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Financial HighlightsIn US Dollars Thousands

First Gen Corporation (Consolidated) 2007 2006* 2005*

Gross Revenues 1,107,856 1,047,135 842,666

EBITDA 356,566 324,918 407,851

Net Income 181,831 147,079 144,147

Net Income attributable to Equity holders of the Parent 104,655 91,839 86,820

Current Assets 768,427 723,788 588,824

Noncurrent Assets 3,256,976 1,017,711 904,128

Total Assets 4,025,403 1,741,499 1,492,952

Current Liabilities 865,119 319,214 298,734

Noncurrent Liabilities 1,885,995 707,092 727,035

Equity attributable to Equity holders of the Parent 611,093 546,570 314,123

Minority Interest 663,196 168,623 153,060

Debt to Equity Ratio (including Minority interest) 2.16 1.44 2.20

Earnings Per Share for Net Income attributable to the Equity holders of the Parent - Basic

$0.130 $0.117 $0.109

1,200

1,000

800

600

400

200

0

07 06 05

GROSS REVENUE

400

300

200

100

0

07 06 05

EBITDA

200

150

100

500

0

07 06 05

NET INCOME

2007 COMPARISON OF FINANCIAL HIGHLIGHTSFOR FIRST GEN AND ITS OPERATING COMPANIES(in USD MIllions)

* as restated

1,200

1,000

800

600

400

200

0

400

350

300

250

200

150

100

0

200

150

100

50

0

GROSS REVENUE EBITDA

NET INCOME

First Gen

FGPC

FGP

EDC*

FG HYDRO*

* Figures for the full year 2007. Translated to US Dollars using the Php 41.411:$1 exchange rate.

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Our VisionFirst Gen desires to enhance its position as the leading world-class Filipino energy company. First Gen aims to deliver cost-effective and reliable energy services to customers. First Gen will rise to the challenges of world-class competition.

Our MissionTo Be the Preferred ProviderWe are committed to be the preferred provider of energy services. In performing our role as the preferred provider, we will acquire, develop, finance, operate, and maintain our investments with the single-minded focus on delivering superior services to our customers.

To Be the Preferred Employer We are a company of talented, dynamic, highly motivateD, and fun-loving individuals. We provide a work environment that encourages innovative and entrepreneurial employees to build our business. We retain and attract talent by offering competitive benefits and compensation packages as well as professional development.

To Be the Preferred InvestmentWe strive to grow the business and enhance shareholder value by proactively pursuing opportunities and subjecting these to a diligent analysis of risks and rewards. We remain focused on our core power generation business while developing and seeking other viable energy-related business opportunities. We value our relationships with our investors, creditors and partners, and demonstrate this through good governance, transparency, and professionalism.

To Be the Preferred DeveloperWe aim to be the preferred partner in nation-building and community development. We are committed to the fulfillment of our social, ethical, environmental, and economic responsibilities.

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1 Financial Highlights

4 First Gen Subsidiaries

8 Message from the Chairman

12 Message from the President and CEO

18 What We Care About

28 Corporate Governance

30 Board of Directors

32 Management Committee

34 Financial Review

37 Statement of Management Responsibility for Financial Statements

38 Report of Independent Auditors

39 Financial Statements

125 Glossary of Terms

126 Corporate Structure

IBC Corporate Directory

Contents

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FIRST GEN Subsidiaries

First Gas Power Corporation (FGPC)

FGP Corporation (FGP)

First Private Power Corporation (FPPC)

DATE OF INCORPORATION 24 November 1994 23 July 1997 27 November 1992

OWNERSHIP 60% First Gen 60% First Gen 40% First Gen

DESCRIPTION FGPC undertook the development, financing, and construction of the 1,000 MW Santa Rita Combined Cycle power plant. The plant uses Siemens V84.3A gas turbines. It is comprised of 2x500 MW blocks, each block comprising of two independent 250 MW modules.

FGP undertook the development, financing, and construction of the 500 MW San Lorenzo Combine Cycle power plant. The San Lorenzo plant was constructed and developed using a structure similar to the structure used for the Santa Rita plant.

FPPC holds a 93.25% stake in the Bauang Private Power Corp. (BPPC) which operates the 225 MW Bauang power plant. It is one of the largest bunker-fired diesel power generation facility in the world, consisting of 21 medium speed diesel 11.5 MW generator sets.

2007 REVENUES (in millions) US$667.7 US$334.1 US$7.7¹

¹ Pertains to 40% equity stake of First Gen

² Pertains to one month revenue of EDC

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First Gen Renewables (FGRI)

First Gen Hydro Power Corporation (FGHPC)

PNOC-Energy Development Corporation (PNOC - EDC)

29 November 1978 13 March 2006 05 March 1976

100% First Gen 100% First Gen 40% Economic Interest with 60% Controlling Stake - First Gen

In June 2004, FGRI through FG Bukidnon won the bid for the 1.6 MW Agusan River Hydroelectric Plant conducted by Private Sector Assets and Liabilities Management Corp. (PSALM).

The run-of-river plant was constructed and commissioned by National Power Corporation (NPC) in 1957. It is located in Damilag, Manolo Fortich, Bukidnon, Mindanao. It consists of two 800 kW turbine generators that use water from the Agusan River to generate electricity. The plant is currently connected to the local Cagayan Electric Power and Light Co., Inc. (CEPALCO) distribution grid via the National Transmission Corporation (TransCo) distribution line. FG Bukidnon, a wholly owned subsidiary, operates the Plant.

In September 2006, FGHPC won the bid for the 112 MW Pantabangan Masiway Hydroelectric Plants conducted by PSALM.

Pantabangan was commissioned by NPC in 1977 while Masiway was completed in 1981. The plants are located in the municipality of Pantabangan in the Central Luzon province of Nueva Ecija. Pantabangan consists of two 50 MW turbines which uses water from the Pantabangan reservoir, while Masiway consists of one 12 MW turbine which uses water discharged by Pantabangan into the Masiway reservoir to generate electricity. The Pantabangan reservoir has the largest strorage capacity in the country at 3.0 billion cubic meters. The two plants are connected to the Luzon grid.

First Gen, through 100% subsidiary Red Vulcan Holdings Corp. won the bid for PNOC and PNOC EDC Retirement Fund’s remaining interest in PNOC EDC on 21 November 2007. The shares were turned over to First Gen on 01 December 2007. Such interest represent 40% economic interest and 60% voting rights in PNOC EDC.

PNOC EDC is the Philippines’ largest producer of geothermal energy and has been largely responsible for the country being the second largest producer of geothermal energy in the world, second only to the United States. The aggregate installed capacity of EDC’s geothermal energy projects is approximately 1,198.8 MW, of which 743.8 MW supplies steam to EDC or Build-Operate-Transfer (BOT) Contractor-operated power plants. The remaining 455 MW supplies steam to NPC-owned power plants.

Php1.27 Php2,619.3 Php1,629.5²

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First Gas Power Corporation (FGPC)

FGP Corporation (FGP)

First Private Power Corporation (FPPC)

KEY ACHIEVEMENTS AND IMPROVEMENTS / ISSUES RESOLVED

In 2007, FGPC completed its power augmentation program which increased the power output of the Sta. Rita Plant by a total of 52.4 MW. The program utilized evaporative cooling technology and Compressor Mass Flow upgrades. Evaporative cooling is a widely-used and proven power augmentation technology for gas turbine plants. Compressor Mass Flow upgrades enhances the generating capacity of the plants by increasing the air mass flow through the gas turbines.

