TABLE OF CONTENTS 1. SUMMARY OF QUARTERLY RESULTS BUSINESS ENVIRONMENT SIGNIFICANT ACTIVITIES IN THE PERIOD... 3

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1 ABU DHABI NATIONAL ENERGY COMPANY TAQA MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) 11 MAY 2010 TABLE OF CONTENTS 1. SUMMARY OF QUARTERLY RESULTS BUSINESS ENVIRONMENT SIGNIFICANT ACTIVITIES IN THE PERIOD RESULTS OF OPERATIONS CAPITAL STRUCTURE AND LIQUIDITY OPERATIONAL DATA

2 SUMMARY OF QUARTERLY RESULTS Three months ended 31 Mar 31 Dec Sept June Mar Dec Sept June 2008 (AED millions, except per share amounts) Total assets 94,133 91,845 93,120 90,165 86,953 86,388 85,401 85,933 Shareholders equity 13,110 12,410 11,313 9,925 7,949 7,747 13,721 9,061 Revenues 4,776 4,361 3,898 4,380 4,206 3,733 4,516 4,560 Profit for the period Attributable to non-controlling interests Attributable to equity holders of the parent 287 (84) Earnings per share (0.018) TAQA benefitted from an increase in commodity prices which resulted in a 38% year on year increase in Upstream and Midstream revenues in the quarter. This solid performance was supported by stable revenues in its Power & Water business. Combined with flat cost of sales, this resulted in a significant increase in net profit after non-controlling interests. BUSINESS ENVIRONMENT Three months ended 31 Mar 31 Dec Sept June Mar Dec 2008 WTI crude oil US$/bbl Brent crude oil US$/bbl NYMEX natural gas US$/mmbtu AECo natural gas CA$/GJ US $/Cdn $ exchange rate US$ US $/British pound exchange rate US$ US $/Euro exchange rate US$ US $/Moroccan dirham exchange rate US$ Crude Oil & Natural Gas Prices TAQA s operating results are partially dependent on crude oil and natural gas prices, which have recently been volatile. Prices for oil are based on world supply and demand and are subject to large fluctuations in response to relatively minor changes to the demand for oil, whether the result of uncertainty or a variety of additional factors beyond the control of TAQA, including actions taken by the Organization of Oil Producing and Exporting Countries ( OPEC ). Revenues for TAQA s oil production are primarily driven by changes in the price of West Texas Intermediate ( WTI ) at TAQA NORTH and changes in the price of Brent in Europe. Both prices have been strong throughout the first quarter of 2010, trading in the range of US$ 70/bbl to US$ 84/bbl. 2

3 Revenues for TAQA s natural gas production in North America are primarily driven off changes in NYMEX natural gas priced at Henry Hub but are subject to market factors which can affect the basis price between the Nymex benchmark and prices received in Western Canada. Natural gas prices improved in the first quarter of 2010, with NYMEX natural gas reaching US$ Foreign Exchange TAQA is exposed to the risk of adverse fluctuations in foreign exchange rates and interest rates. Revenues from its domestic subsidiaries are receivable in UAE Dirhams. Revenues from TAQA s other operating subsidiaries are receivable in U.S. Dollars, Euro, Canadian Dollars, Moroccan Dirham and Rupees. SIGNIFICANT ACTIVITIES IN THE PERIOD Corporate activity during the first quarter of 2010 On 4 th March, Moody s Investors Services downgraded TAQA s corporate credit rating from Aa2 (review for downgrade) to A3 (stable). This was as a result of a change in Moody s ratings criteria that apply to government related issuers as a whole. All Abu Dhabi government related issuers were downgraded. The support for TAQA from the Government of Abu Dhabi remains unchanged. As the Government stated in their press release following the Moody s announcement, TAQA "plays an important role in the Emirate's energy policy." Downstream During Q the domestic power plants operated at an average of 86.8% technical availability, while TAQA s international plants recorded 97.2% availability giving an overall average of 88.8% across the group. In addition, TAQA continued to make progress on value-enhancing projects. During the quarter, it has completed the tender for the EPC contractor for the Jorf Lasfar plant expansion and has selected a preferred bidder. The project expansion of 700 MW remains on track for commissioning in 2013/2014. Midstream The cold winter in Europe resulted in increased usage of European gas storage facilities and PGI Alkmaar performed well, making a significant contribution to the security of supply in the Netherlands. Bergermeer Gas Storage has achieved a key milestone, with the Netherlands Ministry of Economic Affairs issuing a State Permitting Plan, taking the project to the final stage in the permitting process. Engineering work is on schedule and pipeline engineering is ahead of schedule. Upstream TAQA NORTH focussed on asset optimisation during Q1 2010, with well-by-well property reviews yielding previously unrecognised opportunities in the form of high return, quick to execute, small scale projects. In addition, TAQA NORTH experienced historically high reliability due to preventative maintenance, better operating procedures and a relatively mild winter. This led to a Q1 production efficiency of 97% versus 93% last year. 3

