1231 17 ege haina consolidado ingles

Consolidated Financial Statements

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries December 31, 2017 (Along 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 …………..………………………………………………………………………..……….

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

5

Consolidated Income Statements ……………….…………..…………………………….…………………………….…

6

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

7

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

8

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

9-53

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED STATEMENTS OF FINANCIAL POSITION December 31, 2017 and 2016 (Amounts expressed 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 Prepaid expenses Total current assets Income tax credit Property, plant and equipment Other non-current assets Total assets Liabilities and Equity Current liabilities Debt and loans payable short term Trade payables and others Other current liabilities Total current liabilities Debt and loans payable long term Deferred tax liability, net Other non-current liabilities Total liabilities Other current liabilities Equity Paid-in capital Legal reserve Retained earnings Total equity Total liabilities and equity

2016

7 8 9 11 18

238,859,306 51,479,665 35,468,828 3,398,753 3,003,016 332,209,568

94,661,880 41,781,870 70,037,390 35,489,511 3,610,504 2,927,727 248,508,882

18 12 13

1,699,377 621,028,648 3,760,308 958,697,901

1,013,712 601,507,632 1,317,795 852,348,021

14 15 16

33,333,327 79,086,332 2,416,941 114,836,600

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

14 18 12

356,561,902 61,353,563 2,185,455 3,000 534,940,520

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

19

289,000,000 28,900,000 105,857,381 423,757,381 958,697,901

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

See accompanying notes to the consolidated financial statements.

5

2017

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED INCOME STATEMENTS For the years ended December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-)

Notes 20 21 22 23 24 12 and 13 25

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 Financial income Financial expenses Net financial expenses

26 27

Profit before income tax Income tax Net profit

18

See accompanying notes to the consolidated financial statements.

6

2017

2016

329,851,359 (170,080,797) (34,559,862) (13,835,134) (21,183,135) (39,368,296) 1,608,476 (1,452,638) 50,979,973

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

17,201,055 (26,453,477) (9,252,422)

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

41,727,551 (10,844,995) 30,882,556

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

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-)

Balance as of January 1, 2016 Net profit: Net profit Comprehensive income Distributions to owners: Declared dividends Balance as of December 31, 2016 Net profit: Net profit Comprehensive income Distributions to owners: Declared dividends Balance as of December 31, 2017

Note

19

19

Paid-in Capital

Legal Reserve

289,000,000

28,900,000

231,161,489

549,061,489

-

-

35,020,904 35,020,904

35,020,904 35,020,904

289,000,000

28,900,000

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

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

-

-

30,882,556 30,882,556

30,882,556 30,882,556

289,000,000

28,900,000

(45,000,000) 105,857,381

(45,000,000) 423,757,381

See accompanying notes to the consolidated financial statements.

7

Retained Earnings

Total Equity

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements CONSOLIDATED CASH FLOW STATEMENTS For the years ended December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-)

2017

2016

Notes Cash flows from operating activities Profit before income tax Adjustments to reconcile profit 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 Adjustment to the salvage value of property, plant and equipment Adjustment to the net realizable value of inventories Mutual agreement policy provision 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 the sale of property, plant and equipment Additions to property, plant and equipment Additions of intangible assets Held-to-maturity investments Collection of notes receivable

41,727,551

50,371,418

12 y 25 25 12 13 14 y 27

662,099 (612,545) 39,172,225 196,071 248,510

116,774 (39,591) 36,709,714 672,282 271,425

25 25 24 25 14 26 and 27

831,000 872,994 389,655 (104,841) (4,586,871) 9,003,912

1,554,069 (215,400) (1,395,229) 6,753,648

14,551,703 (3,033,170) (75,289) (2,194,768) 26,116,938 (27,650) 16,600,662 (26,792,143) (5,505,447) 107,440,596

2,320,740 (1,825,265) (105,835) 27,254 19,032,638 (241,837) 9,957,989 (18,971,439) (10,093,327) 94,900,028

1,008,485 (58,480,203) (292,679) 41,781,870 -

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

(15,982,527)

73,699,839

12 8 10

Net cash (used in) provided by investment activities Cash flows from financing activities: Funds obtained from financing Payment of financing Dividends paid Debt issurrance costs Net cash used in financing activities

14 14 10 14

97,883,432 (44,999,433) (144,642) 52,739,357

98,845,979 (105,000,000) (146,163,946) (155,428) (152,473,395)

Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year

144,197,426 94,661,880

16,126,472 78,535,408

Cash and cash equivalents at end of year

238,859,306

94,661,880

See accompanying notes to the consolidated financial statements.

8

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 1.

Corporate Information Empresa Generadora de Electricidad Haina, S. A. ("EGE Haina" or “the Company”) was established 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 Company. 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 by 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 with 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 20, 2018. These consolidated financial statements must be presented to the Shareholders’ Assembly for definite approval. They are expected to be approved without changes.

2.

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.

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 4.22.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 2.

Basis of preparation of the consolidated financial statements (continued)

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, 2017 and 2016, 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 (“Senior Notes�), 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, 2017 and 2016 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$).

3.

Changes in accounting policies The accounting policies adopted by the Company to prepare its consolidated financial statements as of December 31, 2017 are consistent with those that were used for the preparation of the consolidated financial statements as of December 31, 2016. The Company early adopted the following standards and amendments to standards that are effective for periods beginning on or after January 1, 2017. These standards and interpretations did not have a significant effect on the consolidated financial statements as of December 31, 2017.

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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 3.

Changes in accounting policies (continued) Disclosure initiative – Amendments to IAS 7 The amendments to IAS 7 Cash Flow are part of the IASB Disclosure initiatives and requires an entity to provided disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes. With the first adoption of the amendment, entities will not need to provide any comparative information for the preceding periods.