FGP likewise completed its power augmentation program in 2007 with the installation of Compressor Mass Flow upgrades involving the replacement of the inlet guide vane and the compressor’s first and second rows blades and vanes. FGP completed the installation of evaporative coolers in November 2006. The program increased the plant’s capacity by a total of 32.8 MW.

Under the terms of the Electric Power Industry Reform Act of 2001 (EPIRA), all contracts between NPC and Independent Power Producers (IPPs), including the BOT Agreement, became subject to mandatory review and renegotiation. As a result, the General Framework Agreement (GFA) was executed on 14 March 2005. The GFA (i) resolved contractual and financial issues under the BOT Agreement that were raised by the Government’s Inter-Agency Committee through PSALM in July 2002; (ii) documented the prior voluntary concessions granted to NPC; (iii) set forth certain additional concessions granted to NPC and PSALM. The GFA was rendered effective on 11 July 2007 upon the approval by the National Economic Development Authority.

CONTRACTUAL ARRANGEMENTS

FGPC sells electricity to Meralco under a 25 year Power Purchase Agreement (PPA). The fuel supply for the plant is provided through a 22 year Gas Sale and Purchase Agreement (GSPA) signed with the Gas Sellers, a consortium composed of Shell Philippines Exploration B.V., Shell Philippines LLC, Chevron Malampaya LLC and PNOC Exploration Corp. O&M services for the plant is provided by Siemens Operations under an Amended and Restated Operation and Maintenance Agreement (OMA).

FGP supplies its electricity to Meralco through a 25 year PPA. Like FGPC, FGP signed a 22 year GSPA with the Gas Sellers for the delivery of natural gas to the plant and an O&M Agreement with Siemens Operations. The terms of the GSPA and the OMA of FGP are similar to that of FGPC.

On 11 January 1993, FPPC and NPC signed a 15 year BOT Agreement whereby power produced by the Bauang plant is sold exclusively to NPC. The BOT Agreement will expire on 25 July 2010.

FIRST GEN Subsidiaries

7

In 2007, The plant generated a total of 9,473.5 MWh, equivalent to a 67.59% capacity factor.

The plant improved its availability and reliability in 2007, as a result of the various preventive maintenance activities conducted during the annual maintenance schedule in April 2007. The plant’s availability reached 94.47%, while reliability registered at 99.61%.

In 2007, FGHPC finalized discussions for the rehabilitation of the Pantabangan Hydroelectric Power Plant. The rehab project is aimed to extend the life of Pantanbangan by an additional 25 years and increase the net dependable capacity by approximately 18 MW. The project is targeted to be completed in December 2010.

TransCo issued FGHPC an accreditation certificate as Ancillary Services provider on 03 October 2007. The Accreditation Certificate shall be effective until 31 August 2008.

In 25 July 2007, the Malitbog and Mahanagdong Power Plants in Leyte were transferred by the BOT Contractor to EDC following the expiration of the 10-year BOT Contract. This was followed by the transfer of the Optimization Power Plant on 25 September 2007. The Upper Mahiao Power Plant was previously transferred to EDC on 25 June 2006.

FG Bukidnon sells the power that it generates to CEPALCO under a Memorandum of Agreement signed on 29 March 2005. CEPALCO is an electric distribution utility operating in the City of Cagayan de Oro.

On 09 January 2008, FG Bukidnon and CEPALCO signed a Power Supply Agreement (PSA). Under the PSA, FG Bukidnon shall generate and deliver to CEPALCO and CEPALCO shall take, or pay for if not taken, the Available Energy until 28 March 2025. The PSA becomes effective upon approval by the Energy Regulatory Commission (ERC).

The power generated from the Pantabangan and Masiway plants are sold to various franchise distributors in Northern Luzon under Transition Supply Contracts (TSC). These TSCs were assigned to FGHPC as part of PSALM’s purchase agreement. FGHPC assumed the TSCs on 26 December 2006. In terms of total generation, approximately 64% is used to serve the TSC customers while the balance is sold in the Wholesale Electricity Spot Market (WESM).

EDC operates seven geothermal steam fields in five contract areas, where it has exclusive rights to geothermal exploration, development and utilization through Geothermal Service Contracts (GSC) with the Department of Energy

Geothermal energy produced from EDC’s geothermal projects is supplied to its BOT Contractors and NPC-owned and operated power plants pursuant to steam sales contracts. These contracts stipulate the steam base price and inflation adjustments. It also includes a guaranteed take-or-pay rate provision at 75% plant factor for a period of 25 years.

EDC entered into Energy Conversion Agreements (ECA) with various international geothermal power producers for the construction and operation of power plants in Leyte and Mindanao to convert the geothermal steam from EDC’s geothermal projects to electricity. Under these BOT Contracts, the BOT Contractor delivers electricity to NPC on behalf of EDC.

The electricity that EDC produces is sold to NPC under various 25-year PPAs.

First Gen Renewables (FGRI)

First Gen Hydro Power Corporation (FGHPC)

PNOC-Energy Development Corporation (PNOC - EDC)

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Message from the Chairman

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Fellow Stockholders,

Even as we recount another excellent operating year that was 2007, we turn an eager eye to a future full of challenges and opportunity. World fossil fuel prices are at unprecedentedly high levels and continue to trend upward. This notwithstanding, a steady supply of fuel, particularly for coal-fired power plants, has been difficult to obtain due to competition from other large users in the region and across the rest of the world. Our own demand and consumption of electric power continues to increase, driven by the country’s robust economic performance. We will soon be reaching capacity limitations in our ability to reliably generate electric power. Against this backdrop of soaring energy usage and soaring prices, we also face the growing threat of global warming and the pressure to switch to cleaner fuels and sources of energy that produce less carbon dioxide as a byproduct.

As you read through this report, you will begin to appreciate that your Company is uniquely poised to provide solutions to these challenges and to exploit them, not as handicaps, but as opportunities. We are the cleanest and most efficient power producer in the country today. For our gas-fired turbine generating plants, we rely on an indigenous supply of clean natural gas. For our hydro-electric plants, we rely on a clean and renewable source of energy – water. And with our acquisition of a controlling interest in PNOC-EDC, we can now aspire to become the leading producer of geothermal energy, not only in the Philippines, but in the world. And as you read through this report, it is my hope that you will also come to appreciate that we have projected a strong vision and built a strong organizational platform to take on these challenges and opportunities.

A Bedrock of Values

“We shall endeavor now and in the future to protect public interest, to improve labor and above all to continue enjoying the confidence of the people. Because only in this way can we truly serve the interests of the stockholders” --- Eugenio Lopez, Sr.

This common saying by my late father, Don Eugenio “Iñing” Lopez, Sr., which prominently hangs in the fourth floor lobby of our main office at the Benpres Building, has been a guiding principle for the Lopez Group in the pursuit of its various businesses.