4 Three Horn River Basin wells were successfully drilled with two tested before the end of the winter drilling season. Preliminary results are promising and complete results are expected in mid TAQA Energy s production was boosted year on year due to the acquisition of DSM Energy. Well workover candidates are being evaluated with the aim to offset natural declines in production. In terms of gas storage, the cold winter in Europe resulted in increased usage of European gas storage facilities and PGI Alkmaar performed well, making a significant contribution to the security of supply in the Netherlands. Post Period Activities On 20 April 2010, a AED 0.10 per share dividend was declared at TAQA s Annual General Meeting. This dividend will be paid to shareholders on 19 May On 28 April 2010, TAQA announced it has further strengthened its leadership team with the appointment of H.E. Abdulla Saif Al-Nuaimi as Chief Executive Officer. Mr. Al-Nuaimi will be retaining his role on TAQA s Board of Directors, a position that he has held since TAQA s inception. In addition, he will continue his role as Director of the Privatisation Directorate of the Abu Dhabi Water and Electricity Authority (ADWEA), Deputy Managing Director of the Abu Dhabi Water and Electricity Company (ADWEC) and Chairman of Gulf Power Company. RESULTS OF OPERATIONS Three months ended 31 March 2010 compared with three months ended 31 March 2009 Revenues Revenues Three months ended 31 March Revenue from oil and gas 2,243 1,605 Revenue from electricity and water 1,475 1,391 Fuel revenue Gas storage revenue Other operating revenue ,776 4,206 TAQA currently generates its revenues primarily from power generation, water desalination, oil and gas production and gas storage. Total revenues were AED 4.8 billion in 2010, 13% higher from total revenues of AED 4.2 billion in Oil and gas revenues in 2010 were AED 2.2 billion, an increase of AED 0.6 billion compared to AED 1.6 billion in This 39 percent increase was driven primarily by the increase in crude oil and natural gas liquid prices, revenue from DSM assets acquired in October 2009 and by strengthening of CAD and EUR against AED. 4

5 Three month revenues from the sale of electricity and water were AED 1.5 billion, a marginal increase compared to such revenues of AED 1.4 billion in The increase was primarily due to Taweelah A1 expansion commissioned in June Fuel revenues were AED 0.8 billion in 2010, compared to AED 1.0 billion in 2009 due to lower fuel cost in 2010 primarily in the Moroccan subsidiary. Gas storage revenues were basically unchanged at AED 161 million in 2010 compared to AED 162 million in Lower gas prices were offset by stronger CAD and Euro against AED. Other operating revenues of AED 146 million in 2010 compared to AED 84 million in 2009 were primarily attributable to processing and tariff income related to the offshore facilities which provide processing, compression and transport services. This higher amount in 2010 was mainly due to higher tariff, higher processing income and sulphur revenue, fewer brokerage losses and earnings from the DSM acquisition. Cost of sales Cost of sales Three months ended 31 March Operating expenses (1,292) (1,111) Depreciation, depletion and amortization Provisions for impairment - property, plant and equipment (737) (969) (48) (69) (2,077) (2,149) TAQA s cost of sales consists of staff costs; repairs, maintenance and consumables used; operation and maintenance charges; gas storage expenses; fuel expenses; depreciation, depletion and amortisation and other operating expenses. Total cost of sales amounting AED 3.2 billion remained mostly flat compared to AED 3.1 billion in Operating expenses increased in 2010 due to the Taweelah A1 expansion in June 2009, higher spare parts consumption and technical fees in the international power business, higher costs driven by the DSM acquisition in October 2009, higher non-operated costs and the impact of higher CAD and EUR exchange rates. The decrease in fuel costs due to lower fuel prices was matched by lower fuel revenue. The lower gas storage expenses were attributable to lower volumes due to reduced gas prices. Higher DD&A was primarily due to higher DD&A rates at TAQA NORTH and the impact of the DSM acquisition, partially offset due to lower DD&A rates in TAQA Bratani. Other Income Statement Items Three months ended 31 Mar Administrative and other expenses (182) (167) Finance costs (959) (971) 5