The Company adopted during 2017, the previous amendments to the International Financial Reporting Standards that entered into force during the year. The adoption of these revised standards has not caused any significant effect in the consolidated financial statements of the Company.

4.

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 profit 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, 2017, to convert the balances in foreign currency (RD$ and EUR) to US dollars were RD$48.32 (2016: RD$46.70) per US$1 and €1.22 (2016: €1.11) 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, as well as the cash flows from operating activities are usually denominated in US dollars.

4.2

Current / non-current classification The Company presents assets and liabilities in the consolidated statement of financial position based on current/non current classification.

An asset is current when it is: · Held primarily for the purpose of trading. · Expected to be realised within twelve months after the reporting period. · Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is current when: · It is held primarily for the purpose of trading. · It is due to be settled within twelve months after the reporting period. · There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

All other liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.3

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.

4.4

Financial instruments The valuation of the Company’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.

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.

4.4.1 Financial assets and other financial assets The financial assets contemplated are classified as financial assets at fair value through profit or loss, as it may be 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 Company’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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.4

Financial instruments (continued)

4.4.1 Financial assets and other financial assets (continued) 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.

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.

4.5

Impairment of financial assets The Company assesses at the date of the statement of financial position, whether if 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 asset’s carrying amount and the present value of future cash flows discounted at the financial asset’s original effective interest rate; it deducts the loss from the asset’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.

4.6

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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.7

Financial liabilities

4.7.1 Initial recognition and measurement of financial liabilities Financial liabilities 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 Company’s financial liabilities include debts and loans payable, trade payables and others, accounts payable to related parties and certain provisions, accruals and withholdings payable, and decommissioning provision.

4.8

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 income statement when the financial liability is derecognized as well as through the amortization process.

4.9

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.

4.10

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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4

Summary of significant accounting policies (continued)

4.10

Derivative financial instruments and hedge accounting (continued) On the date of insertion 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, 2016, the Compnay only participated in a cash flow hedge, which was discontinued that same year. During the year 2017, did not participate in any hedge.

Cash flow hedges – 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.

4.11 Inventory Inventories are valued at its cost or at its 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.

4.12 Property, plant and equipment 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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.12

Property, plant and equipment (continued) 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 equipments

6% 5% 11% 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 asset’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.

The estimated costs of the obligation that the Company has for the decommissioning of the land leased, are capitalized to the respective assets and amortized over the term of the land lease. The amount of amortization of these estimated costs is recognized in the results of the year. The amount of the respective provision will be reduced as future cash disbursements are made. In Note 4.22 "Significant accounting judgments, estimates and assumptions" and Note 12 "Property, plant and equipment", additional information is included about the recognized decommissioning provision.

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 income statements.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.13 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.

4.14 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 greater one between the fair value less costs of sale and its 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.

4.15 Operating leases Company as lessee Leases in which the lessor substantially retains all risks and benefits incidental to asset ownership are considered as 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.

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Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.16 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.

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.

Financial 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 income statement.

4.17 Cost and expense recognition Costs and expenses are recognized in the consolidated income statement 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 income statement.

4.18 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.

18

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.19

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 obligation’s amount can be made. The amount of recorded provisions is assessed periodically and required adjustments are recorded in the results of the year.

4.20 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 agrement policy The Company, from previous years, has a policy through which, by mutual agreement with the employee, provides a remuneration at the time of 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 seniority in employment, and at least five years of employment relationship must have elapsed.

The methodology used by the Company to estimate this liability consists of evaluating the history of the payments made for this concept and estimating the amount based on these data using actuarial methods, using demographic and financial assumptions described in Note 24.

The estimated amount of this obligation as of December 31, 2016, was considered immaterial for the purpose of the consolidated financial statements. As of December 31, 2017, the liability for this concept is included in trade accounts payable and others in the consolidated statement of financial position.

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.

19

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.21 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, 2017 and 2016 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 income statements.

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.

4.22 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.

20

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.22 Significant accounting judgments, estimates and assumptions (continued) In the process of applying its accounting policies, the Company has considered the following relevant judgments, estimates or assumptions: Operating lease The Company has entered into leases and has determined, based on an evaluation of the terms and conditions of the arrangements such as the lease term not constituting a major part of the economic life of the investment property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the asset, that it doesn’t retain all the significant risks and rewards of ownership of these properties and accounts these contracts as operating leases.

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, 2017 and 2016, 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.

21

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 4.

Summary of significant accounting policies (continued)

4.22 Significant accounting judgments, estimates and assumptions (continued) Decommissioning provision The Company has recorded a provision for the decommissioning of the Quisqueya 2 power plant, as it is located on a leased land. To determine the fair value of the provision, assumptions and estimates are made in relation to the discount rate, the expected cost to dismantle and remove the plant and the expected date in which such costs will be incurred. The fair value of the provision as of December 31, 2017 is approximately US$2.2 million. The Company estimates that the costs should materialize over a period of 19 years, with the termination of the lease contract, and calculate the provision using the cash flow discount method with a market rate adjusted to the specific risks of such liability of 7.3%. If the estimated discount rate before taxes used in the calculation would have been 1% higher than the estimate made by the Company, the fair value of the provision would have been approximately US$ 1.8 million.

Mutual agreement policy The estimate of the obligation under the mutual agreement policy is determined by actuarial valuations. Actuarial valuations involve making several assumptions that may differ from actual future events. Assumptions include the determination of the death rate, disability and turnover, dismissal factor, retirement age, the discount rate, salary increase and minimum wage increase. Due to the complexity of the valuation and its long-term nature, the calculation of the obligation is very sensitive to changes in these assumptions. All assumptions are reviewed on each closing date.