Even today, our work in First Gen is imbued with the values, beliefs and tradition that our family has lived up to for the past generations. These core values are part of the rich legacy that my father left us and which I know, will sustain our companies like First Gen through the years. These values are the commitment to family and corporate unity coupled with a strong work ethic and strong spirit of enterprise, commitment to our employees and last but not the least, is the commitment to public service and its corollary corporate social responsibility or CSR.

Message from the Chairman

Even today, our work in First Gen is imbued with the values, beliefs and tradition that our family has lived up to for the past generations.

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Doing well by doing good

We believe that part of First Gen’s success is due to the mutual trust and confidence we have with the local governments, communities and various stakeholders where we operate our power and energy facilities. In compliance with Energy Regulation 1-94, we regularly remit one centavo-per-kwh to the Department of Energy. In the case of our hydro plants, the 112 MW Pantabangan-Masiway and 1.6 MW FG Bukidnon, 1% of gross revenues are remitted to the government in the form of Share in National Wealth Tax. This accounts for the use of water in such facilities. Over the years, the accumulated funds from ER 1-94 have become a vital resource for the local government for its electrification, development, and livelihood projects. At First Gen, we have gone a step further. In consultation and partnership with our various stakeholders, we have developed and implemented local programs that are focused on health, education, environment conservation and enhancement, and livelihood development.

Synergy in Action

First Gen’s growth and progress can be attributed to good governance as well as a disciplined and diligent approach to business. A strong synergy between management and dedicated employees, combined with an experienced Board of Directors, which include independent directors who are acknowledged business leaders in their own right, have given First Gen the extra boost needed in an industry that is currently in transition to a more competitive environment.

New Appointments

Along with this, is the passing of torch from one generation to the next. Peter D. Garrucho, Jr. who has been First Gen’s CEO since 2002 has handed over the leadership of the Company to Federico “Piki” R. Lopez, effective January 2008. Having spearheaded First Gen’s stellar ascent since its inception, we are grateful to Peter for his trailblazing contributions and development of First Gen’s current generation of leaders. As he continues his role in the governance of First Gen as director, your company expects to benefit from his invaluable expertise and experience. Until his recent appointment, Piki has held the position of President since 2000 and Chief Operating Officer (COO) since 2002.

Piki is supported by his executive team composed of Francis Giles B. Puno and Richard B. Tantoco, who were both recently promoted to Executive Vice President. Giles and Ricky are concurrently Chief Financial Officer (CFO) and Chief Operating Officer (COO), respectively. Giles has held the position of CFO since 2000. Prior to his appointment as COO, Ricky headed the Business Development Group in charge of pursuing expansion opportunities through acquisition and Greenfield projects.

2007 also saw other changes in the management roster. Aloysius L. Santos, formerly of Origin Energy of Australia, was appointed as Vice President. Erwin O. Avante, Dennis Michael P. Gonzales, and Vincent Martin C. Villegas were appointed Assistant Vice Presidents. They are principally tasked with leading the various business development efforts of the company.

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MILESTONE

2007, indeed, marked a milestone for First Gen with the acquisition of 60% of PNOC-EDC, the largest geothermal company in the Philippines. The potentials and promise of this sunrise industry coupled with its significance in helping find environment-friendly fuels for power generation is something to watch out for.

As we navigate through the evolving landscape of the Philippine power industry, our success will be measured not just by the value that we create for our shareholders, but also by how our steadfast adherence to these values impact on our nation. These values are our true north that will guide us as we bravely face new challenges and expand our horizons as the premiere Filipino energy company.

As we navigate through the evolving landscape of the Philippine power industry, our success will be measured not just by the value that we create for our shareholders, but also by how our steadfast adherence to these values impact on our nation.

OSCAR M. LOPEZChairman of the Board

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Dear Shareholders,

It’s my privilege to address you this year as First Gen’s Chief Executive. For 2008, we deliberately chose the theme: “The Energy to Dare, The Power To Care”. These are not empty sound bites for us; and as First Gen’s story unfolds as a leading power and energy company, it will be evident how these words guide our growth in the years to come.

2007: Preparing To Unlock Future Value

We will always remember 2007 as a transformational, milestone year for us due to the successful acquisition of PNOC-Energy Development Corporation (EDC). The magnitude of this purchase however tends to eclipse many notable achievements this past year.

To begin with, I am quite pleased to report that First Gen’s consolidated net income in 2007 amounted to $181.8 million, a 23.6% increase compared to the previous year’s consolidated net income of $147.1 million. The increase is attributed to the higher net income of FGPC’s Santa Rita plant ($9.0 million) and FGP’s San Lorenzo plant ($20.3 million), the additional $22.0 million income generated from the first full year operations of FG Hydro’s Pantabangan-Masiway plant, and the additional $16.7 million brought about by the consolidation of EDC.

The increase in our net income, however, was tempered by three factors. The foreign exchange loss at the parent level was higher by $10.1 million compared to the previous year’s amount. Also, the parent company and Red Vulcan recognized $6.6 million increase in interest expense arising from the loans availed in 2007 relative to the acquisition of EDC. Moreover, total documentary stamp taxes and underwriting fees for such loans reached $16.4 million.

Message from the President and CEO

We will always remember 2007 as a transformational, milestone year for us due to the successful acquisition of PNOC-Energy Development Corporation (EDC).

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First Gen’s equity share in net earnings for the year ended December 31, 2007 amounted to $104.7 million. This is $12.8 million or 14.0% higher than the $91.8 million equity share in 2006.

Our largest assets, the 1,500 MW First Gas power plants, continue to perform superbly. Both the Santa Rita and San Lorenzo gas-fired plants have consistently been among the highest dispatched plants in the country with record levels of reliability and availability that far exceed benchmarks set by the North American Electricity Reliability Council (NERC). The net result was that First Gas’ all-in tariffs to Meralco have been among the most competitive in their mix of power suppliers and thus contributed greatly to lowering Meralco’s rates to all its consumers.

In fact, if our fuel, natural gas from the Camago-Malampaya field, did not have the sizeable government royalties levied on them (of roughly Php1.47/kWh) we would undoubtedly be the cheapest source of power for Meralco by a mile at Php2.42/kWh. Ironically, no other fuel is taxed more heavily in the Philippines than clean, domestically sourced natural gas! We continue to raise awareness for the need to remove these royalties on indigenous natural gas for power-intensive, job-creating industries so these consumers can enjoy lower rates that should come from using such fuel sources. We are confident that our government will eventually recognize that the greater national interest will be served by reducing the tax and royalty burden on clean, indigenous fuel sources.

We are confident that our government will eventually recognize that the greater national interest will be served by reducing the tax and royalty burden on clean, indigenous fuel sources.

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Our 112 MW Pantabangan-Masiway hydroelectric power plant is proving to be a hidden gem in the Philippine power system. With hydro’s unique ability to respond instantly to surges in demand during the day, Pantabangan-Masiway is indispensable at meeting the peaking requirements of the Luzon grid. This same capability will also prove vital later as the market for ancillary services to the grid is established and Pantabangan-Masiway once again demonstrates its many unique abilities to service those needs. With its water reservoir of 3 Billion Cubic Meters—the largest in the Philippines—hydro complexes the likes of Pantabangan-Masiway are unlikely to be built in the country again and therefore represent a valuable and strategic asset for First Gen. Given the asset’s value to the Luzon grid we are increasing the generating capacity of Pantabangan through an additional 18 MW that will be online by 2010.

