EGE Haina 4Q 2013

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013

EGE Haina Reports Fourth Quarter 2013 Net Income of US$25.4 million; Revenues of US$193.4 million Special points of interest:

Santo Domingo, Dominican Republic, May 01, 2014 – EGE Haina announced today a Net Income of US$25.4 million for the fourth quarter of 2013,

 As of March 31, 2014, the

compared to a Net Income of US$16.5 million in the fourth quarter of 2012,

Company repaid the Bridge Loan in the amount of US$100 million.

driven by a higher energy demand, higher spot sales and an increase in the average energy sales price for the period. Fourth quarter 2013 revenues

 In March, 2014, the

Company signed a short term promissory note with Popular Bank for the amount of US$14 million.

The maturity date is July 7, 2014.

amounted to US$193.4 million, showing a 6% increase when compared to the same period of the previous year.

Financial and Operational Summary

 In February 2014, the

(US$ Thousands, except for Operational data)

Company paid dividends in the amount of US$7 million.

Description

 In February 2014, the

Company obtained the definitive concession for the Quisqueya 2 power plant and the expansion of the Los Cocos wind farm.

 On December 4, the

Company received the approval of the SIV for a Corporate Bonds issuance up to US$100MM with an average term of five years.

4Q'13

4Q'12

Var %

YTD'13

YTD'12

Var %

Revenues

193,350

182,536

6%

726,339

677,186

7%

Operating Costs

157,432

158,623

-1%

593,486

565,634

5%

Variable M argin

72,826

52,121

40%

256,206

220,401

16%

EBITDA¹

44,294

29,125

52%

159,268

132,430

20%

Operating Income

35,918

23,912

50%

132,853

111,552

19%

Net Income

25,427

16,508

54%

93,167

75,437

24%

(54,876)

(12,719)

331%

11,182

86,909

-87%

Availability, %

98

97

1%

92

98

-6%

Sales, GWh

859

706

22%

2,980

2,607

14%

Generation, GWh

767

481

59%

2,205

1,749

26%

Spot Purchases, GWh

6

99

-94%

74

434

-83%

PPA Purchases, GWh

85

125

-32%

702

424

65%

Operating cash, net

 As of December 31, 2013,

EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.44:1.0 and Minimum Debt Service Coverage ratio of 5.14:1.0.

What’s inside  Quarter highlights

2

 External factors

2

 MD&A

3

 Financial Debt

5

 Collections

6

 Financial Results

7

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

1

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Quarter Highlights and Recent Developments 

As of March 31, 2014, the Company repaid the Bridge Loan in the amount of US$100 million.



In March, 2014, the Company signed a short term promissory note with Popular Bank for the total amount of US$14 million. The maturity date is July 7, 2014.



In February 2014, the Company paid dividends in the amount of US$7 million.



In February 2014, the Company obtained the definitive concession for the Quisqueya 2 power plant and the expansion of the Los Cocos wind farm.



As of December 31, 2013, EGE Haina reported a Consolidated Net Debt to Consolidated EBITDA Ratio of 2.44:1.0 and Minimum Debt Service Coverage ratio of 5.14:1.0.



On December 3, 2013, the Company received approval from the SIV for the issuance of Corporate Bonds in the DR debt capital market up to the amount of US$100 million with an average term of five years. As of April 30, 2014, eight tranches of $10 million each were placed, with annual interests rates of 6.25% and 6.00%. The cash proceeds were used to partially refinance the Bridge Loan.



During the 4Q’13, the Company signed short term promissory notes with different DR financial institutions for the total amount of US$95.5 million.



In October, 2013, the Quisqueya II power plant was inaugurated with an investment of approximately US$264 million. The power plant consists of 12 combined cycle reciprocation engines with an installed capacity of 215MW. The power plant can be operated using LNG, fuel or diesel.



In October, 2013, the Company signed a power purchase agreement with CEPM. Under this contract the Company will purchase all the energy produced by CEPM’s wind farm, Quilvio Cabrera. The contract has a twenty-year term and is subject to one-year renewals thereafter upon the consent of both parties.

External Factors Average price of fuel for 4Q’13 was US$91.2 Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs).