Deferred tax asset The determination of the amount of deferred tax assets that qualify to be recognized requires significant judgement by the Company, based upon the likelihood of the term and the level of future taxable profits, together with future tax planning strategies.

5.

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, 2017, 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 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. Under the modified retrospective method changes in revenue recognition are recorded against retained earnings and the comparative figures are not restated.

22

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 5.

Future changes in accounting policies (continued) The Company plans to adopt the standard in 2018 using the full retrospective method.With the adoption of this standard is not expected to have any impact in the Company’s results under the power sales agreements and the operating and maintenance services.

IFRS 16 Leases In January 2017, 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.

6.

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, 2017 2016 Expressed 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

120,852,196 17,985,394 5,098,130 143,935,720

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

3,887,509 1,390,412 190,747,310 196,025,231 (52,089,511)

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

302,929 32,806 335,735

17,546 17,546

1,650,691

1,661,070

(1,314,956)

(1,643,524)

Expressed 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

23

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 7.

Cash and cash equivalents Below is a breakdown of cash and cash equivalents: December 31, 2017 2016

Cash on hand: Denominated in US dollars Denominated in Dominican pesos Denominated in Euros 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

1,500 19,868 1,714

1,501 21,306 -

16,983,808 1,046,343 301,215

5,590,513 633,951 17,546

100,718,873 119,785,985 238,859,306

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

(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, 2017, these accounts generated US$289,532 (2016: US$161,525) (Note 26), which is included in the line of financial income in the accompanying consolidated income statements. As of the date of these consolidated financial statements, there were no restrictions on the use of cash in banks.

(ii)

As of December 31, 2017, these are certificates of deposit that expire in three months or less, which accrue interest at annual rates in Dominican pesos between 6.21% y 10.51% anual (2016: 6.83% and 10.91%) and 2.51% y 3.69% (2016: 3.0% and 3.25%) for US dollars.

During the year ended as of December 31, 2016, these generated financial revenues of US$5,461,918 (2016: US$4,754,436) (Not 26), which are included in the line of financial income in the accompanying consolidated income statements.

As of December 31, 2017 and 2016, there was no difference between the recorded values and the fair values of these financial assets.

8.

Held-to-maturity investments Correspond to certificates of deposit in US dollars with a maturity of greater than 90 days, automatically renewable, which earn annual interest rates of 3.50% in 2017 and 2016. These certificates were cancelled during march 2017 and generated financial revenues of US$327,437 (2016: US$2,583,139) (Note 26), which are included in the line of financial income in the accompanying consolidated income statements.

24

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 9.

Notes and trade receivables and others The composition of notes, trade receivables and others is as follows: December 31, 2017 2016 Trade accounts: Related parties (Note 10) Unrelated third parties (a) Notes: Unrelated third parties (b) Other accounts receivable: Unrelated third parties Related parties (Note 10) Advances to vendors Tax on hydrocarbons (c) (a)

34,687,140 14,152,587 48,839,727

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

-

1,300,372 1,300,372

1,329,461 1,044,505 230,138 35,834 51,479,665

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

See Note 20 b, d - i for further details.

(b) As of December 31, 2017, the Company has a contract signed in 2010 with the State entity Empresa de TransmisiĂłn ElĂŠctrica Dominicana (ETED), through which was transferred the transmission line that connected the Los Cocos wind farm 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.

Costs incurred by the Company in the construction of the transmission line were approximately US$10.9 million, which were 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, 2017, the Company has compensated approximately US$1.3 million (2016: US$9.6 million approximately), corresponding to the total outstanding balance as of December 31, 2016, concluding with the responsibilities and obligations derived from this contract. (c) After the approval of Decree No. 275-16, which regulated 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 became effective.

These amounts are reimbursed to the extent that the fuels are consumed.

The aging detail of notes, trade receivables and others as of December 31, is as follows:

Year

Not past due

Past due but not impaired From From More 31 to 61 to than 60 days 90 days 91 days

Total

2017

32,107,452

19,372,213

-

-

51,479,665

2016

38,628,254

22,724,089

8,671,951

13,096

70,037,390

25

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 9.

Notes and trade receivables and others (continued) 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, 2017, the average rate was 11.15% (2016: 14.28%) for balances in Dominican pesos and 6.39% (2016: 6.94%) for balances in US dollars.

During the year ended as of December 31, 2017, interest generated by notes and trade receivables amounted to US$11,122,168 (2016: US$3,102,428) (Note 26). These interests are included as financial expenses in the accompanying consolidated income statement.

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.

As of December 31, the balances held and transactions conducted with related parties and shareholders are as follows:

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) Pasteurizadora Rica, S. A. (RICA) (i) Other accounts receivable: San Pedro Bio-Energy, S.R.L. (iii) HIC

Relation

December 31, 2017 2016

Related

8,390,063

21,311,521

Related Related Related Related

18,867,103 5,953,265 1,158,096 318,613

15,470,893 5,973,750 1,101,829 -

34,687,140

43,857,993

1,044,505 1,044,505

459,418 35 459,453

35,731,645

44,317,446

1,138,722 16,973 1,155,695

1,479,861 4,500 1,484,361

Related Shareholder

Accounts payable to related parties and shareholders: HIC Shareholder Cristรณbal Colon, S. A. Related V Energy, S. A. Related Dividends payable (v): Balances as of January 1 Add: Dividends declared Less: Dividends paid

Shareholders 15,001 45,000,000 (44,999,433)

Balances as of December 31

15,568 1,171,263

26

7,054 146,207,568 (146,199,621) 15,001 1,499,362

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 10.

