Ege haina 3q 2010 by EGE Haina

Quarterly Quarterly Financial Report Financial Report September 30th, 2010

September 30th, 2010

EGE Haina Reports Third Quarter 2010 Net Income of US$11.8 million; Revenues of US$118.9 million Special points of interest:

Santo Domingo, Dominican Republic, November 4th, 2010 – EGE Haina

 EGE Haina reported a

Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.2:1.0 and 6.5:1.0, respectively, as of September 30th, 2010.

 On July 17, 2010, the

Company re-implemented the PPA with EDE Este for 50MW. The additional 50MW (to complete the original 100MW) will remain suspended for a 24-month period.

announced today third quarter 2010 net income of US$11.8 million, compared to a net income of US$8.1 million in the third quarter 2009, driven by an increase in energy sales price and higher demand. Third quarter 2010 revenues were US$118.9 million, showing a 35% increase when compared to the same period of the previous year.

Financial and Operational Summary

 In September, 2010 the

Company entered into a letter of credit by € 15 million with Citibank in favor of Cobra with an annual interest rate of 0.75%. The LC expires in May, 2011 and is collateralized with a certificate of deposit accruing interests at 0.40% annual interest rate.

(US$ Thousands, except for Operational data)

Description

3Q'10

3Q'09

Var %

YTD'10

YTD'09

Var %

Revenues

118,935

88,421

35%

307,963

212,399

45%

Operating Costs

101,931

77,803

31%

261,638

193,483

35%

Variable Margin

37,772

29,392

29%

108,388

72,272

50%

EBITDA¹

21,004

14,474

45%

58,347

30,499

91%

Operating Income (loss)

17,004

10,618

60%

46,325

18,916

145%

Net Income (loss)

11,810

8,119

45%

29,188

9,589

204%

(20,706)

(10,154)

104%

58,733

(18,341)

-420%

Availability, %

-9%

Operating cash, net

Inside this Issue:  Quarter highlights

Sales, GWh

609

514

19%

1,597

1,449

10%

 External factors

Generation, GWh

458

384

19%

1,262

1,059

19%

 MD&A

Spot Purchases, GWh

151

130

17%

335

390

-14%

 Financial Debt

 Collections

 Financial Results

EBITDA is a non-GAAP financial measure, which is calculated by adding depreciation and amortization expenses to the Operating income.

Quarterly Financial Report September 30th, 2010

Quarter Highlights and Recent Developments EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio and a Consolidated Interest Coverage Ratio of 1.2:1.0 and 6.5:1.0, respectively, as of September 30th, 2010. In July, 2010 the Company repaid the loan outstanding with Banco de Reservas for US$2.5MM. On July 17, 2010, the Company re-implemented the PPA with EDE Este for 50MW. The additional 50MW (to complete the original 100MW) will remain suspended for a 24-month period. In September, 2010 the Company entered into a letter of credit by €15 million with Citibank in favor of Cobra (wind park “Los Cocos” EPC Contractor) with an annual interest rate of 0.75%. The LC expires in May, 2011 and is collateralized with a certificate of deposit accruing interests at 0.40% annual interest rate. On October 26, 2010 The Executive Board of the International Monetary Fund has completed the second and third reviews of the Dominican Republic’s economic performance under a program supported by a 28-month Stand-By Arrangement (SBA). The completion of the reviews allowed the immediate disbursement of approximately US$249 MM, bringing total disbursements under the arrangement to an amount equivalent of US$687.6 MM.

External Factors

Coal, Natural Gas and Fuel-Oil #6 Price Evolution (US$/MMBtu)

Average price of fuel for the month of September was US$67.17 /Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs). th

Exchange rate as of September 30 , 2010, closed at RD$37.25/USD.

