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1 ABU DHABI NATIONAL ENERGY COMPANY TAQA MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) 13 August, 2012 Table of Contents 1. Summary of Quarterly Results Business Environment Significant Activities in the Period Results of Operations Capital Structure and Liquidity Operational Data Summary of Quarterly Results (AED millions, except per share amounts) 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep Total assets Shareholders equity Revenues 114, , , , , , , ,289 12,454 14,492 12,590 12,420 16,063 16,261 15,238 11,482 6,042 5,743 5,444 6,168 7,069 5,480 6,283 5,201 Profit for the period (250) Attributable to non-controlling interests Attributable to equity holders of the parent (380) Earnings per share (AED per share) (0.061) Business Environment Average prices WTI crude oil Brent crude oil NYMEX natural gas AECO natural gas US$/bbl US$/bbl US$/mmbtu CA$/GJ 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30- Sep

2 Exchange Rate US $/Cdn $ US $/British pound US $/Euro US $/Moroccan dirham US$ US$ US$ US$ 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30- Sep Crude Oil & Natural Gas Prices TAQA s operating results are partially dependent on crude oil and natural gas prices. Prices for TAQA s oil production are primarily driven by changes in the price of Brent crude oil in Europe as well as changes in the price of West Texas Intermediate ( WTI ) crude oil but also subject to market factors like over-supply at Cushing that affects the prices realized at TAQA NORTH. Revenues for TAQA s natural gas production in North America are primarily driven by 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. The period has been dominated by the weakening of commodity prices, reflecting lower global demand. In particular, there has been continued ongoing weakness of North American gas prices, Henry Hub fell from US$2.96/mmbtu at the beginning of the year, to a low of US$1.84/mmbtu on the 20 April, before recovering to US$2.74/mmbtu on the 30 June. The WTI price started the period at US$102.96/bbl, rising to a high of US$109.49/bbl on 24 February, before falling to a low of US$77.69/bbl on 28 June. WTI finished the period at US$84.96/bbl. Brent commenced the period at US$112.29/bbl, rising to a high of US$128.1/bbl on the 24 February before falling to a low of US$88.99/bbl on 21 June. Brent finished the period on US$97.55/bbl. Foreign Exchange TAQA is exposed to the impact of fluctuations in foreign exchange rates. Revenues and costs from its domestic subsidiaries are received or incurred in UAE Dirhams. Revenues and costs from TAQA s other operating subsidiaries are received or incurred in U.S. Dollars, Euros, Canadian Dollars, British Pounds, Moroccan Dirhams and Indian Rupees 3. Significant Activities in the Period : Power and Water TAQA produced 34,322 GWh of electricity and 114,984 MIG of water during H1 2012, generating total revenues of AED 4.0 billion for the first half. The 14.1% increase in revenues compared to 2

