SPAIN: 09/3/10 7:00:32 AM    ALBERTA: 09/3/10 1:00:32 AM

TSXV: EUG
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OVERVIEW
ECONOMIC CONTEXT
PROJECT TIMELINE
THE UGS PROCESS
STRATEGIC PARTNERSHIP
PERMITTING & COMMUNITY
LAND ACQUISITION
EPC
REMUNERATION
SPAIN
REMUNERATION

Castor UGS will be a regulated utility with its remuneration set by Spanish regulation. Remuneration for UGS includes three components: repayment of capital, return on investment and payment for operating and maintenance expenses.

The capital cost of the project is returned in equal payments over the useful life of the asset, which is set by regulation at 10 years for all facilities except for the cushion gas, which is set at 20 years. A provisional remuneration regime may be implemented for the period between the granting of the concession and the start-up of the facility, which would provide early cash flow. After the end of the useful life of the facilities, the cost of extension of useful life payment commences at half the rate that was paid in the last year of the useful life and continues for the remaining period of the concession (30 years plus two extensions of 10 years each).

Return on investment is based on the net investment times the remuneration rate. The remuneration rate is equal to the Spanish government 10-year bond rate plus 3.5 percent and is set for the full useful life of the facility. As with repayment of capital, after the end of the useful life, the cost of extension of useful life payment will commence at half the rate that was paid in the last year of useful life and continues for the remaining period of the concession. Payment for operating and maintenance expenses includes both a fixed component and a variable component and is designed to cover actual operating and maintenance costs.

2007 Annual Report
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