11.00

11.19

10.08

10.9

10.61

4.34 3.73

4.23 4.22

Q2'10

Q3'10

8.23 6.37 5.89 6.41

Accumulated inflation in DR, as of September 30th, 2010 was 4.24%.2

6.20 6.23 4.48

5.30 4.07 3.81

3.44

4.91

5.04

3.78

3.58

Q4'09

Q1'10

According with the WEO of the FMI, the DR GDP will grow 5.5% in 2010.3 Q4'08

Q1'09

Q2'09

Q3'09 HFO

2 3

COAL

http://www.bancentral.gov.do IMF World Economic Outlook, October 2010

Quarterly Financial Report September 30th, 2010

Consolidated Financial Results4 Revenues (US$ Thousands) Description

3Q'10

3Q'09

Var %

YTD'10

YTD'09

Var %

Contracted Energy

105,382

77,207

36%

272,523

178,803

52%

Contracted Capacity

12,544

10,924

15%

34,255

31,982

Others

1,010

290

248%

1,186

1,614

-27%

118,935

88,421

35%

307,963

212,399

45%

Total Revenues

3Q’10 revenues increased by 35% when compared with the same period of previous year (US$ 118.9 MM Vs. US$ 88.4 MM). This positive variance is essentially driven by a 6.0% increment in the average energy sales price for the period (3Q’10 US$170.59/MWh vs 3Q’09 US$160.76/MWh) as a result of the increase in Fuel Oil prices, which is the main escalator of our PPAs’ pricing formula, and higher demand by 18.5% (3Q’10 608.9 GWh vs 2Q’09 513.7 GWh).

Operating Expenses (US$ Thousands) Description

3Q'10

3Q'09

Var %

YTD'10

YTD'09

Var %

Fuel Expense

49,603

33,770

47%

129,720

83,159

56%

Transmission Tolls

3,257

2,695

21%

7,746

8,070

-4%

Purchased Power

26,310

21,389

23%

57,946

47,492

22%

Frequency Regulation

1,992

1,174

70%

4,163

1,405

196%

Operation & Maintenance

8,053

7,689

25,315

22,436

13%

General & Administrative

8,715

7,229

21%

24,726

19,338

28%

Depreciation

3,999

3,856

12,022

11,583

101,931

77,803

31%

261,638

193,483

35%

Total Operating Expenses

During 3Q’10 operating expenses were higher than 3Q’09 comparative figures by 31% (US$101.9 MM Vs. US$77.8 MM). This increase is mainly explained by: Fuel costs: 47% or US$15.8 MM increase, as a consequence of higher fuel consumption (3Q’10 451.57 thousand of BBLS vs 3Q’09 441.9 thousand of BBLS) due to 73.8GWh of higher energy generation and a negative average price effect for the period (3Q’10 US$72.1 per BBLS vs 3Q’09 US$66.0 per BBLS). Purchased power: 23% or US$4.9 MM increase is the result of a negative average price effect for the period (3Q’10 US$174.7/MWh vs 3Q’09 US$151.4/MWh) and higher spot energy purchases (3Q’10 152.1 GWh vs 3Q’09 131.9 GWh). General and administrative expenses: 21% or US$1.5 MM increase mainly due to i) US$1.1 MM higher technical advisory fee expense due to higher sales; ii) US$0.3 MM higher office operation costs mainly due to the LNG procurement strategy project consulting services performed during July’10 and iii) US$0.1 MM higher regulatory payment. Frequency regulation expenses: 70% or US$0.8 MM increase is mainly due to the participation of new generation companies in the regulation market.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These consolidated financial statements include the accounts of EGE Haina, and those of its wholly owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.

Quarterly Financial Report September 30th, 2010

Net Income Net income was US$11.8 MM in 3Q’10, compared to a net income of US$8.1 MM in the same period of the prior year. The positive variance of US$3.7 MM is explained by: Higher EBITDA by US$6.5 MM as explained in the above paragraphs. US$2.1 higher exchange gain as a result of our exposure to the Euro. US$1.3 MM lower interest expense, net due to: a)US$1.2 MM lower interest on Senior Notes in 2010; b) US$0.6 higher interest capitalized during the period; c) US$0.3 MM lower bank and fees charges; d)US$0.2 higher interest income on short term investments; e) US$0.2 MM decrease in commercial interest expenses; f)US$0.3 MM other positive higher minor variances; partially offset by: g) US$0.7 MM lower interest income from distribution companies as a result of lower accounts receivable; h) US$0.5 MM lower interest in sovereign bonds as a result of the sale of tranche #3 and redemption of tranche 1 maturing June 2010; i) US$0.3 MM higher interest expenses in the local bond since tranches 34-5 were placed during third and fourth quarters of 2009. Partially offset by : US$3.5 MM higher income tax. US$2.7 MM higher other income as a consequence of the partial repurchases of the 144A Senior Notes during July’09.