3 the same period last year, reflects the contribution from Shuweihat 2 which came into full production in October Global technical availability was 94.0% for the first half of 2012, in line with the excellent performance of TAQA s power assets in previous periods. Domestic During this period of high demand, TAQA s domestic power plants generated 23,994 GWh of power and desalinated 114,984 MIG of water. Technical availability was high at 94.2%, with a particularly strong performance in the second quarter, reflecting the quality of TAQA s domestic power plants. On 20 June 2012, TAQA signed a Memorandum of Understanding for the joint development of a 100 MW Waste to Energy facility in Abu Dhabi with the Centre of Waste Management Abu Dhabi. The finished plant will be one of the largest Waste to Energy plants in the world, and the first of its kind in The United Arab Emirates. The facility will be capable of processing up to a million tonnes of municipal solid waste per annum and is expected to be operational by 2015/16. International TAQA s international power portfolio, which comprises of assets in Morocco, Ghana, India, Saudi Arabia, Oman, Iraq and the USA, generated 10,328 GWh of power during the first half. International technical availability was 93.09%. In Morocco, the Jorf Lasfar 700 MW expansion project continued to progress on schedule with AED 2.1 billion of capex having been invested as of 30 June On 23 June 2012, financing arrangements were signed for a US$ 1.4 billion equivalent, 16-year, multi-currency non-recourse project financing for the expansion. The 700 MW expansion will bring Jorf Lasfar s gross capacity to 2,056 MW and will create 3,000 direct jobs and 2,000 indirect jobs during construction, and 135 direct and 1,000 indirect jobs post-construction. The commissioning of units 5 and 6 is planned for the end of 2013 and early 2014, respectively. On 8 April 2012, TAQA signed a joint venture agreement with Mass Global Investments Company Limited, Under the agreement, TAQA will acquire a 50% interest in the 1,000 MW gas fired IPP situated near Sulaymaniyah, in the Kurdish region of the Republic of Iraq. The power plant has been operating from 2009 and has a capacity of 750 MW with additional 250 MW under construction. The transaction is subject to the fulfilment of certain conditions. Oil & Gas TAQA s Oil & Gas business comprises strong, well-resourced centers of excellence supporting a portfolio of assets with viable growth potential across North America, the UK North Sea and the Netherlands. Total Oil & Gas revenues, including gas storage and other operating revenues, were AED 5.9 billion for H1 2012, a decrease of 3.6% compared to H This decline was driven primarily by the sharp fall in North American gas prices and lower production in North America. This was partially offset by higher production and higher prices in the UK North Sea. Production in the Netherlands continued to decline in line with previous periods. North America Production in North America declined by 2% to 85.8 mboe/day principally reflecting the impact of approximately 4.0 mboe/day of non-core asset disposals,, the shut-in of small amount of uneconomic natural gas production and delays in the tie-in of new production.. TAQA sold non- 3

4 core acreage in North America for a total of AED 1.7 billion, resulting in a gain of AED 374 million, which is recognised in the consolidated income statement. As would be expected, the decline in the North American natural gas price, which fell by 44% compared to the same period in 2011, has had a negative impact on financial performance. UK Production volumes in the UK North Sea were 43.0 mboe/day during the period, a 4.4% increase compared to the same period last year. During the period, TAQA recorded its1,000 th day as duty holder on its North Sea assets and more than 100m barrels of oil have now passed through the Brent System under TAQA s operatorship. A planned 22 day shut-down was also successfully completed at Eider on time and with no reportable incidents. On 13 February 2012, TAQA entered a farm-in agreement with a subsidiary of Fairfield Energy Limited for a 50% interest in licences P184 and P474 for consideration of USD 50 million (AED 184 million). The transaction is subject to Government and certain third party approvals and is expected to complete in the second half of On 20 April 2012, TAQA Bratani signed a sale and purchase agreement for the acquisition of an additional 13.5% interest in the North Cladhan area (Blocks 210/29a and 210/30a) of the UK Northern North Sea from Sterling Resources (UK) for an initial consideration of US$47 million (AED 173 million) including an allocation to tax allowances to be satisfied through a combination of cash payment and undertaking to fund part of Sterling s development costs for its remaining interest in Cladhan. Legal completion of the acquisition is subject to the satisfaction of conditions precedent and is expected to complete in the second half of Netherlands Production in the Netherlands averaged 7.3 mboe/day, a 13% decrease compared to the same period last year, reflecting the mature nature of the fields. On 2 May 2012, TAQA received approval from the Dutch Council of State for the development of the Bergermeer Gas Storage facility. TAQA and its project partner EBN can now commence construction of the gas storage facility. With a working volume of 4.1 billion cubic metres (i.e. the average annual gas consumption of 2.5 million households in the Netherlands), the Bergermeer Gas Storage facility is intended to be the largest accessible gas storage facility in Europe. TAQA and EBN will invest more than EUR 800 million in the drilling of 14 new wells, the construction of the gas treatment installation in Alkmaar and the intervening pipelines. Significant activities in the quarter On 8 April 2012, TAQA successfully completed the sale of all its holding in Tesla Motors for a total consideration of AED 956 million (USD 260 million) realizing a gain of AED 415 million. Post-period corporate developments On 16 July 2012, TAQA announced that it had secured the requisite parliamentary approval and has signed financing arrangements for the 110 MW expansion of the gas-fired Takoradi 2 (T2) power plant in Ghana. The TAQA-operated T2 power plant currently represents 15% of Ghana s installed power production capacity. The expansion project will convert the existing plant to operate as a combined cycle power plant increasing its output from 220 MW to approximately 330 4