Balances and transactions with related parties (continued)

Relation

December 31, 2017 2016

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

Related Related Related Related Related

70,125,536 60,011,338 78,334,613 12,156,339 272,919 220,900,745

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. (iv)

Related

1,525,968

1,139,778

Collection of notes receivable Edesur (v)

Related

-

651,852

9,730,615

9,813,709

Management fees HIC (vii) (Note 23)

Shareholder

Purchase of fuel V Energy, S. A (viii)

Related

295,214

1,219,613

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

Related

568,381

574,009

22,500,000 22,497,062 2,371 44,999,433

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

Dividends paid (vi): HIC FONPER Minority shareholders

(i)

Shareholder Shareholder Shareholders

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.

27

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 10.

Balances and transactions with related parties (continued) (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.

(iii)

In 2017, the Company signed a three-year agreement Pasteurizadora Rica, S. A. (RICA) through which EGE Haina supplies all the energy required by RICA operations. (See Note 20) for further details. This company is related through a member of HIC's Administrative Board.

(iv)

In July 2016, 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.

(v)

As of December 31, 2016, 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.

(vi)

As of December 31, 2017 and 2016 these correspond to dividends declared and paid to shareholders. These were authorized through the minutes of the shareholder meetings held those years.

(vii)

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.The cost of this services amounts approximately US$9.7 million (2016: US$9.8 million, approximately). Note 23 states the taxes applicable to that service.

(viii) During the year ended December 31, 2017, the Company purchased fuel from V Energy, S.A. under the lubricants supply contract signed April 5, 2017, for approximately US$0.3 million (2016: approximately US$1.2 million). Once this lubricant is consumed, it is recognized in the consolidated income statement in operating and maintenance expenses (Note 22). This company is related through members of the Board of Directors of HIC and EGE Haina. (ix)

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 2 is located, signed on April 26, 2012 for a term of 25 years. The Company agreed to pay US$424,000 each year, subject to indexation by the US Consumer Price Index, plus applicable taxes. As of December 31, 2017, the total paid under this contract was US$0.6 million, approximately (2016: approximately US$0.6 million). This company is related through a member of HIC's Board of Directors.

Transactions with related parties have been made under equivalent conditions as transactions with mutual independence between the parties.

28

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 10.

Balances and transactions with related parties (continued) Compensation to key personnel During the year ended December 31, 2017, the expense for salaries and compensation paid to key personnel and severance benefits was approximately US$9.2 million (2016: approximately US$9.3 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, 2017 2016 Spare parts (at cost) Fuels (at cost): Bunker (Fuel Oil) CarbĂłn DiĂŠsel Inventory in transit - spare parts, at cost (a)

22,298,199

23,455,120

9,828,569 1,171,362 702,484 1,468,214 35,468,828

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

(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. The total inventory in transit was received as of February 28, 2018 (2016: US$384,171 as of March 2, 2017).

During the year ended December 31, 2017, the Company recognized US$0.9 million approximately (2016: US$1.6 million approximately) in losses for adjustments to the net realizable value of inventories (Note 25).

29

Empresa Generadora de Electricidad Haina, S. A. Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 12.

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

Land Acquisition costs: Balance as of January 1, 2016 Additions Disposals Transfers Balance as of December 31, 2016 Additions Disposals Transfers Balance as of December 31, 2017

Buildings

Generation Plants (c, b)

Transportation Equipment

Furniture and Office Equipment

13,560,706 524,920 14,085,626 14,085,626

54,161,886 8,922,058 63,083,944 (226,361) 514,497 63,372,080

533,323,370 1,646,421 (534,160) 116,773,347 651,208,978 4,420,254 (5,841,585) 1,260,280 651,047,927

2,871,644 316,030 (206,245) 2,981,429 563,018 (544,484) 2,999,963

4,709,691 67,876 (18,846) 4,758,721 159,989 4,918,710

-

(7,573,914) (3,436,999) (11,010,913) (3,607,362) 169,801 (14,448,474)

(89,317,536) (32,581,493) 433,155 (121,465,874) (34,827,134) 2,912,875 (153,380,133)

(2,008,133) (343,369) 206,245 (2,145,257) (334,204) 519,848 (1,959,613)

(4,054,434) (196,626) 3,077 (4,247,983) (204,573) (4,452,556)

Minor Equipment 824,464 125,928 73,166 1,023,558 51,068 268,384 1,343,010

Works in Process (a,b) 103,163,862 26,078,963 (125,768,571) 3,474,254 56,508,818 (2,043,161) 57,939,911

Total 712,615,623 28,760,138 (759,251) 740,616,510 61,703,147 (6,612,430) 795,707,227

Accumulated depreciation: Balance as of January 1, 2016 Depreciation expenses for the year Disposals Balance as of December 31, 2016 Depreciation expenses for the year Disposals Balance as of December 31, 2017

(87,624) (151,227) (238,851) (198,952) (437,803)

-

(103,041,641) (36,709,714) 642,477 (139,108,878) (39,172,225) 3,602,524 (174,678,579)

Net carrying value: Balance as of December 31, 2017

14,085,626

48,923,606

497,667,794

1,040,350

466,154

905,207

57,939,911

621,028,648

Balance as of December 31, 2016

14,085,626

52,073,031

529,743,104

836,172

510,738

784,707

3,474,254

601,507,632

(a) In June, 2107, EGE Haina signed an engineering, supply and construction contract for the construction of the second phase of the Larimar Wind Farm. The total amount of the contract was approximately US$89.1 million. As of December 31, 2017, the Company invested approximately US$37.1million in this project (2016: US$o.3 million approximately). The Company expects this project to be completed in the first quarter of 2019. (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, 2017, the Company invested approximately US$19.0 million in this project (2016: US$1.2 million approximately). The Company expects this project to be completed in the third quarter of 2018.

