S&p corporate credit rating 2010 12

December 8, 2010

Empresa Generadora de Electricidad Haina, S. A. Primary Credit Analyst: Carolina Duran, Mexico City 52-55-5081-4417; carolina_duran@standardandpoors.com Secondary Contact: Marcela Duenas, Mexico City (52) 55-5081-4437; marcela_duenas@standardandpoors.com

Table Of Contents Major Rating Factors Rationale Outlook Related Criteria And Research

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Empresa Generadora de Electricidad Haina, S. A. Major Rating Factors Strengths: • Position as the largest electricity generator in the Dominican Republic; • U.S. dollar-denominated, long-term agreements with distributors, mitigating foreign-exchange risk; • Operating efficiency of its plants; and • Smooth debt maturity schedule.

Corporate Credit Rating B-/Stable/--

Weaknesses: • Association with an inefficient and highly subsidized distribution sector, with uncertain long-term operational and financial sustainability; • Operation under the weak regulatory framework in the Dominican Republic; and • Dependence as part of the electric sector on a developing, externally affected Dominican economy.

Rationale Standard & Poor's Ratings Services' ratings on Empresa Generadora de Electricidad Haina S.A. (EGE Haina) and its special-purpose financing entity, Haina Finance S.A., reflect the challenges of operating in the Dominican Republic's electric industry, which is characterized by its relatively weak regulatory framework and an inefficient and highly subsidized distribution sector whose long-term operational and financial sustainability is highly uncertain. The ratings take into account EGE Haina's high off-taker risk, as evidenced by the Dominican distribution companies' failure to fully meet their payment obligations to the generators during the country's latest economic crisis. EGE Haina partially mitigates this risk by diversifying its customer base--entering into power purchase agreements (PPAs) with privately owned companies.

The ratings also incorporate our opinion that there is a low likelihood of timely and sufficient extraordinary support from the government of the Dominican Republic (B/Positive/B) to EGE Haina in a financial distress scenario. In accordance with our criteria for rating government-related entities (GREs), our view of a low likelihood of extraordinary government support is based on our assessment of EGE Haina's limited importance for the Dominican government's key economic and political objectives, and its limited link to the government given the government's low involvement in the company's strategy and day-to-day operations. The Haina Investment Co. (HIC; not rated) owns 50% of the company, and the Dominican government owns 50%.

The ratings reflect the company's improved financial performance, the strengthening in its key financial metrics in 2010, and our expectations that such improvement will continue in 2011 as a result of higher sale prices, an increase in energy sold, and the government's efforts to ensure that the distribution companies pay their bills to power generators. The increase in energy prices in the Dominican Republic has driven the improvement in EGE Haina's key financial metrics. The Dominican government's continued support of the sector partially mitigates off-taker risk associated with electric distribution companies.

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However, the challenges for the nation's distribution companies to fully meet their obligations with power generators continue to represent one of the major risks for EGE Haina. In particular, in 2009 the unpaid bills from Ede-Este to EGE Haina resulted in a temporary energy supply suspension under the PPA. However, in 2010, Ede-Este paid its bills in full and the supply to Ede-Este of 50 megawatts (MW) was reestablished. The remaining contracted capacity of 50 MW will be reestablished on June 30, 2012.

The continuous efforts of the government to uphold the electric sector in Dominican Republic through large subsidies to distribution companies remain a key rating factor. In our view, the government's commitment to the sector will continue in the medium term, as the recent $77 million compensation package to EGE Haina to cover part of the unpaid bills and the long history of support to power generators show.

The company's top-line growth supports the improvement of EGE Haina's profitability and cash flow metrics in 2010. Profitability for the 12 months ending September 2010 rose to 18% from 11% the same period the previous year, resulting mainly from higher prices and contract sales. Haina also benefited from greater generation, as it had to rely less on energy purchases. Because Haina has long-contracted capacity, the more it can meet its contracted energy obligations through the generation of its own electricity, the higher the margins it may achieve, as it generally produces electricity at lower prices than those on the spot market. Also, higher fuel costs led to an increase in margins as the increase in energy prices more than offset the rise in fuel expenses.

For the 12 months ended September 2010, EGE Haina posted a total debt–to-EBITDA ratio of 2.8x and a funds from operations (FFO)-to-total debt ratio of 12.1%. For 2011, we expect EGE Haina's total debt to EBITDA to remain at 2.5x, and FFO to total debt to improve to more than 25% as a result of stronger cash flow generation.

Haina is the largest generator of electricity in the Dominican Republic based on installed capacity and effective capacity. It currently operates six plants. As of Dec. 31, 2009, Haina had an aggregate installed capacity of 565 MW (13 MW less than in 2007 because it withdrew two turbines from commercial operations) and a firm capacity of 296.51 MW. Haina's production consists of a coal-fired steam turbine generation mix, six fuel-oil-fired stream generation units, three diesel generation units, and three gas turbine generation units Recently it undertook the first wind project in the country, for 25MW, to go online in June 2011. EGE Haina's plants are located throughout the Dominican Republic, mainly on the southern coast of the island.

