25 Caribbean Utilities Company, Ltd.  2011  Annual Report Management’s Discussion and Analysis 2011 Fourth Quarter Results Property, Plant and Equipment  Depreciation Selected Annual Financial  Information accrued benefit liability of $0.1 million  (December 31, 2010: $0.1 million). Depreciation, by its very nature  is an estimate based primarily  on the estimated useful life of  the asset. Estimated useful lives  are based on current facts and  historical information and take into  consideration the anticipated physical  life of the assets. As at December  31, 2011, the net book value of the  Company’s PP&E was $369.4 million  compared to $352.5 million as at  December 31, 2010, increasing as a  result of the Company’s generation  and T&D capital expenditures.  Depreciation expense for Fiscal 2011  was $20.6 million and $20.0 million  for Fiscal 2010. Due to the value  of the Company’s PP&E, changes  in depreciation rates can have a  significant impact on the Company’s  depreciation expense. The table  “Selected Annual Financial  Information”  shows the Annual  Financial Information for the financial  years ended December 31, 2011, 2010  and 2009.  Net earnings for the three months  ended December 31, 2011 (“Fourth  Quarter 2011”) were $5.1 million,  a 9% or $0.4 million increase when  compared to $4.7 million for the three  months ended December 31, 2010  (“Fourth Quarter 2010”). Operating  Income for the Fourth Quarter 2011  decreased when compared to Fourth  Quarter 2010 due to increased G&A  and Depreciation costs partially  offset by increased Electricity Sales. This change in Operating Income  was offset by a decrease in Finance  Charges and an increase in Other  Income resulting in an overall increase  in earnings quarter over quarter. Kilowatt-hour sales for the Fourth  Quarter 2011 increased 4% to 132.6  million in comparison to 127.8 million  for the Fourth Quarter 2010. Sales  were positively impacted by warmer  weather conditions that affected  customer air conditioning usage. The average temperature for the  Fourth Quarter 2011 was 1.5 degrees  Fahrenheit higher than the average  temperature experienced for the  Fourth Quarter 2010.  Total operating expenses for the  Fourth Quarter 2011 increased 25%  to $51.7 million from $41.4 million  for the Fourth Quarter 2010. Total  operating expenses for Fiscal 2011  increased 25% to $193.1 million  from $154.2 million for Fiscal 2010.  The main contributing factor to the  increase in operating expenses was  higher power generation expenses  which were comprised predominantly  of fuel costs. Cash flow provided by operations,  after working capital adjustments,  for the Fourth Quarter 2011, was  $9.8 million an increase of $1.5  million when compared to $8.3  million for the Fourth Quarter 2010. This increase was primarily due  to increased earnings adjusted for  increased depreciation. Cash used  in investing activities totalled $11.0  million for the Fourth Quarter 2011,  an increase of $5.5 million from $5.5  million for the Fourth Quarter 2010.  This increase is due to increased  capital related expenditures. Cash  utilised in financing activities totalled  $1.5 million for the Fourth Quarter  2011, a decrease of $2.9 million  from $4.4 million used in financing  activities for the Fourth Quarter 2010. The Company borrowed $6.0 million  in short-term debt during the Fourth  Quarter 2011. Capital expenditures for the Fourth  Quarter 2011 were $10.8 million, a  $5.3 million, or 96% increase from  $5.5 million in capital expenditures  for the Fourth Quarter 2010. Quarterly Results ($ thousands except basic and diluted earnings per Class A Ordinary Share) Operating  Net Earnings  Income applicable to  Earnings per  Diluted earnings Revenue  Class Ordinary A  Class A Ordinary  per Class A Shares Share  Ordinary Share  December 31, 2011  57,733  5,082  4,489  0.15  0.15 September 30, 2011  62,453  6,253  6,140  0.22  0.22 June 30, 2011  53,945  5,924  5,811  0.20  0.20 March 31, 2011  43,967  3,131  3,044  0.11  0.11 December 31, 2010  47,442  4,666  4,048  0.15  0.15 September 30, 2010  49,095  6,568  6,455  0.23  0.23 June 30, 2010  43,182  6,188  6,075  0.21  0.21 March 31, 2010  40,377  2,456  2,346  0.08  0.08