Successful Acquisition of PNOC-EDC

Our successful acquisition of PNOC-EDC, one of the largest geothermal steam producers in the world, will be nothing short of transformational for both First Gen and EDC. This achievement propels us into being the largest vertically integrated power generation play in the country with an unassailable presence in all three geographical grids of Luzon, Visayas and Mindanao.

Of course victory did not come cheap and was achieved at a 55% premium to PNOC-EDC’s prevailing market price then, and a 21% premium to the next highest bidder. You must all be wondering, “What did First Gen see in PNOC-EDC?”

We see a world turning increasingly hostile towards carbon emissions such that business as usual for power generators will no longer suffice. As the world heads toward a carbon-constrained future and unprecedented coal and oil prices, renewable energy such as geothermal will command a considerable premium over fossil-based alternatives. Our entry into geothermal energy with EDC now brings us in control of the largest clean and renewable source of energy in the country today and also insulates us from high fuel prices plaguing world markets. We see greater control of

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our fuel strategy thru EDC; fuel that is clean and capable of enabling us to deliver outstanding value propositions for our customers. We believe that with our platform, First Gen is now extremely well-positioned to become the country’s energy supplier of choice.

A power generation company’s ability to consistently deliver value propositions to consumers lies in its proficiency and flexibility at handling fuel costs and availability. This is even more critical in today’s world where supply of traditional fossil fuels for power generation is becoming increasingly difficult, expensive and volatile. More and more countries are becoming acutely aware of their vulnerabilities to imported fuel sources and are prioritizing energy security on their agendas. Although the next twelve months for us will be geared towards normalizing First Gen and Red Vulcan’s post-acquisition finances, we will be just as intensely focused on merging EDC’s strengths with that of First Gen. Our commercial skills in power generation and project development fused with EDC’s technical and scientific expertise in resource evaluation, development and the management of geothermal steamfields will most certainly make this combination formidable. Over the next year, we intend to crystallize these synergies, begin revving EDC up to its full potential and subsequently expand with partnerships abroad. We will see these efforts bear fruit in the next three to five years as we project to more than double EDC’s recurring net income.

Not Just A Mad Rush For Megawatts

Even if we’ve become the largest Independent Power Producer in the country today, viewed in its proper perspective, First Gen remains a big fish in a small pond. As the Electric Power Industry Reform Act’s (EPIRA) power reforms take hold we will see our electricity industry open up, more competition will develop and larger, better-funded international players will enter the market. Although the Philippines isn’t a large electricity industry in aggregate terms (approximately 13,000 MW installed capacity) the added challenge posed towards a Philippine

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power company seeking growth is that EPIRA imposes market share caps on generation players (maximum of 30% of a grid and 25% of national capacity). Even the intensity of power use in our economy is dropping as more industries choose to locate elsewhere in the world due to high Philippine power rates.

Although we’ve set our sights on doubling First Gen’s megawatt capacity by 2011, sheer size alone is not our sole aim. The strategic value of the megawatts under our belts will matter a great deal towards our company attaining quality growth under constrained regulatory limits. Thus, as we expand our energy assets via more acquisitions and greenfield projects we always ask ourselves these questions: Where can First Gen uniquely bring the most value to consumers and shareholders? How can our contributions make Philippine industries and our economy more competitive? What distinctive capability can a Filipino power and energy firm bring to the international arena?

Shaping First Gen’s Growth Platform

Quite simply, we are shaping our growth platform along the lines of having the most distinctive set of energy assets that are not easy to duplicate, deliver great value to consumers, yet still be environmentally sustainable. Our intent is to produce the competitively priced megawatt-hours needed to fuel our growing economy with the smallest carbon footprint possible. Our choices must also give us capabilities that ultimately launch our aspirations of becoming an international player that will bring unique strengths and capabilities to the world stage.

Our intent is to produce the competitively priced megawatt-hours needed to fuel our growing economy with the smallest carbon footprint possible.

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As EPIRA’s power reforms progress, the profile of customers we serve will also change. Historically, our customer has been state-owned NPC and the large distribution utilities. We have also recently expanded our customer base to include creditworthy electric cooperatives. As we move towards Retail Open Access, hopefully within the year, we will also be ready to serve the power needs of eligible (1MW and up) industrial and commercial customers.

This early we are already establishing pilot projects that will help electric coops and industrial consumers use power more efficiently. Ultimately we intend to use our expertise in the power industry to help our customers identify many points of waste and inefficiency in their electricity supply chains. We firmly believe that it’s infinitely cheaper and more beneficial to the planet to save a megawatt than it is to build one. As humanity struggles with the challenge of climate change as well as scarce and expensive energy, this not only makes good economic sense but is also the right thing to do.

The year 2008 will be marked by much turbulence in world markets. This will undoubtedly challenge us in the execution of some of our growth plans. Already this year we are seeing stock prices, including ours, being pummeled by the winds of uncertainty. However, there’s no doubt in my mind that we have a great business model that’s responsive to our world’s changing energy needs and we will prosper despite the global turmoil. More importantly, we have a dynamic and experienced team that performs even better with adversity.

To all our investors and stakeholders, thank you for your confidence. We never forget that your trust is precisely what enables us to do great things with our company and create significant value for you and all our customers.

Ultimately, we intend to use our expertise in the power industry to help our customers identify many points of waste and inefficiency in their electricity supply chains. We firmly believe that it’s infinitely cheaper and more beneficial to the planet to save a megawatt than it is to build one.

FEDERICO R. LOPEZPresident and Chief Executive Officer

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What We Care About

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- Jeffrey Sachs

How big is your carbon footprint?

The reliance on fossil fuels, coupled with the increase in overall energy use, has

led to a corresponding growth in Asia- Pacific’s

share of worldwide GHG emissions. In 1973, Asia

Pacific accounted for only 8.7% of all GHG emissions in the world. By 2003, its

contribution had increased to 24.4% and it is estimated

that it will be responsible for 30.4% of worldwide

emissions by 2030.

(ADB, Report of the Energy Efficiency Initiative – Executive Summary of

the Draft Circulated for the Informal Board Seminar, April 2006)

First Gen believes that global warming is the overriding environmental challenge facing the world in the 2�st century. Our portfolio of energy assets is �7.�% less carbon intensive than the Philippine grid average, helping the country directly or indirectly avoid over �.5 million tons of CO² emissions every year. We are well positioned to meet the country’s energy needs amidst the challenge of global warming.

First Gen’s carbon intensity Philippine grid’s carbon intensity

CO2 tons/MWh CO2 tons/MWh

Are we running out?

Producing oil is a self-depleting activity…By some estimates, there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves.

(Vice President Dick Cheney; Autumn 1999, Speech at the London Institute of Petroleum)

Global coal production to peak around 2025 at 30% above current production.

(World Energy Group, Coal: Resources and Future Production; 10 July 2007, EWG- Series 1/2007

First Gen believes that the country’s dependence on imported fuel like oil and coal exposes it to price and supply fluctuations that undermine our energy security. ��% of our installed generating capacity run on indigenous fuel sources like natural gas, hydro and geothermal steam. As the leading renewable energy supplier in the country, we intend to harness the Philippines’ wealth of indigenous fuel resources to meet the energy demand of the future.