5 MW without requiring additional fuel, therefore adding 50% more capacity without increasing carbon dioxide (CO2) emissions. 4. Results of Operation Revenues: Power and Water Three months Six months (AED millions) Revenue from electricity and water 2,074 1,810 3,963 3,473 Fuel revenue Other operating revenues 979 2,074 1,938 2, ,073 3,951 5,930 6,576 Power and water segment generates its revenues primarily from power generation, water desalination, fuel revenues, liquidated damages, and other operating revenues. Three months ended 30 June 2012 compared with three months ended 30 June 2011 Revenues from the sale of electricity and water were AED 2,074 million in 2012 compared to AED 1,810 million in 2011, an increase of AED 264 million. The increase was primarily due to an increase in available capacity from the new plant Shuweihat 2 (which commenced phased generation in July 2011), contributing an increase of AED 272 million offset by a small decrease at Red Oak. Fuel revenues were AED 979 million in 2012 compared to AED 2,074 million in 2011, a decrease of AED 1,095 million. Lower fuel revenues at domestic plants due to lower usage of back up fuel were offset by a higher usage driven by higher generation at Takoradi. Other operating revenues were AED 20 million in 2012 compared to AED 67 million in The decrease is due to absence of liquidated damages at Shuweihat 2. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Revenues from the sale of electricity and water were AED 3,963 million in 2012 compared to AED 3,473 million in 2011, an increase of AED 490 million, The increase was primarily due to an increase in available capacity from the new plant Shuweihat 2 (which commenced phased production in July 2011), contributing an increase of AED 508 million. This was partly offset by decrease in international power due to capital cost adjustment, lower tariff and devaluation of the Euro. 5

6 Fuel revenues were AED 1,938 million in 2012 compared to AED 2,999 million in 2011, a decrease of AED 1,061 million. Lower fuel revenues of AED 1,446 million at domestic plants due to lower usage of back up fuel were offset by a higher usage driven by higher production at Takoradi in the amount of AED 296 million. Other operating revenues were AED 29 million in 2012 compared to AED 104 million in The decrease is due to absence of liquidated damages at Shuweihat 2. Oil & Gas Three months Ended June 30 Six months ended Jun 30 (AED millions) Revenue from oil and gas Gas storage revenue Other operating revenues 2,581 2,728 5,187 5, ,969 3,118 5,855 5,999 Oil and gas segment generate revenues primarily from upstream exploration and production, and midstream processing, transmission and storage. Three months ended 30 June 2012 compared with three months ended 30 June 2011 Revenue from oil and gas was AED 2,581 million in 2012 compared to lower revenue of AED 2,728 million in 2011, a decrease of AED 147 million. The decrease is primarily driven by AED 431 million at TAQA NORTH due to lower commodity prices which was partially offset by higher revenue of AED 227 million recorded at TAQA Bratani. TAQA Bratani s higher revenue is more than offset by AED 279 million recorded in cost of sales due to stock movement,volume impact on gross margin being based on production rather than revenues. Gas storage revenues were AED 5 million in 2012 compared to AED 33 million in 2011, primarily due to lower volumes and lower prices at TAQA NORTH. Other operating revenues were AED 383 million in 2012 an increase of AED 26 million compared to The increase is primarily due to higher trade sales at TAQA Energy. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Revenue from oil and gas was AED 5,187 million in 2012 compared to AED 5,314 million in 2011, a decrease of AED 127 million. The decrease is primarily driven by AED 558 million at TAQA NORTH due to lower commodity prices during The decrease in revenue was mostly offset by higher revenue recorded at TAQA Bratani due to slightly higher prices in the period but mainly due to impact of stock movements which have an offset in cost of sales, volume impact on gross margin being based on production rather than revenues.. Gas storage revenues were AED 118 million in 2012 compared to AED 178 million in 2011, lower in 2012 primarily due to lower volumes and lower prices at TAQA NORTH. 6