Cash Flow Cash provided by (used in) operating activities Net cash used in operating activities was US$20.7 MM during the 3Q’10, compared to US$10.1 MM used in the same period of 2009. The US$10.6 MM negative variation is explained by: a) US$11.3 MM increase in accounts receivable; b) US$6.2 MM lower accounts payable; c) US$9.3 MM of higher negative adjustments reconciling net income to the net cash used in operating activities; partially offset by i) US$3.7 MM higher net income; ii) US$4.5 MM lower inventories; iii) US$7.5 MM increase in other liabilities; and iv) US$0.5 MM lower prepaid expenses and other assets. Cash (used in) provided by investing activities Net cash used in investing activities was US$19.5 MM during the 3Q’10, compared to US$6.8 MM provided by investing activities in the same period of the prior year. The US$26.3 MM change is mainly the result of: i) US$19.0 MM increment of short term investments due to the certificate of deposit provided to Citibank as collateral of the letter of credit; ii) US$4.4 MM higher proceeds from long term investments during 3Q’09 due to the sale of sovereign bonds; iii) US$2.9 MM higher sale of property, plant and equipment during 3Q’09 as a consequence of the engines sold to Megacentro; iv) US$1.9 MM increment of short term investments in 3Q’10 due to new certificates of deposit; v) US$1.1 MM higher additions to property, plant and equipment during 3Q’10; v) US$0.3 MM other minor higher negative variances; partially offset by: vi) US$3.3 MM payment received on long term investment as a consequence of intercompany loan. Cash (used in) provided by financing activities The negative variance of US$5.3 MM in financing activities during 3Q’10 when compared to the same period of the prior year, is mainly driven by the issuance of long-term debt by US$6.0 MM corresponding to the 3rd tranche of the local bond during 3Q’09; partially offset by US$0.6 MM lower repayment of long term debt, which is the net result of a)the partial repurchase of the 144-A Senior Notes by US$3.2 MM during 3Q’09 and b)the repayment to Banco de Reservas for US$2.5MM during the 3Q’10.

Quarterly Financial Report September 30th, 2010

Financial Debt FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Balance Interest type Current Rate Average Life Repayment schedule 164.9 fixed 9.50% 6.56 Balloon payment April 2017 6.0 fixed 8.00% 0.04 Balloon payment October 2010 6.0 fixed 8.50% 0.63 Balloon payment May 2011 6.0 fixed 8.50% 0.79 Balloon payment July 2011 6.0 fixed 8.75% 1.54 Ballonn payment April 2012 6.0 fixed 7.75% 2.20 Ballonn payment December 2012 5.0 variable 7.50% 0.73 Balloon June 2011

Instrument 144 A Bond Local Bond- T1 Local Bond-T2 Local Bond-T3 Local Bond-T4 Local Bond-T5 BHD

Weighted av. Interest rate Weighted av. Life (years) Total financial debt

9.27% 5.52 199.9

Total Debt vs Financial Assets 180.00 160.00 140.00

US$ MM

120.00 100.00 80.00 60.00 40.00 20.00 2010

2011

2012

2013

cash on hand

Debt

2014

2015

2016

2017

Sovereign bonds

Financial Expenses (US$ Thousands) Description

3Q'10

3Q'09

YTD'10

YTD'09

Financial Expenses Interest on Senior Notes

(4,307) (5,595) (12,878) (14,138)

Interest on Short-Term Debt

(74)

(380)

(366)

Interest on Long-Term Debt

(633)

(304)

(1,899)

(427)

(70)

(246)

(522)

(3,226)

(416)

(474)

(1,250)

(1,234)

1,473

Interest on Payables to Power Vendors Amortization of Deferred Charges Capitalized Interest

572

Other Financial Expenses

(39)

(12)

(66)

(692)

(96)

(4,968) (7,011) (15,509) (19,814) Financial Income: Interest on Trade Accounts Receivable

1,259

1,910

4,465

Interest on Short-Term Investments

253

393

Interest on Long-Term Investments

255

614

1,147

2,758

1,247

1,773

2,546

7,251

11,427

Other Financial Income

Total Financial Expenses, Net

(3,195) (4,466)