INDIGENOUS FUEL

Natural Gas 60.6%

�7.�%

Hydro 2.3%

Geothermal 34.9%

Diesel/ Bunker C 2.2%

FIRST GEN 2007 TOTAL GENERATION

PHILIPPINES 2007 TOTAL GENERATION

Will thelights stay on?

If there is no additional capacity [built], the critical period for Luzon will be in 2010/ 2011 during which the reserve level is expected to fall below the minimum required reserve level.

(Department of Energy, Update Supplement, 2006 Power Development Plan)

MW 12,000

10,000

8,000

6,000

4,0002006

10,576

8,302

6,728

2007

10,576

8,614

6,981

Indicative

Committed

Dep. Capacity

Required Capacity

Peak Demand

2008

38.25

10,576

8,949

7,252

2009

38.25

10,576

9,319

7,552

2010

150

38.25

10,496

9,721

7,878

2011

600

38.25

9,846

10,150

8,225

2012

1,050

38.25

9,846

10,607

8,596

2013

1,650

38.25

9,846

11,093

8,990

2014

1,950

38.25

9,846

11,596

9,397

First Gen believes that energy is a vital input to economic growth. As such, we continuously search for and implement enhancements to improve the capacity of our plants.

In 2007, we completed the power augmentation program at our Sta. Rita and San Lorenzo power plants. This resulted to an aggregate total of �5.2 MW of additional capacity. In 200�, we will commence the upgrade and modernization of our Pantabangan Hydroelectric Power Plant. This is expected to be completed by 20�0 and will result in an additional capacity of �� MW and extend its life for another 25 years.

First Gas is ready to construct a new 550 MW gas-fired plant adjacent to Santa Rita and San Lorenzo that will harness synergies and cost-savings through its proximity to existing facilities. Pending the confirmation of additional gas from Camago-Malampaya, San Gabriel can be up and running within a 2 to � year timeframe. Given its prepared site and an approved Environmental Compliance Certificate, this would be faster than the normal development time for a greenfield power plant.

We are committed to respond to the growing demand for power in the country today by constantly upgrading our existing assets and building new capacity for the future.

Will we leave it better? “You have a very, very special marine

natural heritage. You really have this international obligation and responsibility to preserve this marine counterpart of the Amazon River basin…If you were to preserve this, the world would benefit as well. But more important than that, you have something here is that is a source of national pride.”

(Kent Carpenter, Global Marine Species Assessment Coordinator, World Conservation Union)

“This is our home. This is where all our loved ones live, and this is where we’ll stay all our lives.”

(Oscar M. Lopez)

The Verde Island Passage corridor, located between Batangas and Mindoro, is what experts call “the world’s blue water version of the Amazon River basin.” It has been found to have 1,736 overlapping marine species in a 10 km by 10 km area, the largest concentration of marine life in the world.

First Gen believes that environmental management is among its highest corporate priorities and a key determinant to sustainable development. In 200�, we formed a tripartite partnership with the First Philippine Conservation Inc. and Conservation International-Philippines to promote the Verde Island Integrated Conservation and Development Program. The program aims to eliminate the destructive activities along the Verde Island Passage and promote the area as a prime tourist destination. Today, we reaffirm our commitment to more voluntary initiatives and to greater responsibilities in ensuring that our business will have minimal impact on our environment.

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Corporate Governance

BOARD OF DIRECTORS

The company’s governance structures are primarily managed and driven by the Board of Directors. In due recognition of their duties and obligations as directors of a publicly-listed company, the Board members make every effort to ensure that the company responds to the needs of its officers, employees, customers and partners, as well as government and the public in general. Having set forth the company’s goals, the Board is responsible for guiding the company in fulfilling its economic targets and governance aspirations.

Board Composition

In 2005, the Securities and Exchange Commission (SEC) approved an amendment to the company’s Articles of Incorporation increasing membership in the Board from five (5) to nine (9). The members of the Board are elected by the company’s qualified stockholders during the annual stockholders’ meeting held on the 2nd Wednesday of May of each year. Each Board member serves for a term of one (1) year, subject to re-election.

The Board’s two (2) independent directors are individuals who excel in their respective fields. An independent director is free from any relationship which may tend to interfere with the exercise of his independent judgment, as mandated by the company’s Manual on Corporate Governance. For these reasons, their views and opinions on issues brought up for discussion during Board meetings are sought for and are highly regarded by the other directors. This practice helps to ensure the probity and integrity of the Board’s actions.

The entire Board, acting in its capacity as the Nomination Committee, judiciously passes upon the qualifications of nominees to the Board. The committee makes sure that each Board election will result in a mix of proficient directors, who will each be able to add value and bring prudent judgment to the Board.

Following are the members of the company’s 2007 Board of Directors: Oscar M. Lopez (Chairman) Federico R. Lopez Richard B. Tantoco Francis Giles B. Puno Peter D. Garrucho Jr. Elpidio L. Ibañez Fiorello R. Estuar Tony Tan Caktiong (Independent Director) Cezar P . Consing (Independent Director)

Board Remuneration

Each member of the Board receives a standard per diem of Php 50,000.00 for each regular or special board meeting attended. The amount is deemed to be reasonable compensation for the members of the Board, each of whom assumes significant duties and responsibilities upon election by the stockholders. The per diem is duly disclosed in the company’s Information Statement (SEC Form 20-IS) which is distributed to all eligible stockholders prior to the holding of the annual stockholders’ meeting.

Board Performance

The Board of Directors held a total of seven (7) meetings in 2007, including its organizational meeting which was held immediately after the annual stockholders’ meeting. Five (5) of the nine (9) directors enjoyed perfect attendance during the year, with each of the remaining four (4) directors having only one (1) absence.

Committees

Executive Committee. The Executive Committee or ExCom is composed of five (5) of the company’s most senior officers, three

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(3) of whom are members of the Board of Directors. Between the regular or special meetings of the Board, the ExCom meets to deliberate and decide on issues relating to the management and direction of the affairs of the company. A majority of the committee members is necessary to constitute a quorum for a meeting, and the affirmative vote of a majority of the members present at the meeting is necessary for the passage of any resolution. The ExCom members are Federico R. Lopez, Richard B. Tantoco, Francis Giles B. Puno, Ernesto B. Pantangco, and Jonathan Russell.

Management Committee. The Management Committee or ManCom consists of the members of the ExCom, as well as certain key officers of the company as well as its operating companies. The ManCom meets weekly to advise its members on significant events and activities. This helps ensure that the efforts of the company’s various departments and subsidiaries are geared towards identified common goals.

Compensation and Remuneration Committee. The Compensation and Remuneration Committee is comprised of the Chairman of the Board and two (2) directors, one (1) of whom is an independent director. The committee makes sure that the remuneration offered by the company to its directors, officers, and employees is sufficiently competitive to attract and retain the necessary talent and expertise. The current members of the Compensation and Remuneration Committee are Oscar M. Lopez (Chairman), Fiorello R. Estuar, and Cezar P . Consing.

Nomination Committee. The Nomination Committee is composed of the entire Board of Directors. The committee is tasked to ensure that the Board is made up of individuals of proven integrity and competence who have the ability and resolve to steer the company in the right direction.

