Highlights

Achieved record power generation of 1,066,081 MWh;

Achieved commercial operations of phase II at our Melancthon EcoPower Centre (Melancthon II);

Progressed well on the construction of our 197.8 MW Wolfe Island Wind Project (Wolfe Island). Melancthon II and Wolfe Island together will double the size of our Company;

Secured two power purchase agreements in Quebec for a combined 116 MW of wind prospects;

Received a favourable Panel decision to proceed with the construction and operation of our Dunvegan Hydroelectric Prospect (Dunvegan); and

Welcomed Keith O’Regan as executive vice president & chief operating officer.

Revenue, EBITDA, and cash flow, including per share amounts, improved in 2008 and fourth quarter 2008 over the prior year as a result of new EcoPower Centre additions, higher average prices received, and higher hydroelectric generation. Net earnings, including per share amounts, decreased year over year as a result of higher current and future taxes, and higher write-offs of prospect development costs. fourth quarter 2007 included a large future income tax recovery, which benefited net earnings and per share amounts in the prior year.

RESULTS OF OPERATIONS

The addition of phase II of our Melancthon EcoPower Centre (Melancthon II) and the Le Nordais EcoPower Centre (Le Nordais), each of which has a higher contract price than existing EcoPower Centres; and

Higher average Pool prices received on our merchant EcoPower Centres (2008 – CAD73/MWh; 2007 – CAD60/MWh).

Revenue in fourth quarter 2008 increased 36% compared to fourth quarter 2007 due primarily to:

The completion of Melancthon II in November;

The addition of Le Nordais as discussed above; and

Higher average prices received, as discussed below.

The company sold 79% of our generation under long-term sales contracts in fourth quarter 2008 (fourth quarter 2007 – 70%). The average price we received for electricity from all operations for fourth quarter 2008 was CAD78/MWh compared to CAD75/MWh in fourth quarter 2007 due to new EcoPower Centre additions with long-term contracts at higher prices than our existing operating EcoPower Centres.

In addition, kWh per share increased 6% in 2008 compared to 2007. This increase was a result of:

A full year of generation at Le Nordais and the Soderglen EcoPower Centre (Soderglen);

The addition of Melancthon II in November; and

Improved hydroelectric generation in Ontario due to higher water levels than the prior year.

These increases were offset partially by:

Lower generation at our Melancthon I EcoPower Centre as a result of 28 days of downtime in June for a substation expansion required to bring phase II online and less windy conditions in 2008 compared to 2007; and

Lower generation at our Alberta hydroelectric EcoPower Centres as a result of lower water levels.

In fourth quarter 2008, kWh per share increased 19% as a result of:

The completion of Melancthon II in November; and

The addition of Le Nordais as discussed above.

Operating Expenses

Operating expenses increased 31% in 2008 compared to 2007, due to:

A full year of operations at Le Nordais as well as the maintenance program required at the site in order to optimize performance and improve the availability of the turbines;

The addition of Melancthon II in November;

A full year of operations at Soderglen; and

Increased operating expenses at our Grande Prairie EcoPower Centre

(GPEC) as a result of the increased maintenance work performed in 2008.

Offset partially by:

Lower operating expenses at our BC and Alberta hydroelectric EcoPower Centres as a result of lower water flows.

Operating expenses increased 36% in fourth quarter 2008 compared to fourth quarter 2007, due to the reasons discussed above.

On a CAD/MWh basis, operating expenses increased 7% and 13%, respectively, in fourth quarter 2008 and 2008 compared to the same periods in the prior year primarily as a result of the above factors.

Since achieving commercial operations, GPEC has performed below expectations. In the fourth quarter of 2008, we hired a new plant manager and have formalized a detailed plan to improve the operations and profitability to what we had originally planned. We will expend around CAD4,000,000 in 2009 to upgrade, replace and rebuild certain plant components, including the super heaters and boiler protection equipment, as well as combustion modeling changes and the implementation of revised standard operating procedures. This work is planned for the third quarter of 2009, and as a result, we anticipate improved operating results in the fourth quarter of 2009.

At Le Nordais, as part of our plan on acquisition of this EcoPower Centre, we implemented a comprehensive maintenance program, focusing primarily on gearbox maintenance and replacement in order to improve the availability of turbines at the site. The objective of this maintenance program is to have at least 111 of the 133 turbines achieving 98% availability by the end of 2009, and all 133 turbines achieving this target in 2010, which is expected to improve generation above the historical long-term average generation of 165,000 MWh.

Gross Margins

Gross margins as a percentage of revenue were similar in 2008 at 69%compared to 70% in 2007. We expect gross margins to improve in 2009 as we execute on our plans for both GPEC and Le Nordais.

Gross margins, as a percentage of revenue, were consistent at 69% for

fourth quarter 2008 and fourth quarter 2007.

Interest on Credit Facilities and Credit Facilities

The increase in interest on credit facilities (excluding capitalized interest) in 2008 and fourth quarter 2008, compared to the same periods in the prior year, was due to higher outstanding corporate debt, as a result of:

The issuance of the unsecured Series 4 and Series 5 corporate debentures in June 2008, the proceeds of which were used to repay the acquisition facility for Le Nordais issued in December 2007.

On a CAD/MWh basis, net interest expense increased in 2008 as we have not yet had the full generation benefit of the Le Nordais acquisition.

Capitalized interest associated with construction-in-progress and development prospects increased due to projects with higher costs under or nearing construction, compared to the prior year.

Canadian Hydro Developers, Inc. is a Canadian based developer, owner and operator of 20 EcoLogo certified generating facilities.