EGE Haina 2016 by EGE Haina

Consolidated Financial Statements

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries December 31, 2016 (Together with the Independent Auditor's Report)

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements Table of Contents Page(s) Independent Auditors’ Report …………..………………………………………………………………………..……….

1-4

Consolidated Financial Statements: Consolidated Statements of Financial Position ……………….……………….……………..……………………..

Consolidated Statements of Comprehensive Income ……………….…………..…………………………………

Consolidated Statement of Changes in Equity ……………………….….….………………………………………

Consolidated Cash Flow Statements………………………………………………….…………………………………….

Notes to the Consolidated Financial Statements…………………..……………..…………………………………..

9-57

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, 2016 and 2015 (Amounts in United States dollars - US$-)

Notes

Assets Current assets Cash and cash equivalents Held-to-maturity investments Notes and trade receivables and others Inventory Income tax credit balance Prepaid expenses Total current assets

7 8 9 11

Income tax credit balance Notes and trade receivables and others Property, long termplant and equipment Other non-current assets Total assets

Debt and loans payable long term Deferred tax liability, net Other non-current liabilities Total liabilities Equity Paid-in capital Legal reserve Retained earnings Total equity Total liabilities and equity

78,535,408 139,281,065 71,719,923 36,892,454 2,583,103 3,259,692 332,271,645

1,013,712 601,507,632 899,239 852,348,021

1,291,551 466,155 609,573,982 1,404,830 945,008,163

14 15 16

60,145,098 2,444,591 62,589,689

105,000,000 40,020,513 2,751,917 147,772,430

14 18

296,494,800 55,385,707 3,000 414,473,196

198,928,053 49,243,191 3,000 395,946,674

289,000,000 28,900,000 119,974,825 437,874,825 852,348,021

289,000,000 28,900,000 231,161,489 549,061,489 945,008,163

See accompanying notes to the consolidated financial statements.

2015

94,661,880 41,781,870 70,037,390 35,489,511 3,610,504 3,346,283 248,927,438

9 12 13

Liabilities and Equity Current liabilities Debt and loans payable short term Trade payables and others Other current liabilities Total current liabilities

2016

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, 2016 and 2015 (Amounts in United States dollars - US$-) Notes Revenues Cost of fuel and purchase of energy Operating and maintenance expenses Administrative and general expenses Employee benefits Depreciation and amortization Gain on foreign currency exchange, net Other expenses, net Operating profit

20 21 22 23 24

Finance income Financial expenses Net financial expenses

26 27

Profit before income tax Income tax Net profit

Other comprehensive income, net of tax: Items that can be reclassified later to the consolidated income statement Cash flow hedges Comprehensive income

See accompanying notes to the consolidated financial statements.

2016

2015

332,668,090 (163,534,783) (34,111,656) (19,399,530) (19,618,435) (37,381,996) 657,706 (1,882,905) 57,396,491

452,446,474 (237,301,277) (36,438,319) (25,583,896) (21,091,391) (34,557,809) 323,440 (436,900) 97,360,322

10,601,528 (17,626,601) (7,025,073)

19,867,520 (30,271,327) (10,403,807)

50,371,418 (15,350,514) 35,020,904

86,956,515 (23,819,617) 63,136,898

35,020,904

778,417 63,915,315

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended December 31, 2016 and 2015 (Amounts in United States dollars - US$-)

Note Balance as of January 1, 2015 Comprehensive income: Net profit Transfer to legal reserve Other comprehensive income, net of tax: Cash flow hedge Comprehensive income Distributions to owners: Dividends declared Balance as of December 31, 2015 Comprehensive income: Net profit Comprehensive income Distributions to owners: Dividends declared Balance as of December 31, 2016

Paid in capital

Legal reserve

289,000,000

26,459,558

(778,417)

226,065,033

540,746,174

2,440,442

63,136,898 (2,440,442)

63,136,898 -

2,440,442

778,417 -

60,696,456

778,417 63,915,315

289,000,000

28,900,000

(55,600,000) 231,161,489

(55,600,000) 549,061,489

35,020,904 35,020,904

289,000,000

28,900,000

(146,207,568) 119,974,825

(146,207,568) 437,874,825

See accompanying notes to the consolidated financial statements.

Other reserves

Retained earnings

Total Equity

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED CASH FLOW STATEMENTS For the year ended December 31, 2016 and 2015 (Amounts in United States dollars - US$-)

Cash flows from operating activities Profit before income tax Adjustments to reconcile gains before income tax to net cash provided by operating activity: Loss on disposal of property, plant and equipment Gain on sale of property, plant and equipment Depreciation Amortization of other non-current assets Amortization of debt issue costs Ineffectiveness of the cash flow hedge Changes in fair value of notes receivable Exchange gains, net Financial expenses, net Changes in assets and liabilities: Notes and trade receivables and others Inventory Prepaid expenses Other non-current assets Trade payables and others Other current liabilities Interest charged Interest paid Taxes paid Net cash provided by operating activities Cash flows from investing activities: Cash received from sale of property, plant and Additions to property, plant and equipment equipment Addition of intangible assets Decrease in restricted cash Held-to-maturity investments Collection of notes receivable Net cash provided by (used in) investment activities Cash flows from financing activities: Funds obtained from financing Payment of financing Dividends paid Debt issue costs Net cash used in financing activities

Notes

12 and 25

25 12 13 14 and 25

26 and 27

12 8 10

10 14

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

See accompanying notes to the consolidated financial statements.

2016

2015

50,371,418

86,956,515

116,774 (39,591) 36,709,714 672,282 271,425 (215,400) (1,395,229) 6,753,648

273,128 33,667,027 890,782 2,229,757 356,225 (254,607) 8,174,050

2,320,740 (271,196) (86,591) 8,010 18,962,359 (241,837) 9,957,989 (18,971,439) (10,023,049) 94,900,027

220,771,312 (2,313,467) 272,293 (43,064) (81,270,769) 368,753 23,788,796 (20,166,652) (34,329,973) 239,370,106

39,591 (24,316,098) (174,701) 97,499,195 651,852 73,699,839

(74,582,712) (305,715) 3,738,841 (139,281,065) 711,111 (209,719,540)

98,845,979 (105,000,000) (146,163,946) (155,427) (152,473,394)

145,000,000 (240,204,544) (55,596,733) (463,298) (151,264,575)

16,126,472 78,535,408 94,661,880

(121,614,009) 200,149,417 78,535,408

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2016 and 2015 (Amounts in United States dollars - US$-) 1.

Corporate Information Empresa Generadora de Electricidad Haina, S. A. ("EGE Haina" or “the Company”) was organized on August 17, 1999 and incorporated on October 28, 1999, in conformity with the laws of the Dominican Republic as part of the process of capitalization of the Dominican electric sector that took place that year. The Company's administrative offices are located at Lope de Vega Avenue, Torre NovoCentro, 17th floor, Naco, Santo Domingo, Dominican Republic. The shareholders of EGE Haina are Haina Investment Co. Ltd. (“HIC”) (50%), Fondo Patrimonial de las Empresas Reformadas (“FONPER”), an entity of the Dominican State (49.994%) and other noncontrolling shareholders (0.006%). EGE Haina is the greatest electric generator in the country, measured per its installed capacity. EGE Haina owns ten generation plants of 690.2 MW, of which nine are commercially available, distributed throughout the country, and with a generating capacity of 657.2 MW: Sultana del Este, Quisqueya II and Quisqueya Solar in the eastern part of the country, Haina and Barahona in the South, and Pedernales, Los Cocos and Larimar in the West. The fleet of plants consists of a number of thermal units operated through fuel oil and coal, three wind generation parks of 126.7 MW and a photo voltaic generation park of 1.5 MW. The thermal units have different technologies: vapor turbines, diesel engines, a simple cycle gas turbine and combined cycle engines. EGE Haina also operates the Quisqueya I plant, a combined cycle plant with dual fuel (fuel and natural gas), with a net installed capacity of 225 MW, a 138KV substation, and a 230KV transmission line, according to the operation and maintenance contracts signed with Pueblo Viejo Dominicana Corporation Branch (“PVDC”), a Dominican subsidiary of Barrick Gold Corporation that owns the plant. Company’s Management authorized the issueance of the consolidated financial statements on March 17, 2017. These consolidated financial statements must be presented to the Shareholders’ Assembly for definite approval. They are expected to be approved without changes.

Basis of preparation of the consolidated financial statements

2.1

Basis of preparation The Company's consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) and Interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The Company's consolidated financial statements were prepared under the historic cost convention, modified by financial assets and liabilities (including derivative instruments) at fair value through profit and loss and other comprehensive income.

Basis of preparation of the consolidated financial statements

2.1

Basis of preparation (continued) The preparation of financial statements under IFRS requires the use of certain critical accounting estimates; it also requires management to use its judgment while applying the Company's accounting policies. The areas that involve a greater degree of judgment or complexity, or areas where assumptions or estimates are important for the consolidated financial statements, are disclosed in Note 4.21.

2.2

Basis of consolidation Subsidiaries are all of the entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights over, the variable returns from its envolvement in the entity, and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated as of the date on which control is transferred to the Company, and they are deconsolidated on the date that said control ceases. The consolidated financial statements as of December 31, 2016 and 2015, include the financial statements of Empresa Generadora de Electricidad Haina, S. A., EGE Haina Finance Company and Haina Overseas Corporation, Inc. EGE Haina Finance Company was created in 2007, under the laws of the Cayman Islands, as a tax-exempt company, with the purpose of issuing a 144A/Regulation S bond of US$175 million (â&#x20AC;&#x153;Senior Notesâ&#x20AC;?), which was fully settled in September 2013. From that date, the subsidiary does not have operations. Haina Overseas Corporation, Inc., was created in March 2015 under the laws of the Cayman Islands, as a tax-exempt company, to venture into potential foreign investments. To date, this subsidiary has no operations. The financial statements of the subsidiaries were prepared on the same date as the financial statements of Empresa Generadora de Electricidad Haina, S. A., using consistent accounting policies. All balances, transactions, income and expenses, earnings and losses resulting from intragroup transactions have been eliminated in full in the consolidation process. The consolidated financial statements as of December 31, 2016 and 2015 were prepared on a historical cost basis except for certain items that were measured under the accounting policies explained in Note 4. The financial statements are expressed in United States dollars (US$).

Changes in accounting policies The accounting policies adopted by the Company to prepare its consolidated financial statements as of December 31, 2016 are consistent with those that were used for the preparation of the consolidated financial statements as of December 31, 2015. The Company early adopted the following standards and amendments to standards that are effective for periods beginning on or after January 1, 2016. These standards and interpretations did not have a significant effect on the consolidated financial statements as of December 31, 2016.