30

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 12.

Property, plant and equipment, net (continued) (c) In June 2016, the Company capitalized the first phase of the Larimar wind project, with an installed capacity of 49.5 MW. The total amount of the investment amounted to approximately US$119.7 million.

Additionally, the property, plant and equipment property includes the amount of approximately US$2.2 million corresponding to the present value of the decommissioning provision of the Quisqueya 2 power plant as it is located on a leased land. Such provision was determined by calculating the present value of future cash flows, discounted at a market rate adjusted to the specific risks of such liability of 7.3%. This amount will be depreciated using the straight-line method over the remaining useful life of the underlying asset.

Of the total amount of acquisitions for 2017, US$61,703,147 (2016: US$28,760,138), US$4,810,947 (2016: US$5,021,229) do not represent cash flows. Additionally, during 2017 were paid US$1,588,003 (2016: US$577,189) 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$18.5 million (2016: approximately US$19.3 million).

During the yerar ended in December 31, 2017, the Company recognized aproximately US$0.8 million of loss for the adjustment to the salvage value of property, plant and equipment (Note 25).

Property, plant and equipment include capitalized interest on loans attributed to the construction of the assets. The capitalized interest amounted to US$2,102,231 in 2017 (2016: US$2,377,717) (Note 27). The capitalization rate used was approximately 8.17% for 2017 (2016: approximately 7.29%).

13.

Other non-current assets Other non-current assets are comprised as follows:

December 31, 2017 2016

Right of use (a) Intangible assets: Software Less: Accumulated amortization (b) Software, net Easement Intangible assets, net

2,617,711

418,556

1,009,991 (720,970) 289,021 558,580 847,601

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

Collateral and rental deposits

294,996 3,760,308

299,383 1,317,795

(a) Corresponds to the right of use of the pipeline owned by PVDC, under the agreement signed in 2012, for the fuel supply of the Quisqueya 2 power plant. This contract expires in 2037. (b) As of December 31, 2017, intangible assets amortization expense was US$196,071 (2016: 672,282), which are included in the line of depreciation and amortization in the accompanying consolidated income statements.

31

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 14.

Debt and loans payable short and long term Debt and loans payable short and long term consist of: 2017

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

December 31, 2016

33,333,327

-

390,747,290 (33,333,327) (852,061) 356,561,902 389,895,229

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

(a) Local bonds i. In 2017, the Company issued an unsecured local bond for RD$4,665,960,000 million pesos, equivalent as of December 2017 to US$96,563,742, with a term of 10 years, fully placed in 20 tranches of RD$233,298,000 million pesos each, equivalent to US$4,828,187 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 2016, as described below: Tranches

Amount

1-4 5-14 15-20

933,192,000 2,332,980,000 1,399,788,000 4,665,960,000

Annual rate

Date of issuance

Maturity

Payment calendar

11.50% 11.25% 11.00%

28-06-2017 14-08-2017 04-10-2017

28-06-2027 14-08-2017 04-10-2027

Payment on maturity Payment on maturity Payment on maturity

ii. In 2016, the Company issued an unsecured local bond for RD$4,550,950,000 million pesos, equivalent as of December 2017 to US$94,183,568, with a term of 10 years, fully placed in 20 tranches of RD$227,547,500 million pesos each, equivalent to US$4,709,178 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

32

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 14.

Debt and loans payable short and long term (continued) iii. During 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

Date of issuance

Maturity

7.00% 6.50% 6.25% 6.00% 5.75%

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

iv. 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

8

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

1

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 2018-2020payments Equal annual payments 2018-2020 Equal annual payments 2018-2020

v. 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.

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.

33

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 14.

Debt and loans payable short and long term (continued) As part of its debt restructuring strategy, in 2016 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.

The annual movement of documents and loans payable in the short and long term is presented below: December 31, 2017 2016 Balance at the beginning of the year Documents and loans payable in the year Amortizations made in the year Unrealized exchange differences Debt issuance costs paid

296,494,800 97,883,432 (4,586,871) (144,642)

303,928,053 98,845,979 (105,000,000) (1,395,229) (155,428)

Amortizations of debt issuance costs (Note 27) Balance at the end of the year

248,510 389,895,229

271,425 296,494,800

A summary of the maturities of the loans payable in the long term is presented below: December 31, 2017 2016 33,333,327 33,333,327 33,333,327 33,333,327 33,333,327 33,333,327 290,747,309 197,450,748 390,747,290 297,450,729

As of December 31, 2018 As of December 31, 2019 As of December 31, 2020 Foward 15.

Trade payables and others Trade payables and others consist of: 2017 International fuel suppliers Local energy suppliers Other local suppliers Other international suppliers Accounts payable to related parties and dividends (Note 10) Withholdings payable Accruals payable Mutual agreement policy (Note 24)

December 31, 2016

66,338,641 1,285,248 3,922,178 3,273,494

46,002,407 750,409 5,226,820 4,538,400

1,171,263 1,406,791 1,252,703 436,014 79,086,332

1,499,362 1,368,970 758,730 60,145,098

From the total trade payables and other payables, approximately US$66.3 million (2016: approximately US$46.0 million) correspond to pending balances of fuel purchases, with up to 180 days term from the invoice issuance date, and accruing annual interests of LIBOR plus 1.2% (2016: LIBOR 120 days plus 1.3% annual). Of the remaining trade payables and others, most have maturities of zero to thirty days.

34

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 16.