(8,258)

8,605

(8,387)

Quarterly Financial Report September 30th, 2010

Collections Cash Collection rate for 3Q’10 was 61% as compared to the 43% level of last year’s same quarter. The positive variance is The result of the higher cash collections from Edenorte (3Q’10 70% vs 3Q’09 25%) and Edesur (3Q’10 71% vs 3Q’09 31%); partially offset by the non collections from EDE Este during 2010 as a consequence of the effect of the suspension of the PPA and the fact that the company continues receiving the payments of the pledged customers and credit card collection during 2009. The rescheduled debt with EDE Este was fully collected in Dec’09 and the PPA was re-enforced during the second half of July’10.

Cash Collections Vs Billings 152%

100%

96%

89% 67% 64%

60%

52% 43% 3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

Operational Statistics Description

3Q'10

3Q'09

Var.%

YTD'10

YTD'09

Var.%

Heat Rate, Btu/KWh

9,725

9,520

2.2%

9,557

9,264

3.2%

Availability, %

92.1

86.4

6.6%

81.8

90.0

-9.1%

Forced Outage Rate, %

3.6

12.8

-71.9%

3.9

6.7

-41.8%

Installed Capacity, M W

599

0.0%

599

0.0%

Effective Capacity, M W

547

0.0%

547

0.0%

Firm Capacity, M W

247

259

-4.7%

261

345

-24.4%

Energy Balance

580 430

GWh

280 130 (20) (170)

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

(238)

(139)

(111)

(148)

(130)

(101)

(53)

(131)

(151)

GWh - Sales

588

496

457

478

514

507

483

505

609

GWh - Generation

350

357

346

330

384

406

430

375

458

GWh - Spot Purchase

Quarterly Financial Report September 30th, 2010

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009 Amounts in thousands of US$ Sep-10

Dec-09

Assets: Current Assets: Cash and cash equivalents Short term investment Short term investment, restricted Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current assets

68,829 13,319 20,385 138,544 26,921 19,586 897 288,481

39,548 12,328 163,498 30,451 19,432 3,033 268,289

Deposits in banks, restricted Long term invesment, restricted Property, plant and equipment Intangible assets, net Other assets Total Assets

7,831 252,548 7,911 10,183 566,955

7,831 10,480 251,703 9,130 6,874 554,308

23,000 20,653 1,118 17,839 62,611

6,000 32,069 1,009 359 10,563 50,001

176,867 16,242 19 255,740

196,367 16,123 13 262,504

289,000 11,365 41,572

289,000 11,365 22,384

(31,032) 311 311,215

(31,032) 87 291,804

Liabilities and shareholders' equity: Current liabilities: Short-term debt Accounts payable Accounts payable to related parties Derivative financial liabilities Other Liabilities Total current liabilities Long-term debt Deferred income tax Other non-current liabilities Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss: Currency translation adjustment Investments revaluation reserve Total shareholders' equity Total liabilities and shareholders' equity

566,955

554,308 7

Quarterly Financial Report September 30th, 2010

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE NINE AND THREE MOTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009 Amounts in thousands of US$ Three month period ended September 30, 2010 Revenues Energy Capacity Others

Operating costs Fuel Transmission Purchased power Compensation for frequency regulation Operating and maintenance Administrative and general expenses Depreciation and amortization Operating income Financial expenses, net Foreign exchange (loss) gain Other (expenses) income, net Income before income tax Income tax Net income

2009

Nine month period ended September 30, 2010

2009

105,382 12,544 1,010

77,207 10,924 290

272,523 34,255 1,186

178,803 31,982 1,614

118,935

88,421

307,963

212,399

49,603 3,257 26,310 1,992 8,053 8,715 3,999 101,931

33,770 2,695 21,389 1,174 7,689 7,229 3,856 77,803

129,720 7,746 57,946 4,163 25,315 24,726 12,022 261,638

83,159 8,070 47,492 1,405 22,436 19,338 11,583 193,483

17,004 (3,195) 1,849 (627) 15,031

10,618 (4,466) (244) 1,965 7,873

46,325 (8,258) (139) (1,180) 36,749

18,916 (8,387) 126 2,044 12,699

(3,221)