Exchange rate as of December 31, 2013, closed at RD$42.77/USD. Accumulated inflation in DR, as of December 31, 2013 was 3.88%.2

2

http://www.bancentral.gov.do

2

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Consolidated Financial Results3 Revenues (US$ Thousands) Description Contracted Energy Contracted Capacity Others Total Revenues

4Q'13

4Q'12

Var %

YTD'13

YTD'12

Var %

176,082

169,046

4%

658,938

621,379

6%

16,417

12,919

27%

64,818

53,534

21%

851

571

49%

2,583

2,273

14%

193,350

182,536

6%

726,339

677,186

7%

4Q’13 revenues increased 6% when compared with the same period of the previous year (US$193.4MM vs. US$182.5MM). This positive variance is essentially driven by: i) US$14.3MM or 120GWh spot energy sales during the 4Q’13 and ii) a higher demand under the PPAs with the Discos in 6% (4Q’13 622.1GWh vs 4Q’12 586.2GWh); partially offset by: a) lower sales under CEPM’s PPA mainly driven by the major maintenance of Sultana’s engine #4 performed in December’13 and b) a 4% decrease in the average energy sales price for the period (4Q’13 US$230.5/MWh vs 4Q’12 US$240.6/MWh).

Operating Expenses (US$ Thousands) Description

4Q'13

4Q'12

Var %

YTD'13

YTD'12

Var %

Fuel Expense

91,114

67,023

36%

265,998

238,185

12%

Transmission Tolls

4,010

1,777

126%

17,226

9,437

83%

Purchased Power

21,335

59,459

-64%

176,824

200,600

-12%

Frequency Regulation

4,065

2,156

89%

10,085

8,563

18%

Operation & M aintenance

9,476

6,896

37%

33,135

31,717

4%

Administrative & General

19,057

16,100

18%

63,803

56,254

13%

Depreciation

8,375

5,213

61%

26,415

20,878

27%

157,432

158,623

-1%

593,486

565,634

5%

Total Operating Expenses

During 4Q’13 operating expenses were lower than 4Q’12 comparative figures in 1% or US$1.2 million. This decrease is mainly explained by the net effect of:



Purchased power: 64% or US$38.1MM lower than 4Q’12, driven by: a decrease in energy purchases (both spot and PPA’s) by 133.3 GWh or 59%, (4Q’13 91.6 GWh vs 4Q’12 224.9 GWh) driven by an increase in generation; partially offset by an increment in capacity purchases as a consequence of a lower assigned firm capacity by 88 MW, as a result of new plants that were incorporated into the SENI (San Lorenzo, Jigüey 1&2, Aguacate 1&2 and Estrella del Mar).

Partially offset by:



Fuel expense: 36% or US$24.1 million higher than 4Q’12, essentially as a consequence of higher HFO and LFO consumption driven by an increase in thermal generation during the period (4Q’13 720 GWh vs 4Q’12 460 GWh).



Depreciation: 61% or US$3.2 million higher than 4Q’12, due to the expansion of the Los Cocos Wind Farm and Quisqueya 2 Power Plant, both inaugurated in 2013.



Administrative and general expenses: 18% or US$2.9MM increase when compared to 4Q’12 mainly due to: higher expenses related to promotional activities, sponsorship activities, the inauguration of the expansion of the Los Cocos wind farm, expenses related to the Transmission Line for the Los Cocos wind farm and higher professional services related to research and development costs (wind measurement study for the Larimar Project).



Operation and maintenance expenses: 37% or US$2.6MM increase when compared to 4Q’12 mainly due to: higher maintenance expenses and spare parts consumption of Sultana Engines, Los Cocos, Quisqueya 2 and Barahona plants.



Transmission tolls: 126% or US$2.2 million higher than 4Q’12, driven by a decrease in the assigned firm capacity, as explained above.



Frecuency Regulation: 89% or US$1.9 million higher than 4Q’12.

3 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These unaudited condensed 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.

3

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013

Net Income Net income was US$25.4 million in 4Q’13, compared to a net income of US$16.5 million in the same period of the prior year. The positive variance of US$8.9 million is explained by:



US$12.0MM increase in operating income, as explained previously.



US$1.4 million lower tax expense, driven by a decrease of the taxable income in Dominican Pesos (RD$).

Partially offset by:



US$2.7MM higher interest expenses, net, mainly driven by a decrease in capitalized interests in the Quisqueya 2 and los Cocos expansion projects.