Liquidity EGE Haina's liquidity position is adequate. As of Sept. 30, 2010, the company held about $70 million in cash, which compares favorably with debt maturities of $25 million over the next 15 months. As a liquidity enhancement, the company has committed lines of credit with domestic banks for $30 million. Also, EGE Haina's adequate access to markets supports its liquidity, as a recent local bond issue of $30 million for working capital needs demonstrates.

EGE Haina is in compliance with all its covenants and maintains a six-month interest reserve fund to support debt service payments.

Outlook The stable outlook reflects our expectation that EGE Haina will maintain a financial risk profile commensurate with its rating expectations, which its strong competitive position and favorable short-term economic growth prospects support. We expect FFO to total debt to exceed 30% and total debt to EBITDA to return to close to 2.5x. An improvement in EGE Haina's profitability and cash flow metrics, along with a capital investment plan that doesn't

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impact its capital structure, could support a rating upgrade. We could lower the ratings, however, if the company assumes a more aggressive financial policy toward the use of debt or its cash flow metrics deteriorate significantly.

The Dominican government's failure to support the sector's development could also negatively affect the ratings.

Related Criteria And Research • Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009 • 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Table 1

Empresa Generadora de Electricidad Haina S.A.--Peer Comparison* --Fiscal year ended Dec. 31, 2009--

Rating as of Dec. 8, 2010

Empresa Generadora Empresa Generadora de Electricidad Haina AES Dominicana de Electricidad Itabo AES Panama AES CHIVOR & CIA S.A. Energia Finance S.A. S.A. S.A. S.C.A. E.S.P. B-/Stable/-B-/Positive/--¶ B-/Negative/-BBB-/Stable/-BB+/Stable/--

(Mil. $) Revenues

307.2

234.5

214.4

168.7

360.2

Net income from cont. oper.

14.4

4.7

32.0

50.9

86.3

Funds from oper. (FFO)

38.8

43.3

53.5

77.5

90.5

Capital expenditures

5.9

23.5

9.3

4.8

17.3

Cash and short-term investments

51.9

60.7

78.9

38.9

74.5

Debt

202.4

161.0

125.0

303.2

192.4

Equity

291.8

46.3

305.4

146.4

503.4

Debt and equity

494.2

207.3

430.4

449.7

695.8

1.8

1.4

2.9

4.7

6.9

1.5

2.2

3.1

4.0

5.3

19.2

26.9

42.8

25.5

47.1

Discretionary cash flow/debt (%)

(21.3)

(2.9)

29.0

3.4

15.8

Net cash flow/capital expenditures (%)

320.4

184.3

427.7

298.8

290.5

Total debt/debt plus equity (%)

41.0

77.7

29.0

67.4

27.6

Return on common equity (%)

4.7

10.6

10.4

33.4

17.5

Common dividend payout ratio (unadjusted) (%)

0.0

0.0

0.0

0.0

46.8

Adjusted ratios EBIT interest coverage (x) FFO interest coverage (x) FFO/debt (%)

*Fully adjusted. ¶Rating on AES Andres Dominicana.

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Empresa Generadora de Electricidad Haina, S. A.

Table 2

Empresa Generadora de Electricidad Haina S.A.--Financial Summary* Industry Sector: Electric --Fiscal year ended Dec. 31-2009 Rating history

B-/Stable/--

(Mil. $) Revenues

2008 B/Stable/--

2007 B/Stable/--

2006 NR

2005 NR

307.2

460.6

344.5

309.6

250.7

Net income from cont. oper.

14.4

38.9

36.9

22.3

12.1

Funds from oper. (FFO)

38.8

67.5

60.6

47.9

15.0

Capital expenditures

5.9

17.1

1.0

1.0

(0.1)

51.9

22.3

67.1

7.4

4.9

Debt

202.4

176.7

190.7

107.0

113.1

Equity

291.8

318.5

299.1

263.3

241.0

Debt and equity

494.2

495.2

489.7

370.3

354.1

1.8

3.0

2.8

2.8

1.0

Cash and short-term investments

Adjusted ratios EBIT interest coverage (x) FFO interest coverage (x)

1.5

2.8

3.3

3.0

0.7

19.2

38.2

31.8

44.7

13.3

Discretionary cash flow/debt (%)

(21.3)

(17.5)

(0.1)

9.1

12.7

Net cash flow/capital expenditures (%)

320.4

277.7

6,052.0

4,800.7

(10,040.6)

41.0

35.7

38.9

28.9

31.9

4.7

12.6

13.1

8.9

5.1

FFO/debt (%)

Debt/debt and equity (%) Return on common equity (%) *Fully adjusted. NR--Not rated.

Ratings Detail (As Of December 8, 2010)* Empresa Generadora de Electricidad Haina, S. A. Corporate Credit Rating

B-/Stable/--

Senior Unsecured (1 Issue)

B-

Corporate Credit Ratings History 21-May-2009

B-/Stable/--

11-Apr-2007

B/Stable/--

*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.

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