Changes in accounting policies (continued) Amendments to IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in associates and joint ventures." Published in September 2014. This amendment addresses the conflict between IFRS 10 and IAS 28 in the treatment of the sale or contribution of goods between an investor and its associate or joint venture. The main consequence of the amendments is that the gain or loss resulting from the sale or contribution of assets that constitute a business is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only partially, even when these assets are in a subsidiary. The amendments clarify the application of the consolidation exception for investment entities and their subsidiaries. The amendment to IFRS 10 clarifies that the exemption from presenting consolidated financial statements is available to entities in group structures that include investment entities. The modification to IAS 28 allows an entity that is not an investment entity itself but that holds interest in an associate or joint venture that is an investment entity, the option of an accounting policy in the application of the equity method. The entity can retain the fair value measurement applied by the associate or joint venture that is an investment entity, or in its place to conduct a consolidation of the investment entity (associate or joint venture). Amendment to IFRS 7 "Financial Instruments: Disclosures" Servicing contracts: If an entity transfers a financial asset to a third party under conditions that allow the cedent to derecognize the asset, IFRS 7 requires the disclosure of any type of continuing involvement in the financial asset transferred. IFRS 7 provides guidance on what constitutes continuing involvement in this context. The modification is prospective with the option of applying it retroactively. This also affects IFRS 1 to give the same option to those who apply IFRS for the first time. Amendments to IAS 1 "Presentation of Financial Statements" The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify: (a) The materiality requirements in IAS 1, (b) that specific line items in the statement(s) of profit or loss and OCI and the statement of financial position may be disaggregated, (c) That entities have flexibility as to the order in which they present the notes to financial statements, (d) That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and OCI. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. In 2016 the Company adopted the above amendments to International Financial Reporting Standards which entered into effect during the year. The adoption of these revised standards has not had a significant effect on the Company's consolidated financial statements.

Summary of Significant Accounting Policies

4.1

Currency, transactions in foreign currency and conversion of the financial statements The Company records transactions in foreign currency at the exchange rate prevailing at the transaction date. At the period close, to determine its financial position and operating results, the Company remeasures and adjusts its assets and liabilities in foreign currency at the closing rate. Exchange differences that may result from the application of this policy are recognized in the comprehensive income of the year in which they occur in the account for net gains in foreign currency exchange. The exchange rates used by the Company as of December 31, 2016, to convert the balances in foreign currency (RD$ and EUR) to US dollars were RD$46.60 (2015: RD$45.59) per US$1 and â&#x201A;Ź1.11 (2015: â&#x201A;Ź1.13) per US$1. The legal currency of the Dominican Republic is the Dominican peso; however, the Company adopted the US dollar as the functional and presentation currency of its consolidated financial statements since it better reflects the events and transactions that it conducts. The adoption of the US dollar as the functional currency was based on the fact that the selling prices for services are determined in this currency, as well as the main costs and fuel purchases, and cash flows from operating activities are usually denominated in US dollars.

4.2

Cash and cash equivalents Cash and cash equivalents are comprised of cash and highly liquid short-term investments with a maturity less than three months from the date of acquisition. For purposes of the consolidated cash flow statement, cash and cash equivalents are presented by the Company net of bank overdrafts, if any.

4.3

Financial instruments The valuation of the Companyâ&#x20AC;&#x2122;s financial instruments is determined using the fair value or amortized cost, as defined below: Fair value - The fair value of an investment negotiated in an organized financial market is determined using as reference the prices quoted in that financial market for negotiations performed as of the consolidated reporting date. For financial instruments for which there is no active financial market, the fair value is determined using valuation techniques. These techniques include recent market transactions between interested, fully informed parties who act independently; references to the fair value of another substantially similar financial instrument; and discounted cash flows or other valuation models.

Summary of Significant Accounting Policies

4.3

Financial instruments (continued) Amortized cost - The amortized cost is calculated using the effective interest method less any allowance for impairment. The calculation takes into consideration any award or discount in the acquisition and includes the transaction costs and fees which are an essential part of the effective interest rate.

4.3.1 Financial assets and other financial assets The financial assets contemplated in the scope of IAS 39 Financial instruments: Recognition and Measurement may be classified as financial assets at fair value through profit or loss if appropriate. The Company determines the classification of its financial assets upon initial recognition. The Company initially recognizes all of its financial assets at fair value plus costs directly attributable to the transaction, except for financial assets valued at fair value through changes in profit or loss in which these costs are not considered. The Company classifies its financial assets in the category of notes and receivables on the date of initial recognition. This initial classification is reviewed by the Company at the end of each financial year. The Company recognizes the purchase or sale of financial assets on the date of each transaction, which is the date on which the Company commits to buy or sell a financial asset. The Companyâ&#x20AC;&#x2122;s financial assets include cash and cash equivalents, held-to-maturity investments, notes and accounts receivable and others. Notes, trade receivables and others are non-derived financial assets with fixed or determined payments that are not quoted in active markets. They are initially recognized at the respective invoiced amounts. After initial recognition, accounts receivable are measured by the Company at amortized cost using the effective interest method less an impairment allowance. Collection of these financial assets is analyzed periodically, and an allowance is recorded for any accounts classified as doubtful with the corresponding charge to the period results. Accounts declared uncollectible are deducted from the impairment allowance. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity investments, when the Company has the positive intention and ability to hold them to maturity.

Summary of Significant Accounting Policies (continued)

4.3

Financial instruments (continued)

4.3.1 Financial assets and other financial assets (continued) After initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method. Gains or losses are recognized in results of the year in which the investments are derecognized or impaired, as well as through amortization. 4.4

Impairment of financial assets The Company assesses at each statement of financial position date whether there is any objective evidence that a financial asset or group of assets could be impaired. A financial asset or group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measurable decrease in the estimated future cash flows due to defaults. Impairment of financial assets carried at amortized cost When the Company determines that it has incurred in an impairment loss in the value of its financial assets carried at amortized cost, it estimates the loss amount as the difference between the assetâ&#x20AC;&#x2122;s carrying amount and the present value of future cash flows discounted at the financial assetâ&#x20AC;&#x2122;s original effective interest rate; it deducts the loss from the assetâ&#x20AC;&#x2122;s carrying value and recognizes such loss in the results of the year in which it occurs. If, in a subsequent period, the amount of the loss due to impairment decreases and may be objectively related to an event subsequent to the recognition of impairment, the loss due to impairment is reversed. Once the reversal is recorded, the carrying amount of the financial asset does not exceed the original recorded amount. The amount of the reversal is recognized in the results of the year in which it occurs.

Summary of Significant Accounting Policies (continued) Derecognition of financial assets Financial assets are derecognized by the Company when the rights to receive cash flows from the asset have expired, or when the financial asset is transferred along with its inherent risks and benefits and contractual rights to receive cash flows from the asset are surrendered, or when the Company retains the contractual rights to receive cash flows and assumes the obligation to pay them to one or more parties.

4.6

Financial liabilities

4.6.1 Initial recognition and measurement of financial liabilities Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, notes and loans payable and derivative financial instruments designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. The Company recognizes all financial liabilities initially at fair value on the date of acceptance or contracting of the liability, plus, in the case of debt and loans payable, directly attributable transaction costs. The Companyâ&#x20AC;&#x2122;s financial liabilities include debts and loans payable, trade payables and others, accounts payable to related parties and certain provisions, accruals and withholdings payable. 4.7

Subsequent measurement of financial liabilities The subsequent measurement of financial liabilities depends on their classification as described below: Debts and loans payable, trade payables and others, accounts payable to related parties. After initial recognition, debts, loans and trade payables and others are measured at amortized cost using the effective interest method. Gains or losses are recognized in the consolidated statement of comprehensive income when the financial liability is derecognized as well as through the amortization process.

4.8

Derecognition of financial liabilities Financial liabilities are derecognized when the obligation has been paid, canceled or expires. When a financial liability is replaced by another, the Company derecognizes the original and recognizes a new liability. Differences that may result from the replacements of these financial liabilities are recognized in the results of the year in which they occur.

Summary of Significant Accounting Policies (continued)

4.9

Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract was signed, and are subsequently remeasured at fair value. By virtue of hedge accounting, the Company classifies its hedges under the following parameters: a) As a fair value hedge when it is a hedge of the exposure to changes in fair value of assets or liabilities recognized or unrecognized firm commitments. b) As a cash flow hedge when it is a hedge of the exposure to the variation of cash flows that (i) is attributed to a particular risk associated to a recognized asset or liability, or a highly likely expected transaction, and that (ii) could affect the period's results. c) As a hedge of a net investment in a foreign operation. On the date of inception of a hedging agreement, the Company formally designates and documents the hedging relationship to which it wishes to apply the hedge accounting as well as its risk management objective and strategy to engage the hedge. The documentation includes the identification of the hedging instrument, item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the effectiveness of the hedge instrument in offsetting the exposure to changes in cash flows of the hedged item attributable to the risk hedged. It is expected that these hedges are highly effective in offsetting the changes in cash flows and they are assessed continuously to determine whether they have been highly effective throughout the financial periods for which they were designated. During the year ended December 31, 2015, the Compnay only participated in a cash flow hedge, which was discontinued that same year. Cash flow hedges â&#x20AC;&#x201C; The portion of gains or losses of the hedge instrument that is determined as effective is recognized in other comprehensive income in the reserve for cash flow hedges, and the ineffective portion of the gain or loss of the hedge instrument is recognized in the results of the year.

4.10 Inventory Inventories are valued at the lower of cost and net realizable value. Inventory costs include all costs derived from their acquisition, as well as other costs incurred to bring them to their condition and current location. Inventory consist of bulk fuel (coal, bunker fuel oil and diesel), as well as spare parts. These are recorded at average acquisition cost and are derecognized when they are consumed, used or disposed. Merchandise in transit is recorded at specific invoiced cost.

Summary of Significant Accounting Policies (continued)

4.11 Property, plant and equipment As a result of the transition of IFRS as of January 1, 2013, the Company remeasured at fair value the categories of land, buildings and generation plants of the property, plant and equipment, and designated this value as attributed cost on that date. After the adoption date, these assets are measured at cost less accumulated depreciation and any accumulated impairment. The fair values of those assets as of January 1, 2013 were determined by independent appraisal experts engaged by the Company. The other categories of property, plant and equipment are recorded at historical cost, net of the corresponding accumulated depreciation. The historical cost includes expenditures directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying value or as a separate asset, as applicable, only when it is likely that the future economic benefits associated with the item will be transferred to the Company, and the cost of that item can be measured reliably. The cost of replaced parts is derecognized. All other repair and maintenance costs are charged to the results of the year in which they are incurred. Depreciation is calculated on a straight line basis, over the estimated useful life of each asset. The residual value of depreciable assets, estimated useful life and depreciation methods are reviewed annually by Management and are adjusted when considered pertinent, at the end of each financial year. The depreciation rates used by the Company were: Annual depreciation rate

Category Buildings Generation plants, including reusable spare parts Transportation equipment Office furniture and equipment Minor equipment

5% 5% 12% 4% 15%

Construction and installation costs are charged to temporary accounts and subsequently transferred to the respective asset accounts once the works are completed. These works in process include all disbursements directly related to the design, development and financial costs attributable to the works. A component of property, plant and equipment is written off when it is sold or when the Company no longer expects future benefits from its use. Any loss or gain from the assetâ&#x20AC;&#x2122;s disposal, calculated as the difference between the net carrying amount and the sales proceeds, is recognized in the results of the year in which the transaction occurs. Reusable spare parts, as opposed to spare parts, are those that can be repaired and reused. Their estimated useful life is 10 years and does not exceed that of the generation plants that they support.

