materials and personnel can have significant impacts such as land and water pollution because of possible coal and chemical spills during transport and unloading, and the release of effluents and solid waste from ships or accidental spills; and air pollution and ozone depletion due to emissions and ozonedepleting substances. We invest in extensive measures in ensuring against any kind of pollution stemming from our operations, from the unloading of coal at the unloading jetty up to the disposal of waste products. We have an accreditation process for suppliers and transport service providers to make sure that all transport vehicles are properly maintained and follow coal and materials delivery guidelines to avoid any spills. Our solid waste management program also ensures the proper disposal of packaging and residual wastes. In 2012, AES Philippines spent USD1.87 million on environmental protection (see

52

AES Philippines

breakdown in table) consisting of the cost of equipment and materials, monitoring activities, management systems, and personnel among others in an effort to manage our impacts. We maintain a 100-squaremeter plant nursery inside the main power plant complex, where we nurture over 33,000 seedlings, plants, and fruitbearing trees, as part of our carbon sink program and in support of the government’s National Greening Program. We use seedling production and dispersal to manage our environmental impacts. Dedicated personnel work at the nursery to make sure we are able to protect the growth of the seedlings and the plants so that they can be distributed to our various partners such as the Department of Education; municipal, and provincial offices of the Department of Environment and Natural Resources; the local government units in Zambales; Philippine National Police; schools and barangays, and can also be used in tree-planting activities. In 2012, we donated a total of 22,850 seedlings to various partners. The Company also participates in events such as the Philippine Coal Plant Users Group Technical Forum on increasing operational efficiency of the country’s power generation industry so that our employees are always abreast of practices and technologies that improve plant reliability

and efficiency, and ensure compliance with regulations. In terms of the impacts of our major materials such as coal, water, gasoline, diesel, and other oil products, we make sure our requirements remain within the established consumption and water withdrawal rates and ensure excellent operations and maintenance for optimum performance and efficiency in our materials use. We have an Integrated Management System, specifically for OHSAS 180012007 and ISO-14001-2004, and an Environmental Management Plan to help manage and control the risks to quality, safety, health, environment that are inherent in our business. The Company has an Aspect Identification and Evaluation system where each significant impact has corresponding objectives, targets, and programs that will reclassify it as non-significant. We also classify and label chemicals according to the Globally Harmonized System (GHS) and implement proper segregation of chemicals at the plant. The plant has Air Pollution Control Facilities such as the Electrostatic Precipitator for dust control and implements mitigating measures such as the use of good-quality fuel, well-managed ash disposal area, covered conveyors, dust suppressors, and water sprinklers/sprayers among

others. Full-grown trees that serve as wind-breakers, minimizing coal dispersion and serving as noise barriers, surround our coal yard. We make sure that all noise-generating equipment are in excellent condition so that any noise produced remains within if not below the proper levels. We conduct regular monitoring of noise levels in different parts of the plant, especially in work areas, and an annual audiometry

test among employees. Frequent coal pile compaction helps prevent spontaneous combustion. To reduce our greenhouse gas emissions and possible pollutants, the power plant uses imported coal with low sulfur content and a two-stage combustion method at the boiler furnace to decrease combustion temperature. Our combustion process also

maintains 3% excess air, which promotes better heat rate, leading to less carbon emissions. Repairs made on the Stacker/ Reclaimer A and B improved coal treatment so that we can now select drier coal from the pile, again resulting in better heat rate figures. Last year’s emission figures marked a drop of 719 tons, compared to 2011 data. We strive keep improving our plant’s performance for better figures and emissions readings.

ENVIRONMENTAL PROTECTION EXPENDITURES BY WASTE DISPOSAL

Disposal/Treatment

Details

Cost (in USD)

Wastewater Treatment

Personnel and chemicals

80,497

Solid Waste Management

Trash bins, sacks and other solid waste management cost

Ash Pond (Bottom Ash)

Capital Expenditure

510,414

Ash Disposal Area (Fly Ash with carbon content of more than 3%)

Heavy equipment maintenance, transportation, and fuel

54,095

21,740

Environmental Protection Expenditures by Emissions Treatment Disposal/Treatment Ash Collection from Flue Gas (to meet DENR standard on gas density and opacity)

Details

Cost (in USD)

Electrostatic precipitator and capital expenditure

729,025

Environmental Protection Expenditures by Remediation Costs

Environmental Guarantee Fund

A contingency fund to compensate project-related impacts, where such impacts are not addressed through mitigation measures and fund programs

48,800

Environmental Protection Expenditures by Prevention Costs Hazardous Waste Management

Hazardous waste management cost

36,915

Environmental Protection Expenditures by Environmental Management Costs

Environmental Management

External certifications, air and water quality monitoring, marine ecological monitoring, stack emission, oil spill management, greening programs

392,176

2012 Sustainability Report

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HEAT RATE IMPROVEMENTS

Masinloc Heat Rate

Heat Rate 2011

Heat Rate 2012

Heat Rate Improvement

Displaced CO2 Emissions

Unit 1

10,234.65 BTU/kWh

10,355.69 BTU/kWh

-101.04 BTU/kWh

619.90 gCO2/kWh

Unit 2

10,480.05 BTU/kWh

10,158.47 BTU/kWh

321.58 BTU/kWh

66.03 gCO2/kWh

Average

10,357.35 BTU/kWh

10,247.08 BTU/kWh

110.27 BTU/kWh

685 gCO2/kWh

In addition, our Company is a signatory to the Terms of Cooperation re: Demonstration of Best Available Technique and Best Environmental Practices in Fossil Fuel-Fired Utility and Industrial Boilers in Response to the Stockholm Convention on Persistent Organic Pollutants (POPs) with United Nations Industrial Development

Organization (UNIDO), Department of Energy, and DENR. Through the cooperation, a regional project of UNIDO and funded by the Global Environment Faculty (GEF), we commit to enhance guidelines on our best available techniques and best environmental practices so that we are able to reduce and, where feasible,

eliminate unintentionallyproduced persistent organic pollutants and emission releases. Through our participation, we also hope to contribute to the enhancement of specific features of industry, common practices in the region, and socioeconomic considerations related to reducing UP-POPs dioxins, and furans.

SOME INITIATIVES TO MITIGATE EMISSIONS

Metal Oxides (Power boiler and combustion engine operations)

Control the emission of metal oxides from the boiler and emergency diesel engine; proper operation and maintenance of Electrostatic Precipitator (EP), Emergency Diesel Generator (EDG), Ash Handling, and ash disposal area; regular semi-annual stack emission testing; regular annual Relative Accuracy Test Audit (RATA) of Continuous Emission Monitoring Systems (CEMS) analyzers.

Sulfur Oxides (Combustion engine operations)

Fuel Oil quality as per the requirements of the Environmental Compliance Certificate; control the emission of Sulfur Oxides from EDG; regular semi-annual stack emission testing; regular annual RATA of the CEMS analyzers.

Nitrogen Oxides (Power boiler and combustion engine operations)

Control the emission of nitrogen oxides through proper operation and maintenance of the boiler, EDG, and by the use of Low NOx burners; control the emission of metal oxides from the boiler and emergency diesel engine; proper operation and maintenance of EP, EDG, Ash Handling and ash disposal area; regular semi-annual stack emission testing; regular annual RATA.

Particulate Matter and Opacity (Power boiler operations)

Control the emission of particulate matters from the boiler; proper operation and maintenance of EP; regular semi-annual stack emission testing; regular annual RATA.

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AES Philippines

2012 Sustainability Report

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In terms of water use, our consumption is monitored through flow meters to make sure that pipes and tanks are secure and do not have leaks. We maintain proper operations of our wastewater treatment plant and submit quarterly multipartite monitoring reports to DENR on our water quality, especially our the quality and volume of our discharges to Oyon Bay, including wastewater discharges from our vessels. Our Chemical Section conducts daily monitoring. We also conduct water testing/sampling in various schools and barangays of our host communities to make sure that their water supply is safe for drinking and domestic use. A water quality checker was used to test the turbidity or the clarity of the water, after which collected water samples were brought to the AES Environmental Laboratory for further analysis. Throughout the year, we implement Solid Waste Management and Hazardous Waste Management procedures so that all waste generation and disposal activities are controlled and managed through a permitting system. We have a Zero Plastic policy and management has issued stainless steel lunch boxes to all plant-based personnel

56

AES Philippines

in an effort to reduce the generation of plastic waste. We have a Materials Recovery Facility for all solid wastes and Hazardous Waste Building for hazardous byproducts. Eighty (80) used drums were also donated in support of the solid waste management programs

of various communities and organizations. We also assisted the Masinloc local government unit in its acquisition of two garbage trucks through the Energy Regulation Funds (ER1-94) to intensify its solid waste management program within the municipality.

AES assisted the Masinloc local government unit in its acquisition of

2 Garbage trucks

80 Drums

were donated in support of the solid waste management programs of various communities and organizations.

