Risks, Enterprise Enhancements, and Governance

Under manufactured capital, EDC takes on risks  such as natural catastrophe, project execution,  equipment reliability risks, and geothermal capacity.  
The worsening climate crisis and extreme weather  conditions pose a serious concern to EDC’s  operations, facilities, and host communities.  Typhoon Odette was one such event that damaged  infrastructure and disrupted day-to-day living in  2021.  
Its landfall in the Visayas region in December 2021  resulted in outages at our geothermal power plants  in Leyte. While we were able to restore facilities,  which sustained minor impact, in 5 days, damage  to transmission lines operated and maintained by  the National Grid Corporation of the Philippines  (NGCP) continued to affect electricity distribution.  Additionally, the Nasulo power plant experienced  an outage in March due to the activation of its main  transformer On Load Tap Changer surge relay. It  was repaired and restored within 52 days.  
To address and further prevent outages such as these,  we developed a Natural Catastrophe (NatCat)  Resiliency Framework that covers initiatives before,  during, and after disasters. These include identifying  potential landslide areas and mitigations, installing  sensors as early warning devices on ground  movements, and developing dashboards for realtime sensor monitoring. We also established an  on-site weather forecasting system in partnership  with a weather forecasting company and created  a hazard map model on landslide susceptibility and  forest fire hazards.  
In Leyte, we completed all six (6) typhoon-proofing  building projects, lowering the risk level for typhoons  from high to medium. EDC also completed two (2)  cooling tower replacement projects, addressing the  risks from earthquakes and typhoons. The buildings  and cooling towers did not sustain heavy damage  from Typhoon Odette that hit in December 2021.  
In mitigating geohazard risks such as landslides and  floods, EDC has completed all nine (9) mitigation  projects fleetwide. With the controls put in place,  we have lowered the risk levels in these areas  from medium to low. We have also completed two  (2) additional projects. These are the landslide  mitigation for the new expansion areas in Leyte- Pad  MGM and Pad UMD. We have been proactively  identifying and mitigating potential risks even before  wells are drilled and pipelines are constructed.  
Furthermore, EDC conducted the following activities  to support resilience to natural catastrophes:  
• Quarterly Updating of Risk Assessments  
• Implementation of Forest Fire Protection  Measures (Establishment of Firelines,  Engagement of Fire Trucks, Purchase of Fire  Fighting Tools)  
• Conduct of LiDAR Survey and Updating of  Landslide Susceptibility Maps  
• Re-deployment of Emergency Restoration  Structures to ensure quick Return-to-Service  in case of transmission line damage during  typhoons  
• Geohazard Assessments for both local and  international projects  
As a result of these continuous efforts in mitigating  risks to natural catastrophes, EDC is now at medium  risk levels in terms of typhoons, geohazards,  and forest fires. We still have high risk nodes for  earthquakes, but we are gradually reducing them  through the continuation of the NatCat Resiliency  Program.  
Mitigating earthquake risk is one of the EDC’s  priorities for the coming years. We will continue  with the cooling tower replacement program and  strengthen our powerhouses and critical buildings  through structural retrofitting.  
In relation to the risks from the ongoing pandemic,  new guidelines and protocols were laid out and  are continuously being revisited as new evidence  arrives. EDC provided equipment necessary for  the implementation of the protocols including, but  not limited to, ventilation improvements, thermal  scanners, medicines, and PPE. We also hired  additional human resources for health (HRH)  including various health experts and implementers  on the ground.  

We also mitigated equipment and project  execution risks in some of our facilities through  an Asset Management System, aligned with ISO  55000:2014 standards. Key parts of the EDC Asset  Management System include Reliability Centered  Maintenance (RCM), Risk-Based Inspection (RBI),  and Maximo, our enterprise asset management  solution from IBM. In addition, EDC identified  asset-related risks through the Failure Mode Effects  Criticality Analysis (FMECA). The critical risks are  included in the Critical Asset Risk Register (CARR),  which is managed at the facility level. These insights  are further incorporated in developing the LongTerm Asset Plan (LTAP).  