7 Other operating revenues were AED 550 million in 2012 compared to AED 507 million in 2011, with the increase by AED 43 million due to higher trade sales at TAQA Energy. Cost of sales Power and water TAQA s cost of sales for power units consist of depreciation depletion and amortization, fuel expenses, and operating expenses. Operating expenses include staff costs, repairs, maintenance and consumables used, operation and maintenance charges, and other operating expenses. Three months Six months (AED millions) Operating expenses (511) (507) (928) (926) Fuel expenses (886) (1,786) (1,776) (2,650) Depreciation, depletion and amortization (DD&A) (448) (377) (895) (750) (1,845) (2,670) (3,599) (4,326) Three months ended 30 June 2012 compared with three months ended 30 June 2011 Operating expenses were AED 511 million in 2012 compared to AED 507 million in 2011, an increase of AED 4 million. The increase of AED 31 million is primarily due to Shuweihat 2, which commenced operations in July 2011 this was mainly offset by lower expenses of AED 29 million in Red Oak due to lower dispatch factor. Fuel expenses were AED 886 million in 2012 compared to AED 1,786 million in 2011, a decrease of AED 900 million due to lower back up fuel used at U.A.E. subsidiaries. DD&A expenses were AED 448 million in 2012, compared to AED 377 million in 2011, an increase of AED 71 million. The new Shuweihat 2 plant contributed AED 64 million of the increase. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Operating expenses were AED 928 million in 2012 compared to AED 926 million in The increase was driven by AED 61 million due to new Shuweihat 2 plant operation in 2012 offset by lower operating expenses at Taweelah 1, which incurred major inspection cost in 2011 and lower expenses in Red Oak due to lower dispatch factor. Fuel expenses were AED 1,776 million in 2012 compared to AED 2,650 million in 2011 due to lower back up fuel used at U.A.E. subsidiaries. DD&A expenses were AED 895 million in 2012, compared to AED 750 million in 2011, an increase of AED 145 million. The new Shuweihat 2 plant contributed AED 120 million of the increase. 7

8 Oil and gas Cost of sales for oil and gas units consist of depreciation, depletion and amortization, gas storage expenses, and operating expenses. Operating expenses include staff costs, repairs, maintenance and consumables used, fuel expenses, and other operating expenses including adjustments for stock movements from period to period. Three months Six months (AED millions) Operating expenses (1,420) (962) (2,232) (1,769) Gas storage expenses (6) (35) (19) (72) Depreciation, depletion and amortization (DD&A) (936) (916) (1,828) (1,813) (2,362) (1,913) (4,079) (3,654) Three months ended 30 June 2012 compared with three months ended 30 June 2011 Operating expenses were AED 1,420 million in 2012 compared to AED 962 million in 2011, an increase of AED 458 million. The increase was driven by AED 279 million due to stock movement and higher repair and maintenance costs of AED 142 million mainly due to higher production at TAQA Bratani, and higher trade costs at TAQA Energy. Gas storage expenses were AED 6 million in 2012 compared to AED 35 million in 2011, a decrease of AED 29 million due to lower volumes and prices at TAQA NORTH DD&A expenses were AED 936 million in 2012, compared to AED 916 million in 2011, an increase of AED 20 million. The increase is mainly at TAQA Bratani due to higher production and is partially offset by lower depreciation at other Oil and Gas businesses due to lower production volumes. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Operating expenses were AED 2,232 million in 2012 compared to AED 1,769 million in 2011, an increase of AED 463 million. The increase was driven mainly by AED 261 million due to stock movement and higher repair and maintenance costs of AED 180 million mainly due to higher production at TAQA Bratani, and higher trade costs at TAQA Energy. Gas storage expenses were AED 19 million in 2012 compared to AED 72 million in 2011, a decrease of AED 53 million due to lower volumes and prices at TAQA NORTH. DD&A expenses were AED 1,828 million in 2012, compared to AED 1,813 million in 2011, an increase of AED 15 million. The increase is mainly at TAQA Bratani due to higher production and is partially offset by lower depreciation at other Oil and Gas businesses due to lower production. 8

