Financial Analysis

The industry is awaiting release of the feed-in tariffs that will determine the wholesale price paid for renewable energy. It is expected that this will vary by source of renewable energy, in order to take into account the particular capital requirements and balance the Internal Rate of Return (IRR) to make it attractive enough for the private sector to participate, while minimizing the impact or ‘sticker shock’ for the end consumer.

Recent projects that have been approved have established tariff rates in the range of P4.50 per kW hour. Moving forward, it is expected that these rates will move up closer to p6.00 per kW hour.

Based on these assumptions, Internal Rates of Return (IRR) can be expected to range from 10% - 25% depending on construction and operating costs for the Company’s projects.

There are two Company projects currently in front of the Department of Energy within the Mountain Province, for which the Company is conducting full scale feasibility studies, with a total combined capacity of 11 MW.

Using a conservative plant factor of approximately 70% for the Caneo and Ambugao projects, these hydro stations would generate just under 70,000 MWh of electricity per year combined. At P 4.50, this implies gross revenue of just over €5 million annually.

Based on a construction cost of approximately P120 per MW, the total construction costs should be in the range of €20 – €25 million total. Rough operating costs are anticipated in the range of €1 million per power station.

It should be noted that these are very approximate numbers. A more detailed financial analysis will be conducted as part of the feasibility studies to be completed by the 4th quarter of 2010, and when finalized feed-in tariffs have been determined.