US$1.1 MM lower exchange gain, mainly due to a greater devaluation of the Dominican Peso (RD$) experienced in 4Q’12 in comparison with 4Q’13, affecting our net liability exposure in such currency.



US$0.7 million higher other expenses, related to a loss on asset disposal in 4Q’13.

Cash Flow Cash used in operating activities Net cash used in operating activities was US$54.9MM during 4Q’13, compared to US$12.7MM used during the same period of 2012. The US$42.2MM variance is explained by: US$108.7MM decrease in accounts payable; partially offset by: a) US$28.9MM lower accounts receivable, b) US$9.0MM lower other assets, c) US$8.9MM higher net income, d) US$6.8MM increase in other liabilities, e) US$6.5MM higher positive adjustments reconciling net income to the net cash used in operating activities, f) lower inventories in US$5.8MM and g) US$0.6MM decrease in prepaid expenses.

Cash used in investing activities Net cash used in investing activities was US$14.3MM during 4Q’13, compared to US$150.8MM used in the same period of the prior year. The US$136.3MM variance is mainly due to lower additions to property, plant and equipment by $83.6MM during 4Q’13 and a decrease in restricted cash by US$52.7MM during 4Q’13 as a result of the payments made to Wärtsilä under the construction agreement for Quisqueya 2.

Cash provided by financing activities The negative variance of US$23.8MM in financing activities during 4Q’13 when compared to the same period of the prior year, is due to: i) lower proceeds from long term debt by US$44MM and ii) 3.9MM higher repayments of long-term debt by US$3.9MM; partially offset by a) higher proceeds from short term debt by US$22.5MM and b) lower dividend payments by US$2MM.

4

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 Financial Debt as of December 31, 2013 FINANCIAL DEBT GENERAL CONDITIONS AND RELEVANT STATISTICS Instrument

Balance

Interest type

Interest Rate

Repayment schedule

Avg Life

Long Term Facilities

Citi Project Facilities Local Bond (2) - T1/2 Local Bond (2) - T3/4 Local Bond (2) - T5/6 Local Bond (2) - T7/8 Local Bond (2) - T9/10 BHD DR term loan program BPD DR term loan program BHD Panamรก term loan program

190.0 Variable (L3M + 5.75%, 6.25% floor) 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 10.0 Fixed 6.5 Variable (DR US$) 5.8 Variable (DR US$) 1.0 Variable (DR US$)

7.12% 7.00% 7.00% 7.00% 6.00% 7.00% 5.75% 5.75% 5.50%

Quarterly - ending March 2017

100.0 75.0 15.0 15.0 14.5 3.0 475.7

6.17% 3.17% 3.75% 5.95% 3.48% 3.25% 5.95%

Bullet payment Mar 2014

Bullet payment May 2016 Bullet payment June 2016 Bullet payment June 2016 Bullet payment Oct 2014 Bullet payment Oct 2016 Monthly - ending March & May 2016 Monthly - ending May 2016 Monthly - ending May 2016

2.22 2.42 2.50 2.50 0.83 2.84 1.22 1.25 1.23

Short Term Facilities

Citi Bridge Loan Scotiabank Short Term Loan BPD DR Short Term Loan Banreservas Short Term Loan Citi Short Term Loan Santa Cruz Short Term Loan Totals and Averages

Variable (L1M + 6%) Variable (LIBOR 1M + 3%) Fixed Variable (DR US$) Variable (LIBOR 1M + 3.2%) Variable (DR US$)

Bullet payment Feb, Apr & Jun 2014 Bullet payment Aug 2014 Bullet payment Feb 2014 Bullet payment March 2014 Bullet payment March 2014

0.25 0.39 0.67 0.16 0.25 1.00 1.31

Financial Expenses (US$ Thousands) Description

4Q'13

4Q'12

2013

2012

Financial Expenses Interest on Senior Notes

(4,332)

(18,706)

Interest on Short-Term Debt

(1,932)

-

(2,103)

-

Interest on Long-Term Debt

(5,289)

(4,478)

(20,087)

(13,906)

Interest on Payables to Power Vendors

(2,915)

(1,558)

(8,545)

(6,275)

Amortization of Deferred Charges

(1,251)