In our geothermal operations, EDC faced challenges  in steam decline and reservoir processes, insufficientreinjection capacity, well integrity issues, and the  experimental nature of major innovation projects. To  ensure these risks are addressed, we implemented  a management-approved Drilling Program and  a Project Stage Gating Process, along with Well  Risk Review Framework and Well Risk And Asset  Management that reinforced the operational  efficiency of our facilities. We also implemented  the Leytex Bilateral Steam Exchange as part of  our Fluid Collection and Recycling System (FCRS)  optimization initiative.     
In addition, we installed a scale-inhibition system  by Nalco Water (an Ecolab company) to address  the crucial blockage in the two-phase header where  all the wells of a production pad are connected.  This was caused by mineral deposits of silica and  iron sulfide, obstruction that could have decreased  the geothermal output of the wells by 65%. Two  products were used to prevent or slow down  future blockage rate. blockage: Nalco® GEO980  and Nalco ® GEO962. The first tool, Nalco®  GEO980, greatly reduced silica buildup, while  Nalco ® GEO962 dispersed and controlled the  iron sulfide. These products were selected through  Nalco Water’s Geomizer™, a digital modeling  tool that determines the proper remedies for a  plant’s scale and corrosion risk. Then, Nalco Water  implemented a treatment plan following a technical  evaluation. After four months, the treatment plan  resulted in a 70% annual reduction in scaling and  prevented production decline. It also reduced  downtime, reduced chemistry usage, and increased  the interval between mechanical pipeline cleanings  twice a year to once every two years.  
We also introduced Low Temperature Arc Welding  for our power plants and qualified the methods for  our rotating equipment repairs. As a result of the  considerable time spent in workshops employing    another type of cold submerged arc welding  (SAW), turbine diaphragms no longer warp and  rotors don’t bend. In the past, the SAW method  would often result in bent rotors that would have to  be shipped to Indonesia, Australia, Scotland or the  US, with substantial costs and prolonged outages.  One rotor that bent ultimately cost close to PHP  40 million to repair. In collaboration with our local  partners, we slowly worked to establish capability,  developed work procedures, and qualified both  the technology and methodology. We started with  non-rotating parts to prove our technology. In the  first stage of the process, we repaired valves and  valve flanges (the part of the valve where gaskets  are embedded) and proved successfully that the  technology works. Our age-old expensive issue of  warping flanges with the old welding and rebuilding  methods are now a thing of the past. Crucially, the  turbine rotor journals, the part of the rotor that rests  on the bearing, used to take six months and caused  considerable risk of bent rotors given that the repairs  expose the equipment to 650°C temperatures.  If the rotors are bent, shipping would take two to  three months round-trip, and stress relieving or  straightening would take another three months.  
As of January 2022, we now have 100% rotating  spares, many of which have used the new method.  The method is also used to repair eroded leading  edges of blades normally in the low pressure stages  on the back end of the turbine, where most of the  condensation takes place.  
In the past, a turbine repair that ended up with a bent  rotor cost us over USD 1 million to repair, with close  to 13 months of opportunity cost. Today, the repair  takes three months at a cost of sub USD 300,000,  with certainty in the outcome and substantially less  stress on the equipment along the way.  
Considering the importance of EDC to integrating  these new systems with our operations, we continue  to implement initiatives to protect, maintain, and  upgrade our manufactured capital. These are  enhanced resource management, geoscientific  activities, continuous development and testing  of existing wells, drilling of new wells, and well  intervention, to name a few. For our geothermal  reservoirs, we have routine monitoring and  maintenance, which include preventive and  corrective maintenance.  
All of these underscore EDC’s focus on purposeful  innovation, leveraging technology to further  advance its mission to build a decarbonized and  regenerative future.