INITIATIVES IN MITIGATING THE IMPACT OF WASTE

Oil Contaminated Substances (rugs, absorbents, other materials)

Control generation of oil contaminated substances; implementation of MPPCL-EHS-SP-02-002 Hazardous Waste Management procedure.

Waste oils, lubricants, grease, solvents

Control generation of waste/used oil; implementation of MPPCLEHS-SP-02-002 Hazardous Waste Management procedure.

Surplus and Abandoned/ Expired Chemicals

Control generation of surplus chemicals; proper inventory of chemicals

Spent Laboratory Chemicals and Empty Chemical Containers

Maintain proper storage and disposal of spent laboratory chemicals and empty chemical containers; implementation of MPPCL-EHS-SP-02-002 Hazardous Waste Management.

Medical Wastes (Expired medicines, pathogenic wastes)

Proper inventory of medicines; control generation of expired medicines.

Miscellaneous Industrial Wastes (Spent Batteries, Busted Fluorescent Lamps, Empty Paint Cans)

Control the generation of miscellaneous industrial wastes; implementation of MPPCL-EHS-SP-02-002 Hazardous Waste Management.

Ash from ash handling systems

Coal quality as per ECC requirements; proper operation and maintenance of boiler and mills; control generation of ash.

Non-hazardous Domestic Solid Waste

Implementation of MPPCL-EHS-SP-02-003 Solid Waste Management procedure; control generation of non-hazardous domestic solid waste; proper operation of scrap yard and Materials Recovery Facility; implementation of the Iwas Plastic program.

Domestic wastes from sea vessels

Control domestic wastes from sea vessels; implementation of the jetty permit conditions.

Control generation of non-hazardous industrial solid waste; Non-Hazardous Industrial Solid Wastes (Including used proper operation and maintenance of Materials Recovery Facility. electrical and electronics equipment/ accessories) Grease from canteen operations

Maintain proper disposal of grease from canteen operations; monthly anti-grease treatment of canteen washings septic tank.

Sludge/Cakes from Wastewater Treatment Plant

Maintain proper disposal of sludge generated from Wastewater Treatment Plant; maintenance of ash disposal area.

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Plant personnel undergo necessary training on all environmental, health, and safety procedures and laws and regulations all within the context of operational excellence and responsible business. Last year, AES Philippine hosted an Oil Spill Awareness and Emergency Response Training to create awareness among our different stakeholders on the potential impacts of oil spills to marine life, create partnerships, and define priorities and greater application of contingency plans for Masinloc and Oyon Bay Marine Reserve. Forty participants from the DENR Regional Office, Provincial Environment and Natural Resources Office, City Environment and Natural Resources Office; provincial government of Zambales, local and barangay government units

of Masinloc; and Masinloc Marine Sanctuary Association and Samahang Pangkabuhayang San Salvador (SPSS) attended the training together with plant personnel from the Environmental, Coal Handling, Power Block, Chemical and Safety teams. The training consisted of lectures designed to create awareness on Philippine marine laws and regulations and to teach people how to respond to an oil spill and prepare an oil contingency plan. An actual demonstration of an oil spill response took place on the last day of the four-day training workshop at Oyon Bay. Next year, AES Philippines will have a fully implemented Oil Spill Contingency Plan. We are glad to report that because of our environmen-

tal initiatives there were no incidences of non-compliance with environmental laws and regulations last year and no case has been brought against the Company through the use of local, national, and international dispute mechanisms. We adhere to world-class standards and have always complied with all environmental laws and regulations. Air monitoring data reveals emissions from plant operations meet Clean Air Act parameters. Suspended Particulate Matters are well below DENR and World Bank parameters. The quality of effluents also meets the Clean Water Act parameters, and there is no thermal pollution from our discharges as we stay below the 3-degree Celsius limit of DENR.

Protecting Our Biodiversity Located in the largely agricultural province of Zambales and the countryâ&#x20AC;&#x2122;s mango capital that is Masinloc, AES Philippines understands that our impacts on the ecosystem can affect the quality of life of the residents whose

58

AES Philippines

livelihood and wellbeing are tied intimately with their surroundings. Hence, biodiversity protection is one of five local environmental goals of AES Philippines, which is upheld in our EHS policy and documented and monitored in our quar-

terly self-monitoring reports. The plant manages impacts on biodiversity through our Environmental Management Plan that is in compliance with the Environmental Performance Report and Management Plan. Our Marine Ecological Monitor-

BIODIVERSITY VALUE OF MASINLOC OYON BAY MARINE RESERVE (NATIONAL INTEGRATED PROTECTED AREAS SYSTEM ACT OF 1992)

1. Fish

Species diversity (750m2); Adult abundance (individual/250m2); Juvenile abundance (individual/50m2); Adult biomass (mt/km2)

2. Seagrass/Seaweed

13 (Enhalusacoroides, Cymodocearotundata, Thalasiahemprichii, Halodulepinifolia, Syringodiumisoetifolium, Sargassum sp., Halimeda, Red algae, Uninervis, Padina minor, Turbinaria, Halophilaovalis, Hydroclathrus)

3. Corals

Hard Coral Cover: 1 (Non-Acropora) Massive Corals: 2 (Porites, Faviids) Mushroom Coral: 1 (Fungia) Commonly Encountered: 12 (Porites, Acropora, Heliopora, Galaxeamontipora, Echinopora, Mycedium, Cyplastrea, Pachyseris, Merulina, Lobophylia, Algae)

4. Marine Phyto Plankton

14 (Division Chrysophyta, Order Centrales, CorderCymbellales, Order Pennales, Order Naviculales, Order Dictyochales, Division Chlorophyta, Division Cyanaphyta, Order Oscillatoriales, Order Nostocales, Division Dinoflagellata, Order Dinokonte, Division Protozoa, Division Foraminifera)

5. Marine Zooplankton

4 (Phylum Anthropoda, Phylum Chaetognatha, Phylum Chordata, Phylum Cnidaria)

6. Marine Benthos

5 (Phylum Annelida, Phylum Echinodermata, Phylum Anthropoda, Phylum Mollusca, Phylum Sipuncula)

ing System includes the monitoring of corals and associated reef fish, plankton communities, sea grass and seaweed communities, meiobenthos and macrobenthos fauna, and marine quality. The maintenance and enhancement of the buffer zones as alternative habitats for faunal species and the development of a suitable area for wild duck migrations are guided by and done in compliance with the Environmental Compliance

Certificate issued by DENR and the National Greening Program of the Philippine government. We also conduct biodiversitymonitoring surveys as part of our environmental management system. Masinloc Power Plant is bound by the West Philippine Sea in the west, the Lauis River in the north, and Oyon Bay in the south. The plant sits in a 137.18-hectare lot, is adjacent

to the Masinloc Oyon Bay Marine Reserve, and is three kilometers from the San Salvador Fish Sanctuary. There is also a 23.5-hectare buffer zone that is part of the Companyâ&#x20AC;&#x2122;s maintenance and protection activities. Within the plant, specifically at the ash pond, are five hectares of natural habitat for around 200 endangered Philippine Ducks, considered endangered and among the 5,000 in the world.

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With the support of the Wild Bird Club of the Philippines (WBCP), we conducted a birdwatching activity at the ash pond of Masinloc Power Plant and at Yaha Island in Barangay San Lorenzo, Masinloc, in 2011, to help us identify and record information on the bird species in our project site and establish a program that will promote co-existence of our power generation activities and biodiversity conservation. Representatives of the Municipal Environment and Natural Resources Office (MENRO) and Municipal Tourism Office of Masinloc also attended the activity. Apart from the 200 Philippine Ducks, WBCP was also able to identify 21 bird species at the five-hectare mangrove-formed island, about five kilometers from the mainland of Masinloc town, and 51 more species unique to the area. The list of bird species from our site are now included in the database of WBCP. Arising from this biodiversity monitoring and awareness effort is a proposed five-hectare wild duck reservation adjacent to the original area where the wild ducks stayed during their migration, which has similar biodiversity conditions. Two endangered plant species have also been identified in the project site: Canangaodorata (indigenous, Ilang-ilang) and Cycasrevoluta (exotic, Oliva).

60

AES Philippines

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Fresh Perspectives S

afety plays an integral role in the way we do business; we view safety as a code we live by every day at AES Philippines. However, the Company takes on a different, more comprehensive perspective of safety. For us, safety first at work covers all aspects of operations such as environment, health, and safety (EHS) and the provision of a decent workplace for our employees; however, safety also holds another, deeper dimension. In terms of ensuring the financial wellbeing of our employees and their families, safety means providing economic security to our employees and their families through adequate compensation and benefits. In relation to the communities we serve, safety takes on the perspective of sustainability and compels us to live up to the social imperative of mitigating the impact of our operations on the environment and contributing to the development of our ho st communities via our social investments.