Summary of Significant Accounting Policies (continued)

4.11 Property and equipment (continued) Major and minor maintenance All disbursements recognized as major and minor maintenance expenses comprise those incurred in the reconditioning of the generation plants. They are charged directly to the consolidated statements of comprehensive income. 4.12 Other non-current assets Intangible assets Intangible assets acquired separately are initially recorded at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses, as necessary. The intangible assets held by the Company relate to acquisitions of computer software licenses that are capitalized based on the cost incurred to acquire and place the software into operation. These costs are amortized throughout their estimated useful life (between three and five years). Additionally, the Company has easement contracts, which relate to easements acquired from third parties to use their land. The easement grants EGE Haina the right of use over a portion of the property for an indefinite period. Management's intention is to use the easement beyond the foreseeable future. These intangible assets are not subject to amortization. The useful lives of the intangible assets are defined as finite or indefinite. Intangible assets with finite useful lives are amortized under the straight line method over the estimated useful lives, which are reviewed by the Company each year. Expenses for the amortization of intangible assets are recognized in the results of the year in which they are incurred. Intangible assets with indefinite useful lives are not amortized. On an annual basis, the Company conducts an assessment to identify reductions in realizable value when events or circumstances indicate that recorded values may not be recovered. If this indication exists and the carrying value exceeds the recoverable amount, assets or cash generating units are measured at their recoverable amounts. Deferred charges The deferred charges are the costs related to contracts for the sale of energy to the distribution companies. These are amortized under the straight line method for the term of the corresponding contracts, which expired in 2016.

Summary of Significant Accounting Policies (continued)

4.13 Impairment of non-financial assets Intangible assets with an indefinite useful life or intangible and tangible assets that are not ready for use, are not subject to amortization and are assessed for impairment each year. Assets subject to depreciation and amortization are assessed for impairment when events or changes in circumstances indicate that the carrying value may not be recovered. An impairment loss is recognized for the amount for which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In order to assess for impairment, the assets are grouped at the lowest levels for which the cash flows are highly independent (cash generating units). Impairment losses of non financial assets previously recognized are reviewed for possible reversals at the end of each year reported. 4.14 Operating leases Company as lessee Leases in which the lessor substantially retains all risks and benefits incidental to asset ownership are considered operating leases. Payments under these leases, according to rates established in the respective contracts, are recognized as expenses on a straight-line basis over the lease term. 4.15 Revenue recognition The Company measures its revenue from ordinary activities using the fair value of the consideration received or to be received, derived from revenue. Sale of energy Revenues from sale of energy, both contracted and to the spot market, are recognized based on the energy produced and demanded by clients each calendar month, and their collection is reasonably assured. Each company in the National Interconnected Electric System (SENI according to its initials in Spanish) reports the end of month metering reading to the Coordinating Body of the National Interconnected Electric System (OCSENI according to its initials in Spanish), which is the entity in charge of reporting the system's transactions. OCSENI determines the amounts of energy sold by contract and those sold in the spot market. Contracted energy sales are priced per the contracts and those sales made in the spot market are priced per the market price.

Summary of Significant Accounting Policies (continued)

4.15

Revenue recognition (continued) Sale of services Revenue from operation and maintenance fees of third party plants are recognized when the amount of ordinary revenue can be measured reliably, it is probable that the Company will receive economic benefits from the transaction, the stage of completion of the service rendered can be measured reliably as of the consolidated reporting date, and costs already incurred, as well as those remaining to complete the service, can be measured reliably. Where the revenue from services cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are considered to be recovered. Finance income Revenue arising from financial instruments is recognized in relation to the passage of time, calculated over the average monthly balances for the invested principal, applying the effective interest method. Interest income is included as financial income in the consolidated statement of comprehensive income.

4.16 Cost and expense recognition Costs and expenses are recognized in the consolidated statement of comprehensive income under the accrual basis, that is, when the real flow of goods and services (and what they represent) occurs, regardless of when the related monetary or financial flow occurs. The most important cost of the business is: Cost of fuel: The cost of fuel, coal, bunker fuel oil and diesel is recognized in results when it is consumed. This effect is included as cost of sales in the accompanying consolidated statement of comprehensive income. 4.17 Financing costs The Company capitalizes borrowing costs directly or indirectly attributable to the acquisition, construction, production or installation of an asset that necessarily requires a certain period of time to be suitable for use or sale, as part of the cost of the asset. Borrowing costs include interest, exchange differences and other borrowing costs. Borrowing costs that do not meet the conditions for capitalization are recorded in the results of the year in which they are incurred. 4.18

Provisions, accruals and withholdings payable Provisions, accruals and withholdings payable are recognized: i) when the Company has a present obligation (legal or constructive) as a result of a past event, ii) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligationâ&#x20AC;&#x2122;s amount can be made. The amount of recorded provisions is assessed periodically and required adjustments are recorded in the results of the year.

Summary of Significant Accounting Policies (continued)

4.19 Cost of employee benefits Pension plan Starting with the entry into effect of Law 87-01, which establishes the Dominican Social Security System (SDSS), the Company recognizes as expenses the monthly contribution made to the pension system to be deposited in the employees' individual capitalization accounts, as well as the employees' own contributions, as an accrual until they are deposited at the financial entities authorized by the Superintendence of Pensions of the Dominican Republic, to be later transferred to the individual accounts at the pension fund administrators. Bonuses The Company grants bonuses to its executives and employees based on work agreements and/or the fulfillment of goals, and the liability is accounted for with a charge to the results of the period when they are generated. Mutual agreement Policy The Company, since prior years, has a mutual agreement policy by means of which, by mutal agreement with the employee, it grants a compensation upon the resignation of the employee, as long as a series of pre-established conditions are met. The calculation of the amount of the benefit will depend, among other things, on the length of service of the employee, with a minimum term of five years of employment. The methodology used by the Company to estimate this liability consists of assessing the history of payments made under this concept and estimating the amount based on this data using actuarial methods, considering variables such as: the resignation rate , the life expectancy, the retirement age, and a discount rate. The estimated amount of this obligation is considered immaterial for purposes of the consolidated financial statements. Other benefits The Company provides benefits to its employees, such as vacation and Christmas bonus, according to the provisions of the country's labor laws, as well as other benefits per its internal policies.

Summary of Significant Accounting Policies (continued)

4.20 Taxes Current income tax Current income tax is calculated based on the provisions of Law 11-92, Tax Code of the Dominican Republic, its rules and modifications. The tax rate used to determine income tax as of December 31, 2016 and 2015 is 27% of the net taxable income at that date. The subsidiaries' operations (Note 2.2) are tax exempt in their country of incorporation, since their operations take place outside of said jurisdiction. Tax on assets Asset tax under the Dominican law is an alternative or minimum tax that is calculated, in this case for energy generation, transmission and distribution companies, as defined in the General Electricity Law No. 125-01, based on 1% of the balance of property, plant and equipment, net of depreciation. Tax on assets co-exists with income tax, and taxpayers must pay the higher of the two each year. If one year the Company's tax obligation is to pay tax on assets, the excess over the income tax is recorded as an operating expense in the consolidated statements of comprehensive income. Deferred income tax Deferred income tax is recognized for the temporary differences that arise between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates in effect or substantially in effect on the consolidated balance sheet date and expected to be applicable when the corresponding deferred tax asset is realized or the tax liability is settled. Deferred tax assets are recognized only to the extent that it is probable that there will be sufficient taxable income in the future use against the temporary differences. Tax on the Transfer of Industrialized Goods and Services (ITBIS) Energy sales are considered ITBIS exempt per the Tax Code of the Dominican Republic. ITBIS incurred in the acquisition of assets or services is recorded in the acquisition cost of the asset or as an expense, depending on the case. The net value receivable from or payable to the Tax Authorities for ITBIS is included as an account receivable or provisions, accruals and withholdings payable in the accompanying consolidated statement of financial position.

Summary of Significant Accounting Policies (continued)

4.21 Significant accounting judgments, estimates and assumptions The preparation of the consolidated financial statements requires Management to conduct judgments, estimates and assumptions affecting the reported figures of revenues, expenses, assets and liabilities and the corresponding disclosures, as well as the disclosure of contingent liabilities. Given the implicit uncertainty of these estimates and assumptions, adjustments affecting the disclosed amounts of assets and liabilities may be required in the future. In the process of applying its accounting policies, the Company has considered the following relevant judgments, estimates or assumptions: Impairment in the value of non-financial assets The Company assesses at each consolidated reporting date whether there are any indications that a non- financial asset could be impaired. Non-financial assets are also assessed for impairment when there are indications that recorded values may not be recovered. When these values are calculated, management must estimate future cash flows expected for related assets or for the generating unit, and it must use a discounted rate to calculate the present value of these cash flows. Depreciation of property, plant and equipment The Company makes judgments when assessing the estimated useful lives of its assets, and determining the estimated residual values, if applicable. Depreciation is calculated on a straight line basis over the estimated useful lives of the assets. These estimates are based on the life cycles analysis of the assets and their potential at the end of their useful lives. The residual values of the assets and their useful lives are reviewed and adjusted if appropriate at each reporting date. During the years ended December 31, 2016 and 2015, management reviewed these estimates and did not make any adjustments or variations on the prior year's useful lives. Fair value of derivative financial instruments The fair value of derivative financial instruments that are not negotiated in an active market is determined using valuation techniques. The Company uses judgment to select a variety of methods and conduct assumptions that are mainly based on the market conditions existing at each consolidated reporting date. For derivatives in a liability position, the fair value of interest rate swaps on the reporting date is determined by discounting the future cash flows using the yield curves on the reporting date, incorporating the counterpart credit risk in the discount rate used. As of December 31, 2016, the Company does not maintain derivatives.