9 Other Income Statement Items TAQA s administrative and other expenses consist of salaries and related expenses, professional fees, and other expenses. TAQA s finance costs primarily consist of interest expense on bank loans and outstanding bonds. The foreign exchange (loss) gain results from the translation of net monetary assets and liabilities of subsidiaries and the settlement of transactions denominated in currencies other than the dirham, TAQA s functional currency. Power and water Three months Six months (AED millions) Administrative and other expenses Finance costs Changes in fair value of derivatives Net foreign exchange (loss) gain Other income Gain on sale of joint venture Share of results of associates (83) (46) (143) (122) (632) (527) (1,277) (1,042) (7) 38 (29) (599) (564) (1,206) (1,089) Three months ended 30 June 2012 compared with three months ended 30 June 2011 Administrative and other expenses were AED 83 million in 2012 compared to AED 46 million in 2011, an increase of AED 37 million. Mainly the increase is due to AED 13 million ancillary fees incurred at Red Oak, AED 8 million due to reclass from operating expenses, AED 5 million due to new Shuweihat 2 plant and AED 4 million for timing difference in sponsorship fee at Jorf Lasfar. Finance costs were AED 632 million in 2012 compared with AED 527 million in 2011, an increase of AED 105 million. The new Shuweihat 2 plant contributed AED 125 million of the increase which was partially offset by lower finance cost in other power units due to lower debt. Net mark to market movement in fair value of derivatives was AED 21 million in 2012 compared to AED 6 million in The variance was primarily due to more favorable movement at Red Oak mainly due to higher spark spread (net of hedges) in Net foreign exchange gains in 2012 were AED 70 million, compared to losses of AED 7 million in The variance was primarily due to exchange rate fluctuations between US Dollar (USD) and Indian Rupee (INR) relating to revaluation of operating financial assets investment at Neyveli, and between USD and Morocco Dirham (MAD) relating to revaluation of MAD loans at Jorf. 9

10 Other income was AED 25 million in 2012 compared to AED 8 million in Higher other income in 2012 was as a result of other income on the bridge loan at Jorf. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Administrative and other expenses were AED 143 million in 2012 compared to AED 122 million in 2011, an increase of AED 21 million. Mainly the increase is due to AED 13 million ancillary fees incurred at Red Oak, AED 6 million due to New Shuweihat 2 plant and AED 4 million timing difference in sponsorship fee at Jorf Lasfar. Finance costs were AED 1,277 million in 2012 compared with AED 1,042 million in 2011, an increase of AED 235 million. The new Shuweihat 2 plant contributed AED 250 million of the increase which was partially offset by lower finance cost in other power units due to lower debt. Net mark to market movement in fair value of derivatives was AED 131 million in 2012 compared to AED 59 million in The variance was primarily due to more favorable movement at Red Oak mainly due to higher spark spread (net of hedges)in Net foreign exchange gains in 2012 were AED 38 million, compared to losses of AED 29 million in The variance was primarily due to exchange rate fluctuations between US Dollar (USD) and Indian Rupee (INR) relating to revaluation of operating financial assets investment at Neyveli, and between USD and Morocco Dirham (MAD) relating to revaluation of MAD loans at Jorf. Other income was AED 43 million in 2012 compared to AED 13 million in Higher other income in 2012 was as a result of other income on the bridge loan at Jorf Lasfar The AED 28 million gain in 2011 was from sale of Marubeni assets in January Oil and gas Three months ended Jun 30 Six months ended Jun 30 (AED millions) Administrative and other expenses Finance costs Changes in fair value of derivatives Net foreign exchange (loss) gain Gain (loss) on asset sale Bargain purchase gain Other income Share of results of joint venture (125) (136) (262) (236) (107) (83) (209) (164) (1) (18) (4) (116) (119) 115 (299) 10