Upholding Employee Welfare AES Philippines believes our employees are the embodiment of the Companyâ&#x20AC;&#x2122;s core values and principles. It is for this reason that we invest heavily in the sourcing, hiring, and retention of talent who exhibit exceptional competencies in this industry. We employ a total of 210 people, all working on a full-time basis, 203 of whom are regular employees, while six are on probationary status (as of the writing of this report) and one is on a fixed term contract. In terms of workforce composition, there are 35 females and 175 males; most of the employees, a total of 176, are based in MPPPL while 34 are in the based in the AES Corporate Head Office in Taguig. In terms of organizational framework, we have established 21 managerial positions, 11 supervisors, and 14 team leaders; the balance 164 employees are rank and file. [Please see table for detailed breakdown.] AES contracts the services of Servicio Filipino, Inc. (SFI), a service contractor to manage the housekeeping of the plant and to fill in temporary manpower requirements, mostly for MPPCL. The ratio between regular manpower and personnel contracted through SFI is 1.70:1, in favor of regular manpower.

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AES EMPLOYMENT BY TYPE, REGION AND CONTRACT, 2012

MANAGER Asia/Philippines

10

11

(20 Regular and 1 Probationary)

TEAM LEADER Asia/Philippines

12

2

(14 Regular)

SUPERVISORY Asia/Philippines

11 (11 Regular)

We offer a competitive employment and benefits package for our employees. Apart from the monthly salary and the13th-month pay mandated by law, AES Philippines awards an Annual Performance Bonus computed on a percentage rate stipulated in the contract and using the annual salary as basis. Age, gender, race, or any diversity indicator is never used as basis for computation of benefits and bonuses.

RANK AND FILE Asia/Philippines

142 22 (6 Regular, 8 Probationary and 1 Project Base)

AES EMPLOYMENT BY TYPE, REGION AND CONTRACT, 2012 [NOTE: GRAPHIC AGENCY MAY LAYOUT RAW FILE TO ALIGN WITH OVERALL DESIGN OF THE REPORT]

Row Labels

Count of POSITION CODE

Manager

21

Rank & File

164

Supervisory

11

Team Leader

14

Grand Total Row Labels

210 Count of EMPLOYMENT STATUS

PROB

6

PROJECT BASED

1

REG

203

Grand Total

210

Row Labels

Count of GEOGRAPHICAL LOCATION

Masinloc

176

Taguig

34

Grand Total Row Labels

210 Count of EMPLOYMENT TYPES

full-time employee

210

Grand Total

210

Row Labels Fixed Term or Temporary Contract

Count of EMPLOYEMENT CONTRACT 1

Permanent Contract

209

Grand Total

210

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AES Philippines

Our minimum wage for rank and file employees is significantly higher than that of the national average set by the Department of Labor and Employment (DOLE). DOLE sets the national guideline for minimum wage; figures correspond to the cost of living in a given area and wage rates for Metro Manila are higher than that of the other provinces and urban centers in the country. AES Philippinesâ&#x20AC;&#x2122; minimum wage is twice the rate that is set by the DOLE for Metro Manila. Moreover, there is no distinction between the minimum wage rate of Metro Manila-based employees and those from the provinces, where the minimum wage is usually lower. We also provide medical insurance coverage for all our employees, regardless of employment contract. Our medical benefits offer Php300,000 coverage per illness per year for inpatient, out-patient and maternity

care and a Php1,000 subsidy on out-patient medication. Parental leaves are available to both men and women, and a total of 191 employees were entitled to maternity and paternity leaves in 2012, four (0.2%) of whom availed of it. All four returned to work after the designated period. We see these benefits and investments as crucial to the morale, wellbeing, and competitiveness of our employees. It is AES Philippinesâ&#x20AC;&#x2122;s commitment to develop its talent by tooling them through extensive training programs and providing opportunities for career growth. This is enshrined in the Learning and Development Policy, established for the mentorship of employees through in-house, external, or on-the-job training. All employees are provided equal opportunities to avail themselves of the training and resources to promote productivity and growth in their careers. On a yearly basis, team leaders and immediate supervisors conduct a Training Needs Assessment (TNA) to evaluate skills and knowledge gaps in any of the key areas of safety, business acumen, leadership, and power plant operations. Knowledge is shared through a combination of on-thejob training, buddy system/ mentoring, on-line learning and classroom training.

In 2012, all 210 AES Philippines employees underwent various forms of skills development training corresponding to both their job skills and function. A total of 3,232 training hours were recorded during the reporting period, or an average of 61.44 training hours per employee. Breaking this down, majority of the attendees were men at 83%, owing to the large male population of our technical and engineering group. The management team received 53.71 average training hours or 1,880 hours per year while the staff who numbered 175 received an average of 7.73 training hours or about 1,352 training manhours per year. Recognizing the need to promote employees as their skills set improves, AES Philippines has an Operators Progression Program that is designed to support the development of a multi-skilled environment and the provision of career development monitoring to personnel. The program seeks to motivate employees who continuously strive to develop oneself through the acquisition of diverse skills. Initially open to non-team leader positions within the Operations Team, it offers incentives for personnel who successfully meet the required number of training hours (1,000 hours of duty per year to maintain certification) and other requirements. Consequently, qualifications form part of the considerations for promotion,

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lateral transfers, and other relevant employee movements. At present, there are a total of 15 qualified employees undergoing cross-training. Three Turbine Operators are having their cross-training on Boiler, two Turbine Operators on Control Board, three BOP Operators on Boiler, three Shift Relief Operators on Control Board and four Boiler Operators on Turbine training. Apart from this, the Company also supports employees through the Continuing Education Program. We provide a subsidy of PhP25,000 per semester to interested employees for enrollment in a Master’s Degree program and/ or licensure review classes. Upon completion of the course, the employee is subject to a training bond of two years. The standard measure of employee performance is the conduct of an annual performance review; 100% of employees undergo performance reviews although at different periods. Probationary & new employees are reviewed on their third, fifth and sixth month while regular employees’ are reviewed midyear and at yearend. All 210 AES employees have been subjected to mid-year and yearend performance reviews. Employee retention is one of our Company’s goals, but we

66

AES Philippines

recognize that key to sustaining and keeping a robust work force requires comprehensive succession planning that includes discovering the potential of young talent, building a talent pool for critical areas of operation, and monitoring employee turn-over and retirement. To discover fresh talent, AES has forged linkages with top engineering universities in Metro Manila and in Northern Luzon such as the Mapua Institute of Technology to provide on-the-job training. In this program, which forms part of the school’s engineering curriculum, students go through structured training to familiarize themselves with power generation and plant operations. Students who pass the rigorous selection process undergo a comprehensive training and immersion under the Plant Traineeship program for a year. Upon program completion, they receive certification as plant operator. During the training period, the young engineers are potentially hired as regular employees of the Company. We also believe in equipping our people with skills so they can share their knowledge with others in the future. Our Trainer’s Training Program is designed to create a pool of competent mentors who can help their fellow AES Philippines employees improve

and achieve their own key performance indicators. The program, which runs for 96 hours for a period of 11 sessions, covers conducting a training needs analysis, setting metrics for KPIs and using them as training modules and other training methodologies. There were 12 employees who completed the Training of Trainers module last year. In 2012, we had a total of 15 personnel who retired or resigned from AES Philippines; 10 of these employees were male and 8 were between the ages of 30 and 50 and working in the Taguig corporate headquarters. We have also forecasted and planned for the retirement of our employees in the coming years. Over the next five years, we expect an employee turnover of 1.43% to 2.86% due to retirement, mostly among our office and technical staff (which includes engineers, skilled operators and technical professionals) in Masinloc. We expect the highest turn over in 2024 of about 5.71%, also among this group. In fact, 95% of our projected retirees will be from Masinloc, with breakdown by job function as follows: • • • •

79% - Office and technical staff 11% - Supervisors 5% - Junior to middle managers (Team Leaders) 2% - Middle Manager to Director Level (Management Level)

A minimal amount of 4% of retirees will be from the Head Office in Taguig, with 2% from office and technical staff and another 2% from the management or director level.

Just as the Company believes in bolstering its capacity in light of retiring employees, we believe in preparing our employees for this phase in their life. For employees nearing the retirement age of 65, our Human Resource department

provides pre-retirement planning to help them transition into this new life stage and or retraining should they intend to continue working. There was no recorded forced termination of employment in 2012.

Engaging our Employees through Continuous Dialogue In adherence to Philippine Labor Laws, it is the goal of the Company to provide a conducive and open working environment where each employee will be given a chance to voice his opinion or concerns. All organizational initiatives affecting employees are communicated to affected personnel, a minimum of one week prior to implementation. Certain employee policies that are in compliance with Philippine labor laws (such as but not limited to special leave for female employees to ensuring a drug-free workplace) are communicated, on the average, 90 days before implementation. Email communications and classroom orientation are tools for cascading policies to all employees. AES Philippines employees are free to organize themselves in a union; there is no policy prohibiting employees from doing so. However, since AES Philippines took over the operations of the Masinloc Power Plant in 2008, no labor

unions have been formed by the employees. Nevertheless, the Company remains committed to the protection of the rights and interests of labor. The Company upholds freedom of association and the right to self-organize. All operational and administrative policies are carefully drafted and deliberated on so as not to infringe on this right. AES has established systems and protocols that allow employees to air grievances and give feedback. Several platforms have been made available by the Human Resources Department, which include the Employee Complaints and Grievance Committee, Employee Communications, the AES

helpline, and Employee Engagement Surveys. Our non-retaliation policy ensures employees that their opinion will be heard objectively, held in confidence, and responded to in a professional manner and without fear of retaliation. We also provide training on handling employee complaints. In 2012, Team Leaders and Managers of the Masinloc Power Plant and the Taguig Corporate Headquarters attended a one-day training used roleplaying and video simulations to recreate different workplace scenarios to demonstrate effective ways to manage complaints and resolve them.