6 Interest income Changes in fair value of derivatives Net foreign exchange (loss) gain 41 (31) Share of results of associates 48 9 Share of results of joint venture 24 1 Gain on repurchase of bonds Other income 5 3 Income tax credit (expense) (426) (6) Administrative and Other Expenses TAQA s administrative and other expenses consist of salaries and related expenses, professional fees and other expenses. Administrative and other expenses were AED 182 million in 2010 compared to AED 167 million in The increase of AED 15 million is mainly explained by donations made during 2010 and higher CAD exchange rates. Finance Costs TAQA s finance costs primarily consist of interest expense on bank loans and outstanding bonds. Finance costs were AED 1.0 billion in 2010 and 2009, the cost of additional debt issued in 2009 was offset by the absence in 2010 of debt breakage costs incurred by the Moroccan subsidiary in Interest Income Interest and investment income in 2010 amounted to AED 19 million compared to AED 17 million for The increase was attributable to interest received on a shareholder s loan from a domestic subsidiary, which was loan was previously non-interest bearing. Changes in value of derivatives The favorable change of AED 223 million in value of derivatives is primarily from energy trading activities by TAQA GEN X. Net foreign exchange (loss) gain Gain/loss on exchange consists of foreign exchange gain/loss from the settlement of transactions denominated in currencies other than the dirham, TAQA s functional currency. Gain on exchange was AED 41 million in 2010 compared to a loss of AED 31 million in The current year s gain arose from favorable exchange movements of Moroccan Dirhams, Euro and GBP against AED. Gain on repurchase of TAQA bonds A gain of AED 170 million was recorded in 2009 from the buy back of bonds of a nominal value of US$ 201 million. No bond repurchases were made during Profit Before Tax As a result of the above, profit before tax was AED 0.9 billion in 2010, compared to a profit of AED 0.1 billion in

7 Income Tax Income tax expense was AED 426 million for the year 2010, comprising AED 358 million of current income tax expense and AED 68 million of deferred income tax expense, resulting in an effective tax rate (expense) of 49 percent, compared to tax expense of AED 6 million and an effective tax rate of 4 percent in 2009, comprising AED 78 million of current income tax expense and AED 72 million of deferred income tax benefit. The increase in current and deferred income tax expense was due to higher profits and reduction of tax-deductible finance costs in taxing jurisdictions. Profit for the Period Profit for the period (before non-controlling interest) was AED 440 million in 2010, an increase of 224 percent compared with profit in 2009 of AED 136 million. THREE MONTHS ENDED 31 MARCH 2010 COMPARED WITH THREE MONTHS ENDED 31 DECEMBER 2009 Revenues Three months ended Revenues 31 Mar 31 Dec Revenue from oil and gas 2,243 1,995 Revenue from electricity and water 1,475 1,536 Fuel Revenue Gas storage revenue Other operating revenue ,776 4,361 Total revenues were AED 4.8 billion in 2010, 9% higher from total revenues of AED 4.4 billion in Oil and gas revenues in the first quarter of 2010 were AED 2.2 billion, an increase of AED 0.2 billion compared to AED 2.0 billion in the fourth quarter of This 10% increase was driven primarily by the increase in crude oil and natural gas prices partly offset by weaker EUR against AED. Three month revenues from the sale of electricity and water were marginally lower but remaining at AED 1.5 billion between fourth quarter 2009 and first quarter The decrease in 2010 was primarily due to the quarter being shorter by two days. Fuel revenues were AED 0.8 billion in 2010, compared to AED 0.6 billion in 2009 primarily due to higher generation of electricity in international power plants. Gas storage revenues increased from AED 97 million in fourth quarter 2009 to AED 161 million in first quarter 2010 due to higher gas prices in 2010 offset by weaker Euro against AED. 7

8 Other operating revenues of AED 146 million in 2010 compared to AED 136 million in 2009 were primarily attributable to processing and tariff income related to the offshore facilities which provide processing, compression and transport services. This higher amount in 2010 was mainly due to ancillary services provided at Red Oak and insurance claim received in Takoradi. Cost of sales Three months ended Cost of sales 31 Mar 31 Dec Operating expenses (1,292) (1,361) Fuel expenses (737) (607) Gas storage expenses (48) (20) Provision for impairment - (538) (2,077) (2,526) Depreciation, depletion and amortization (1,096) (1,017) (3,173) (3,543) Total cost of sales were AED 3.2 billion for the three months ended 31 March 2010 compared to AED 3.5 billion for the three months ended 31 December Operating expenses were mainly lower in the first quarter of 2010 due to absence of impairment charge and lower exploration expense due to fewer lease expiries. The increase in fuel costs is due to higher electricity generation at the international power plants and was matched by higher fuel revenue. The higher gas storage expenses were attributable to higher volumes due to increased gas prices. Higher DD&A is primarily due to the absence of an adjustment recorded in December 2009 in TAQA Bratani following the completion of the purchase price valuation. Other Income Statement Items Three months ended 31 Mar 31 Dec Administrative and other expenses (182) (191) Finance costs (959) (953) Interest income Changes in fair value of derivatives 267 (87) Net foreign exchange (loss) gain Share of results of associates Share of results of joint venture 24 1 Other income 5 5 Income tax credit (expense) (426) 237 Administrative and Other Expenses Administrative and other expenses were AED 182 million in 2010 compared to AED 191 million 8