Other current liabilities Other current liabilities consist of: December 31, 2017 2016 Provision for personnel compensation Provision for lawsuits (Note 17)

17.

2,298,071 118,870 2,416,941

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

Provision for lawsuits As of December 31, 2017, 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$118,870 (2016: US$124,168).

18.

Income tax According to the Dominican Tax Code, modified by the Tax Reform Law No. 253-12, income tax for 2017 and 2016 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, 2017 2016 Current income tax Deferred income tax

4,877,139 5,967,856 10,844,995

35

9,207,998 6,142,516 15,350,514

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 18.

Income tax (continued) Below is a reconciliation between income before taxes, at the current tax rate, and the expense for the years ended 2017 and 2016, as well as a reconciliation of the Company's effective tax rate.

December 31, 2017 2016 Profit before income tax

41,727,551

50,371,418

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 Other adjustments Current income tax before tax credits Tax credits under Law No. 57-07 (b) Current income tax

11,266,439 257,047 (158,388) 2,489 (815,394) (5,245,648) (159,992) 5,146,553 (269,414) 4,877,139

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

(a)

The activity related to Los Cocos I and II wind farms is 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, 2017, the credit has been totally consumed.

Below is the effective tax rate for the years ended December 31, 2017 and 2016: December 31, 2017 2016 Statutory income tax rate Inflation of non-monetary assets Non-deductible expenses Exchange difference Other permanent adjustments Effective income tax rate

27% (2%) 0.4% (0.5%) (7.0%) 18%

36

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

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 18.

Income tax (continued) 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, Currency

2017

2016

Property, plant and equipment, net Exempt assets under Law No. 57-07 Revaluation of assets Assets subject to taxation Tax rate Tax on assets Average exchange rate

RD$

26,108,381,018 (5,049,985,525) (811,399,279) 20,246,996,214 1% 202,469,962 47.58

24,915,582,685 (5,410,182,746) (811,399,279) 18,694,000,660 1% 186,940,007 46.11

Total tax on assets

US$

4,255,359

4,054,218

RD$

Income tax credit balance The movement of the income tax credit balance as of December 31, 2017 and 2016, is as follows: Consolidated Statement of Financial Position 2017 2016 Balance at the beginning of the year Unrealized exchange differences Advance payment of taxes paid during the year Current income tax expense Balance of the income tax credit Less: long-term portion

37

4,624,216 (154,394) 5,505,447 (4,877,139) 5,098,130 (1,699,377) 3,398,753

3,874,655 (135,768) 10,093,327 (9,207,998) 4,624,216 (1,013,712) 3,610,504

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 18.

Income tax (continued) Deferred tax The components of deferred income tax as of December 31, 2017 and 2016, as well as its movements in the years then ended are: Consolidated Statement of Financial Position 2017 2016 Deferred tax assets: Allowance for inventory impairment Total deferred tax assets

13,225 13,225

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

(58,473,594) (2,893,194) (61,366,788) (61,353,563)

316,663 316,663 (52,679,734) (3,022,636) (55,702,370) (55,385,707)

Consolidated Income Statement 2017 2016 Fiscal difference of property, furniture and equipment Allowance for inventory impairment Provisions and others Total 19.

(5,793,860) (303,438) 129,442 (5,967,856)

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

Equity Share capital As of December 31, 2017 and 2016, the shared 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

38

Share capital Class of Shares B A A

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

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 19.

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 2016, 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 May, 2017, the Company declared dividends for its shareholders for US$45,000,000 (2016: in April and November for US$36,096,456 and US$111,111,112, respectively, for a total of US$146,207,568 of which US$15,568 (2016: US$15,001) are outstanding. As of December 31, 2017, the dividend declared per share is US$0.98 (2016: US$3.18).

Earnings per share During the years ended December 31, 2017 and 2016, earnings per share were as follows: December 31, 2017 2016 30,882,556 45,951,000 0.67

Net profit Number of shares Net profit per share for the year 20.

35,020,904 45,951,000 0.76

Revenues December 31, 2017 2016 Sale of energy (a - j) Sale of capacity (a - j) Operating and maintenance services (k - l) Fuel storage service Other Total revenues

39

269,219,380 56,714,766 2,833,373 846,804 237,036 329,851,359

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

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 20.

Revenues (continued) a.

In December 2017, the Company signed power purchases (“PPA”) agreements with the Distribution Companies for the supply of energy, capacity (40 MW) and connection rights. The agreements expire on April 19, 2022. The source of production of this energy will be essentially the Barahona Carbón power plant. The price is established in US dollars and indexed by the US Consumer Price Index (CPI) and the associated fuel prices. The revenues recognized under this contract were approximately US$2.0 million.

b.

In 2017, the Company signed a PPA with a Distribution Company, for which EGE Haina must supply 3.97 MW of capacity and associated energy to the isolated system of the southern part of the country. The source of production of this energy will be essentially the Pedernales power plant. The PPA establishes an original term of 2ars. The price is established in US dollars and indexed by the US Consumer Price Index (CPI). The revenues recognized for this contract were approximately US$2.7 million.

c.

In 2017, the Company signed a PPA with a local related dairy industry company, for which EGE Haina must supply the entire energy required by this company's operations. The PPA establishes an original term of 2 years. The price is established in US dollars and indexed by the US Consumer Price Index (CPI). The revenues recognized for this contract were approximately US$0.3 million.

d.

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$54.3 million (2016: US$48.4, approximately).

e.

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 2016, 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$12.2 million (2016: approximately US$13.5).

40

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 20.

Revenues (continued) f.

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$17.4 million (2016: approximately US$10.6 million).

g.