Audit Committee. The Audit Committee is made up of three (3) directors, two (2) of whom are independent directors, including its Chairman. The committee reviews the company’s financial reports and verifies their compliance against pertinent accounting standards and regulatory requirements. Meetings are held to

discuss with internal and external auditors various accounting and auditing issues affecting the company. The committee is responsible for ensuring the establishment of a transparent financial management control system within the company. The Audit Committee is headed by Cezar P . Consing, with Elpidio L. Ibañez and Tony Tan Caktiong as members.

Disclosures on Ownership Structure

To properly apprise the investing public of the company’s ownership structure and in compliance with regulatory requirements, the company files monthly reports showing the level of its foreign ownership, quarterly listings of its top 100 stockholders, and quarterly public ownership reports which detail the shareholdings of the company’s directors, officers, and principal stockholders. The company likewise discloses, in its Information Statement, the security ownership of the company’s directors and executive officers, as well as shareholders holding more than five percent (5%) of the company’s capital stock.

Plans to Enhance Corporate Governance

Through its Board of Directors and senior management, First Gen diligently searches for ways and means to improve its corporate governance. Firmly believing that corporate governance is a necessary component of sound business management, the company continues to review its existing policies and programs to elevate the level of accountability among the company’s directors, officers, and employees. As the company sets its sights on playing an even greater role in the power industry, it recognizes the need to strengthen risk management capabilities within the company. First Gen is steadfast in its efforts to enhance corporate governance in the company, and will exert every effort necessary to achieve its goals and aspirations.

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Board ofDirectors

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Oscar M. LopezChairman

Oscar M. Lopez has been Chairman of the Corporation since its incorporation in 1998. He serves as Chairman and Chief Executive Officer of First Philippine Holdings Corporation (FPHC) and Chairman of Benpres Holdings Corporation as well as member-companies of the First Gen and First Gas groups of companies. Through his Chairmanship of FPHC and Benpres Holdings Corp., Mr. Lopez sits as Chairman of the Lopez Group of Companies. He is also the Chairman of PNOC Energy Development Corporation, and a member of the board of ABS-CBN Broadcasting Corporation. Mr. Lopez has led FPHC’s efforts in other businesses aside from energy and power, including toll road construction, industrial park and real estate development, and electronics manufacturing. Mr. Lopez has a Masters degree in Public Administration from the Littauer School of Public Administration, Harvard University (1955). Mr. Lopez also earned his Bachelor of Arts degree (cum laude) from Harvard University (1951).

Federico R. LopezPresident And Chief Executive Officer

Federico R. Lopez is President and Chief Executive Officer of the Corporation, and Managing Director for Energy of FPHC. He is a member of the board of FPHC, ABS-CBN Broadcasting Corporation, PNOC Energy Development Corporation, First Private Power Corp., and Bauang Private Power Corp. He also serves as director, President and CEO of all member-companies of the First Gen and First Gas groups of companies. Mr. Lopez is also President of First Philippine Conservation, Inc. He is a graduate of the University of Pennsylvania with a Bachelor of Arts degree in Economics and International Relations (cum laude, 1983).

Richard B. TantocoDirector and Chief Operating Officer

Richard B. Tantoco is Executive Vice President and Chief Operating Officer of the Corporation. He led the negotiations of major project contracts that resulted in the development of the 1000MW Santa Rita and 500MW San Lorenzo power projects, and the 8-km. Tabangao-Santa Rita gas pipeline. He is also a member of the board of PNOC Energy Development Corporation, and a Senior Vice President of FPHC. Prior to joining the Corporation, Mr. Tantoco worked with management consulting firm Booz, Allen and Hamilton, Inc. in New York and London. Mr. Tantoco has an MBA in Finance from the Wharton School of Business of the University of Pennsylvania (1993) and a Bachelor of Science degree in Business Management from Ateneo de Manila University where he graduated with honors (1988).

Francis Giles B. PunoDirector and Chief Finance Officer

Francis Giles B. Puno is Executive Vice President and Chief Financial Officer of the Corporation. He led the Corporation in the financing of the 1000MW Santa Rita and 500MW San Lorenzo power projects, two major merger and acquisition deals with the entry of AIDEC FG Power Corporation Limited and Sumitomo Corporation as investors, as well as in the sale of Panay Power Corporation. He is also a member of the board of PNOC Energy Development Corporation, First Gen Renewables, Inc., First Private Power Corp., and Bauang Private Power Corp., and a Senior Vice President of FPHC. Prior to joining the Corporation, Mr. Puno was Vice President of the Global Power and Environmental Group of The Chase Manhattan Bank based in Singapore. Mr. Puno has a Master of Management degree from the Kellogg Graduate School of Management of Northwestern University (1990) and a Bachelor of Science degree in Business Management from Ateneo de Manila University (1985).

Peter D. Garrucho, Jr.Director

Peter D. Garrucho, Jr. served as Vice Chairman and CEO from 1998 to 2008. He also sits in the board of FPHC, ABS-CBN Broadcasting Corporation, PNOC Energy Development Corporation, and Manila Electric Company. Mr. Garrucho served in the government as Secretary of Tourism and Secretary for Trade & Industry during the administration of President Corazon C. Aquino. He was also Executive Secretary and Presidential Adviser on Energy Affairs under President Fidel V. Ramos. Mr. Garrucho has an AB-BSBA degree from De La Salle University (1966) and a Master of Business Administration degree from Stanford University (1971).

Elpidio L. IbañezDirector

Elpidio L. Ibañez is President and Chief Operating Officer of FPHC. As COO of FPHC, Mr. Ibañez monitors the company’s affiliated companies in manufacturing, property development, and toll roads. He is also Chief of Staff of Benpres Holdings Corporation and a member of the board of the various Benpres-affiliated companies. Mr. Ibañez obtained a Masters degree in Business Administration from the University of the Philippines (1975) and a Bachelor of Arts degree major in Economics from Ateneo de Manila University (1972).

Fiorello R. EstuarDirector

Fiorello R. Estuar is Vice-Chairman and CEO of First Balfour Inc., and head of the Infrastructure Business Development Group of FPHC. He is also a Senior Consultant at Cesar Virata and Associates; member of the JBIC Advisory Committee; private sector representative in the Government Procurement Policy Board; and Chairman of Eastern Twin Star Foundation and the NAIA 3 Commission. He previously held the positions of Presidential Adviser and Secretary of the Department of Public Works and Highways; Administrator of the National Irrigation Administration; and President of PNCC. He was also previously PEZA consultant; President/CEO of Maynilad, President of First Philippine Balfour Beatty Inc., and Chairman/member of the board of over 20 public and business corporations. Mr. Estuar obtained his Bachelor of Science degree in Civil Engineering at the University of the Philippines (1959) and his Ph.D. in Civil Engineering at Lehigh University in Pennsylvania (1965).

