Forward-Looking Statements

This filing contains certain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, related to the expected future performance of our plans and objectives, such as forecasts and projections of expected future performance or statements of Management's plans and objectives. These forward-looking statements may be contained in filings with the SEC and in press releases and oral statements. We use words such as "anticipate," "estimate," "predict," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are based on the current expectations, estimates or projections of Management and are not guarantees of future performance. Some or all of these forward-looking statements may not turn out to be what the Company expected. Actual results will differ, and some of the differences may be material.

Factors that could cause actual results to differ materially from our projections include, among other matters, legislation and regulation, construction of new transmission facilities, financing risk for new transmission facilities, risk from joint development agreement, contract risks at MAM USG, attraction and retention of qualified employees, economy of the region and general economic conditions, competitive conditions, holding company structure, interest rate and debt covenant risk, pension plan investments, information technology, environmental risks, aging infrastructure and reliability, weather, vandalism, terrorism and other illegal acts, alternative generation options, and professional liability. Therefore, no assurances can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

Annual Performance Summary

Net Income and Earnings per Share



        (Dollars in Thousands Except per Share Amounts)    2008         2007
        Income (Loss) from Continuing Operations
        Regulated Electric Utility                        $ 4,909     $  3,732
        Unregulated Utility Services                         (487 )        (29 )
        Other*                                               (787 )     (1,078 )

        Income from Continuing Operations                   3,635        2,625

        Income (Loss) from Discontinued Operations
        Unregulated Engineering Services                      977         (746 )
        Unregulated Software Technology                         -         (247 )

        Income (Loss) from Discontinued Operations            977         (993 )

        Net Income                                        $ 4,612     $  1,632

        Basic Income Per Share                            $  2.75     $   0.98

* The "Other" line in Continuing Operations includes activities of the holding company (including corporate costs directly associated with unregulated operations and common costs not allocated to the regulated utility) and inter-company eliminations. "Other" in Discontinued Operations is inter-company eliminations.

MAM's consolidated net income increased $3.0 million from $1.6 million in 2007 to $4.6 million 2008. These improved results translated to more than 2.8 times the earnings per share, an increase of $1.77 per share. Although the increase in net income includes a one-time Gain on Foreign Exchange from Liquidation of $997,000, the increase also includes over $1.0 million in overall improved earnings performance from continuing operations.

The improved financial performance was recognized by the market through the continued solid pricing of our stock. As illustrated in the chart below, the average daily closing price of our stock increased by 41% over

2007, and by 128% compared with 2006. According to Edison Electric Institute ("EEI"), MAM had a total shareholder return of 15.9% in 2008, the second highest among the 59 EEI Index companies, in a year when only five of the 59 companies had a positive return.

[[Image Removed: LOGO]]

In spite of this success, 2008 was not without its share of financial challenges. While our overall financial performance trended upward in almost all categories, there were negative trends that caused some concern in specific areas:

• MPS electric sales were down modestly (-1.3%) in the residential category when compared to the prior year and were down sharply (-14.1%) for the large commercial segment compared to 2007. These trends appear to be a product of the overall poor economy which encouraged people to focus more on the cost of energy as well as the overall costs of being in business. While we do not expect this trend to continue for residential users, because conservation has its limits, we do expect continuing challenges for our commercial customers in the wood and lumber industry unless the market for those products improves.

• Accounts receivable at MPS have been affected by the continuing increase in the price of the energy and are up $603,000 or 7.7% over the prior year. While MPS is not in the generation business, the combination of the price of energy with transmission and distribution costs causes customers in a depressed economy to pay slower, negotiate additional payment arrangements, and incur slightly higher bad debts. Dollars under payment arrangements, which usually do not involve any form of discount, are up by 19.5%. In response, we have increased our reserve for bad debts from 5% at the end of 2007 to 6% at the end of 2008. While these are not positive trends, we have not experienced as large a slide in these metrics as other investor-owned utilities in our region.

• 2008 was the first full year of operation for our unregulated affiliate, MAM USG. While MAM USG contributed $8.4 million of revenue, the segment incurred an overall loss. See more detailed discussion of MAM USG below as part of Unregulated Utility Services.

Overview of Company Strategy

We are pleased with our progress during 2007 and 2008. However, we realize it is of critical importance that we continue to operate efficiently and to pursue investments to further solidify the Company and the future interests of our shareholders. Our basic strategy has remained unchanged from last year:

1. Efficiently manage and maximize our existing regulated utility operations, and

2. Utilize our utility-related core competencies to pursue other unregulated opportunities.

Utility Operations

Our strategy for our existing franchise as a regulated electric transmission and distribution utility has not changed. We have been serving customers in our territory for over a century. What was true during that span and remains true today is our objective to provide our customers with safe, reliable and competitively-priced electricity service while targeting a fair regulated return on investment for our shareholders. While we are challenged by our low customer density, slow economic growth, and rugged geography, we are proud to be able to provide rates that are competitive with other larger utilities.