11 Three months ended 30 June 2012 compared with three months ended 30 June 2011 Administrative and other expenses were AED 125 million in 2012 compared to AED 136 million in 2011, a decrease of AED 11 million due to lower corporate allocation at TAQA Bratani. Group finance costs is managed on a group basis and is not allocated to operating segments. Finance costs representing accretion costs were AED 107 million in 2012 compared with AED 83 million in The increase was due to higher accretion expenses of AED 15 million at TAQA NORTH and AED 9 million at TAQA Bratani and TAQA Energy. Net mark to market movement in fair value of derivatives at TAQA NORTH was favourable at AED 58 million in 2012, due to oil hedge positions revaluing on declining WTI prices, compared to favourable movement of AED 9 million in Net foreign exchange gains were AED 32 million in 2012 compared to exchange gain of AED 3 million in The variance was primarily due to exchange rate fluctuations between US Dollar (USD) and British Pound (GBP) relating to revaluation of net monetary liabilities at TAQA Bratani. A loss on assets sale of AED 4 million relates to disposition expenses on TAQA NORTH assets sold in the first quarter 2012 compared to a gain of AED 61 million on the sale of certain non-core assets in Earnings from share of results of joint venture at NoordGas Transport BV at TAQA Energy were AED 24 million in 2012, compared to AED 27 million in Lower earnings in 2012 were primarily due to higher depreciation in Six months ended 30 June 2012 compared with six months ended 30 June 2011 Administrative and other expenses were AED 262 million in 2012 compared to AED 236 million in 2011, an increase of AED 26 million. The increase was mainly at TAQA NORTH due to increase in new long-term incentive plan benefit compared to prior year plan. Group finance costs is managed on a group basis and is not allocated to operating segments. Finance costs representing accretion costs were AED 209 million in 2012 compared with AED 164 million in The increase was mainly due to higher accretion expenses of AED 21 million at TAQA NORTH, and AED 20 million at TAQA Bratani and TAQA Energy. Net mark to market movement in fair value of derivatives at TAQA NORTH was favourable at AED 46 million in 2012 due to oil hedge positions revaluing on declining WTI prices, compared to unfavourable movement of AED 1 million in Net foreign exchange gains were AED 19 million in 2012 compared to exchange loss of AED 18 million in The variance was primarily due to exchange rate fluctuations between US Dollar (USD) and British Pound (GBP) relating to revaluation of net monetary liabilities at TAQA Bratani. Gains on assets sale of AED 374 million in 2012 was at TAQA NORTH, related to the divestments of certain non-core land holdings and operating assets, compared to AED 61 million in Bargain purchase gain of AED 94 million in 2012 was recognised on completion of phase 2 of acquisition of Otter field and associated infrastructure primarily due to the change in fair values between the economic date of the agreement (1 September 2009) and the legal completion date when purchase accounting was applied. 11

12 Earnings from share of results of joint venture at NoordGas Transport BV at TAQA Energy was AED 46 million in 2012, compared to AED 59 million in Lower earnings in 2012 were primarily due to higher depreciation in Corporate Interest and Other Group financing (including finance costs except for the subsidiaries involved in power and water generation with project financing arrangements and interest income) is managed on a group basis and is not allocated to operating segments. Investment in certain associates with activities other than power and water generation and oil and gas and available for sale investment is managed on a group basis and is therefore not allocated to operating segments. Three months ended June 30 Six months (AED millions) Finance costs Administrative and other expenses Share of results of associates Gain on Sale of Available for sale Investment Other (514) (479) (1,027) (961) (36) (37) (65) (63) (24) (404) (515) (869) Three months ended 30 June 2012 compared with three months ended 30 June 2011 Corporate finance costs were AED 514 million in 2012 compared with AED 479 million in The variance was due to an increase in fixed term debt as a result of the Malaysian Sukuk bond issued in the first quarter of 2012 and USD bond Issued in end of The fixed term debt replaced short term bank loans that carried significantly lower interest rates. Corporate administrative and other expenses were AED 36 million in 2012 compared to AED 37 million in This is due to increase in staff at corporate headquarters. Corporate earnings from share of results of associates were AED 49 million in 2012 compared to AED 84 million in 2011, a decrease of AED 35 million. The decrease was primarily due to lower earnings from Sohar Aluminium Company LLC of AED 31 million, driven by lower aluminum prices and decrease in earnings from Al Wathba Capital of AED 4 million. Gain on sale of available for sale Investment relates to AED 415 million sale of all holdings in Tesla Motors, a listed investment outside U.A.E on 8 April Other corporate expenses was income of AED 62 million in 2012 compared to income of AED 28 million in The variance was mainly due to foreign exchange gains in the second quarter of