Tony Tan CaktiongDirector

Tony Tan Caktiong is the Chairman and CEO of retail giant Jollibee Foods Corp. He is at the helm of Chowking, Greenwich, Delifrance, Red Ribbon Bakeshop, and Yonghe King. He is a member of the board of trustees of the Asian Institute of Management, St. Luke’s Medical Hospital, and the Philippine Academy of Sakya, and is an independent director of Sun Life Prosperity Dollar Abundance Fund, Inc. and Sun Life Prosperity Dollar Advantage Fund, Inc. He has received numerous awards including the World Entrepreneur of the Year award in 2004. Mr. Tan Caktiong has a Bachelor of Science degree in Chemical Engineering from the University of Santo Tomas (1975) and has management tutoring certifications from Harvard University, Asian Institute of Management, University of Michigan Business School, and Harvard Business School.

Cezar P. ConsingDirector

Cezar P. Consing is a Partner of the Rohatyn Group, a New York-headquartered independent investment management company that focuses on emerging markets. He has over twenty years’ experience in international finance. Mr. Consing is also an independent director of Bumiputra Commerce Holdings Berhad, CIMB Group Sdn. Berhad, and CIMB-GK Pte Ltd. He is director and chairman of the executive committee of Premiere Bank, and board member of the Asian Youth Orchestra and FILGIFTS.com. He was a board director of Bank of the Philippine Islands from 1995-2000 and 2004-2006. Prior to joining the Rohatyn Group, Mr. Consing held several senior management positions at JP Morgan & Co. and JP Morgan Securities (Asia Pacific) Limited. Mr. Consing has a Bachelor of Arts degree in Economics (magna cum laude) from De La Salle University (1979) and a Master’s Degree in Applied Economics from the University of Michigan (1980). Mr. Consing is based in Hong Kong. The Rohatyn Group has never rendered professional advisory services to the Corporation or any of its subsidiaries.

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ERNESTO B. PANTANGCO *FEDERICO R. LOPEZ *LEONIDES U. GARDEDENNIS P. GONZALES

ERWIN O. AVANTE

DANIEL H. VALERIANORICHARD B. TANTOCO *VICTOR B. SANTOS, JR.

JEROME H. CAINGLET

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EMMANUEL P. SINGSONJONATHAN C. RUSSELL *

* EXECUTIVE COMMITTEE

Management Committee

ALOYSIUS L. SANTOS

NESTOR H. VASAY VINCENT MARTIN C. VILLEGAS

ANA REGINA B. GOCOLIN J.D. FLEMING

FRANCIS GILES B. PUNO *

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Financial Review

The year 2007 is another milestone year for the Company in terms of financial performance. As in previous years, our 2007 results demonstrate the Company’s ability to maximize its existing portfolio and its drive to deliver shareholder value.

The following key factors contributed to the increase in the Company’s earnings for 2007: (1) the full-year operation of the 112 MW Pantabangan-Masiway Hydroelectric Power Plants under First Gen’s management; (2) the high dispatch and capacity levels exhibited by the First Gas plants after the completion of the power augmentation projects that resulted in higher earnings and cash flows; (3) the successful bid and acquisition of a controlling stake at PNOC-EDC --- the Philippines’ largest producer of geothermal energy, that significantly increased our total consolidated assets and put in an additional one-month income to the Company; and, (4) the extension of Santa Rita’s income tax holiday (ITH) until May 2007 and the approval of FG Hydro’s six-year ITH incentive (which commenced in April 2007) that have contributed to the improvement in the current year’s consolidated net income.

INCOME STATEMENT

Based on the consolidated financial statements for the year ended 31 December 2007, First Gen’s revenues rose to US$1,107.9 million, up by 5.8% or US$60.7 million higher than last year’s US$1,047.2 million. The increase was primarily due to: (1) improved dispatch and capacity levels of the First Gas plants with the implementation of the power augmentation initiatives; (2) contribution of an additional US$30.6 million from the Pantabangan-Masiway Hydroelectric Plants; and, (3) one-month revenues of PNOC-EDC from its sale of electricity, steam, and drilling services.

First Gen’s consolidated net income in 2007 increased by 23.6% or US$34.8 million to US$181.8 million as against last year’s US$147.1 million (as restated), mainly on account of: (1) the

additional US$22.0 million generated from the operations of the Pantabangan-Masiway Hydroelectric Plants; (2) the additional US$16.7 million brought about by the consolidation of PNOC-EDC in 2007; (3) higher income generated by the First Gas plants; and, (4) a one-time gain of US$4.8 million which pertains to the proceeds from an insurance claim of FGP.

First Gen’s equity share in net earnings for the year amounted to US$104.7 million, which is US$12.8 million or 14.0% better than the US$91.8 million (as restated) equity share in 2006.

BALANCE SHEET

The Company’s total consolidated assets in 2007 significantly increased by US$2.3 billion. This was brought about by the following significant factors: (1) the recognition of a provisional goodwill¹ amounting to US$1.1 billion following the successful acquisition of a 60% controlling stake in PNOC-EDC; (2) the recognition of concession receivables of PNOC-EDC amounting to US$891.0 million resulting from the early adoption of Philippine Interpretation IFRIC 12 in 2007; (3) the recognition of PNOC-EDC’s noncurrent assets amounting to US$146.7 million consisting of deferred tax assets, long-term receivables, exploration and evaluation assets, prepaid expenses, and other non-current assets; (4) US$82.9 million increase in inventories due to the replenishment of fuel consumed during the Malampaya outage amounting to US$50.2 million, the recognition of spare parts and supplies inventory of PNOC-EDC worth US$27.5 million, and adjustment to the liquid fuel account; (5) increase in accounts receivables of US$63.3 million mainly on account of the recognition of PNOC-EDC’s trade and other receivables; (6) the recognition of PNOC-EDC’s property held for sale amounting to US$40.4 million and available-for-sale investments amounting to US$28.4 million; and, (7) the recognition of PNOC-EDC’s property, plant, and equipment amounting to US$26.8 million.

¹ Provisional goodwill is subject to adjustment within a twelve-month period from acquisition date.

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Total consolidated cash and cash equivalents as of end December 2007 stood at US$218.2 million, which is US$241.0 million lower as compared to last year’s level of US$459.2 million. The reduction in the cash balance was due to the payment of the purchase price for the acquisition of a controlling stake at PNOC-EDC and the continuous debt service at FGPC and FGP levels, including the prepayment of US$87.8 million (inclusive of principal, interest and fees) in February 2007 by FGPC. These decreases were tempered mainly by cash generated from operations.

Total consolidated liabilities likewise increased by US$1.7 billion to US$2.8 billion in 2007 from US$1.0 billion in 2006 mainly on account of: (1) additional long-term debt of US$705.1 million at the Red Vulcan level which represents the staple financing, and short-term debt of US$442.9 million at the parent level that were availed to partially fund the acquisition of a 60%-controlling stake at PNOC-EDC; and,(2) the consolidation of PNOC-EDC in 2007 which resulted to an increase in long-term debt, trade payables and other long-term liabilities. The new debt and the additional liabilities recognized from PNOC-EDC however were offset by: (1) principal debt payments totaling to US$145.4 million; and, (2) scheduled payments of US$27.7 million under the deferred payment facility with the gas sellers.

Total equity, on the other hand, improved significantly by 78.2% to US$1.3 billion in 2007 as compared to US$715.2 million (as restated) in 2006. The increase was mainly due to the minority interest on PNOC-EDC. The US$181.8 million of the Company’s consolidated net income for 2007 also contributed to the increase, though partially tempered by the payment of cash dividends in 2007. US$611.1 million of the total equity is attributable to the equity holders of the parent company, an improvement of 11.8% or US$64.5 million from last year’s US$546.6 million (as restated).