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Creating a Culture and Consciousness for Safety The business has a Safety Management System in place to set occupational safety and health goals, objectives and targets; commit to prevent injuries; measure health and safety performance; conduct regular health and safety audits and assessments to review compliance with applicable health and safety requirements; and make necessary adjustments to our system to achieve continuous improvement and a world class safety culture. The Plant Manager is ultimately responsible for ensuring that AES Philippines is developing, implementing and maintaining the Environmental Health and Safety (EHS) procedures. The company-appointed Management Representative and the Integrated Management System (IMS) Team ensure that the IMS is implemented and observed at all times. The Health and Safety Committee is the planning and policymaking group on all matters pertaining to safe and health. It takes the lead in developing accident prevention programs, conducting monthly safety meetings, developing and maintaining a disaster contingency plan, periodic training on emergency preparedness, among others. The committee is well represented

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AES Philippines

across the business, having member form the management team and representatives from each business section. The Safety and Health Team Leader supports the EHS committee members through compliance and regulatory investigations. He also alerts the committee of new developments in Philippine legislation that will impact operations. He reports both to the authorities and internally to MPPCL and submits committee meetings to the Department of Labor and Employment (DOLE). An average of 14.29% of the total workforce is represented in formal joint management-worker health and safety committees. Provisions of the AES Philippines’ EHS policy include 100% safety meeting participation rate, monthly proactive and reactive safety reporting, no lost time injury, no fatality, and no environment excursion. Our safety policies cover all employees and contractors. All new employees are given an orientation on the safety procedures of the plant. Attendance to monthly safety meetings, where employees are updated on safety measures of the plant, is tracked and tied to performance objectives. We provide training to all contractors to enhance all personnel’s awareness for safety. We have a comprehensive

contractor safety induction program so that everyone involved in plant operations is fully aware of the risks and knows how to address and mitigate them. Thus, 100% of our contractors undergo a safety orientation that is valid for one year prior to the start of a work contract. Last year, there were a recorded total of 90,268 mandays worked by contractors and sub-contractors on various ad hoc utility, mechanical and maintenance jobs: welding jobs, painting jobs, insulation and cladding works, valve and pump inspections, non-destructive testing (NDT) inspections, scaffolding works, mechanical works, instrumental and control (I&C) works, civil works, on-line sealing works, and belt splicing works. We made sure to provide safety orientation for our contractors and sub-contractors prior to the commencement of work on an awarded project. A total of 195 contractors, equal to 80%, underwent safety training in 2012, while the remaining 20% were trained in the last quarter of 2011. We make sure that all contractors and subcontractors are subjected to the required safety trainings.

Across all AES plants worldwide, performance on safety has improved over the last two and a half years where LTI case rate decreased by 56% for AES people and 48% for operational contractors. In 2012, the Company recorded a 14% injury rate among MPPCL employees and 6% injury rate among

identification of an occupational disease is still ongoing. The table below details workrelated injuries according to type and period of occurrence. Our procedure on Incident Investigation and Reporting defines an incident as a workrelated event that leads to injury, ill health, pollution, or property damage. Examples include events that require first aid, involve vehicle or property damage, and result in lost time incidents, near misses, and fatalities.

Number of injuries and fatalities to the public involving company assets, including legal judgments, settlements and pending legal case of diseases

Type of data

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2012

2.1 Report the number of individuals affected by injuries and fatalities involving company assets.

quantitative

6

3

5

0

4

4

6

3

3

4

1

1

40

2..2 Report the annual number of health and safety related legal cases (resolved and pending), including diseases and judgments affecting members of the public and the potential risks associated with these cases.

quantitative

1

0

0

0

0

0

1

1

0

0

0

0

3

JAN MPPCL

MAR

APR

MAY

JUNE

JULY

AUG

SEPT

OCT

NOV

DEC

TOTAL

2

1

3

0

4

0

5

3

3

3

0

0

Recordables

0

0

0

0

0

1

0

0

0

1

0

0

2

LTA

0

0

0

0

0

0

0

0

0

0

0

0

0

205

205

204

204

213

213

214

214

213

212

209

209

29,568 29,568

29,920 33,088

Manpower Total # of Hours Worked CONTRACTOR

FEB

First Aid

29,400

25,632

32,912

26,928

29,760

32,560

First Aid

4

0

2

0

0

3

1

0

0

0

0

1

Recordables

0

1

0

0

0

0

0

0

0

0

1

0

LTA Manpower

Safety is a responsibility that rests with all those who work in or with AES. Both our employees and our contractors are empowered with a “Stop Work

contractors/sub-contractors. Out of the 40 incidents in 2012, 35 were first aid cases, four were recordable case, and one was a Lost Time Incident. There were no fatality cases. Currently, there is no recording of absenteeism or lost day rates, but this is an area that AES Philippines is looking into to monitoring the productivity and output of our work force. In addition, current internal procedures do not cover classification of absenteeism as per occupational disease. Development of guidelines for

Authority” that allows them to demand the immediate cessation of work if and when they observe unsafe acts or conditions at the workplace.

Total # of Hours Worked SL leave availments

27,968 26,640

0

1

0

0

0

0

0

0

0

0

0

0

461

264

253

224

282

200

205

185

187

210

233

243

66,348

38,016

36,432

26,928 30,240

33,552

34,992

41

63

52

48

56

32,256 40,608 28,800 29,250 26,640 42

54

57

88

45

63

56

24

2012 Sustainability Report

11

2

69


The Company conducts several activities throughout the year to promote consciousness and instill a culture of safety. EHS goals are communicated to all plant personnel during plantwide monthly meetings and form part of an employee’s annual performance appraisal or key performance indicators. A written Site EHS policy document is posted in many prominent common locations of the plant to serve as a daily reminder that working safely is a responsibility equally shared by all employees and contractors. Lastly, an AES Corporate Audit and independent EHS audit is conducted periodically to identify any procedural or executional gaps in the

implementation of these standards.

safety solutions that are specific to the AES Philippines work environment.

In May 2012, AES Philippines held a Company-wide Safety Day to reinforce our commitment to safety both inside and outside the plant. The day’s activities included video screenings on various aspects of safety and an emergency response drill led by the AES Philippines’ Fire Brigade Team. The second activity was also participated by the Masinloc and Candelaria Bureau of Fire Protection as well as the Masinloc Volunteer Fire Brigade. During the assembly, a status update on the three-year Safety Action plan was also presented. The Action Plan was initiated in 2010 to produce customized

Our code of safety extends to our homes where we need to remain vigilant in safeguarding our families and keeping them out of harm’s way. AES Philippines has implemented monthly off-thejob safety program orientations for AES employees and their family members on topics such as prevention of bathroom and kitchen injuries, manual lifting, among others. When necessary, medical counseling is provided by an AES physician. The coverage of these training and assistance programs and their beneficiaries are summarized in the table below.

SUMMARY OF TRAINING AND ASSISTANCE PROGRAMS AND BENEFICIARIES, 2012

areas inside the fence-line of the AES plant are covered by the plan. The ERCP was developed considering the worst-case scenarios of identified emergency incidents to instill a sense of preparedness among our employees. The ERCP identifies potential off-site

Integrity, Diversity and Equal Opportunity in All Aspects of Business At AES Philippines, the value of integrity is deeply embedded in the way that we conduct business. We commit ourselves to honoring diversity, equal opportunity, and compliance with policies and regulations against corruption and noncompetitive behavior.

TRAINING AND ASSISTANCE PROGRAMS PROGRAM RECIPIENTS

EDUCATION/TRAINING Y

N

COUNSELING Y

Y p

p

p

WORKERS’ FAMILIES

p

p

COMMUNITY MEMBERS

p

p

70

AES Philippines

CONTROL

N

WORKERS

AES discloses any work accident injuries in its Annual Employer’s Work Accident/ Illness Report and Annual Medical Report, which are submitted to the Bureau of Working Conditions of the Department of Labor and Employment.

PREVENTION/RISK

N

The AES Philippines Emergency Response and Contingency Plan (ERCP) covers all potential emergency situations and potential incidents associated with the significant Occupational Health and Safety hazards and environmental aspects of AES.

Y

N

p p

p

TREATMENT

p p

It is applicable to all facilities owned and/or operated by, under construction for, leased to, or otherwise used by AES. Also included are those areas that may be affected by the consequences of an emergency incident resulting from any AES operation. All

and on-site emergency situations and accidents at AES Philippines that can have an impact on the health and safety of personnel and/or the environment. In the case of an emergency, all employees should be able to respond in a prompt, well-coordinated, and orderly manner.

