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Electricity sales revenue for Fiscal 2011 was relatively flat at $69.6 million compared to $69.5 million for Fiscal 2010. There was an increase in kWh sales in the commercial sector, which was offset by a decrease in sales to residential customers. 

Rising world fuel prices continue to impact CUC’s fuel costs and electricity rates to consumers. The average Fuel Cost Charge rate per kWh charged to consumers for Fiscal 2011 was $0.27, a 35% increase from $0.20 per kWh for Fiscal 2010. CUC passes through 100% of fuel and lubricating oil costs to consumers on a two-month lag basis without mark-up. Management believes that the increasing fuel factor is negatively impacting electricity sales as consumers reduce electricity use. 

In March 2011 the Electricity Regulatory Authority (“ERA”) approved the Fuel Price Volatility Management Programme. This fuel hedging programme utilises call options to create a ceiling price for fuel costs at pre-determined contract premiums and is currently structured to cover 40% of expected fuel consumption. The call options were purchased in an effort to provide consumers protection from a rapid increase in fuel pricing, and the monthly premiums are included in fuel costs. 

The current options expire in March 2012. Options will be renewed if approved by the ERA. 

Operating Income declined in Fiscal 2011 due to increased Depreciation and General and Administration 

(“G&A”) costs. The higher G&A was driven by transitional costs which we expect will result in improved efficiencies and a stronger, safer performance. 

As the economy and electricity demand remain flat going into the third consecutive year, CUC continues to focus on containing discretionary expenditures while operating in a prudent and efficient manner. 

## Customer Service and Operations 

CUC is committed to providing its customers with a safe and reliable service. 

At December 31, 2011, there were 26,636 customers, an increase of 2% compared to 26,151 customers as at December 31, 2010. An average of 40 customers were connected per month for Fiscal 2011 as compared to an average of 58 customers per month for Fiscal 2010. The Company continues to see an increase in customer numbers but also continues to see a decline in the average customer kWh consumption that began in 2009. 

With the decline in the construction sector, and general weakness in the economy, the number of work permit holders on the Island decreased significantly since 2009 according to information released by the Government of the Cayman Islands (the “Government”). This has led to high vacancy levels for rental properties, many of which continue to maintain active electricity accounts with little electricity consumption. The 

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