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$21.0 million (2016: approximately US$11.6 million).

h.

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

i.

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 2017, the Company sold excess energy for 1,845.3 GWh (2016: 994.8 GWh) in electricity, equivalent to approximately US$207.0 million (2016: US$88.8 million, approximately).

j.

Energy revenues include approximately US$4.7 million (2016: US$7.2 million, approximately), which correspond to the service of Compensation of the Superintendence of Electricity (SIE Compensation) and approximately US$4.3 million (2016: US$3.3 million approximately), which correspond to the Frequency Regulation service.

k.

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 2017 and 2016 each.

l.

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 in 2017 and 2016 each.

41

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 21.

Cost of fuel and purchase of energy December 31, 2017 2016 Fuel (a) - (c) Transmission Purchased energy and capacity

157,557,103 11,346,142 1,177,552 170,080,797

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

Fuel (a) Fuel Oil As of December 31, 2017, EGE Haina maintained an agreement with an overseas supplier for the delivery of 2.7 million barrels of fuel (2016: 3.2 million). In 2017, the Company consumed 2.8 million barrels at a cost of US$138.0 million (2016: 3.2 million barrels at a cost of US$118.0 million). (b) Coal As of December 31, 2017, EGE Haina maintained an agreement with a foreign supplier for the delivery of 160 thousand metric tons of coal (MT) (2016: 160 thousand tons). In 2017, the Company consumed 179 thousand MT at a cost of US$14.5 million (2016: 187 thousand MT at a cost of US$12.6 million. (c) Gasoil In 2017, EGE Haina maintained contracts with a related local supplier for the purchase of a maximum of 720 thousand gallons of gasoil per year (2016: 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 2017 and 2016, the Company purchased gasoil in the spot market. In 2017, the Company consumed 78.2 thousand barrels at a cost of US$5.1 million (2016: 215 thousand barrels at a cost of US$12.9 million).

Purchased energy and capacity (d) Spot Market As of December 31, 2017, the Company participates in the Dominican electricity spot market, as a seller or buyer. During the year 2017, the Company recorded an energy cost of US$0.4 million approximated according to true-up adjustment of the spot transacions in April 2017 (2016: purchased 19.0 GWh of electricity and 218.4MW of capacity, equivalent to approximately US$5.4 million). (e) Power Purchase Agreement (PPA) The Company signed a PPA on October 1, 2013, for the purchase of the energy produced by the Quilvio Cabrera wind farm 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 2017, the Company purchased 11.2 GWh of energy for US$0.8 million, approximately, (2016: approximately 12.7 GWh per US$0.7 million).

42

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 22.

Operating and maintenance expenses During the years ended December 31, operating and maintenance expenses were itemized as follows: December 31, 2017 2016 Maintenance expenses Insurance Lubricants Security services Technical advisory fees Land rental Professional services Other

23.

19,189,147 5,846,093 3,247,513 1,185,197 1,053,005 989,379 513,885 2,535,643 34,559,862

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

Administrative and general expenses During the years ended December 31, administrative and general expenses were itemized as follows: December 31, 2017 2016 Management fees (Notes 10 and 28) (i) Withholding tax on management fees (Notes 10 and 28) (i) Superintendence of Electricity and OCSENI (ii) Office operating costs Professional services (i)

9,730,615 1,817,179 1,585,665 701,675 13,835,134

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

As of November 2016, the Company discontinued the practice of accretion on the management fee.

(ii) 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.

43

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 24.

Employee benefits The composition of employee benefits for the years ended December 31, is as follows: December 31, 2017 2016 Salaries, benefits and other severance benefits Social security contributions

19,846,588 1,336,547 21,183,135

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

Mutual agreement policy As of December 31, 2017, the Company made the best estimate of its obligation under the mutual agreement policy (Note 4.20), which amounts to approximately US$436.0 thousand, equivalent to RD$21.1 million approximately. The summary of the provision as of December 31, 2017, is as follows: 2017 Balance at the beginnig Service cost Interest cost Balance at the end

389,655 46,359 436,014

Demographic and financial assumptions were used to estimate the obligation. The demographic assumptions include the mortality, disability and turnover rate, dismissal factor and retirement age. The financial assumptions include the determination of the discount rate, salary increase and minimum salary increase. Additionally, in order to do the provision, sensitivity analysis on the changes in the discount rate, the rate of salary increase and the payment of labor benefits were made.

25.

Other expenses, net December 31, 2017 2016 Adjustment to the net realizable value of inventories (Note 11) Adjustment to the salvage value of property, plant and equipment (Note 12) Loss on asset disposal Tax on checks and transfers Changes in fair value of notes receivable (Note 9 (b)) Gain on sale of property, plant and equipment Others, net

44

(872,994)

(1,554,069)

(831,000) (662,099) (86,269) 104,841 612,545 282,338 (1,452,638)

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

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 26.

Financial income December 31, 2017 2016 Interest on trade receivables and notes receivable (Note 9) Interest on certificates of deposit (Notes 7 and 8) Other financial income (Note 7)

27.

11,122,168 5,789,355 289,532 17,201,055

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

Financial expenses December 31, 2017 2016

28.

Interest on local bonds Interest on other financing Interest on debt with agents of the Dominican electric market Capitalized interest (Note 12) Sub total

27,074,043 -

18,094,628 699,456

7,121 (2,102,231) 24,978,933

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

Interest on financing for purchase of fuel Amortization of debt issue costs Taxes retained on interest Other financial expenses

980,815 248,510 245,219 26,453,477

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

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, 2017, the expense for this concept was US$989,379 (2016: US$854,341) and this was included as operating and maintenance expenses in the accompanying consolidated income statements (Note 22).