As we commit to hiring the best talent to meet our manpower requirement, we base selection on the candidate’s competencies and suitability for the job. Because of the training and on-the-job knowledge that our current employees possess, it is our policy to prioritize hiring internally before looking for external applicants. Our Manpower Selection and Placement Policy explicitly states that no candidate shall be denied nor accepted on the basis of gender, age, or race. We explicitly denounce any form of discrimination. The Company adheres to a strict

“No child labor policy” which prohibits the Company from hiring anyone who is below 18 years old and does not condone forced or compulsory labor. To date, there have been no incidents of discrimination or human rights violations, including specific violations of indigenous rights, reported in AES Philippines. Neither are there human rights cases filed against us in any courts or through any grievance mechanisms. While a larger portion of the employee base is comprised of men at 83.33%, this is attributed to the absorption of the former National Power Corporation workforce, which was predominantly male, during the 2008 acquisition. In addition, their current salary structure and rank were used as basis for the employment starting point under AES Philippines. Women seeking employment

The AES Philippines Safety Pyramid: We advocate pro-active behavior and vigilance as key elements to preventing workplace incidents. How we practice safety at AES Philippines is best illustrated in the Safety Pyramid and premised on the principle that workplace incidents can be avoided by identifying workplace hazards. Workplace hazards may be an unsafe act or behavior, and unsafe condition. These hazards form the base or the bottom layer of the Safety Pyramid, followed by near misses and injuries requiring first aid; at the topmost layer are recordable injuries, major injuries and fatalities. We believe that by focusing attention and awareness on these baseline issues, we can greatly reduce the probability of more serious incidents in the upper layers of the pyramid.

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with the organization are encouraged and welcomed, evident in the employment trend over the last five years of an influx of female members in the organization, including the management level. From 2008, where only about 7% of the workforce was female, this number went up to 17% in 2012. We foresee that as more female employees join our workforce and occupying senior positions in the Company will drive up the average salary of the female employee population. Related to this, all investment agreements and contracts that we enter into with partners are rigorously screened by our Compliance Committee to make sure that their processes uphold human rights in accordance with both Philippine and international laws. In 2012, there were no recorded investment agreements of size and significance that required the inclusion of human rights clauses or a human rights screening. Similarly, there were no suppliers and contractors that specifically underwent screening on human rights. However, it should be noted that as a policy, all contractors and suppliers are mandated to comply with applicable labor laws and regulations, which includes laws safeguarding human rights. All policies that will affect security of employees and human rights protection are also

72

AES Philippines

coordinated with the official security representative. The Security Agency then cascades and provides the necessary information to all its personnel. To keep informed and updated, regular seminars on ethics, compliances and code of conduct are offered to employees. In 2012, all employees equivalent to 100% attended training on these subjects. Similarly, we expect all parties that we do business with to hold themselves to the same ethical standards we espouse. AES Philippines commits to fully comply with the U.S. Foreign Corrupt Practices Act (FCPA) and all anticorruption and bribery laws of the Philippines. The AES Foreign Corrupt Practices Act Policy prohibits all AES Philippines personnel from bribing government officials in whatever form, in whatever manner and for whatever purpose. This policy also mandates all AES Philippines personnel to accurately and fairly record, in reasonable detail, all transactions and dispositions of the assets of AES and its subsidiaries. No AES Philippines employee shall participate in falsifying any accounting or business documents, including all books, records, and accounts. No undisclosed or unrecorded fund or asset may be established or maintained for any purpose.

The General Counsel and the Deputy Legal and Compliance Officer of AES Philippines are in charge of ensuring compliance with the U.S. FCPA Policy and the anti-corruption and bribery laws of the Philippines. Under the Policy, AES and all its subsidiaries must maintain controls to ensure that Company assets are properly controlled, that transactions are executed only with proper authorizations, and that transactions are properly recorded. All AES personnel involved in business development efforts are required to complete FCPA training within the first two months of employment. Furthermore, they are required to participate in an FCPA training session once every two years thereafter. Web-based training sessions are offered monthly by the Ethics and Compliance Department. All business development consultants commissioned to work on time-bound projects are also required to participate in web-based FCPA training before working with AES Philippines. We have a comprehensive corporate compliance program to ensure that the Company enters into business relationships with partners who share a commitment to the highest ethical and legal standards in all transactions. All employees have received training on the Companyâ&#x20AC;&#x2122;s anti-corruption,

ethics policies/procedures and other allied issues. Every year, we conduct training that serves as a refresher course and an update on new policies and/or amendments. The Company, in conjunction with an independent third

party, investigated reports of alleged corruption and they were found to be without any basis. There have been no fines, legal actions or punitive measures of any kind brought against AES Philippines for anti-competitive behavior, anti-trust and monopoly

practices or non-compliance with any of the regulations that prohibit such activities. It is AES Philippinesâ&#x20AC;&#x2122; corporate mandate to refuse gifts or give contributions of any kind to politicians, political parties, and other such institutions.

Creating Value for Communities To make sure that our operations positively impact our environment and host communities, our Corporate Social Responsibility (CSR) programs are grounded on consultative and collaborative efforts. We take into consideration the inputs of stakeholders and enlist the support of other members in the community such as provincial/local government, non-government organizations (NGOs), and peopleâ&#x20AC;&#x2122;s organizations (POs) among others. This also applies to the decision to possibly exit a community, i.e., exit conferences must be implemented with local government leaders and program beneficiaries. We have developed a Stakeholder Communications Plan that outlines our community projects and goals. The AES Foundation, Inc. and the Corporate Communications Department take the lead in developing strategies and programs to engage our stakeholders based on the results of the Community

Resource Inventory & Mapping of Strategic Indicators for Masinloc Coal Power Station conducted by the UA&P in August 2011. Based on the lessons and recommendations of this report, AES Philippines developed its 2012 Community Relations Programs focusing on health, education, livelihood and environment needs of the host communities. Information and education campaigns consisting of regular visits to LGU leaders and participation in group meetings organized by various organizations are also part of the strategy to enlist support for and public awareness of our CSR programs. Our Environmental Monitoring Program (EMP), which outlines our policy on protecting and preserving the environment of our host communities, is a crucial element of our community development thrust. Contingent with the provisions of our Environmental Compliance Certificate, a Multipartite Monitoring Team (MMT) was created to monitor the effective implementation of the EMP.

The MMT is composed of representatives from the DENR, the provincial government of Zambales, the municipal government of Masinloc, Candelaria, Palauig, officials in neighboring villages, the Department of Energy (DOE), and the POs among others. The MMT conducts quarterly monitoring activities that evaluate the following: air quality, noise levels, water quality, sediments and soil quality monitoring, coal and solid waste quality, solid and hazardous wastes monitoring, socio-economic and Information and Education Communication monitoring. After the completion of the laboratory analyses, an MMT Quarterly Report is prepared and reviewed by all the MMT members. Copies of the approved reports are submitted to the DENR Regional Office as well to the respective organizations of the MMT members. Apart from this testing, the MMT conducts dialogues in the form of an exit conference

2012 Sustainability Report

73


to discuss the results of the monitoring activities. Based on the output and feedback, an action plan is developed to appropriately address any issues or concerns raised. We believe that implementation of our CSR

programs must be a multistakeholder engagement that includes monitoring of implementation and evaluating their impact to cull out gaps and maximize positive impacts. Our Community Grievance System receives issues and concerns through

formal letters, phone calls, site visits of meetings various stakeholders, if any. Stakeholders may raise any concerns through the Site Communications Unit, who is also responsible for ensuring that these concerns are properly addressed.

Relating with our Customers distribution utilities, we believe our programs help strengthen the overall institutional and operational capacity of the electric cooperatives to whom we supply energy, reducing energy inefficiencies that in turn translate to savings that they can pass on to the endconsumer who will benefit from a lower cost of electricity.

CSR Highlights for 2012 According to the latest study by the UNESCO Institute for Statistics, the Philippines is among the top five countries with the highest number of out-of-school youths. The reasons listed for this included limited financial capacity, lack of access to nearby schools, and insufficient classrooms. A key CSR strategy for AES Philippines is to work with the Department of Education (DepEd), academic institutions, and the local government to supplement efforts to improve the state of education in the Philippines. AES Philippines takes part in the annual Brigada Eskwela program of the Department of

Education, a nationwide program that mobilizes volunteers to conduct cleaning and minor repairs of public schools. In partnership with the Ramon Magsaysay Technical University in Zambales, AES Philippines provides financial assistance in the form of tuition fee payment and allowances for books, school supplies, transportation, dormitory and uniform for nine college scholars. Aside from providing for the educational needs of students, AES Philippines also provides for their nutritional needs. Child malnutrition has been noted a major factor that inhibits a child from attending and performing well in school.

School (SY 2012-2013)

No. of Malnourished pupils as of September 2012

The feeding program was paired with nutritional awareness programs targeted to parents covering food safety and sanitation and proper nutrition. During the six-month implementation of our school-based supplementary feeding program, specifically from September to December 2012, there was a decline in the number of malnourished pupils.

