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## Corporate and Regulatory Overview 

The principal activity of the Company is to generate, transmit and distribute electricity in its licence area of Grand Cayman (the “Island”), Cayman Islands pursuant to a 20-year exclusive Transmission & Distribution (“T&D”) Licence and a 21.5 year non-exclusive Generation Licence (“the Licences”) granted by the Cayman Islands Government (the “Government”), which expire in April 2028 and September 2029 respectively. 

The Licences contain the provision for a rate cap and adjustment mechanism (“RCAM”) based on published consumer price indices. CUC’s return on rate base (“RORB”) for 2011 was 7.6% (2010: 7.9%). CUC’s RORB for 2011 was targeted in the 7.75% to 9.75% range (2010: 

## Financial and Operational Highlights 

7.75% to 9.75%). 

CUC’s base rates are designed to recover all non-fuel and regulatory costs and include per kilowatt-hour (“kWh”) electricity charges and fixed facilities charges. Fuel cost charges and regulatory fees are billed as separate line items. Base rates are subject to an annual review and adjustment each June through the RCAM. Base rates were last adjusted in June 2009. In early May 2011, after the requisite review, the Company confirmed to the Electricity Regulatory Authority (“ERA”) that the RCAM yielded no rate adjustment for June 2011 as the slight inflation in the applicable United States price index, adjusted to exclude food and fuel, was offset by deflation in the Cayman Islands consumer price index, also adjusted to exclude food and fuel, 

for calendar year 2010. All fuel and lubricating oil costs are passed through to customers without mark- up as a per kWh charge. 

Rate Base is the value of capital upon which the Company is permitted an opportunity to earn a return. The value of this capital is the average of the beginning and ending values for the applicable financial year of completed fixed assets less accumulated depreciation, plus the allowance for working capital, plus regulatory assets less regulatory liabilities. 

The ERA has the overall responsibility of regulating the electricity industry in the Cayman Islands in accordance with the ERA Law. The ERA oversees all licencees, establishes and enforces licence standards, enforces applicable 

(in $ thousands except basic earnings per Class A Ordinary Share, dividends paid per Class A Ordinary Share and where otherwise indicated) 

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