(146)

(4,818)

(1,939)

Capitalized Interest Other Financial Expenses

154

871

4,838

15,751

(17,253)

9,922

(189)

(422)

(1,036)

(880)

(10,551)

(6,098)

(39,544)

(30,331)

4,547

2,921

15,559

12,683

239

75

1,113

3,353

10

11

68

64

Financial Income: Interest on Trade Accounts Receivable Interest on Short-Term Investments Other Financial Income

Total Financial Expenses, Net

4,796

3,007

16,740

16,100

(5,755)

(3,091)

(22,804)

(14,231)

5

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013

Collections Collection rate for 4Q’13 was 72%, which was higher of that of last year’s same quarter which stood at 65%. As shown in the graphic below, the Distribution Companies, with the help of the DR Government’s subsidy, are making the effort to maintain less than three invoices in arrears.

Discos Cash Collections Vs Billings 154%

153% 123%

90%

82% 80%

74%

2Q11

3Q11

4Q11

72%

65%

54%

56%

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

Operational Statistics Operational Statistics Description

4Q'13

4Q'12

Var.%

YTD'13

YTD'12

Var.%

Heat Rate, Btu/KWh

8,602

9,540

-9.8%

9,240

9,486

-2.6%

Availability, %

97.6

97.1

0.5%

91.7

97.9

-6.3%

Forced Outage Rate, %

0.3

1.2

-75.0%

2.7

0.9

200.0%

Installed Capacity, M W

896

624

43.5%

896

624

43.5%

Firm Capacity, M W

202

221

-8.8%

211

258

-18.3%

Energy Balance 650 500

GWh

350 200 50 (100) (250)

1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13

GWh - Spot Sale (Purchase) (178) (179) (153) (213)

(84)

GWh - Sales

635

573

631

GWh - PPA Purchase GWh - Generation

566

613

647

(134) (117)

-

-

(8)

(2)

(71)

(97)

387

434

486

420

418

401

696

(99)

68

(10)

(125)

(6)

706

658

701

762

859

(131) (125) (229) (223) (165) 448

481

498

468

472

(85) 767

6

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ 2013

2012

Assets Current Assets: Cash and cash equivalents Restricted cash Accounts and notes receivable Inventories Income tax credit Prepaid expenses Deferred tax asset Total current assets

86,559 3,739 358,333 47,135 3,685 3,787 607 503,845

141,661 38,161 279,085 38,793 2,802 461 500,963

7,747 639,149 108 6,220 18 474 1,157,561

11,811 13,382 604,184 91 9,910 381 504 1,138,784

192,500 55,510 135,252 2,489 6,304 1,437 50 6,637 400,179

30,000 15,849 213,217 4,321 10,679 9,398 930 52 8,834 290,839

Long-term debt Derivative financial instrument Deferred income tax Other non-current liabilities Total liabilities

227,736 80 15,063 3 643,061

398,899 1,717 12,596 3 704,055

Shareholders' equity: Common stock Legal reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity

289,000 25,167 232,544 (32,211) 514,500

289,000 20,509 158,036 (32,815) 434,729

Restricted cash, long term Long term notes receivable Property plant and equipment, net Intangible assets Deferred charges, net Deferred tax asset Other assets Total assets Liabilities and Shareholders' Equity Current liabilities Short-term debt Current portion of long-term debt Accounts payable Payable to related parties Diviends payable Income tax payable Derivative financial instrument Deferred tax liability Other current liabilities Total current liabilities

Total liabilities and shareholders' equity

1,157,561

1,138,784

7

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ Three month period ended December 31, 2013

2012

Year ended December 31, 2013

2012

Revenues Energy

176,082

169,046

658,938

621,379

16,417

12,919

64,818

53,534

851

571

2,583

2,273

193,350

182,536

726,339

677,186

Fuel

91,114

67,023

265,998

238,185

Purchased energy and capacity Transmission

21,335 4,010

59,459 1,777

176,824 17,226

200,600 9,437

4,065

2,156

10,085

8,563

9,476 19,057 8,375 157,432

6,896 16,100 5,213 158,623

33,135 63,803 26,415 593,486

31,717 56,254 20,878 565,634

35,918 (5,755) 50 (506) 29,707

23,912 (3,091) 1,164 161 22,147

132,853 (22,804) 3,930 (715) 113,264

111,552 (14,231) 2,324 (78) 99,567

(1,868) (2,413)