The total future minimum lease payments are: Year

Amount

2018 2019 2020 2021 En adelante

912,000 912,000 912,000 912,000 12,328,000 15,976,000

45

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 28.

Commitments and contingencies (continued) b) Lawsuits On August 8, 2012, through a written document filed with the Tax District Attorney representatives acting in the name of FONPER, filed a notice of criminal complaint (hereinafter referred to as “Lawsuit”) 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 Lawsuit on September 17, 2012.

It questions the methodology to calculate the management fee that EGE Haina pays HIC (Notes 10 (vii) y 23); 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 Tax District Attorney 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. After evaluating the points described above, the Chamber of Accounts in its final report only suggests certain recommendations that aim to improve the internal control regarding the tax applicable to the management fee (Notes 10 (vii) and 23); which were adopted by the Company. This process is currently underway and although the result of the litigation is inherently unpredictable, the Company does not expect the outcome will have a material adverse effect on its financial condition or results of operations.

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. This process ended in 2017.

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 the General Management, under the guidelines approved by the Management Board.

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.

46

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 29.

Financial risk management objectives and policies (continued) 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

2017 2017

RD$

+5% -5%

2,480,453 (2,480,453)

2016 2016

RD$

+5% -5%

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

2017 2017

EUR

+5% -5%

62,617 (62,617)

2016 2016

EUR

+5% -5%

78,263 (78,263)

Liquidity risk Liquidity risk is the risk that the Company is unable to fulfill its 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, 2017, the Company had US$220.5 million in financial certificates with original maturities of three months or less (2016: US$88.4 million), cash on hand and at banks for US$18.4million (2016: US$6.3 million) and asl of December, 2016, 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 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 Debt and loans payable Decommissioning provision Other non-current liabilities

From 1 to 2 years

2017 From 2 to 5 years

More than 5 years

Total

65,558,975

125,222,849

111,193,955

337,630,649

639,606,428

79,086,332 2,416,941

-

-

-

79,086,332 2,416,941

-

-

-

2,185,455

2,185,455

-

-

3,000

-

3,000

147,062,248

125,222,849

111,196,955

339,816,104

723,298,156

less than 1 year

47

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 29.

Financial risk management objectives and policies (continued) From 1 to 2 years

2016 From 2 to 5 years

More than 5 years

Debt and loans payable 23,288,619 Trade payables and others 60,145,098 Other current liabilities 2,444,591 Other non-current liabilities -

108,194,601

103,101,888

233,882,204

468,467,312

-

-

-

60,145,098 2,444,591

-

3,000

-

3,000

85,878,308

108,194,601

103,104,888

233,882,204

531,060,001

Balances

less than 1 year

Total

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, 2017, the Company's entire long term debt is agreed at fixed rates, thus the Company is not exposed to this risk.

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"). 60% of the Company's total revenues for 2017 (2016: 69%) came from sales to the Distribution Companies, which comprised 63% (2016: 63%) of accounts receivable from related parties and shareholders as of December 31, 2017. 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.

48

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 29.

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:

Cash in banks and short term bank deposits: Local credit rating - Fitch/Feller AA+ AA International credit rating – Fitch A+ Cash on hand Total cash and cash equivalents

2017

2016

191,569,059 23,401 580 191,593,040

89,148,387 86 89,148,473

47,243,184 47,243,184 23,082 238,859,306

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

2017 Held-to-maturity investments Local credit rating - Fitch AA+ 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

2016

-

41,781,870

49,884,232

59,634,900

-

1,300,372

1,365,295 51,249,527

8,887,852 69,823,124

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.

49

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 29.

Financial risk management objectives and policies (continued) Capital Management The primary objective of the Company’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 on-going enterprise. 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 2017 and 2016.

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 income statements.

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, 2017 and 2016, is shown below: 2017 Debt and loans payable long term Less: cash and cash equivalents

389,895,229 (238,859,306)

296,494,800 (94,661,880)

-

(41,781,870)

151,035,923 90,192,431

160,051,050 96,003,686

Less: held-to-maturity investments Net debt EBITDA (Note 31) Net debt to EBITDA index

1.7

50

2016

1.7

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 29.

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, 2017 Recorded Fair Value Value Debt and loans payable

389,895,229

405,748,505

December 31, 2016 Recorded Fair Value Value 296,494,800

308,450,597

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 4.4 y 4.7, 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.

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.

51

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 30.

Financial instruments (continued) The following table presents the Company's assets measured at fair value:

Balance Liabilities: Mutual agreement policy provision Decommissioning provision

436,014 2,185,455 2,621,469

Balance Assets: Notes receivable

1,300,372

Measurement of fair value As of December 31, 2017 using Level 1 Level 2 Level 3 -

-

436,014 2,185,455 2,621,469

Measurement of fair value As of December 31, 2016 using Level 1 Level 2 Level 3 -

-

1,300,372

As of December 31, 2017, 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.

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: 2017 Revenues Operating profit EBITDA Total assets as of December 31, Total liabilities as of December 31,

329,851,359 50,9797,971 90,192,431 958,697,901 535,954,601 52

2016 332,668,090 57,396,491 96,003,686 852,348,021 414,473,196

Empresa Generadora de Electricidad Haina, S. A. and Subsidiaries Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017 and 2016 (Amounts expressed in United States dollars - US$-) 31.

Segment information (continued) 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: 2017 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

90,192,431 (39,368,296) 1,608,476 (1,452,638) (9,252,422) 41,727,551 (10,844,995) 30,882,556

2016 96,003,686 (37,381,996) 657,706 (1,882,905) (7,025,073) 50,371,418 (15,350,514) 35,020,904

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

53