Future changes in accounting policies International Financial Reporting Standards or their interpretations that have been issued but have not become effective as of December 31, 2016, are described below: The standards or interpretations described are only those that, per Management's belief, may have a significant effect on the Company's disclosures, position or financial performance when they are applied at a future date. The Company has the intention of adopting these Standards or interpretations when they enter into effect, and is in the process of assessing their impact on financial information. IFRS 9 Financial Instruments In July 2014, the IASB published the final version of IFRS 9 Financial instruments, which reflects all of the phases of the financial instrument project, and replaces IAS 39 Financial instruments: Recognition and Measurement and all prior versions of IFRS 9. The standard introduces new requirements for the classification and measurement, impairment and accounting of hedges. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, and early application is allowed. Retrospective application is required, but comparative information is not mandatory. For hedge accounting, requirements are generally applied prospectively, with certain limited exceptions. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with clients. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted IFRS 16Leases In January 2016, the IASB issued a new standard that requires lessees to recognize most of the lease contracts in their consolidated statement of financial position. Lessees will have a single accounting model for all leases, with certain exceptions. Accounting for the lessor will not experience a substantial change. The new standard enters into effect starting on January 1, 2019, with the possibility of a limited early adoption, as long as the Company has adopted IFRS 15.

Balances in foreign currency A summary of financial assets and liabilities denominated in foreign currency included in the various items of the accompanying consolidated statement of financial position is presented below: December 31, 2016 2015 In Dominican pesos Balances: Financial assets: Cash and cash equivalents Notes and trade receivables and others Income tax credit balance Financial liabilities: Trade payables and others Other current liabilities Debt and loans payable long term Excess of financial (liabilities) assets

9,016,866 37,631,211 4,639,577 51,287,654

2,200,030 2,528,917 3,874,654 8,603,601

2,707,012 1,378,321 97,450,749 101,536,082 (50,248,428)

3,117,451 1,421,466 4,538,917 4,064,684

17,546 17,546

20,197 11,322 31,519

1,661,070

2,018,434

(1,643,524)

(1,986,915)

In Euros Balances: Financial assets: Cash and cash equivalents Notes and trade receivables and others Financial liabilities: Trade payables and others Excess of financial liabilities

Cash and cash equivalents Below is a breakdown of cash and cash equivalents: December 31, 2016 2015

Cash on hand: Denominated in US dollars Denominated in Dominican pesos Cash in banks (i): Denominated in US dollars Denominated in Dominican pesos Denominated in Euros Cash equivalents (ii): Denominated in US dollars Denominated in Dominican pesos

1,501 21,306

1,501 18,755

5,590,513 633,951 17,546

1,177,324 1,070,834 20,197

80,035,454 8,361,609 94,661,880

75,136,356 1,110,441 78,535,408

(i) Cash deposited in bank accounts earns interest based on daily rates determined by the corresponding banks. During the year ended as of December 31, 2016, these accounts generated US$161,525 (2015: US$92,861), which is included in the line of financial income in the accompanying consolidated statements of comprehensive income. As of the date of these consolidated financial statements there were no restrictions on the use of cash in banks balance. (ii) As of December 31, 2016, these are certificates of deposit that expire in three months or less, which accrue interest at annual rates in Dominican pesos between 6.83% and 10.91% (2015: 8.75% and 9.62%) and 2.51% and 3.69% (2015: 3.0% and 3.25%) for US dollars. During the year ended as of December 31, 2016, these generated financial revenues of US$4,754,436 (2015: US$2,889,303), which is included in the line of financial income in the accompanying consolidated statements of comprehensive income. As of December 31, 2016 and 2015, there was no difference between the recorded values and the fair values of these financial assets.

Held-to-maturity investments Held-toomaturity investments were comprised as follows: December 31, 2016 2015 Certificates of deposit

41,781,870

139,281,065

As of December 31, 2016, these are certificates of deposit in US dollars with maturity of more than 90 days, automatically renewable, which earn annual interest rates of 3.50% (2015: 3.15%). During the year ended as of December 31, 2016, these generated financial revenues of US$2,583,139 (2015: US$695,449), which are included in the line of financial income in the accompanying consolidated statements of comprehensive income. 9.

Notes and trade receivables and others The composition of notes, trade receivables and others is as follows: December 31, 2016 2015 Trade accounts: Related parties (Note 10) Unrelated third parties (a) Notes: Unrelated third parties (b) Related parties (Note 10) Other accounts receivable: Tax on hydrocarbons (c) Advances to vendors Related parties (Note 10) Unrelated third parties Sub total Less non-current portion: Notes receivable

43,857,993 15,317,489 59,175,482

62,703,447 4,331,175 67,034,622

1,300,372 1,300,372

3,276,725 651,470 3,928,195

8,301,565 214,266 459,453 586,252 70,037,390

857,210 140,503 225,548 72,186,078

70,037,390

(466,155) 71,719,923

(a) See Note 20 b, d - i for further details. (b) As of December 31, 2016, the Company has a contract signed in 2010 with the State entity Empresa de TransmisiĂłn ElĂŠctrica Dominicana (ETED), through which it transferred the transmission line that connected the Los Cocos wind park with the SENI. This line was built by the Company on behalf of ETED, which is the lawful owner of the country's electric transmission network.

Notes, trade receivables and others (continued) Costs incurred by the Company in the construction of the transmission line were approximately US$10.9 million, which are being reimbursed by ETED, per the contract, through the compensation of the transmission toll payments that EGE Haina must pay under the General Electricity Law No. 125-01. As of December 31, 2016, the Company has compensated approximately US$9.6 million (2015: US$7.4 million approximately), leaving an outstanding balance to be compensated of approximately US$1.3 (2015: US$3.3 million approximately). (c) After the approval of Decree No. 275-16, which governs the reimbursement system of selective taxes over the consumption of all fossil fuels and petroleum derivatives, created through Law 253-12, the payment of taxes on fuel imports began. These amounts are reimbursed to the extent that the fuels are consumed. The detail of the agin of notes, trade receivables and others as of December 31, is as follows: Past due but not impaired

Year

Not past due

From 31 to 60 days

From 61 to 90 days

More than 91 days

Total

2016

38,628,254

22,724,089

8,671,951

13,096

70,037,390

2015

33,880,839

37,827,531

477,708

72,186,078

Past due notes and trade receivables generate interest equivalent to the average commercial banking lending rate published by the Central Bank of the Dominican Republic. As of December 31, 2016, the average rate was 14.28% (2015: 16.48%) for balances in Dominican pesos and 6.94% (2015: 5.62%) for balances in US dollars. During the year ended December 31, 2016, interest generated by notes and trade receivables amounted to US$3,102,428 (2015: US$16,189,907). These interests are included as financial revenues in the accompanying consolidated statement of comprehensive income. 10.

Balances and transactions with related parties The Company has important balances and transactions with related parties. These transactions are conducted under the conditions agreed by the parties, which results in charges between them, by mutual agreement. The transactions that the Company conducts with related entities and shareholders consist mainly of sales of energy and capacity, pre-operating services, payment of management fees, purchase of lubricants, lease of lands, etc.

Balances and Transactions with Related Parties (continued) As of December 31, the balances held and transactions conducted with related parties and shareholders are as follows: Relation Balances Accounts receivable: EDENORTE Dominicana, S. A. (Edenorte) (i) Empresa Distribuidora de Electricidad del Este, S. A. (Edeeste) (i) EDESUR Dominicana, S. A. (Edesur) (i) DOMICEM, S.A. (ii) Other accounts receivable: San Pedro Bio-Energy, S.R.L. (iii) HIC FONPER

21,311,521

22,708,050

Related Related Related

15,470,893 5,973,750 1,101,829 43,857,993

18,240,480 20,391,482 1,363,435 62,703,447

459,418 35 459,453

104,360 18,620 17,523 140,503

44,317,446

651,470 63,495,420

Related Shareholder Shareholder

Notes receivable Edesur (iv)

December 31, 2016 2015

December 31, 2016 2015 Accounts payable to related parties and shareholders: HIC Cristรณbal Colon, S. A. V Energy, S. A.

Dividends payable (v): Balances as of January 1, 2016 Add: Dividends declared Less: Dividends paid Balances as of December 31, 2016

Shareholder Related Related

1,736,615 4,500 1,741,115

847,769 118,430 966,199

Shareholder 7,054 146,207,568 (146,199,621) 15,001 1,756,116

3,820 55,600,000 (55,596,766) 7,054 973,253

Balances and Transactions with Related Parties (continued)

Relation

December 31, 2016 2015

Transactions: Revenues Sale of energy, capacity and interest charges Edesur (i) Edenorte (i) Edeeste (i) DOMICEM (ii)

Related Related Related Related

83,927,487 70,833,648 63,679,514 13,566,613 232,007,262

Revenues from pre-operating services San Pedro Bio-Energy, S. R. L. (iii)

1,139,778

333,137

651,852

711,111

Shareholder

9,813,709

13,347,171

Purchase of lubricants V Energy, S. A (vii)

1,219,613

2,078,135

Lease of land Cristรณbal Colon, S.A (viii)

574,009

568,977

Dividends paid (v): HIC FONPER Minority shareholders

Shareholder Shareholder Shareholder

73,103,784 73,094,239 1,598 146,199,621

27,800,000 27,796,370 396 55,596,766

Collection of notes receivable Edesur (iv) Management fees HIC (vi) (Note 28 b)

165,072,415 122,726,569 107,292,650 17,207,269 412,298,903

(i)

Sale agreements with distribution companies Edesur, Edenorte and Edeeste. These distribution companies are related since FONPER, a shareholder of EGE Haina, is also a shareholder of these companies. Sales made by the Company to these distributors are based partially on existing agreements that are described in more detail in Note 20.

(ii)

In 2014, the Company signed a three-year agreement with DOMICEM, S.A. (DOMICEM) through which EGE Haina supplies the capacity and related energy. (See Note 20) for further details. This company is related through a member of HIC's Administrative Board.

Balances and Transactions with Related Parties (continued) (iii) In July 2015, the Company signed a pre-operating service contract with San Pedro Bio-Energy, S. R. L., to start operating a generation facility, Planta de Biomasa de San Pedro Bio-Energy (See Note 20). This company is related through a member of HIC's Board of Directos. (iv) As of December 31, 2015, the Company held a financing agreement with Edesur for US$3.2 million, signed in 2011, to be used for the reconstruction of the distribution infrastructure near the communities adjacent to the Los Cocos wind farm. Edesur agreed to reimburse EGE Haina for the financing amount in 54 monthly installments starting in June 2012, accruing interest at the lending rate published by the Central Bank of the Dominican Republic. This loan was paid in November 2016. (v)

As of December 31, 2016 and 2015 these correspond to dividends declared and paid to shareholders. These were authorized through the minutes of the shareholder meetings held those years.