Status as of December 2012 Malnourished

Normal

Bani Elementary School

127

122

5

BaniRelocation Elementary School

107

82

25

Taltal Elementary School

138

79

59

Lauis Elementary School

50

14

36

422

297

125

Total

74

Together with the DepEd, AES Philippines conducted a feeding program to respond to the â&#x20AC;&#x153;short-term hungerâ&#x20AC;? syndrome among children by providing daily nutritious lunches to 442 pupils from Grades 1 to 6 in four elementary schools in Masinloc and Candelaria.

AES Philippines

Our safety philosophy extends to our customers. We are able to do this through our Asset Management Policy, which enshrines and operationalizes our commitment to maximize our stakeholder value without compromising the health and safety of our employees, contractors, visitors, our communities, and the general public. Our power plant is a networked system that is fully integrated with financial and sustainable performance, and our lifecycle approach covers the concept, design, construction, operation, maintenance, renewal, and disposal phases to optimize profit while remaining environmentally compliant, promoting health and safety, and upholding our contractual obligations. Last year, the Company did not post any violations or incidences of noncompliance with regulatory and voluntary codes concerning the health and safety impacts of our product.

Continuous enhancement of our operational performance is a pillar of our product responsibility thrust so that the end-users of our customers always have access to the safe, reliable, low-cost, and sustainable energy that we produce. Internally, we benchmark our performance against rigorous standards, use process improvement tools for optimization, and learn from deviations from normal operations or failures using Root Cause Analysis principles. Externally, we share our goals with our customers and empower them to act in accordance with our targets through AES Academy. The Company set up the facility to develop and strengthen the financial, operational, and safety capabilities of the electric cooperatives and distribution utilities. While we do not deal directly with the end-users of our products, i.e., the customers of our electric cooperatives and

To help improve access to electricity in our host communities and promote their self-reliance, we host education and information campaigns between them and the Department of Energy to teach our communities to access the Energy Regulations (ER) No.1-94 Funds, which consists of financial benefits to host communities of energy companies, so that they may be used for electrification, livelihood development, and reforestation. In 2012, Masinloc projects funded by the ER 1-94 included the renovation of covered court of Barangay Bani; purchases of two garbage trucks for Masinloc, Zambales; renovation of Rural Health Clinic of Masinloc, and; the construction of village clinic for Barangay Bani. All in all, in 2012 a total of USD419,275 in funding was obtained from ER1-94 for the following projects:

2012 Sustainability Report

75


Name of Project

Funding Source

Amount of Project (Php)

Amount of Project (US$) FX Ave 2012 (42.26PHP/USD)

Purchase of 2 Units Garbage Truck for Masinloc, Zambales

RWMEEFMasinloc Share

4,462,500.00

105,596.31

Renovation of Rural Health Unit of Masinloc, Zambales

Development and Livelihood Fund – Municipal Share

5,283,499.61

125,023.65

Construction of Barangay Clinic of Bani, Masinloc, Zambales

RWMEEFBarangay Share

7,863,590.84

186,076.45

17,609,590.45

416,696.41

Total Available ER1-94 funds as of December 2012:

DEVELOPMENT AND LIVELIHOOD FUND (DLF) Host Community

Available Fund (Php)

Available Fund (US$) FX Ave 2012 (42.26PHP/USD)

Region 3

3,604,846.96

85,301.63

Province of Zambales

10,814,540.88

255,904.90

Municipality of Masinloc

7,333,464.75

173,532.06

Barangay Bani

4,229,459.92

100,081.87

Resettlement Area

1,802,423.48

42,650.82

27,784,735.99

657,471.27

Total

REFORESTATION, WATERSHED MANAGEMENT, HEALTH AND/OR ENVIRONMENT ENHANCEMENT FUND (RWMHEEF) Host Community

Available Fund (Php)

Available Fund (Php) FX Ave 2012 (42.26PHP/USD)

Region 3

3,604,846.96

85,301.63

Province of Zambales

10,814,540.88

255,904.90

Municipality of Masinloc

8,154,464.36

192,959.40

Barangay Bani

2,933,873.64

69,424.36

Resettlement Area

1,802,423.48

42,650.82

27,310,149.32

646,241.11

Total

76

AES Philippines

Because we communicate regularly with our customers, all IEC and marketing materials as well as our sponsorships are guided by our Marketing Policy that is observed by all AES employees, agents, and potential, new, and existing customers. The policy is referenced against our Code of Conduct and Ethics, and other policies meant to uphold ethical behavior, integrity, and transparency in all our dealings. Our Compliance Department also reviews and approves all such programs prior to implementation, thus no violations have been recorded.

the organization to regularly obtain feedback on the issues and parameters that are important to our customers, to determine their perception on our performance on these parameters, identify priorities for improvement, and track customer attitude towards our performance. Customer visits are also conducted once every two months, although customers may request more frequent meetings or visits from AES Philippines personnel to address urgent issues and concerns.

The parameters in the 2012 survey were: scope of supply, term of contract, payment To make sure our IEC security, risk allocation, pricing, materials are clear and easily billing and invoicing, corporate understood, we produce social responsibility, product them in both English and the complements, and customer national language Filipino. relations. Census, survey One publication “Enerhiyang forms, meetings, and followMaasahang Sambayanan” up clarificatory meetings were [Energy the Nation Can Depend the tools and methods used to On] is rendered in a comic strip conduct the study. Results were format to illustrate concepts of analyzed and feed planning, energy generation and safety. management, and product A section entitled, “Answers to development input. A gap Your Questions” enumerates analysis was also conducted to ways that community concerns further improve performance. about AES operations may We shared the results of the be relayed to the Plant’s Site 2012 study with our customers Communications, the Plant to serve as opportunity to Manager or the Corporate Affairs clarify and address concerns Office. As a full-circle response, that they raised. it also lists the ways that AES will look into resolutions. In 2012, AES customers posted satisfied and highly satisfied rankings in the survey across Every year, starting 2012, AES Philippines will conduct customer all parameters, except for one customer who was dissatisfied satisfaction surveys to enable

with a payment security issue, which we have already addressed by reviewing the credit worthiness of customers and possible amendments to the credit policy. Pricing was a concern of our customers, which we have started to address so that significant reduction of power rates may be enjoyed by the end of 2013. Retail competition and open access were the challenges in the electric power industry that our customers deemed we must be ready to address. As a response, AES is already preparing a briefing for our customers to keep them updated of the significant changes taking place. Our CSR program and AES Academy, according to our customers, make us highly distinctive from our other suppliers and are among our overall strengths, together with customer relations and billing and invoicing process. There were no complaints regarding breaches in customer privacy and loss of customer data in 2012. The customer satisfaction survey is unique in the industry and we are proud of the fact that AES is the first power supplier to do this. At the same time, we hope that this will serve as a model program that other power suppliers and our customers can adopt as a means of engaging with and empowering their own customers.

2012 Sustainability Report

77


Sustainability Commitments

Sustainability Report

In terms of financial performance, we commit to deliver on our 10-year plan to our corporation, shareholders, and business partners.

CHAMPION Andy Horrocks

Our

In terms of operations and reliability, we commit to remain in the list of top decile companies by providing excellent technical performance conducted in a very cost-effective way. In terms of national and local impacts, we commit to working closely with the local, regional, and national governments and our host communities so that our Companyâ&#x20AC;&#x2122;s growth and expansion benefits a greater majority of Filipinos and our presence adds value to the Philippines. In terms of environment, health, and safety, we commit to investing in programs that prioritize responsible performance, going beyond compliance where possible, and ensuring buy-in from our partners and stakeholders.

Council President and CEO

CHAIR Kim de Leon Executive Manager Corporate Affairs

CO-CHAIR Cynthia PantoĂąal Executive Director AES Philippines Foundation

MEMBERS Johnny Tanis Executive Director AES Philippines Foundation

Chrys Herrera Vice-President Commercial Affairs

Irvin Joseph Fabella

In terms of talent management, we commit to train high-performing leaders and experts by investing in our people at all levels and providing them with the necessary, top-of-the-line personnel development programs so that they are dynamic, competitive, and productive.

Deputy Legal & Compliance Officer

Vivian Cruz Executive Manager Human Resources

In terms of our supply chain, we commit to applying global best practices by leveraging off our size throughout the world and working proactively with our suppliers and contractors to improve and align their sustainability performance with our goals and objectives. In terms of community development and stakeholder engagement, we commit to supporting AES Foundation and its programs as we deliver on our covenant with our community, country, and customer to work cooperatively with our stakeholders and help promote equitable development. In terms of corporate governance, we commit to practicing our business ethically, abiding by all the laws, regulations, and standards, and ensuring that our corporate culture and our people uphold integrity in all their actions.

