2 3 - Semirara Mining and Power Corporation

1 23 TOWARDS GREATER VALUE | Semirara Mining AND Power Corporation 2014 INTEGRATED ANNUAL report ysteOur journey towards greater value began with the forward integration of our coal Mining operations to Power generation. This move allowed us to maximize the value of our coal resources and deliver affordable electricity to millions of Filipinos. As we continue with our journey, we commit to further improve our operations so we can deliver even greater results to our host communities, public sector partners, customers, shareholders and other growth allies. CONTENTSGROUP OVERVIEWH ighlights From Deposit to Customer How We Create Value Board of Directors Management Committee and Officers Message from the Chairman EmeritusLetter from the Chairman and CEOS tatement from the President and COOM anagement Discussion 2442502522522532542564681012161822265210 2112156157159160243 ANNEXF urther Information on Board of DirectorsSubsidiaries REPORTSC orporate GovernanceRisk Management Corporate Sustainability and ResponsibilityStatement of Board of Directors Responsibility for Internal Controls & Risk Management SystemsAudit Committee report to

2 TheBoard of DirectorsStatement of Management s Responsibility for Consolidated Financial StatementsConsolidated Financial StatementsFive-year Summary SHAREHOLDER S INFORMATIONS hare Price Financial Calendar Shareholding Statistics Industry Concepts and TermsCorporate Information 45 TOWARDS GREATER VALUE | Semirara Mining AND Power Corporation 2014 INTEGRATED ANNUAL REPORTHIGHLIGHTSSHAREHOLDERSGOVERNMENTCU STOMERSHOST COMMUNITIESEMPLOYEESENVIRONMENTC onsolidated Revenues+5%Government RoyaltiesP Hours 60,000+HoursGiant Clams85,975 Trees Planted+3 MCoal Sales+16%Jobs1,442 Graduates942 Net Income-9%24/7 Energy Generated2,840 GWhStock Dividend200%Higher coal production and sales raised consolidated revenues by 5% to billion Royalties due to the national government, province, municipality and barangay billionTotal employee workforce training hours exceeded 60,000 Current population of giant clams in Semirara IslandTotal number of trees planted since year 2000 From million metric tons (MT)

3 , coal sales reached million MTNumber of mine site workers from Semirara , Caluya and PanayConsolidated net income declined 9% due to the extended outage of Sem-Calaca Power unit 2 Monitoring of wall movement at themine pitGenerated energy dropped 22% from 3,638 GWh in 2013 Local residents who graduated from Semirara Training Center, Inc. since 2006On top of cash dividends, a 200% stock dividend was declared 67 TOWARDS GREATER VALUE | Semirara Mining AND Power Corporation 2014 INTEGRATED ANNUAL REPORTFROM DEPOSIT TO CUSTOMER1 Exploration and Development6 Shipping3 Stockpiling7 Combustion2 Extraction5 Rehabilitation4 Processing8 Generation9 DeliveryThe location, volume and quality of coal deposits are determined by conducting geological investigation, geodetic survey and sub-surface on the available information.

4 The Company decides if deposits could be safely and economically is transported to customers by barge and bulk carriers. The supply is delivered to local Power producers, cement manufacturers, foreign clients and our Company s coal-fired Power plants. Extracted coal is loaded directly into trucks for hauling to the stockpiles. Stockpiling helps stabilize coal supply. Coal is grinded to a fine powder and blown into the boiler. Grinding increases the coal s surface area, which helps it burn faster and hotter, producing as much heat with as little waste as possible. Burning coal also produces ash and exhaust gases.

5 Large machines remove the overburden (top soil and rock layers) to expose the coal seam. The coal deposit is then extracted using large excavators. This process is called open pit Mining or strip Mining . Site rehabilitation involves the restoration of the mined-out land to its natural state. This is done through the strict, research-based revegetation and regeneration of natural ecosystems. From the stockpile, the coal goes on a conveyor belt to a washing plant located at the mine site. The plant cleans and processes coal to remove other rocks, as well as dirt, ash, sulfur, and other unwanted coal is burned inside boilers to produce steam, which passes through a turbine.

6 The rapidly spinning turbine powers a generator that turns mechanical energy into electric energy. The Power plants deliver electricity using transformers, which increase the electricity voltage according to the distance it must travel and the amount required by the Power distribution PROPOSITION Semirara Island in Antique has the largest coal deposit in the PROPOSITION We operate the largest and most modern open pit mine in the Philippines. Our truck and shovel operations can produce 8 million metric tons of coal a year. VALUE PROPOSITION Around 80% of our run of mine coal is clean coal while the remaining 20% is washable coal.

7 Our coal washing plant has an average recovery of 65%.VALUE PROPOSITION We are the only independent Power producer in the Philippines that owns and mines its own fuel source. VALUE PROPOSITION Prolonged or improper storage could lead to deterioration of coal quality. To help minimize product deterioration, we have stringent guidelines on stockpile size, time and storage conditions. VALUE PROPOSITION We follow a rehabilitate-while-we-mine principle to create structurally stable landform around our current mine site, while preparing the area for productive use in the future. VALUE PROPOSITION We have an installed Power generation capacity of 600MW, with an additional 1200MW in the pipeline.

8 With Power demand in the country steadily increasing, greater value is expected to come from our Power units in the coming PROPOSITION We remove, collect and sell the ash from the boiler to industrial customers, who use it as an ingredient for building materials like concrete and hollow blocks. Semirara Mining and Power Corporation is the largest coal producer in the Philippines, and the only Power producer in the country that owns and mines its own fuel source (coal). We have an installed capacity of 600MW, with an additional 1,200MW in the integrating our coal Mining activities and Power operations, we have created a value chain that enables us to transform low-value input into high-value output.

9 VALUE PROPOSITION By forward integrating coal Mining to Power generation, we are able to supply affordable, reliable electricity to millions of customers. 89 TOWARDS GREATER VALUE | Semirara Mining AND Power Corporation 2014 INTEGRATED ANNUAL REPORTHOW WE CREATE VALUEHOW WE OPERATE We operate according to three strategic pillars: Cost-efficiency Using a mine software, we are able to implement a coal extraction plan that helps lower our fuel and equipment maintenance costs. Regular technical improvements and equipment upgrades improve the performance of our Power -generating units. Our plant and mobile information management system gives our employees easier access to timely, reliable and vital business information.

10 Financial strength Stable financial condition and prudent cash management gives us the flexibility to undertake capital expenditures for high-value projects. Our strong liquidity position allows us to consistently pay out cash dividends that exceed our dividend policy of 20% of the preceding year s net We comply with all applicable laws, regulations and requirements of the government. We have a Good Governance program that clearly outlines the required framework, conduct, standards, policies and processes for making and implementing key decisions within our WE MEASURE OURSELVES We periodically report our operating and financial performance to the Board of Directors, who measure both against a balanced scorecard that charts our key performance indicators (KPIs).