December 12, 2011 – – Credit Rating and Investors Services Philippines, Inc (CRISP)assigned ‘AA’ (SR) rating to Panay Power asset-backed securities issued by Resiliency (SPC) Inc., a special purpose corporation organized under “The Securitization Act of 2004” solely for the purpose of issuing asset-backed securities.

ISSUE NAME: Asset-Backed Securities PPC-2009-1 (ABS-PPC 2009-1) Amount:    FIFTY MILLION PESOS (PhP 50,000,000) Interest Rate:    Fixed

STRUCTURE: Senior Certificates: FORTY MILLION PESOS (PhP 40,000,000) Subordinated Certificates: EIGHT MILLION NINE HUNDRED FOURTEEN THOUSAND PESOS (PhP 8,914,000)

Sinking Fund: FIVE HUNDRED TWENTY THOUSAND PESOS (PhP 520,000)

Maturity:    Three years (retired 2014)

Purpose:    To securitize FIFTY MILLION PESOS (PhP 50,000,000) representing a portion of the receivables arising from the under-recoveries in the power generation cost of electricity delivered by the Panay Power Corporation (PPC), a power generating company, to various end-users within the franchise area of the Panay Electric Coopertative (PECO), a power distribution company, during the period from August 1, 2005 to December 15, 2005.

Background:   The On May 19, 2005, the Energy Regulatory Commission (ERC) issued an order that pegged the generation rate that may be recovered by PECO from consumers in its franchise area to the grid rate of the National Power Corporation (NPC). But since NPC grid rate was lower than PPC’s power generation cost, PPC booked the discrepancy as an outstanding obligation by PECO.  On May 21, 2008, PPC and PECO agreed to settle the obligation in 60 equal monthly installments subject to the finality of the decision allowing such recovery by the ERC, the Court of Appeals or the Supreme Court, as the case may be. Subsequently, PPC and PECO filed a joint application before the ERC for the recovery of FOUR HUNDRED SIXTY EIGHT MILLION FOUR HUNDRED EIGHTY NINE THOUSAND THREE HUNDRED TWENTY THOUSAND AND 50/100 PESOS (PhP 468,489,320.50), claimed as representing the discrepancy between PPC’s power generation cost and the amount billed by PECO and paid by consumers in its franchise area.

On May 4, 2009, the ERC issued a provisional authority on authorizing the recovery of FOUR HUNDRED MILLION THREE HUNDRED FORTY ONE THOUSAND SEVEN HUNDRED FORTY FOUR AND 22/100 PESOS (PhP 400,341,744.22) representing the under-recoveries during the period from August 1, 2005 to December 15, 2005. The approved amount was equivalent to PhP 0.2391/kWh based on the latest five-year kWh sales from 2004-2008.

RATING RATIONALE:

Strong cashflow: The ‘AA’ (SR) rating reflects CRISP’s opinion that the source cashflow of ABS-PPC 2009-1 demonstrates more than adequate capacity to pay debt service and expenses.  Since the implementation of the ERC decision, PECO has collected an average of P6.1 million per month calculated over a 24-month period beginning August 2009. This cashflow exceeded the monthly cashflow requirements of the security by over P4.7 million.

Improved power outlook:  Earlier this year, the Global Business Power Corporation (GBPC) commissioned its 164 MW coal-fired power plant through its unit, the Panay Energy Development Corporation.  This development helped alleviate the on-going power shortage in the franchise area as PECO contracted with PEDC  a 25-year supply contract to make 65 megawatts of electricity available for its consumers.  As an immediate benefit to consumers, PECO announced in June of this year a P2.69 per kWh drop in its rates due to the lower rate from the coal-fired powered plant. PEDC is a member of the power generation consortium of the Global Business Power Corporation which also includes PPC.

Prior to this arrangement, Panay Island, was dealing with frequent power outages due to an estimated 77 MW of power shortfall. In 2008, peak demand on Panay Island has grown by about 15.4%

 Continuing regulatory risk:  Operations and business decisions of public utilities are subject to regulatory scrutiny.  In addition to oversight by the Energy Regulatory Commission (ERC), such decisions also come under close scrutiny by the country’s legal courts which could result in reversals with serious financial implications.