78

AES Philippines

TECHNICAL WORKING GROUP Members Norez Abdullah Jon Cleofas Kristine Cunanan Chuyie Kaye Guibelondo Grace Lim Antonia Lopez Mariel Maya Franz Monsato Geraldine Ronquillo Arnulfo Sangalang Evangeline Serrano Ronald Allan Sumague Alfredo Tresmanio Joselito Tutanes

2012 Sustainability Report

79


Third-Party Verification and Assurance Statement AES Philippines 2012 Sustainability Report GRI Application Level: “A+”

Standard Disclosures This is the first time that AES Philippines, Inc. has prepared a sustainability report (the Report) using the GRI A+ application level for Electric Utilities Sector Supplement for its 2012 performance, the company has engaged the services of an External Review Committee (ERC) composed of independent experts from the field of economics, environment, labor and human rights to review and assure the content and quality of the disclosures in the Report. The company has entered into a partnership with the Center for Social Responsibility of the University of Asia and the Pacific (CSR-UA&P) in order to provide the administrative and logistical support for the review and assurance process.

As well, the Report is excellently prepared, complete and comprehensive. To a large extent, it mirrors some of the commendable practices and core values of the company. For instance, the safety of the personnel, the welfare of the community and the protection of the environment are high on the company’s consciousness and practices. The company puts a premium on people development through its continuing education program. Its commitment to transparency and objectiveness are manifested by its willingness to have third parties gather in-depth baseline data on its performance and external impacts and subject the same to their evaluation and verification. The AES Academy displays the company’s commitment to helping its partners upgrade their skills and knowledge and to transmitting good values and best practices to them. Likewise, the Report shows balance by recognizing the present and real challenges facing the company whilst proposing the means to overcome them. This is particularly true in its presentation of the company as a profitable economic enterprise and its disclosure of the inherent risks in doing business in the country.

AES Philippines shouldered the expenses of the site visits, including the honorariums of the ERC members and the support provided by CSR-UA&P. The company also pre-selected the facilities visited and the people interviewed in the course of the assurance review.

The comprehensiveness of the Report also provided a 360-view of the company’s performance, allowing it to generate baseline data and information to set future sustainability targets and milestones.

The review is limited by the scope defined in the Report. Likewise, the ERC statement should not be construed as the views of UA&P nor a guarantee to the accuracy of the data and information presented as well as the principles and standards of practices of AES Philippines.

Recommendations

Methodology The ERC utilized the Principles for Defining Report Content and Principles for Ensuring Report Quality of the GRI G3 Guidelines for EUSS to undertake the review process. During the review, which began on May 15, 2013 until October 4, 2013, the ERC convened 5 times and conducted interviews of key stakeholders and visited the company’s site operations in Masinloc, Zambales. As a first time reporter, the company was allowed by the ERC to revise the report and indicators based on its comments and recommendations to the initial set of data and information submitted by the company.

Findings

The incorporation of sustainability as a core component of the company’s mission, vision and values has tremendous implications in the way management and employees view AES as an energy company. It can potentially lead to a paradigm shift and fresh perspective on the role the company plays in bringing about significant growth in areas where it operates. As the company President and CEO has noted in his report, sustainability reporting has direct implications on how the company should conduct itself in the future. Reporting should not be viewed as mere compliance or a framework to adopt every year. Rather, everyone in the company should internalize the knowledge and culture demanded by a business that is serious in optimizing the “triple bottom line”. Everyone should be aware of the interconnectedness of the company’s day-to-day operations to the broader sectors of society as well as the interdependence that exists among the different functional areas of the company. It is in this sense that a profitable and socially and environmentally responsible business enterprise can have a profound impact on society.

Overall, the ERC finds the final Report consistent with the GRI reporting guidelines, specifically with the principles of materiality, stakeholder inclusiveness, completeness, accuracy, balance, timeliness, and reliability.

80

AES Philippines

2012 Sustainability Report

81


Moving forward, the company can capitalize on having a fresh start in ensuring business sustainability by considering the following recommendations: •

Conduct road shows within the company to orient everyone, including key subcontractors, as to the importance of pursuing sustainability and adherence to best practices;

Build the business case for sustainability, especially for environmental initiatives - for instance, by measuring and closely monitoring the value generated and the savings realized from waste or emission mitigating initiatives;

Externalize the practice of sustainability by formulating and aligning the company’s sustainability standards and practices to that of its partners, customers and community. In this regard, the AES Academy can provide the necessary support by way of education and training programs;

Improve the company’s communication plan for its various stakeholders, especially the communities and the local government. This is to ensure that the stakeholders appreciate and understand the sustainability and disclosure efforts of the company;

In the area of human rights, in-house as well as contractual personnel should strengthen its awareness and practices of human rights provisions and anti-discrimination policies. In the longterm, the expertise of 3rd party consultants may be needed to assess the company’s human right impact; and

Incorporate the sustainability indicators as part of the company’s management scorecard in order to inform decision-making, strategic target setting, and appraisal of performance.

The members of the ERC would like to extend its congratulations to AES Philippines for publishing the company’s first sustainability report as well as for taking the bold steps in its journey towards business sustainability.

Members of the External Review Committee:

WINSTON CONRAD PADOJINOG, Ph.D. Chairman, External Review Committee Dean, School of Management University of Asia and the Pacific

GRACE FAVILA Chair, Advisory Council, Philippine Business for the Environment Vice Chair, Kaibigan ng Kalikasan at Kaunlaran Vice President, Philippine Pollution Prevention Roundtable

NANETTE DUNGO, Ph.D. Adjunct Professor, University of Asia and the Pacific Former Chairperson, Sociology Department, University of the Philippines

JAY YACAT Assistant Professor, Department of Psychology, University of the Philippines, Diliman President, National Association for Sikolohiyang Pilipino, Inc. Member, Board of Directors, Psychological Association of the Philippines

Manila, Philippines October 8, 2013

82

AES Philippines

2012 Sustainability Report

83


Global Reporting Initiative Index Application Level Standard Disclosures Part I: Profile Disclosures 1. Strategy and Analysis

3.10

Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change of base years/periods, nature of business, measurement methods).

Not reported

Not reported

Profile Disclosure

Disclosure

Page

3.11

Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.

1.1

Statement from the most senior decision-maker of the organization.

4-7

3.12

Table identifying the location of the Standard Disclosures in the report.

1.2

Description of key impacts, risks, and opportunities.

22-33

3.13

Policy and current practice with regard to seeking external assurance for the report. Disclosure

2. Organizational Profile

2

4. Governance, Commitments, and Engagement

Profile Disclosure

Disclosure

2.1

Name of the organization.

8-9

Profile Disclosure

2.2

Primary brands, products, and/or services.

8-9

4.1

11

2.3

Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures.

8-9

Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.

2.4

Location of organization’s headquarters.

8-9

4.2

Indicate whether the Chair of the highest governance body is also an executive officer.

11

2.5

Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

8-9

4.3

For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

11

2.6

Nature of ownership and legal form.

8-9

4.4

Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).

8-9

Mechanisms for shareholders and employees to provide r ecommendations or direction to the highest governance body.

11

2.7

4.5

Scale of the reporting organization.

8-9

2.9

Significant changes during the reporting period regarding size, structure, or ownership.

8-9

Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance).

11-12

2.8

2.10

Awards received in the reporting period.

42-43

4.6

Processes in place for the highest governance body to ensure conflicts of interest are avoided.

11-12

EU1

Installed capacity, broken down by primary energy source and by regulatory regime.

8-9

4.7

11

EU2

Net energy output broken down by primary energy source and by regulatory regime.

8-9

Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity.

4.8

Number of residential, industrial, institutional and commercial customer accounts.

8-9

Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

12

EU3 EU4

Length of above and underground transmission and distribution lines by regulatory regime

4.9

12

EU5

Allocation of CO2e emissions allowances or equivalent, broken down by carbon trading framework.

Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

4.10

Disclosure

Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

12

Profile Disclosure 3.1

Reporting period (e.g., fiscal/calendar year) for information provided.

1

4.11

Explanation of whether and how the precautionary approach or principle is addressed by the organization.

12

3.2

Date of most recent previous report (if any).

1

4.12

3.3

Reporting cycle (annual, biennial, etc.)

1

Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

3.4

Contact point for questions regarding the report or its contents.

2

4.13

12

3.5

Process for defining report content.

1-2

3.6

Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.

1

Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.

4.14

List of stakeholder groups engaged by the organization.

16-21

3.7

State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope).

Not reported

4.15

Basis for identification and selection of stakeholders with whom to engage.

16-21

3.8

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.

4.16

Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

16-21

3.9

Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols.

4.17

Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.

16-21

3. Report Parameters

84

AES Philippines

2

2012 Sustainability Report

85


Standard Disclosures Part II: Disclosures on Management Approach (DMAs)

DMA SO

Disclosure on Management Approach SO

Aspects

Local communities

G3.1 EUSS DMAs

Disclosure

EU19

Stakeholder participation in the decision making process related to energy planning and infrastructure development.