13 Six months ended 30 June 2012 compared with six months ended 30 June 2011 Corporate finance costs were AED 1,027 million in 2012 compared with AED 961 million in The variance was due to an increase in fixed term debt as a result of the Malaysian Sukuk bond issued in the first quarter of 2012 and USD bond Issued in end of The fixed term debt replaced short term bank loans that carried significantly lower interest rates. Corporate administrative and other expenses were AED 65 million in 2012 compared to AED 63 million in Corporate earnings from share of results of associates were AED 94 million in 2012 compared to AED 140 million in 2011 decreased by AED 46 million. The decrease was primarily due to lower earnings from Sohar Aluminium Company LLC of AED 48 million driven by lower aluminum prices Gain on sale of available for sale Investment relates to AED 415 million sale of all holdings in Tesla Motors, a listed investment outside U.A.E. on 8 April Other corporate expenses was income of AED 68 million in 2012 compared to income of AED 15 million in The variance was mainly due to foreign exchange gains of AED 48 million in 2012 compared to losses of AED 23 million in 2011 partially offset by lower interest income on short term deposits. Profits and Taxes Three months Six months ended Jun 30 (AED millions) Profit before taxes 1,096 1,377 2,501 2,338 Income tax expenses (450) (665) (1,174) (1,315) Profit after taxes(before non-controlling interest) ,327 1,023 Three months ended 30 June 2012 compared with three months ended 30 June 2011 Profit before tax Profit before tax for the second quarter of 2012 was AED 1,096 million, compared to a profit before tax of AED 1,377 million in second quarter of 2011, a decrease of AED 281 million or 20%. Income Tax Second quarter 2012 income tax expense was AED 450 million, comprised of AED 572 million current income tax expense partially offset by deferred income tax benefit of AED 122 million, resulting in an effective tax rate of 41%. For the second quarter 2011 total income tax expense was AED 665 million, comprised of AED 683 million of current income tax expense and partially offset by deferred income tax benefit of AED 18 million, resulting in an effective tax rate of 48%. 13

14 The lower effective tax rate when compared with the previous year is primarily driven by a tax free capital gain on the divestment of our interest in Tesla Motors. This positive effect is somewhat offset by relatively higher pre-tax profits in jurisdictions with higher tax rates. Profit for the period Profit for the period (before non-controlling interest) was AED 646 million for the second quarter 2012 compared with the profit for AED 712 million for the second quarter 2011, a decrease of 9%. Six months ended 30 June 2012 compared with six months ended 30 June 2011 Profit before tax Profit before tax for the year ended 30 June 2012 was AED 2,501 million, compared to a profit before tax of AED 2,338 million for the year ended 30 June 2011, an increase of AED 163 million or 7%. Income Tax For the year ended 30 June 2012, income tax expense was AED 1,174 million, comprised of AED 1,315 million of current income tax expense partially offset by deferred income tax benefit of AED 141 million, resulting in an effective tax rate of 47%. For the year ended 30 June 2011, income tax expense was AED 1,315 million, comprised of current income tax expense of AED 1,245 and deferred income tax expense of AED 70 million, resulting in an effective tax rate of 56%. The lower effective tax rate when compared with the previous year is primarily driven by a tax free capital gain on the divestment of our interest in Tesla Motors. This positive effect is somewhat offset by relatively higher pre-tax profits in jurisdictions with higher tax rates. Profit for the period Profit for the period (before non-controlling interest) was AED 1,327 million for the year ended 30 June 2012 compared with the profit of AED 1,023 million for the year ended 2011, an increase of 30%. 5. Capital Structure and Liquidity Capital Structure Six month ended June 30 (AED millions) Total assets Total debt 114, ,176 73,187 74,997 Cash and cash equivalents 5,276 3,977 Net debt 67,911 71,020 Total equity 12,454 16,063 Net debt/net capital % 76.6% 76.8% 14