(5,354) (286)

(16,862) (3,235)

(24,595) 465

25,427

16,508

93,167

75,437

63

(1,783)

604

(1,783)

Capacity Others

Operating costs

Compensation for frequency regulation Operating and maintenance expenses Administrative and general expenses Depreciation Operating income Financial expenses, net Foreign exchange gain, net Other (expenses) income, net Income before income tax Income tax Current Deferred Net income Other comprehensive income (loss), net of tax: Cash flow hedge Compehensive income

25,491

14,725

93,771

73,654

8

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTH PERIODS AND YEAR ENDED DECEMBER 31, 2013 AND 2012 Amounts in thousands of US$ Three month period ended December 31, 2013 Cash flows from operating activities: Net income Adjustments to reconcile net income to the net cash (used in) provided by operating activities: Gain from the sale of property, plant and equipment Loss on asset dispossal Deferred income tax Depreciation Cash flow hedge infeffectivenness Financial expenes Provision for doubful accounts Non-cash expenses Change in assets and liabilities: Accounts receivable Inventories Prepaid expenses Other assets Accounts payable Income tax payable Payable to related parties Other liabilities

2012

Year ended December 31, 2013

2012

25,427

16,508

93,167

75,437

262 2,412 8,375 (125) 661 65 -

(18) 286 5,212 355 (906) 69 186

(23) 618 3,235 26,415 (348) 10,332 231 19

(37) 204 (465) 20,878 355 4,957 176 186

(21,294) (577) (316) 27 (63,380) (3,685) (3,334) 606 -

(50,149) (6,425) (995) (9,014) 36,789 1,359 169 (6,145) -

(80,129) (11,662) (985) 30 (10,182) (13,083) (1,832) (4,621)

(123,058) (4,847) (468) (301) 118,915 (4,965) 3,264 (3,322)

Net cash (used in) provided by operating activities

(54,876)

(12,719)

11,182

86,909

Cash flows from investing activities: Proceeds from the sale of property, plant and equipment Purchases of property, plant and equipment Purchases of intangible asset Net changes in restricted cash Disbursement of notes receivable Collection of notes receivable Collection of restricted investments Net cash used in investing activities

(46,901) 32,293 178 (14,430)

37 (130,498) (20,417) 119 (150,759)

23 (121,075) (17) 46,233 711 (74,125)

37 (242,117) (49,972) (1,700) 356 8,314 (285,083)

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

22,500 (11,348) 30,000 (382) 40,770

(7,437) 74,000 (2,000) 64,563

(30,000) 192,500 (185,557) 49,000 (16,975) (1,127) 7,841

(17,658) 181,000 (2,000) (5,386) 155,955

Net decrease in cash and cash equivalents

(28,536)

(98,915)

(55,102)

(42,218)

Cash and cash equivalents at the beginning of the period

115,095

240,576

141,661

183,879

Cash and cash equivalents at the end of the period

86,559

141,661

86,559

141,661

9

EMPRESA GENERADORA DE ELECTRICIDAD HAINA, S.A. FINANCIAL QUARTERLY REPORT DECEMBER 31, 2013 The condensed consolidated financial statements presented herein have not been audited and were prepared in conformity with Generally Accepted Accounting Principles in the United States (USGAAP).

The consolidated financial statements are audited and were prepared in conformity with Generally Accepted Accounting Principles in the United States (USGAAP). The consolidated financial statements can be obtained from Web site at www.egehaina.com.

EGE Haina, the largest generator of electricity in the country, when measured by installed capacity, currently owns and operates eight (8) power plants throughout the country with an installed capacity of 895.8 MW – Quisqueya 2, San Pedro de Macorís and Sultana del Este in the eastern part of the country, Haina and Barahona in the southern part of the country, Puerto Plata on the northern coast, and Los Cocos and Pedernales in the west. The power plant fleet consists of a number of oil and coal-fired boiler steam-turbine generators, diesel generators, a simple cycle gas turbine, and a 77 MW wind farm. EGE Haina had contracted approximately 84% of its power generation with three State owned distributors, and approximately 16% with a related operating company. 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.

10