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Financial Statements

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Glossary of Selected Terms

Affiliate In relation to the Company, BPPC or any other company which, directly or indirectly, through one or more intermediaries, is controlled by the Company or is under common control by the Company with another person; excluding subsidiaries. For purposes of this definition, “control” shall mean the power to direct or cause the direction of the management poli-cies of this company by contract, agency or otherwise

BacMan GSC BacMan Geothermal Service Contract dated 16 October 1981

BIR Bureau of Internal Revenue

Bondholders Registered holders of the Bonds

Bonds The Company’s P5 billion Peso-denominated fixed-rate bonds due 2010

BOT Agreement BOT Agreement dated January 11, 1993 between FPPC and NPC, as amended

Combined Cycle The combination of the gas turbine thermodynamic cycle with the steam turbine thermodynamic cycle by utilizing the waste heat energy from the gas turbine, to generate steam for use in a steam turbine

DOE Department of Energy

EDC Philippine National Oil Company Energy Development Corporation

Gas Sellers Consortium comprised of Shell Philippines Exploration B.V., Shell Philippines LLC, Chevron Malampaya LLC and PNOC Exploration Corporation

Grid The Philippines’ high voltage backbone system of interconnected transmission lines, substations and related facilities

IFRIC International Financial Reporting Interpretation Committee

IPP Administrators As defined in the EPIRA, qualified independent entities appointed by PSALM who shall administer, conserve and man-age the contracted energy output of NPC IPP contracts

kW Kilowatt, or one thousand watts

kWh Kilowatt-hour, the standard unit of energy used in the electric power industry. One kilowatt-hour is the amount of energy that would be produced by a generator producing one thousand watts for one hour

Meralco Manila Electric Company

MMBFOE Million Barrels of Fuel Oil Equivalent

MW Megawatt, or one million watts. The installed capacity of power plants is generally expressed in terms of MW

NDC Net Dependable Capacity, or the net dependable generating capacity of the plant (net of unit energy utilized to drive the station’s service or auxiliaries), expressed in kW or MW

Net Electrical Output/Energy Generation

Net energy delivered by a seller to the agreed delivery point and expressed in kWh

Open Access As defined in the implementing rules of the EPIRA, the system of allowing any qualified person the use of electric power transmission, and/or distribution systems, and associated facilities subject to the payment of transmission and/or distribution retail wheeling rates duly approved by the ERC

Retail Competition As defined in the implementing rules of the EPIRA, the provision of electricity to a Contestable Market by persons au-thorized by the ERC to engage in the business of supply to electricity end-users through Open Access

San Lorenzo O&M Agreement Operations and Maintenance Agreement between Siemens Operations and FGP dated 15 April 1999

Santa Rita O&M Agreement Amended and Restated Operation and Maintenance Agreement between Siemens Operations and FGPC dated 11 April 2000

Stranded Costs As defined in the EPIRA, the excess of the contracted costs of electricity under eligible contracts over the actual sell-ing price of the contracted energy output under such contracts. Eligible contracts are those approved by the ERB from December 31, 2000 onwards

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Corporate Structure

* Refers to common shares that represent a 40% economic interest in EDC. The combined common shares and preferred shares represent 60% of the voting rights in EDC.

*

Red Vulcan Holdings

Corp.

Corporate StructureFirst Gen Corporation3rd Floor Benpres BuildingExchange Road corner Meralco Avenue Pasig City Philippines 1600Trunkline No. (632) 449-6400Fax No. (632) 910-4846/638-4706

First Gas Power CorporationCorporate Office3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6286Fax No. (632) 635-2322

Plant SiteSta. Rita, Batangas CityBatangas, Philippines 4200Telephone No. (6343) 723-9526 to 28Fax No. (6343) 723-7792/723-9048

FGP Corp.Corporate Office3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6286Fax No. (632) 910-0253

Plant SiteSta. Rita, Batangas CityBatangas, Philippines 4200Telephone No. (6343) 723-9526 to 28Fax No. (6343) 723-7792/723-9048

First Gen Hydro Power Corporation 3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6400Fax No. (632) 910-4846

Plant SiteBarangay West PoblacionPantabangan Nueva EcijaPhilippines 3124TeleFax No.: (632) 449-6521

First Private Power Corporation3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6400Fax No. (632) 637-1969/637-1967

Bauang Private Power CorporationCorporate Office3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6400Fax No. (632) 637-1969/637-1967

Plant SiteKm. 255, Bo. Payocpoc SurBauang, La UnionTelephone No. (6372) 705-2077/(632) 449-6501Fax No. (6372) 705-2084

First Gen Renewables Inc.3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City, Philippines 1600Telephone No. (632) 449-6458Fax No. (632) 631-3103

FG Bukidnon Power CorporationCorporate Office3rd Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone No. (632) 449-6458Fax No. (632) 631-3103

Plant SiteDamilag Manolo Fortich BukidnonPhilippines 8705TeleFax No.: (6388) 223-3295

PNOC EDC Facilities and Directory

PNOC EDC Head OfficesMerritt Road, Fort Bonifacio, Taguig CityTel: (632) 893-6001 to 47, 893-1320 to 64Fax: (632) 840-1575www.energy.com.ph

Energy Research And Development CenterCommonwealth Ave., Diliman, Quezon CityTel.: (632) 929-7611Fax: (632) 929-3412

Bacon-Manito Geothermal Production Field Palayang Bayan, Manito, AlbayTel.: (632) 893-6001 loc. 2405Telefax: 812-3841

Leyte Geothermal Production FieldTongonan, Kananga, LeyteTel.: (632) 893-6001 loc. 2400/2401/2402Telefax: 812-4803

Southern Negros Geothermal Production FieldTicala, Valencia, Negros OrientalTel.: (632) 893-6001 loc. 2403Telefax: 812-9810

Mindanao Geothermal Production FieldIlomavis, Kidapawan City, North CotabatoTel.: (632) 893-6001 loc. 2404Telefax: 812-3129

Northern Negros Geothermal ProjectBago City, Negros OccidentalTel.: (632) 893-6001 loc. 2406Telefax: 812-8685

Northern Luzon Wind Power ProjectBrgy. Saoit, Burgos, Ilocos NorteTel.: 09195401863Telefax: 09195470576

INDEPENDENT PUBLIC ACCOUNTANTSSycip, Gorres, Velayo & Co.SGV Building6760 Ayala AvenueMakati City, Philippines 1226Telephone No. (632) 891-0307Fax No. (632) 819-0872

STOCK TRANSFER AGENTSecurities Transfer Services, Inc.4th Floor Benpres BuildingExchange Road corner Meralco AvenuePasig City Philippines 1600Telephone Nos. (632) 631-8024 to 30(632) 449-6151 to 56Fax Nos. (632) 631-7148/(632) 631-4089

Corporate Directory

Agency K2 INTERACTIVE (ASIA) INC. Photography (Covers, Portraits & Operations) ERIK LIONGOREN

Additional Photography ALBERT LABRADOR FOR EDC AND DR. SAMMY ANG Printing VELPRINT