(vi) As part of the capitalization process, HIC maintains a management contract which expires in 2020, for the daily management of the Company's operations, under the leadership of the Company's Board of Directors. Per this contract, HIC charges the Company 2.95% of net annual sales, which are approximately US$9.8 million (2015: US$13.3 million, approximately). Note 23 states the taxes applicable to that service for US$3.6 million, approximately (2015: US$4.9 million, approximately), in accordance with current legislation in the Dominican Republic. (vii) During the year ended December 31, 2016, the Company purchased from V Energy, S.A. under the lubricant supply contract signed June 29, 2015, for approximately US$1.2 million (2015: approximately US$2.1 million). Once this lubricant is consumed, it is recognized in the consolidated statement of comprehensive income in operating and maintenance expenses (Note 22). This company is related through members of the Board of Directors of HIC and EGE Haina. (viii) The Company maintains a land lease contract with Crist贸bal Col贸n, S. A. (Crist贸bal Col贸n), where the plant Quisqueya II is installed. It was signed on April 26, 2012 for a term of 25 years. The Company agrees to pay US$424,000 each year, subject to indexation by the US Consumer Price Index, plus applicable taxes. As of December 31, 2016, the total paid under this contract was US$0.6 million, approximately (2015: approximately US$0.6 million). This company is related through a member of HIC's Board of Directors.

Balances and Transactions with Related Parties (continued) Transactions with related parties have been made under equivalent conditions as transactions with mutual independence between the parties (arm's length). Compensation to key personnel During the year ended December 31, 2016, the expense for salaries and compensation paid to key personnel and severance benefits was approximately US$9.3 million (2015: approximately US$9.5 million), which are defined as those who occupy the positions of General Manager, Vice Presidents, directors and managers.

11.

Inventory Inventory is comprised as follows: December 31, 2016 2015 Spare parts (at cost) Fuels (at cost): Bunker (Fuel Oil) Coal Diesel Inventory in transit - spare parts, at cost (a)

23,455,120

22,822,173

9,171,215 1,214,154 1,001,151 647,871 35,489,511

7,437,793 3,194,021 1,026,998 2,411,469 36,892,454

(a) These correspond to spare parts and construction parts inventories, which were in transit at year end. These include specific import costs at that date. Of total inventory in transit, US$384,171 were received as of February 24, 2017 (2015: US$2,161,184 as of March 2, 2016). During the year ended December 31, 2016, the Company recognized US$1.6 million approximately in losses for adjustments to the net realizable value of inventories (Note 25).

Empresa Generadora de Electricidad Haina, S. A. Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2016 and 2015 (Amounts in United States dollars - US$-) 12.

Property, plant and equipment, net The movements of property, furniture and equipment for the years ended June 31, are as follows:

Acquisition costs: Balance as of January 1, 2015 Additions Disposals Transfers Balance as of December 31, 2015 Additions Disposals Transfers Balance as of December 31, 2016

Buildings

Generation Plants (a)

13,210,386 350,320 13,560,706 524,920 14,085,626

53,654,882 507,004 54,161,886 8,922,058 63,083,944

530,097,858 921,727 (491,538) 2,795,323 533,323,370 1,646,421 (534,160) 116,773,347 651,208,978

2,561,439 293,980 16,225 2,871,644 316,030 (206,245) 2,981,429

4,280,487 429,204 4,709,691 67,876 (18,846) 4,758,721

(4,457,344) (3,116,570) (7,573,914) (3,436,999) (11,010,913)

(59,746,957) (29,788,989) 218,410 (89,317,536) (32,581,493) 433,155 (121,465,874)

(1,659,710) (348,423) (2,008,133) (343,369) 206,245 (2,145,257)

(3,697,593) (356,841) (4,054,434) (196,626) 3,077 (4,247,983)

14,085,626 13,560,706

52,073,031 46,587,972

529,743,104 444,005,834

836,172 863,511

510,738 655,257

Land

Transportation Equipment

Furniture and Office Equipment

Minor Equipment 194,651 156,952 472,861 824,464 125,928 73,166 1,023,558

Works in Process (b)

Total

39,187,613 67,767,662 (3,791,413) 103,163,862 26,078,963 (125,768,571) 3,474,254

643,187,316 69,919,845 (491,538) 712,615,623 28,760,138 (759,251) 740,616,510

Accumulated depreciation: Balance as of January 1, 2015 Depreciation expenses for the year Disposals Balance as of December 31, 2015 Depreciation expenses for the year Disposals Balance as of December 31, 2016 Net carrying value: Balance as of December 31, 2016 Balance as of December 31, 2015

(31,420) (56,204) (87,624) (151,227) (238,851) 784,707 736,840

3,474,254 103,163,862

(69,593,024) (33,667,027) 218,410 (103,041,641) (36,709,714) 642,477 (139,108,878) 601,507,632 609,573,982

(a) In June 2016, the Company capitalized the Larimar I wind project with an installed capacity of 49.5 MW. The total amount invested was approximately US$119.7 million. (b) In November 2016, EGE Haina signed an engineering, supply and construction contract to obtain greater efficiency from the Barahona plant through the modernization of part of its equipment. The total amount of the contract was approximately US$23.5 million. As of December 31, 2016, the Company invested approximately US$1.2 million in this project. The Company expects this project to be completed in the third quarter of 2018.

Property, plant and equipment, net (continued) Of the total amount of acquisitions for 2016, US$28,760,138 (2015: US$69,919,845), US$5,021,229 (2015: US$1,536,304) do not represent cash flows. Additionally, US$577,189 were paid in 2016 (2015: US$6,199,171) relating to balances pending as of the prior year close. Property, plant and equipment include fully depreciated assets in use with an acquisition cost of approximately US$19.3 million (2015: approximately US$18.6 million). Property, plant and equipment include capitalized interest on loans attributed to the construction of the assets. The capitalized interest amounted to US$2,377,717 in 2016 (2015: US$4,106,683). The capitalization rate used was approximately 7.29% for 2016 (2015: approximately 5.29%).

13.

Other non-current assets Other non-current assets are comprised as follows: December 31, 2016 2015 Deferred costs: Less: Accumulated amortization (a) Deferred costs, net

11,811,229 (11,811,229) -

11,811,229 (11,302,714) 508,515

Intangible assets: Software Less: Accumulated amortization (b) Software, net Easement Intangible assets, net

802,175 (524,899) 277,276 322,580 599,856

652,002 (361,132) 290,870 298,052 588,922

299,383 899,239

307,393 1,404,830

Collateral and rental deposits

(a) As of December 31, 2016, deferred charges amortization expense was US$508,515 (2015: US$871,399), which are included in the line of depreciation and amortization in the accompanying consolidated statements of comprehensive income. (b) As of December 31, 2016, intangible assets amortization expense was US$163,767 (2015: US$19,383), which are included in the line of depreciation and amortization in the accompanying consolidated statements of comprehensive income.

Debt and loans payable short and long term Debt and loans payable short and long term consist of: 2016

Debt and loans payable short term Promissory notes and bank loans (b) Current portion of long term debt Long term debt Local bonds (a) Less: current portion of long term debt Less: debt issue costs

(a)

December 31,

2015

65,000,000 40,000,000 105,000,000

297,450,729 (955,929) 296,494,800 296,494,800

239,999,980 (40,000,000) (1,071,927) 198,928,053 303,928,053

Local bonds i. In 2016, the Company issued an unsecured local bond for RD$4,550,950,000 million pesos, equivalent as of December 2016 to US$97,450,749, with a term of 10 years, fully placed in 20 tranches of RD$227,547,500 million pesos each, equivalent to US$4,872,537 million each, with interests payable on a monthly basis, according to the approval of the Superintendence of Securities of the Dominican Republic (SIV) in December 2015, as described below: Tranches

Amount

1-3 4-10 11-16 17-20

682,642,500 1,592,832,500 1,365,285,000 910,190,000 4,550,950,000

Annual rate

Date of issuance

Maturity

Payment calendar

12.00% 11.50% 11.25% 11.25%

27-06-2016 21-07-2016 10-08-2016 19-09-2016

27-06-2026 21-07-2026 10-08-2026 19-09-2026

Payment on maturity Payment on maturity Payment on maturity Payment on maturity

ii. In 2015, the Company issued an unsecured local bond for US$100 million, fully placed in 10 tranches of US$10 million each, with interests payable on a monthly basis, through the SIV's approval in December 2014, as shown below: Tranches 1 2 3-5 6-8 9-10

Amount 10,000,000 10,000,000 30,000,000 30,000,000 20,000,000 100,000,000

Annual rate 7.00% 6.50% 6.25% 6.00% 5.75%

Date of issuance

Maturity

23-01-2015 25-02-2015 25-03-2015 28-04-2015 11-06-2015

23-01-2025 25-02-2025 25-03-2025 28-04-2025 11-06-2025

Payment calendar Payment on maturity Payment on maturity Payment on maturity Payment on maturity Payment on maturity

Debt and loans payable short and long term (continued) iii. In 2014, the Company issued an unsecured local bond for US$100 million, fully placed in 10 tranches of US$10 million each, with interests payable on a monthly basis, through the SIV's approval in December 2013, as shown below: Date of issuance

Maturity

6.25%

01-23-2014

01-13-2020

19,999,992

6.00%

02-13-2014

02-13-2020

4-5

20,000,000

6.00%

03-04-2014

03-04-2020

6-7

19,999,988

6.00%

02-17-2014

03-17-2020

10,000,000

6.00%

04-21-2014

04-21-2020

9-10

20,000,000 99,999,980

5.75%

05-27-2014

05-27-2020

Tranches

Amount

10,000,000

2-3

Annual rate

Payment calendar Equal annual payments 2018-2020 Equal annual payments 2018-2020 Equal annual payments 2018-2020 Equal annual payments 2018-2020 Equal annual payments 2018-2020 Equal annual payments 2018-2020

iv. In 2016, the Company paid upon maturity US$40 million of tranches 1 to 6, 9 and 10, associated with the unsecured local bonds issued and placed in 2011 for a total of US$50 million, fully placed in 10 segments of US$5 million each, with interests payable on a monthly basis, through the SIV's approval in April 2011, as shown below: Tranches

Amount

1-2 3-4 5-6 7-8 9-10

10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 50,000,000

Annual rate

Date of issuance

Maturity

Payment calendar

7.00% 7.00% 7.00% 6.00% 7.00%

19-05-2011 01-06-2011 28-06-2011 19-10-2011 19-10-2011

19-05-2016 01-06-2016 28-06-2016 19-10-2014 19-10-2016

Payment on maturity Payment on maturity Payment on maturity Payment on maturity Payment on maturity

(b) Promissory notes and bank loans Includes promissory notes and unsecured bank loans with maturity of one to six months, at annual rates between 1.70% and 2.00% in 2015.