246

(7,561)

(3,110)

11,810

8,119

29,188

9,589

Quarterly Financial Report September 30th, 2010

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTS FOR THE NINE AND THREE MOTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009 Amounts in thousands of US$ Three month period ended September 30, 2010 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash provided by (used in) operating activities: Gain on sale of fixed asset Loss on asset dispossal Gain on early liability extinguishment Net foreign exchange loss Deferred income tax Depreciation and amortization Investments revaluation reserve Financial expenses Forward contracts Put option Others Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Payable to related parties Other liabilities Other non-current liabilities Net cash provided by (used in) operating activities

2009

Nine month period ended September 30, 2010

2009

11,810

8,119

29,188

9,589

(2,073) 1,168 3,999 (5,066) 622 -

(662) 151 (1,314) (246) 3,856 550 5,529 97

(769) 2,664 12,022 3,176 507 622 -

(666) 151 (1,314) 3,110 11,583 (5,723) 8,564 97

(49,020) 7,089 (763) (1) 5,392 175 5,962 -

(37,750) 2,598 (1,076) (262) 11,607 169 (1,511) (8)

2,929 1,190 2,244 (27) 4,489 110 384 6

(60,717) (8,916) (10,823) (644) 40,703 (1,240) (2,094) -

(20,706)

(10,154)

Cash flows from investing activities: Net changes in restricted cash Sale of property, plant and equipment Advance payments of property, plant and equipment Additions to property, plant and equipment Long-term investments Short-term investments restricted Short-term investments Payments received on long-term investments Changes in long term receivables Net cash (used in) provided by investing activities

58,733

(18,341)

(55) (1,564) (19,043) (2,162) 3,294 (19,531)

212 2,878 (504) 4,400 (220) 6,766

(3,482) (6,277) (19,043) 9,159 3,294 (16,350)

3,226 2,882 (1,195) 4,400 (728) 8,585

Cash flows from financing activities: Proceeds from long-term debt Proceeds from short-term debt Repayment of long-term debt Repayment of short-term debt Dividends Debt issuance costs paid Net cash (used in) provided by financing activities

(2,500) (2,500)

6,000 15 (3,154) (69) (34) 2,758

5,000 (7,500) (10,000) (30) (12,530)

25,500 17,015 (3,154) (11,223) (20,003) (338) 7,797

Net increase (decrease) in cash and cash equivalents

(42,736)

(630)

29,853

(1,958)

Cash and cash equivalents at the beginning of period

110,833

39,548

22,340

Effects of exchange rate change on the balance of cash Cash and cash equivalents at the end of period Supplemental cash flow information of non-cash activities Decrease in accounts receivable through offsets with accounts payable Reclassification of accounts receivable from non-current to current Unpaid additions of property, plant and equipment Dividends paid in nature with financial assets by US$20.00 million with, a fair market value of US$19.4 million

732

21,011 -

(572)

68,829

20,381

68,829

20,381

946 2,814

6,671 8,307 1,543

19,620 2,868

64,287 12,497 3,857

19,364

Quarterly Financial Report September 30th, 2010

The consolidated financial statements presented herein have not been audited and were prepared in conformity with Generally Accepted Accounting Principles in the United States (USGAAP). EGE Haina is the largest generator of electricity in the Dominican Republic, based on installed capacity, currently operating 11 electric power generation units at six plants, consisting of San Pedro, Sultana del Este – barge, Haina and Barahona in the southern part of the country, Puerto Plata in the northern and Pedernales in the western part of Santo Domingo. EGE Haina has contracted approximately 96% of its power generation to the three Dominican Republic distributors. For more information, visit the Company's Web site at www.egehaina.com. Caution Concerning Forward-Looking Statements: This report may contain “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will”. Forward-looking statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of the Company may differ materially from those expressed or implied by such forward-looking statements and assumptions. For us, particular uncertainties that could adversely or positively affect our future results include, but are not limited to: changes in general economic, political, governmental and business conditions; the behavior of financial markets; changes in commercial market regulations. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. EGE Haina assumes no obligation and does not undertake to update forward-looking statements.

Investor Contact: Please address any questions or comments related to this report to our investor’s e-mail: hainainvestors@egehaina.com.