HISTORICAL BACKGROUND OF BATELEC II

Batelec II is a non-stock, non-profit electric cooperative in the province of

Batangas.

Presidential Decree 269 granted exclusive franchise to Batelec II to

distribute electricity to two (2) cities and fifteen (15) municipalities in Batangas.

In 2003, ten (10) new directors were elected which became the majority
block.

In 2004, the newly installed board of directors undertook the

computerization amounting P86 million and approved by the 14 directors.

In 2006, National Electrification Administration (NEA) filed an

administrative case of syndicated estafa against the 14 directors. The six (6)
directors who were no longer directors at the time of filing the case were banned
from running as directors, and the seven (7) directors wre dismissed on October
5, 2006.

The decison of NEA to dismiss the seven (7) directors was sustained by the
Court of Appeals.

The Supreme Court issued a Status Quo Ante Order barring Batelec II from
holding election to fill the vacant seats in the board thereby leaving Tanauan and
the six (6) municipalities without representation in the management of the
cooperative.

The seven (7) remaining directors reorganized Batelec II. Since 2006,
Batelec II was under Ruperto Manalo, a director and president representing the
municipality of San Juan. The other officers are Delio Ambal of San Jose as vice
president; Danilo Gulfo of Rosario as secretary; Dakila Atienza of Lipa as
treasurer; Adrian Ramos of Lobo as auditor; Marlino Braga of Padre Garcia as
director and Perlito Datu, Jr. of Mabini/Tingloy as director.

These small group of directors controlled the management of Batelec II

leaving the city of Tanauan, and the seven (7) municipalities of Alitagtag, Cuenca,
Mataas na Kahoy, Talisay, Mabini/Tingloy, Taysan, Laurel , Malvar/Balete and
Lobo without representation.

On April 12, 2016, the Supreme Court affirmed the decision of the Court of
Appeals in dismissing the directors on October 5, 2006, thereby lifting the Status
Quo Ante Order to pave the way for the election of directors in Batelec II.

The lack of representation of Tanauan and the other municipalities in the

management lasted for more than ten (10) years from October 5, 2006 to April
12, 2016.

During the interregnum, Tanauan et al suffered from the effects of

mismanagement of Batelec II. It is characterized for the regularity of power
blackout leading the members-consumers to favor a transfer of power supply to
its competitor, Meralco. For more than a decade the members-consumers
suffered the inconvenience of unreliable service of Batelec II that seemed no end
in sight.

The By-Laws of Batelec II provided for the requiremehts to be a member of

the board. However, Republic Act No.10531 or the National Electrication
Administration Reform Act of 2013 added a provision of attending twice in the
Annual General Membership (AGMA).

To date, four (4) district directors have yet to be filled up. Laurel is
scheduled for election on June 2, Lobo on June 6, Malvar/Balete on June 9, and
Tanauan on June 23, 2018.

During the regular yearly general assembly in 2017, Batelec neglected to

report the true financial condition of the cooperative.

In the year 2017, Batelec II had a not loss from operations of P61,111,234.
It had an accumulated loss of P393,352,849 as of the year end December 21,
2017.

The succeeding analysis will attempt to define the true financial conditions
of Batelec II