Endorsement by the Board of Directors and the Management

ENDORSEMENT BY THE BOARD OF DIRECTORS AND THE MANAGEMENT

The financial statements of HS Veitur hf are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU .

The Company was established upon the division of Hitaveita Suðurnesja hf on 1 December 2008 . On 31 December 2008, assets, liabilities and equity pertaining to the non-competitive operation of Hitaveita Suðurnesja hf were transferred to HS veitur hf . At the same time, HS Veitur hf took over the operation of distribution of electricity, and hot and cold water from HS Orka hf . Equity taken over by HS Veitur hf amounted to ISK 8,798 million . In May 2008, the Icelandic Parliament, Althingi, no . 58/2008, amendments to law on the resource and energy sector . According to the law, Hitaveita Suðurnesja hf was obligated to separate formally in special entities a competitive operation from non-competitive operation . Legally, the division of Hitaveita Suðurnesja hf is based on 1 July 2008 . The accounting and administrative division was however not concluded until 31 December 2008 and the operational division is based on that date .

No operation was carried on in the Company in the year 2008 . According to the balance sheet, the Company‘s assets amounted to ISK 16,936 million at year end . Equity amounted to ISK 8,798 million or 51 .9% of total capital .

Shareholders in the Company numbered eight at year end, and the number remains unchanged from the establishment of the Company . At year end four shareholder held more than a 10% share in the Company, they are:

Share The Municipality of Reykjanesbær . . . . . . . . . . . . 34 .74% Geysir Green Energy hf . . . . . . . . . . . . . . . . . . . . . 32 .00% Orkuveita Reykjavíkur . . . . . . . . . . . . . . . . . . . . . . 16 .58% The Municipality of Hafnarfjarðarbær . . . . . . . . . . 15 .42%

The Company‘s Board of Directors proposes that in the year 2009 no dividends shall be paid to shareholders .

The Act on Public Limited Liability Companies states that in case a claimant on the Company, which has participated in the division, does not obtain satisfaction of his claim on the Company due to effect payment of the claim, each of the other participating Companies will be responsible in solidum for the liabilities which had been established at the time information about the schedule of division was published . The responsibility of the other recipient Companies will, however, be limited to the net value of that which was added in each individual recipient Company at the time of publication of the schedule, but the responsibility of the Company being divided and continuing operations will be limited to the net value remaining in the Company at the same time . The Company is thus responsible for HS Orka hf .‘s liabilities to the amount of ISK 9,449 million .

Statement by the Board of Directors and the Management

According to the Board of Directors‘ and the Management‘s best knowledge the financial statements are in accordance with International Financial Reporting Standards as adopted by the EU and it is the opinion of the Board of Directors and the Management that the financial statements give a true and fair view of the Company‘s assets, liabilities and financial position as at 31 December 2008 .

Furthermore, it is the opinion of the Board of Directors and the Management that the financial statements and endorsement by the Board of Directors and the Management contain a fair overview of the Company‘s financial development and performance, its position and is describing the main risk factors and uncertainties faced by the Company .

The Board of Directors and the Management of HS Veitur hf have today discussed the Company‘s financial statements for the year 2008 and hereby confirm them by means of their signature . The Board of Directors and the Management submit the financial statements for approval before the annual general meeting .

STJÓRN:

Reykjanesbær, 13 March 2009

FORSTJÓRI: AÐSTOÐARFORSTJÓRI