Not reported

DMA EC

Disclosure on Management Approach EC

EU20

Approach to managing the impacts of displacement

Not reported

Aspects

Economic performance

Corruption

Market presence

Public policy

Indirect economic impacts

Anti-competitive behavior

Availability and reliability

Compliance

EU6

EU7

Management approach to ensure short and long-term electricity availability and reliability

Not reported

Demand-side management

Not reported

Demand-side management programs including residential, commercial, institutional and industrial programs

Not reported

Disaster/Emergency planning and response EU21

Contingency planning measures, disaster/emergency management plan and training programs, and recovery/restoration plans.

DMA PR

Disclosure on Management Approach PR

Aspects

Customer health and safety

System efficiency

Product and service labelling

Research and development EU8

EU9

Marketing communications

Research and development activity and expenditure aimed at providing reliable electricity and promoting sustainable development

Customer privacy

Plant decommissioning

Not reported

Provisions for decommissioning of nuclear power sites

Not reported

DMA EN

Disclosure on Management Approach EC

Aspects

MaterialsCOMM

Not reported

Compliance Access EU23

Programs, including those in partnership with government, to improve or maintain access to electricity and customer support services.

75,77

Provision of information

Energy

EU24

WaterCOMM BiodiversityCOMM

Practices to address language, cultural, low literacy and disability related barriers to accessing and safely using electricity and customer support services

75,77

Standard Disclosures Part III: Performance Indicators

Emissions, effluents and wasteCOMM Indicator

Products and services

Disclosure Economic performance

Compliance Transport

EC1

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

34-35

EC2

Financial implications and other risks and opportunities for the organizationâ&#x20AC;&#x2122;s activities due to climate change.

25

Overall DMA LA

Disclosure on Management Approach LA

Aspects

Employment

EU14

Programs and processes to ensure the availability of a skilled workforce

64

EC3

Coverage of the organizationâ&#x20AC;&#x2122;s defined benefit plan obligations.

37

EU15

Percentage of employees eligible to retire in the next 5 and 10 years broken down by job category and by region

64-65

EC4

Significant financial assistance received from government.

35

EU16

Policies and requirements regarding health and safety of employees and employees of contractors and subcontractors

Market Presence

66 EC5

Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation.

39

EC6

Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

39-40

EC7

Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

39-40

Labor/management relations Occupational health and safety Training and education Diversity and equal opportunity

Indirect economic impacts

Equal remuneration for women and men EC8

Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

39-43,74

EC9

Understanding and describing significant indirect economic impacts, including the extent of impacts.

39-43,74

Freedom of association and collective bargaining Child labor

Availability and reliability

DMA HR

Disclosure on Management Approach HR

Aspects

Investment and procurement practices Non-discrimination

Prevention of forced and compulsory labor

EU10

Security practices Indigenous rights Assessment Remediation

86

AES Philippines

Planned capacity against projected electricity demand over the long term, broken down by energy source and regulatory regime.

Not reported

System efficiency EU11

Average generation efficiency of thermal plants by energy source and regulatory regime.

36-37

EU12

Transmission and distribution losses as a percentage of total energy.

Not reported

2012 Sustainability Report

87


Indicator

Disclosure

Overall

Materials

EN30

Total environmental protection expenditures and investments by type.

53

Social: Labor Practices and Decent Work

EN1COMM

Materials used by weight or volume.

46

EN2

Percentage of materials used that are recycled input materials.

46

Indicator LA1COMM

Total workforce by employment type, employment contract, and region, broken down by gender.

62-64

LA2COMM

Total number and rate of new employee hires and employee turnover by age group, gender, and region.

62-64,67

EU17

Days worked by contractor and subcontractor employees involved in construction, operation and maintenance activities.

EU18

Percentage of contractor and subcontractor employees that have undergone relevant health and safety training.

68

LA3

Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

67

LA15

Return to work and retention rates after parental leave, by gender.

Energy

Employment

EN3

Direct energy consumption by primary energy source.

47

EN4

Indirect energy consumption by primary source.

47-48

EN5

Energy saved due to conservation and efficiency improvements.

47-48

EN6

Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.

48

EN7

Initiatives to reduce indirect energy consumption and reductions achieved.

47-48

Water EN8COMM

Total water withdrawal by source.

48

EN9

Water sources significantly affected by withdrawal of water.

48

EN10

Percentage and total volume of water recycled and reused.

48-49

Biodiversity EN11

Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

54,59

EN12COMM

Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

52,58

EU13

Biodiversity of offset habitats compared to the biodiversity of the affected areas

EN13

Habitats protected or restored.

60

EN14COMM

Strategies, current actions, and future plans for managing impacts on biodiversity.

48-49,59

EN15

Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

59-60

Labor/management relations LA4COMM

Percentage of employees covered by collective bargaining agreements.

Not Reported

LA5

Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.

Not Reported

Occupational health and safety LA6

Percentage of total workforce represented in formal joint managementworker health and safety committees that help monitor and advise on occupational health and safety programs.

68

LA7COMM

Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender.

69

LA8

Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.

70

LA9

Health and safety topics covered in formal agreements with trade unions.

Not Reported

Training and education

Emissions, effluents, and waste EN16COMM

Total direct and indirect greenhouse gas emissions by weight.

50-51

EN17

Other relevant indirect greenhouse gas emissions by weight.

51

EN18COMM

Initiatives to reduce greenhouse gas emissions and reductions achieved.

54-58

EN19

Emissions of ozone-depleting substances by weight.

51

EN20COMM

NOx, SOx, and other significant air emissions by type and weight.

51

EN21COMM

Total water discharge by quality and destination.

48-49

EN22COMM

Total weight of waste by type and disposal method.

51-52

EN23

Total number and volume of significant spills.

51-52

EN24

Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

51-52

Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organizationâ&#x20AC;&#x2122;s discharges of water and runoff.

48-49

EN25

EN27

EN28

88

AES Philippines

Average hours of training per year per employee by gender, and by employee category.

65

LA11

Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

65-66

LA12

Percentage of employees receiving regular performance and career development reviews, by gender.

65-66

Diversity and equal opportunity LA13

LA14

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.

71

Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.

71

Social: Human Rights Indicator

Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

52,58

Percentage of products sold and their packaging materials that are reclaimed by category.

Not Reported

Disclosure Investment and procurement practices

HR1

Percentage and total number of significant investment agreements and contracts that include clauses incorporating human rights concerns, or that have undergone human rights screening.

Not Reported

Compliance

HR2

Not Reported

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

Percentage of significant suppliers, contractors and other business partners that have undergone human rights screening, and actions taken.

HR3

Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Transport EN29

LA10

Equal remuneration for women and men

Products and services EN26

Disclosure

Significant environmental impacts of transporting products and other goods and materials used for the organizationâ&#x20AC;&#x2122;s operations, and transporting members of the workforce.

52

2012 Sustainability Report

89


Anti-competitive behavior

Non-discrimination HR4

Total number of incidents of discrimination and corrective actions taken.

71

HR5COMM

Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.

67

SO7

Compliance SO8

Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor.

71

Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor.

Indicator PR1COMM

Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

Not reported

PR2

Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

Not reported

EU25

Number of injuries and fatalities to the public involving company assets, including legal judgments, settlements and pending legal cases of diseases.

71

Security practices HR8

Percentage of security personnel trained in the organizationâ&#x20AC;&#x2122;s policies or procedures concerning aspects of human rights that are relevant to operations.

Product and service labeling

Indigenous rights HR9

Total number of incidents of violations involving rights of indigenous people and actions taken. Assessment

HR10

Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.

Not reported

Remediation HR11

PR3

Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

Not reported

PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.

Not reported

PR5

Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

77

Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms.

Marketing communications

Social: Society Indicator

Disclosure Customer health and safety

Prevention of forced and compulsory labor HR7

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. Social: Product Responsibility

Child labor HR6

Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes.

PR6

Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.

75-77

PR7

Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

77

Disclosure Local communities

SO1COMM (EUSS)

Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.

38-39

SO1 (G3.1)

Percentage of operations with implemented local community engagement, impact assessments, and development programs.

Not reported

EU22

Number of people physically or economically displaced and compensation, broken down by type of project.

Not reported

SO9

Operations with significant potential or actual negative impacts on local communities.

Not reported

SO10

Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities.

Not reported

Customer privacy PR8

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.

77

Compliance PR9

Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. Access

EU26

Percentage of population unserved in licensed distribution or service areas.

Corruption SO2

Percentage and total number of business units analyzed for risks related to corruption.

72

EU27

Number of residential disconnections for non-payment, broken down by duration of disconnection and by regulatory regime.

SO3

Percentage of employees trained in organizationâ&#x20AC;&#x2122;s anti-corruption policies and procedures.

72

EU28

Power outage frequency.

38

EU29

Average power outage duration.

38

SO4

Actions taken in response to incidents of corruption.

EU30

Average plant availability factor by energy source and by regulatory regime.

38

Pulic Policy SO5

Public policy positions and participation in public policy development and lobbying.

72

SO6

Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.

72

90

AES Philippines

2012 Sustainability Report

91


18/F Bench Tower, 30th Avenue cor. Rizal Drive, Crescent Park West 5, Bonifacio Global City, Taguig City

92

AES Philippines

AES - 2012 Sustainability Report  
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