15 Total assets were AED billion at the end of June 2012, down from AED billion at the end of June The decrease in total assets was due to divestments and impairments of certain noncore assets in Canada in January 2012 and December 2011 respectively, the sale of Tesla Motors in April 2012 and devaluation of Euro and CAD from 30 June 2011 to 30 June This was partly offset by the acquisition of an additional 50% undivided interest in the Otter field in February 2012, investment of AED 171 million in WesternZagros in October 2011, completion of the Shuweihat 2 plant, and expansion of the Jorf Lasfar project in Morocco. Total debt and net debt decreased by AED 1,810 billion mainly due to AED 1.8 billion proceeds of sale from divestments made in TAQA NORTH and sale of Tesla Motors (AED 956 million) offset by issuance of Malaysian Sukuk bond in March 2012 (AED 794 million). TAQA s net debt to net capital ratio was 76.6% at the end of June 2012 compared with 76.8% at the end of June Liquidity Six month ended June 30 (AED millions) Cash and cash equivalents 5,276 3,988 Unused portion of credit facilities 14,632 11,678 Total available liquidity 19,908 15,655 Consolidated cash on hand as of 30 June 2012 was AED 5.2 billion compared with AED 4.0 billion at the end of 30 June The company had unused credit lines of AED 14.6 billion as of 30 June 2012, compared to AED 11.7 billion as of 30 June The increase in available liquidity was due to reduced borrowings from credit facilities from bond issues during the period US$ 1.5bn bonds and MYR 650m (US$ 215m) bonds and proceeds from the divestments of assets at TAQA NORTH and Tesla Motors offset by buyback of US$ 589 million worth of bonds. 6. Operational Data Power & Water UAE domestic plants Three months ended June 30 Six months ended June Power generation (GWh) 14,919 12,576 23,994 19,890 Water desalination (MIG) 60,870 53, , ,659 Technical availability (%) 97.59% 97% 94.20% 92.60% International plants Power generation (GWh) 5,231 3,639 10,328 7,034 Technical availability (%) 92.97% 91.30% 93.09% 89.50% 15

16 Oil and Gas Pricing Average Realised Prices TAQA NORTH Crude oil Natural gas liquids Natural gas Average TAQA Bratani Crude oil Natural gas liquids Natural gas Average TAQA Energy Crude oil Natural gas Average (US$/bbl) (US$/bbl) (US$/mcf) (US$/boe) (US$/bbl) (US$/bbl) (US$/mcf) (US$/boe) (US$/bbl) (US$/mcf) (US$/boe) Three months ended June 30 Six months ended June Oil & Gas Production Average Daily Production Three months ended June 30 Six months TAQA North Crude oil (mbbls/day) Natural gas liquids (mbbls/day) Natural gas (mmcf/day) Total TAQA Bratani (mboe/day) Crude oil (mbbls/day) Natural gas liquids (mbbls/day) Natural gas (mmcf/day) Total (mboe/day)

17 Average Daily Production Three months ended June 30 Six months TAQA Energy Crude oil (mbbls/day) Natural gas (mmcf/day) Total (mboe/day) Total (mboe/day) Netback Analysis (US$/boe) TAQA NORTH Three months ended June 30 Six months Gross price Royalties Net sales price Operating costs Operating netback TAQA Bratani Gross price Net sales Operating costs Operating netback TAQA Energy Gross price Royalties Net sales price Operating costs Operating netback (0.26)

18 Carl Sheldon Chief Executive Officer Abu Dhabi National Energy Company TAQA 18