Debt and loans payable short and long term (continued) Secured syndicated senior loan Loan contract for an original amount of US$200 million with Citibank N.A., signed on March 16, 2012, whose resources were used to finance a part of the capital investments in the Quisqueya II generation plant and the expansion of the Los Cocos II wind farm. The assets acquired through these projects secured that loan. Interest were payable quarterly at the higher of LIBOR (3 months) plus 5.75% for the year and 6.25% annual interest. The principal was payable in quarterly fees of US$10 million, beginning on December 31, 2013 and a balloon payment of US$70 million with an original maturity of March 2017. As part of its debt restructuring strategy, in 2015 the Company paid in advance the pending principal of the Secured Syndicated Senior Loan with the issuance of the corporate bonds described in section (a) ii.

15.

Trade payables and others Trade payables and others consist of: December 31, 2016 2015 International fuel suppliers Local energy suppliers Other local suppliers Other international suppliers Dividends and accounts payable to related parties (Note 10) Withholdings payable Accruals payable

46,002,407 750,409 5,517,411 4,538,400 1,756,116 821,625 758,730 60,145,098

26,614,416 3,503,948 3,509,963 3,467,763 973,253 1,510,741 440,429 40,020,513

Of the total trade payables and other payables, approximately US$46.0 million (2015: approximately US$26.7 million) correspond to pending balances of fuel purchases, with up to 120 days term from the invoice issuance date, and accruing annual interests of LIBOR plus 1.3%. Of the remaining trade payables and others, most have maturities of zero to thirty days. 16.

Other current liabilities Other current liabilities consist of: December 31, 2016 2015 Provision for personnel compensation Provision for lawsuits (Note 17)

2,320,423 124,168 2,444,591

2,583,295 168,622 2,751,917

Provision for lawsuits As of December 31, 2016, the Company is involved in certain legal procedures that occasionally arise in the ordinary course of business, such as labor lawsuits. Although the final result cannot be established with certainty, the Company reviewed the facts and representations of its legal advisors, and considered that the final outcome of these matters will not involve a loss exceeding the recorded provision of US$124,168 (2015: US$168,622).

18.

Income tax According to the Dominican Tax Code, modified by the Tax Reform Law No. 253-12, income tax for 2016 and 2015 is determined based on 27% of the net taxable income, following the expenses deductibility rules set in this code. Asset tax under the Dominican laws is an alternative or minimum tax that is calculated, in this case for energy generation, transmission and distribution companies, as defined in the General Electricity Law No. 125-01, based on 1% of the balance of property, plant and equipment, net of depreciation. The Tax Law requires taxpayers to maintain their accounting records and prepare tax returns in Dominican pesos (local currency) for tax purposes. This requirement also applies for those who use a functional currency different from the Dominican peso. Also, Article 293 of the Tax Law establishes the recognition of exchange differences as deductible expenses or taxable revenues in the determination of taxable income. The tax authorities annually indicate the exchange rate to be used in the measurement of monetary items originated in foreign currencies. Tax expense The income tax expense for the year ended December 31 was as follows: December 31, 2016 2015 9,207,998 6,142,516 15,350,514

Current income tax Deferred income tax

16,349,085 7,470,532 23,819,617

Income Tax (continued) Below is a reconciliation between income before taxes, at the current tax rate, and the expense for the years ended 2016 and 2015, as well as a reconciliation of the Company's effective tax rate. December 31, 2016 2015 Profit before income tax

50,371,418

86,956,515

Income tax calculated at the rate in effect Taxes and other non-deductible expenses Exchange differences Share of losses in subsidiary Exempt income, net, under Law No. 57-07 (a) Adjustment of tax depreciation Ineffectiveness of hedge instrument Other adjustments Current income tax before tax credits Tax credits under Law No. 57-07 (b) Current income tax

13,600,283 88,259 741,854 4,772 (100,398) (5,007,345) 158,611 9,486,036 (278,038) 9,207,998

23,478,259 134,778 598,428 5,193 (2,695,878) (4,844,087) 97,910 (141,185) 16,633,418 (284,333) 16,349,085

(a) The activity related to Los Cocos I and II wind farms are benefitted by a 100% income tax exemption until 2020, according to Law No. 57-07 “Incentivo al Desarrollo de Energía Renovable” (Incentive for Development of Renewable Energy"). (b) The investment made in the Quisqueya Solar plant enjoys tax exemption incentives for self-producers for activity related to electro-solar installations (photovoltaic) of up to 40% of the investment in equipment, as an income tax credit. This credit will be discounted from income tax in three consecutive years, at a rate of 33.33% per year, according to Law No. 57-07. As of December 31, 2016, the pending credit is of approximately US$0.3 million, which will be consumed in fiscal year 2017.

Income Tax (continued) Below is the effective tax rate for the years ended December 31, 2016 and 2015: December 31, 2016 2015 Statutory income tax rate Inflation of non-monetary assets Non-deductible expenses Exchange difference Other permanent adjustments Effective income tax rate

27% (0.2%) 0.1% 1.3% (0.7%) 28%

27% (0.2%) 0.1% 0.6% (3.4%) 24%

Tax on assets Income tax was higher than tax on assets, which is applied as an alternative minimum tax, thus the tax was paid based on taxable income. The asset tax estimation is as follows: December 31, 2016 Property, plant and equipment, net Exempt assets under Law No. 57-07 (a) Assets subject to taxation Tax rate Tax on assets

609,573,982 (134,183,956) 475,390,026 1% 4,753,900

2015 601,507,632 (144,601,304) 456,906,328 1% 4,569,063

Deferred tax The components of deferred income tax as of December 31, 2016 and 2015, as well as its movements in the years then ended are: Consolidated Statement of Financial Position 2016 2015 Deferred tax assets: Allowance for inventory impairment Total deferred tax assets

316,663 316,663

Deferred tax liabilities: Fiscal difference of property, furniture and equipment Other non-monetary assets Total liabilities for deferred tax assets Deferred tax liability, net

(52,679,734) (3,022,636) (55,702,370) (55,385,707)

(45,342,918) (3,900,273) (49,243,191) (49,243,191)

Income Tax (continued) Deferred tax (continued) Consolidated Statements of Comprehensive Income 2016 2015 Fiscal difference of property, furniture and equipment Allowance for inventory impairment Provisions and others Derivative financial instrument Total

(7,336,816) 316,663 877,637 (6,142,516)

(7,316,774) (249,939) (191,727) (7,758,440)

The tax credit related to other comprehensive income is: As of December 31, 2016

Before tax Cash flow hedge

19.

Tax (charge) credit

As of December 31, 2015

After taxes

Tax (charge) credit

Before tax

(287,908)

After taxes

287,908

Equity Share capital As of December 31, 2016 and 2015, the share capital consisted of 45,951,000 common shares issued and outstanding, with a nominal par value of RD$100 (US$6.29). Below is an itemization of the distribution and class of shares: Shares issued HIC FONPER Other shareholders Balance as of December 31

22,975,500 22,972,500 3,000 45,951,000

Share capital Class of Shares B A A

Total amount 144,500,000 144,481,132 18,868 289,000,000

Equity (continued) Legal reserve The Commercial and Limited Liability Corporations Law of the Dominican Republic establishes that at least 5% of the net annual gains should be segregated as part of the Company's legal reserve until the balance is equal to 10% of the outstanding capital. This reserve cannot be capitalized, reassigned to retained earnings or used for the payment of dividends. In 2015, the Company reached the maximum legal amount required. Dividends paid The Foreign Investment Law of the Dominican Republic establishes the right to repatriate capital and remit benefits in freely convertible currencies. Dividends may be declared each fiscal year up to the total amount of accumulated earnings and net benefits of the year, and are subject to the payment of 10% withholding tax. In April and November, 2016, the Company declared dividends for its shareholders for US$36,096,456 and US$111,111,112, respectively, for a total of US$146,207,568 (2015: US$55,600,000 declared in March), of which US$15,001 (2015: US$7,054) are outstanding. As of December 31, 2016, the dividend declared per share is US$3.18 (2015: US$1.21). Earnings per share During the years ended December 31, 2016 and 2015, earnings per share were as follows: December 31, 2016 2015 35,020,904 45,951,000 0.76

Net profit Number of shares Net profit per share for the year

63,136,898 45,951,000 1.37

Revenues December 31, 2016 2015 Sale of energy (a-g) Sale of capacity (a-g) Operating and maintenance services (h-i) Fuel storage service Other Total revenues a.

264,341,915 64,446,253 2,646,711 935,603 297,608 332,668,090

380,161,533 69,187,224 1,692,952 971,172 433,593 452,446,474

For a portion of 2016, the Company invoiced the Distribution Companies for the services related to energy, capacity (350 MW) and connection rights, according to the power purchase agreements (PPA) that existed. Those contracts established a term of 15 years and matured in August 2016. The prices and amounts invoiced were established in US dollars, but could be paid in Dominican pesos at the exchange rate at the time of payment. The indexation exchange rate used followed the market rate for the US dollar based on the daily foreign currency exchange transactions of the commercial banks published by the Central Bank of the Dominican Republic. As of December 31, 2016, the revenues recognized for these services amount to approximately US$145.4 million (2015: US$346.9, approximately).

The Company maintains a PPA with a local energy generation and distribution company, under which EGE Haina must supply at least 65MW of capacity and associated energy. In November 2015, the Company received a request to increase the contracted capacity to 81MW, effective in March 2016. The PPA establishes a term of 18 years that expires in 2026. The prices and amounts invoiced are determined in US dollars. The revenues recognized for this contract were approximately US$48.4 million (2015: US$47.4, approximately).

In 2014, the Company signed a PPA with a local related cement company, for which EGE Haina must supply the entire energy required by this company's operations. The source of production of this energy will essentially be the Los Cocos I and II wind farms. The PPA established an original term of 3 years. The price established is the price by law for energy, based on the wind energy production, adjusted by the company's nodal factor, according to the Coordinating Body. The prices and amounts invoiced are determined in US dollars. In 2015, two amendments were signed through which the term of the PPA was extended until July 2020, and a fixed sale price indexed per the US Consumer Price Index (CPI) was set. The revenues recognized for this contract were approximately US$13.5 million (2015: approximately US$17.0).

Revenues (continued) d.

In 2016, the Company signed a PPA with a local cement company, for which EGE Haina must supply the entire energy required by this company's operations. The source of production of this energy will essentially be the wind farms. The PPA establishes an original term of 5 years. The price is fixed and indexed by the US Consumer Price Index. The prices and amounts invoiced are determined in US dollars. The revenues recognized for this contract were approximately US$10.6 million.

In 2016, the Company signed a PPA with Corporación Dominicana de Empresas Eléctricas Estatales (“CDEEE”), for which EGE Haina must supply the entire energy generated by the Larimar I wind park. The PPA establishes an original term of 20 years. The price is fixed, and should be raised 1.67% for the year, until reaching a limit of 20% of the base price. The prices and amounts invoiced are determined in US dollars. The revenues recognized for this contract were approximately US$11.6 million.

