PENELCO and National Power Corporation represented by National Transmission Corporation entered into Lease Purchase
Agreement (LPA) on the the sale of sub transmission asset last August 16, 2006.

This sub transmission asset (69kV line) amounts to Ninety Million Five Hundred Forty Three Thousand One Hundred and 90/100, (Php90,543,100.90). But prior to filing of the Application for Approval of LPA, the Energy Regulatory Commission (ERC) rendered a decision denying the sale of sub transmission assets to Cotabato Light and Power Company (CLPC) and (ERC) ruled that the selling price of the subtransmission assets as agreed by the parties to the contract must be compared with that of the appraisal value as determined by Sinclair Knight Merz (SKM),the independent appraisser.Since the date of LPA between CLPC and TRANSCO is later than June 13,2006, the agreed selling price does not reflect the best estimate of the asset values at the time the contract was entered into by both parties.

With the aforementioned ERC decision, TRANSCO and PENELCO has agreed to renegotiate the contract price and other relevant provision of the LPA particularly the 1. Sale and Purchase Of Subtransmission Assets; 2. Purchase Price,(Sixty One Million Nine Hundred Nineteen Thousand Three Hundred Fifty Seven and 98/100); 3. Manner and Form Of Payment; and 4.Connection and Residual Subtransmission Charges.

Subject to the final agreement approval of ERC and upon receipt of NPC/TRANSCO of the 20% down payment, transfer of possesion, operation and maintenance of 69kV Transmission Line assets to PENELCO will take place.