9 in The decrease of AED 9 million is mainly explained by the absence of business development expenses during Finance Costs Finance costs were virtually unchanged between fourth quarter of 2009 and first quarter of 2010 at AED 1.0 billion. Interest Income Interest and investment income in 2010 amounted to AED 19 million compared to AED 13 million for The increase was mainly due to higher interest earned on higher cash balances at the domestic subsidiaries. Changes in value of derivatives The favorable change of AED 354 million in value of derivatives is primarily from energy trading activities by TAQA GEN X. Net foreign exchange (loss) gain Gain on exchange was AED 41 million in 2010 compared to a gain of AED 153 million in The gain was lower due to less favorable exchange movements of Moroccan Dirhams, Euro and GBP against AED. Profit Before Tax As a result of the above, profit before tax was AED 0.9 billion in the first quarter 2010, compared to a loss of AED 0.2 billion in the fourth quarter Income Tax Income tax expense was AED 426 million for the year 2010, comprising AED 358 million of current income tax expense and AED 68 million of deferred income tax expense, resulting in an effective tax rate (expense) of 49 percent, compared to tax benefit of AED 237 million, comprising AED 79 million of current income tax expense and AED 316 million of deferred income tax benefit. The increase in income tax expense was primarily due to higher profits in the quarter for certain taxing jurisdictions as compared to the prior quarter. Profit for the Period Profit for the period (before non-controlling interest) was AED 440 million in 2010, an increase of AED 396 million compared with profit in the fourth quarter of 2009 of AED 44 million. CAPITAL STRUCTURE AND LIQUIDITY Capital structure Three months ended 31 Mar Total Assets 94,133 86,953 Cash and cash equivalents 6,008 4,609 Total Debt 58,782 59,901 Net Debt 52,774 55,292 Total Equity 13,110 5,666 Net Debt/Total Capital %

10 Total assets grew to AED 94 billion up from AED 86 billion at the end of the first quarter of The increase is primarily due to investments in Marubeni s Caribbean power assets and the acquisition of DSM Energy during the year. The stronger CAD and Euro period end rates also contributed to the increase in total assets. TAQA s net debt to total capital ratio improved from 85% in the first quarter of 2009 to 79% in the first quarter of 2010 due to stronger earnings and a reduction in net debt. Liquidity Three months ended Mar 31 Cash and cash equivalents 6,008 4,609 Unused portion of credit facilities 14,397 8,395 Total available liquidity 20,405 13,004 Consolidated cash on hand as of 31 March 2010 was AED 6.0 billion compared with AED 4.6 billion as at the end of the first quarter of The company has unused credit lines of approximately AED 14.4 billion as of 31 March OPERATIONAL DATA Power & Water Three months ended 31 Mar UAE domestic plants Power generation (GWh) 7,024 6,071 Water desalination (MIG) 49,369 46,211 Technical availability (%) International plants Power generation (GWh) 3,691 3,569 Technical availability (%) Upstream Pricing Average Realized Prices TAQA NORTH Three months ended 31 Mar Crude oil (US$/bbl) Natural gas liquids (US$/bbl) Natural gas (US$/mcf) Average (US$/boe) TAQA Bratani Crude oil (US$/bbl) Natural gas liquids (US$/bbl)

11 Natural gas (US$/mcf) Average (US$/boe) TAQA Energy Crude oil (US$/bbl) Natural gas (US$/mcf) Average (US$/boe) Netback Analysis (US$/boe) (US$/boe) TAQA NORTH Three months ended 31 Mar Gross price $ $ Royalties Net sales price Operating costs Operating netback $ $ TAQA Bratani Gross price $ $ Royalties - - Net sales price Operating costs Operating netback $ $ TAQA Energy Gross price $ $ Royalties Net sales price Operating costs Operating netback $ $ Oil & Gas Production Average Daily Production Three months ended 31 Mar TAQA NORTH Crude oil (mbbls/day) Natural gas liquids (mbbls/day) Natural gas (mmcf/day) Total (mboe/day) TAQA Bratani Crude oil (mbbls/day) Natural gas liquids (mbbls/day) Natural gas (mmcf/day)

12 Total (mboe/day) TAQA Energy Crude oil (mbbls/day) Natural gas (mmcf/day) Total (mboe/day) Total (mboe/day)