Caribbean Utilities Company, Ltd.  2011  Annual Report Management’s Discussion and Analysis 10 months of 2012. A licence fee of 1%, payable to  the Government, is charged on  gross revenues, then prorated and  applied only to customer billings  with consumption over 1,000 kWh  per month as a pass-through charge.  In addition to the licence fee, a  regulatory fee of ½ of 1% is charged  on gross revenues, then prorated and  applied only to customer billings with  consumption over 1,000 kWh per  month.  In the event of a natural disaster  as defined in the T&D Licence, the  actual increase in base rates will be  capped for the year at 60% of the  change in the Price Level Index and  the difference between the calculated  rate increase and the actual increase  expressed as a percentage, shall be  carried over and applied in addition  to the normal RCAM adjustment in  either of the two following years if  the Company’s RORB is below the  target range. In the event of a disaster  the Company would also write-off  destroyed assets over the remaining  life of the asset that existed at time of  destruction. Z Factor rate changes will  be required for insurance deductibles  and other extraordinary expenses. Net earnings for Fiscal 2011 were  $20.4 million, representing a 3%  or $0.5 million increase from net  earnings of $19.9 million for the  twelve months ended December  31, 2010 (“Fiscal 2010”). Operating  Income decreased for Fiscal 2011  when compared to the same period  of 2010 as a result of increased G&A  and Depreciation costs. This change  in Operating Income was offset by a  decrease in Finance Charges and an  increase in Other Income resulting in  an overall increase to earnings year  over year. The ERA also annually reviews  and approves CUC’s capital  investment plan (“CIP”). In 2010,  the Company submitted the 2011  - 2015 CIP totalling approximately  $219 million. In March 2011, the  ERA approved the $134 million of  proposed non-generation installation  expenditures in the 2011 - 2015 CIP.  CUC submitted its 2012 - 2016 CIP,  totalling approximately $192 million,  during the fourth quarter of 2011  for ERA approval. $131.0 million of  the submission is proposed non- generation installation expenditures.  Generation needs are subject to a  competitive bid process. The 2012  - 2016 CIP has been prepared in-line  with the Certificate of Need that was  filed with the ERA in November 2011  for 18 megawatts (“MW”) of new  generating capacity to be installed in  2014 and for an additional 18 MW of  generating capacity to be installed  in either 2015 or 2016, contingent  on growth over the next two years.  ERA approval of the 2012 - 2016 CIP  is expected during the first three  environmental and performance  standards, reviews the RCAM and  sets the rate adjustment factors as  appropriate. ($ millions) 2010 2011 2009 TP 2008 2008 19.9 TP - Transitional Period 23.8 20.4 20.0 12.6 (Sales in thousands kWh) 2010 2011 2009 TP 2008 2008 Residential Commercial 262,545 284,966 TP - Transitional Period 238,346 266,957 175,386 197,344 265,212 286,865 258,765 289,043 Residential and Commercial Sales Earnings Earnings