The Company participates in the Dominican electricity spot market, as a seller or buyer. Of the generation provided to the SENI, that portion that is not fully contracted results in a sale to the spot market; otherwise, when the sale contracts exceed the energy provision, this results in a purchase in the spot market. In 2016, the Company sold excess energy for 994.8 GWh (2015: 269 GWh) in electricity, equivalent to approximately US$88.8 million (2015: 20.3 million, approximately).

Energy revenues include approximately US$7.2 million (2015: US$17.0 million, approximately), which correspond to the service of Compensation of the Superintendence of Electricity (SIE Compensation) and approximately US$3.3 million (2015: US$0.7 million approximately), which correspond to the Frequency Regulation service.

The Company maintains service contracts with PVDC for the operation and maintenance of the Quisqueya I plant, for a term of 10 years ending in 2023. These services generated revenues of approximately US$1.4 million in 2016 and 2015 each.

In July 2015, the Company signed a pre-operating service contract with a local related company to start operating a generation facility, Planta de Biomasa de San Pedro Bio-Energy, which expired in January 2016. In April 2016, an amendment was signed which recognizes that starting in May 2016, the operation and maintenance service began and the Company began setting a fixed rate and all costs associated to the service. These services generated revenues of approximately US$1.4 million (2015: US$0.3 million, approximately).

Cost of fuel and purchase of energy December 31, 2016 2015 Fuel (a) - (c) Transmission Purchased energy and capacity Compensation of frequency regulation

143,486,654 13,986,410 6,061,719 163,534,783

205,551,367 18,736,312 8,636,563 4,377,035 237,301,277

Fuel (a) Fuel Oil As of December 31, 2016, EGE Haina maintained an agreement with an overseas supplier for the delivery of 3.2 million barrels of fuel (2015: 3.0 million). In 2016, the Company consumed 3.2 million barrels at a cost of US$118.0 million (2015: 3.5 million barrels at a cost of US$170.2 million). (b) Coal As of December 31, 2016, EGE Haina maintained an agreement with a foreign supplier for the delivery of 160 thousand metric tons of coal (MT) (2015: 180 thousand tons). In 2016, the Company consumed 187 thousand MT at a cost of US$12.6 million (2015: 175 thousand MT at a cost of US$15.5 million). (c) Gasoil In 2016, EGE Haina maintained contracts with a related local supplier for the purchase of a maximum of 720 thousand gallons of gasoil per year (2015: 720 thousand gallons). The contract price is established in the market by the Ministry of Industry and Commerce of the Dominican Republic, minus a discount. Additionally, in 2016 and 2015, the Company purchased gasoil in the spot market. Purchased energy and capacity (d) Spot Market As of December 31, 2016, the Company participates in the Dominican electricity spot market, as a seller or buyer. In 2016, the Company purchased 19 GWh of electricity and 218.4 MW of capacity, equivalent to approximately US$5.4 million (2015: 21.4 GWh of electricity and 239.2MW of capacity, equivalent to approximately US$7.0 million).

Cost of fuel and purchase of energy (continued) (e) Power Purchase Agreement (PPA) The Company signed a PPA on October 1, 2013, for the purchase of energy produced by the Quilvio Cabrera wind park from a local generation and distribution company, at a spot price less a discount per Kwh. The contract has a term of 20 years and is subject to renewals of one year from that date, with the consent of both parties. Additionally, that company agreed to pay for the use the EGE Haina substation which allows the energy from that wind park to be injected to the SENI. In 2016, the Company purchased 12.7 GWh of energy for US$0.7 million, approximately, (2015: approximately 19.7 GWh per US$1.6 million).

22.

Operating and maintenance expenses During the years ended December 31, operating and maintenance expenses were itemized as follows: December 31, 2016 2015 Maintenance expenses Insurance Lubricants Security services Land rental Technical advisory fees Professional services Other

23.

18,122,625 6,045,938 4,119,462 1,155,266 854,341 744,304 670,878 2,398,842 34,111,656

16,683,618 6,760,281 5,474,657 1,402,026 855,651 1,571,332 1,606,570 2,084,184 36,438,319

Administrative and general expenses During the years ended December 31, administrative and general expenses were itemized as follows: December 31, 2016 2015 Management fees (Note 10) Withholding tax on management fees (Note 10) Office operating costs Superintendence of Electricity and OCSENI fees (i) Professional services

(i)

9,813,709 3,629,728 3,334,608 1,804,038 817,447 19,399,530

13,347,171 4,936,625 3,787,624 2,472,173 1,040,303 25,583,896

According to the General Electricity Law No. 125-01, companies operating electricity generation businesses should make contributions to the regulatory bodies. This contribution amounts to 0.5% of the Company's share of the transactions of the Wholesale Electricity Market. 46

Employee benefits The composition of employee benefits for the years ended December 31, is as follows: December 31, 2016 2015 Salaries, benefits and other severance benefits Social security contributions

25.

18,353,456 1,264,979 19,618,435

19,892,275 1,199,116 21,091,391

Other expenses, net December 31, 2016 2015 Adjustment to the net realizable value of inventories (Note 11) Tax on checks and transfers Loss on asset disposal Changes in fair value of notes receivable (Note 9(c)) Gain on sale of property, plant and equipment Ineffectiveness of cash flow hedge Others, net

26.

(1,554,069) (399,077) (116,774) 215,400 39,591 (67,976) (1,882,905)

(104,396) (273,128) 254,607 (356,225) 42,242 (436,900)

Finance income December 31, 2016 2015 Interest on certificates of deposit (Notes 7 and 8) Interest on trade receivables and notes receivable Other financial income

7,337,575 3,102,428 161,525 10,601,528

3,584,752 16,189,907 92,861 19,867,520

Financial expenses December 31, 2016 2015 Interest on local bonds Interest on other financing Interest on debt with agents of the Dominican electric market Interest on secured syndicated senior loans (Note 14(c)) Capitalized interest (Note 12) Sub total Interest on financing for purchase of fuel Amortization of debt issue costs Taxes retained on interest Amortization of deferred charges Commission on structuring of transaction collection (i) Other borrowing costs

18,094,628 699,456

13,262,654 1,747,144

6,444 (2,377,717) 16,422,811

876,448 6,756,944 (4,106,683) 18,536,507

473,994 271,425 71,273 387,098 17,626,601

452,955 2,229,757 708,975 41,919 6,182,392 2,118,822 30,271,327

(i) Corresponds to the commission for the structuring of the agreements of recognition, cession and collection of debt signed in 2015 by EGE Haina and the Distribution Companies for US$309.1 million. 28.

Commitments and contingencies a) Operating leases The Company has signed various operating lease contracts as lessee, over lands where it maintains generation facilities. The terms of the leases extend from one (1) to twentyfive (25) years, with the option to renew upon maturity, per agreement by the parties. During the year ended December 31, 2016, the expense for this concept was US$854,341 (2015: US$855,651) and this was included as operating and maintenance expenses in the accompanying consolidated statements of comprehensive income (Note 22). The total future minimum lease payments are: Year

Amount

2017 2018 2019 2020 And beyond

912,000 912,000 912,000 912,000 13,240,000

Commitments and contingencies b) Lawsuits against Company executives On August 8, 2012, through a written document filed with the Magistrada Procuradora Fiscal del Distrito Nacional, representatives acting in the name of FONPER, filed a notice of criminal complaint (hereinafter referred to as “Querella”) alleging breach of Art. 408 of the Dominican Criminal Code (Breach of Trust), against certain executives of EGE Haina and the parent company HIC. EGE Haina was notified of the Querella on September 17, 2012. It questions the methodology to calculate the management fee that EGE Haina pays HIC (Note 10 (vi)); certain taxes paid by EGE Haina over this fee; some of the commercial terms and corporate authorizations to sign the energy sale contract with CEPM (Note 20 (b)) and an alleged salary payment by EGE Haina to HIC’s directors April 11, 2013, the Magistrada Procuradora Fiscal del Distrito Nacional instructed the Cámara de Cuentas de la República to perform an audit on EGE Haina, as a part of its 2013 Annual Audit Plan, covering the period from 2008 to 2011. In its final report, the Chamber of Accounts includes recommendations aimed at improving the internal control structure regarding the tax that applies to the management fees (Note 10 (vi)). In addition, since 2012 EGE Haina’s Board of Directors is aware of the existence of a request for arbitration, filed by HIC against FONPER (hereinafter referred to as the “Arbitration”), before the International Chamber of Commerce, and understands that it continues in process. Through the Arbitration, HIC seeks a declaration, among other points, that the allegations in the Querella lack merit and that all actions complained of in the Querella were in conformity with the law and all the relevant contracts between the parties. Both processes are currently underway and although litigation is inherently unpredictable, the Company does not expect that the outcome in any of these matters will have a material adverse effect on its financial condition or results of operations.

29.

Financial risk management objectives and policies The Company's operations expose it to a variety of financial risks: market risk (including exchange risk, interest rate in fair value, interest rate in cash flows and price), credit risk and liquidity risk. The Company uses derivative financial instruments to cover certain risk exposures. Risk management is controlled by General Management, under the guidelines approved by the Management Board.

Financial risk management objectives and policies (continued) Foreign exchange risk As a result of the Company's operations in foreign currency, its exposed to foreign exchange risk when the values of its assets and liabilities are denominated in foreign currency, and therefore their periodic measurement depends on the foreign currency exchange rate in effect in the financial market, mainly the Dominican peso and the Euro. Exchange risk consists of the recognition of exchange differences in the entity's income and expenses, resulting from variations in the exchange rates of the functional currencies or operating currencies and the respective foreign currency. This risk depends on the net position in foreign currency, as shown in Note 6. The following table presents a sensitivity analysis of the effect on the consolidated financial statements of a reasonable variation in the exchange rate of the Dominican peso and the Euro versus the US dollar: Variation in Exchange Rate

Effect on profit before income tax

2016 2016

RD$

+5% -5%

2,392,782 (2,392,782)

2015 2015

RD$

+5% -5%

(349,796) 349,796

2016 2016

EUR

+5% -5%

76,263 (76,263)

2015 2015

EUR

+5% -5%

94,615 (94,615)

Liquidity risk Liquidity risk is the risk that the Company is unable to fulfill lits financial obligations. To mitigate this risk, the Company monitors its liquidity needs to ensure it has sufficient cash to meet its operating requirements, and available credit lines in the event that it needs them. As of December 31, 2016, the Company had US$88.4 million in financial certificates with original maturities of three months or less (2014: US$76.2 million), cash on hand and at banks for US$6.2 million (2014: US$2.3 million) and US$41.8 million in short term investments held to maturity (2016: US$139.3 million), which are expected to generate highly liquid cash flows to manage liquidity risk.

Financial risk management objectives and policies (continued) The table below analyzes the Company's financial commitments according to the relevant maturity grouped based on the remaining period from the reporting date of the consolidated statement of financial position until the end of the contractual period. The amounts disclosed on the table are non-discounted contractual cash flows.

Balances Debt and loans payable Trade payables and others Other current liabilities Other non-current liabilities

Balances Debt and loans payable short term Trade payables and others Other current liabilities Other non-current liabilities

From 1 to 2 years

2016 From 2 to 5 years

More than 5 years

Total

23,288,619

108,194,601

103,101,888

233,882,204

468,467,312

60,145,098

2,444,591

3,000

85,878,308

108,194,601

103,104,888

233,882,204

531,060,001

From 1 to 2 years

2015 From 2 to 5 years

More than 5 years

116,874,305

52,399,443

82,589,461

114,251,781

366,114,990

40,020,513

2,751,917

less than 1 year

Total

3,000

159,646,735

52,399,443

82,592,461

114,251,781

408,890,420

Interest risk Interest risk is the risk that the fair value of future cash flows of a financial instrument could fluctuate as a result of variations in market interest rates. The Company's exposure to this risk is basically related to long term obligations with variable interest rates. The Company maintains important liabilities, comprised mainly of long term debt and bank loans payable, subject to interest rates variations. The Company manages this risk by constantly assessing the evolution of interest rates in the local and international markets in order to determine with a high degree of certainty the risks associated with the financial cost of liabilities, and whenever possible, minimizing the effects of this risk. As of December 31, 2016, the Company's entire long term debt is agreed at fixed rates, thus the Company is not exposed to this risk.

Financial risk management objectives and policies (continued) As of December 31, 2015, if the interest rate of the financial debt denominated in US dollars had been 10 base points higher/lower, with all other variables held constant, the profit after taxes would have been US$0.04 million higher/lower, basically as a result of a higher/lower interest expense on financial debt agreed at variable interest rates; the fair value of the other reserves component within equity would have had an immaterial variation for this change in interest rates. Credit Risk Credit risk is the risk that one of the counterparts does not comply with its obligations derived from a financial instrument or purchase contract, and this translates into a financial loss. Credit risk arises mainly from cash and cash equivalent accounts, held-to-maturity investments, derivative financial instruments and trade receivables. In terms of cash and cash equivalents, held-to-maturity investments and derivative financial instruments, the Company only works with recognized foreign and local financial institutions. The main financial assets that potentially expose the Company to credit risk concentration consist mainly of accounts receivable from related parties and shareholders. The main buyers of energy and power in SENI are the three government distribution companies, Edenorte, Edesur and Edeeste (collectively "the distribution companies"). 69% of the Company's total revenues for 2016 (2015: 84%) came from sales to the Distribution Companies, which comprised 63% (2015: 86%) of accounts receivable from related parties and shareholders as of December 31, 2016. The Company has not had a history of uncollectibility with those distributors. Regarding the risks of cash and cash equivalents as well as investments held-to-maturity, the Company's maximum exposure to noncompliance by the counterpart would be the carrying value of said assets.

Financial risk management objectives and policies (continued) The credit quality of the financial assets that have not matured and that have not suffered impairment losses may be assessed in relation to the credit rating granted by external entities, as follows: 2016 Cash in banks and short term bank deposits: Local credit rating - Fitch/Feller AA+ AA

2015

89,148,387 86 89,148,473

47,039,317 30,334,028 77,373,345

Cash on hand Total cash and cash equivalents

5,490,600 5,490,600 22,807 94,661,880

1,141,808 1,141,808 20,255 78,535,408

Held-to-maturity investments Local credit rating - Fitch AA+

41,781,870

139,281,065

International credit rating - Fitch A+

2016 Accounts and notes receivable without an external credit rating (more than 6 months): Commercial, existing clients / related parties with past noncompliance Notes receivable, related parties / unrelated without previous noncompliance Other receivables (excludes prepayments), related parties / unrelated parties without prior noncompliance

2015

59,634,900

67,025,731

1,300,372

3,928,195

8,887,852 69,823,124

374,942 71,328,868

Fuel price risk The Company is exposed to the risk resulting from the fluctuation of international fuel prices. Since the Dominican Republic is not a producer of fuel, the Company purchases fuel oil used for the generation of energy from international suppliers at prices based on international indexes plus a transportation charge. In general, the cost of fuel oil for the Company is determined by reference to the index published by Platts, which is the same one used in the indexation formulas in the prices of energy sales agreements. Additionally, the energy prices declared for spot market transactions include the fluctuations of fuel prices. As a result, the Company has a natural hedge against the fluctuation of fuel prices.

Financial risk management objectives and policies (continued) Capital Management The primary objective of the Companyâ&#x20AC;&#x2122;s capital management is to ensure that it maintains a strong credit ratio and healthy capital ratios to support its business and maximize profits. Company Management conducts a close follow-up of its capital management to guarantee that it can continue as a going concern. In general, the main strategy is to maintain a healthy credit rating, and maintain adequate financial ratios to guarantee the continuity of the business operations and maximize returns for shareholders, through debt optimization and equilibrium of the consolidated statement of financial position. The Company manages its capital structure and timely requests shareholders for any adjustments in light of changes in the economic environment where it operates. To maintain or adjust the capital structure, the Company may request shareholders to adjust previously agreed dividends, capital returns, or increase capital contributions if necessary. These policies had no significant changes in 2016 and 2015. The Company monitors its capital structure based on the net debt to EBITDA ratio, which is one of the ratios observed when dividends are paid or debt is incurred. The net debt is calculated as the total financing less cash and cash equivalents and held-to-maturity investments, as shown in the consolidated statement of financial position. EBITDA is obtained by adding to the operating profit the depreciation and amortization expense, the gain on foreign currency exchange, net and other expenses, net, as shown in the consolidated statements of comprehensive income. This ratio basically measures the Company's debt capacity as a multiple of its EBITDA. The ratio of net debt to EBITDA as of December 31, 2016 and 2015, is shown below: 2016

2015

Debt and loans payable long term Less: cash and cash equivalents Less: held-to-maturity investments

296,494,800 (94,661,880) (41,781,870)

303,928,053 (78,535,408) (139,281,065)

Net debt EBITDA (Note 31)

160,051,050 96,003,686

86,111,580 132,031,591

Net debt to EBITDA index

1.7

0.7

Financial risk management objectives and policies (continued) Financial instruments The carrying value of cash and cash equivalents, held-to-maturity investments, notes, trade receivables and others, debt and short term loans is approximately equal to the fair value of these instruments, due to their high liquidity or their short maturity. The fair value of notes and loans payable long term is similar to their carrying value and was determined using future cash flows discounted at the rates prevailing on the consolidated statement of financial position reporting date, as indicated below: December 31, 2016 Recorded value Debt and loans payable

296,494,800

Fair value

308,450,597

December 31, 2015 Recorded Fair value value 303,928,053

315,217,522

Fair value estimates are calculated as of the reporting dates, based on relevant market information and financial instruments information. These estimates do not reflect a premium or discount that could result in holding financial instruments as available-for-sale, since none of them are held for that purpose. 30.

Financial instruments As stated in Notes 4.3 and 4.6, the Company's main financial instruments include cash and cash equivalents, notes, held-to-maturity investments, trade receivables and others, debt and loans payable short and long term, trade payables and others, and other liabilities. Since these are mainly short term instruments, Management believes that their carrying amounts approach their fair values. The carrying value of loans payable approaches their fair value since they were agreed at variable interest rates. Fair value estimates are calculated as of the reporting dates, based on relevant market information and financial instruments information. These estimates do not reflect a premium or discount that could result in holding financial instruments as available-for-sale. The nature of these estimates is subjective and involves uncertain aspects and Management's judgment, thus these figures cannot be determined with absolute accuracy. Consequently, should there be changes in the assumptions on which the estimates are based, these could differ from final results.

Financial instruments (continued) Fair value hierarchy The Company uses the following hierarchy to determine and disclose the fair value of financial instruments by valuation technique: -

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The following table presents the Company's assets measured at fair value: Measurement of fair value As of December 31, 2016 using Level 1 Level 2 Level 3

Balances Notes receivable

1,300,372

Measurement of fair value As of December 31, 2015 using Level 1 Level 2 Level 3

Balances Notes receivable

3,276,725

As of December 31, 2016, the nature of these fair value estimates is subjective and involves uncertain aspects and Management's judgment, thus these figures cannot be determined with absolute accuracy. Consequently, should there be changes in the assumptions on which the estimates are based, these could differ from final results. 31.

Segment information Operating segments are components that involve business activities that could obtain revenues or incur in expenses, whose operating results are regularly reviewed by the Chief Operating Decision Maker or CODM, and for which the reserved financial information is available. The CODM is the person or group of persons that decide which resources should be assigned to an operating segment and assesses their performance for the entity. The CODM roles are performed by the Company's General Manager.

Segment information (continued) The CODM reviews and assesses the Company's operating performance based on cash flow reports, contracts and agreements with suppliers of equipment and services, operators and plans for advertising and expansion. They key performance measurement used by the CODM is the EBITDA, deducting depreciation and amortization expenses, the gain on foreign currency exchange, net and other expenses, net from the operating profit of the Company as a whole. The CODM also reviews revenues and gross profits for the entire Company, but not for different service categories or by region. Following the criteria set in IFRS 8, and given that the EBITDA derives from a single business activity, the Company has determined that it mainly has one single operating and reporting segment: production and sale of energy. The segment information reviewed by the CODM for the years reported is: 2016 Revenues Operating profit EBITDA Total assets as of December 31, Total liabilities as of December 31,

332,668,090 57,396,491 96,003,686 852,348,021 414,473,196

2015 452,446,474 97,360,322 132,031,591 945,008,153 395,946,674

Since the EBITDA is not a standard measure of IFRS, the Company's definition of EBITDA may differ from that of other entities. A reconciliation of EBITDA with the year's net profit is: 2016 EBITDA Depreciation and amortization Gain on foreign currency exchange, net Other expenses, net Financial expenses, net Profit before income tax Income tax expense Net profit

96,003,686 (37,381,996) 657,706 (1,882,905) (7,025,073) 50,371,418 (15,350,514) 35,020,904

2015 132,031,591 (34,557,809) 323,440 (436,900) (10,403,807) 86,956,515 (23,819,617) 63,136,898

All of the Company's operating assets are located, and all of the revenues are generated, in the Dominican Republic. 32.

Reclassifications The employee benefits expense for 2015, previously classified as general and administrative expenses for approximately US$9.0 million, and as operating and maintenance expenses for US$12.1 million, was reclassified to a separate caption in order to adjust the presentation of the consolidated statement of comprehensive income as of 2016.