In order to continue providing these services for another one hundred years and beyond, we must continue to efficiently manage and properly invest in our utility asset infrastructure. During 2007, 2008 and over the next few years, MPS has made and will continue to make substantial investments in our core electrical system. Capital expenditures for 2008 were approximately $6.8 million. For 2009-2012, capital expenditures will be approximately $7 million, with each year's capital budget being reviewed and approved by our Board. These capital expenditures are relatively large compared to past years as a result of matching our strong cash flows during the next three years from our regulatory asset stranded costs collections with our capital improvement needs. The investments in these assets will help provide regulated returns to our shareholders during their useful life, assuming favorable regulatory treatment.

What has changed tactically in our utility operation strategy is our pursuit of transmission alternatives. Our interest in transmission construction alternatives originated from interconnection requests filed by potential generation developers within and adjacent to our service territory. As noted in Item 1A. above, MPS continues to pursue development of a transmission line, which, among other things, would support development of renewable generation.

During the past year, we disclosed in SEC filings the Company's efforts to obtain approval for the proposed MPC Project (described under Item 1A. above ). Pursuant to a joint development agreement with CMP, the Company sought MPUC approval and filed a request with ISO-NE for allowance of the cost of the MPC Project to be regionalized in ISO-NE transmission rates as a market efficiency transmission upgrade in order to permit the delivery of renewable power to the New England market.

As is typical for a large and complicated series of regulatory proceedings, we have experienced our share of ups and downs during the last year. On the positive side were several items that supported our filing, including:

• FERC supported our proposal and granted regulated incentive rate treatment which would have provided for a 13.14% rate of return on equity for the proposed transmission investment, contingent on other approvals;

• FERC approved our recovery of prudently incurred costs to pursue this transmission development if the line is not built for reasons beyond our control, thereby reducing investment risks;

• Regional support for reducing New England's carbon footprint and dependence on foreign oil as it strives to meet the Regional Greenhouse Gas Initiative goals;

• Political support from the State of Maine to provide transmission development for renewable energy, particularly wind;

• Encouragement from energy developers to provide a line to deliver their product to the New England marketplace where supply is needed; and

• National support, in general, for investments in infrastructure, smart grid technologies, and renewable energy solutions, including the transmission infrastructure necessary to support them.

Parties opposing the Project cited a number of concerns, including:

• Whether the cost of the project is likely to outweigh its projected regional benefit;

• Whether our service territory, and the State of Maine ratepayers in general, should absorb the rate increases stemming from the project;

• Whether the generation developers should be responsible for some or all of the cost of providing transmission service to their projects;

• Whether MPS should pursue a project that effectively required it to join ISO-NE at a time when the MPUC, in Docket No. 2008-156, is investigating whether to order the withdrawal of Maine's utilities from ISO-NE;

• Whether the project is reasonable in light of the preliminary findings of complex electrical studies showing that under certain extreme contingencies, the project would have adverse impacts on the New England grid, since solving these problems would increase the estimated project costs;

• Whether other competing projects, both generation developments as well as transmission solutions, would better serve customers;

• The overall situation in the national economy, which makes it more challenging for developers to pursue projects; and

• Risks associated with wind generation development and whether proposed wind generation projects were at a satisfactory stage in development supporting the current proposed project as described in the regulatory findings.

As we reported in Form 8-K filings during January 2009, our request for MPC Project regulatory approval in the State of Maine has been dismissed by the MPUC. However, as the MPUC's Order dismissing the case included statements encouraging the project sponsors to continue to pursue transmission options that would facilitate the delivery of renewable energy from northern Maine, and address the lack of liquidity in the northern Maine market.

To that end, the MPC team is pursuing a number of related alternatives including:

• Revising the physical scope of the Project to make it a smaller project (a 300-MW, shorter project), or a larger project (extending the project to Canada);

• Pursuing alternatives to the market efficiency transmission upgrade model, possibly including a participant-funded approach;

• Identifying an approach that avoids having MPS join ISO-NE; and/or

• Pursuing federal economic stimulus funds aimed at right-sizing transmission infrastructure to accommodate the development of renewable generation.

We continue to believe that a northern Maine interconnection such as the MPC Project would generate substantial benefits to our service territory, the State of Maine ratepayers and municipalities, and the New England region, and would also be consistent with national energy policy make logical and economic sense. While it would be impossible for us to predict an outcome at this point, we think it is in the best interests of our customers and shareholders to continue our quest to connect the MPS territory to the rest of Maine and New

England. Future efforts may involve a project which is different, at least in part. As previously reported and as discussed above under Item 1A, recent developments have caused MPS to reevaluate the scope of the project and to also consider alternative means of constructing a transmission line to allow MPS to interconnect its system with the New England Grid and to support renewable energy projects in its service territory.

Unregulated Services

A key portion of our strategy is to provide complementary services to our regulated utility operations by utilizing our core competencies. MAM, as the holding company, formed an unregulated subsidiary in September 2007 to pursue these initiatives. This subsidiary, MAM Utility Services Group, is providing electrical contracting, engineering, planning, procurement, and project management services to developers, generators, and others in the private and public sectors.

MAM USG enjoyed successes during its first full year in business by winning bids to perform the electrical contracting work for two large wind projects as well as several other smaller commercial and industrial projects. Increasing our revenue for this segment was achieved. Total revenue for this segment was $8.4 million for 2008. However, we did incur significant expense which resulted in a loss for that segment of approximately $487,000. Obviously, we are disappointed any time we incur a loss and we have taken steps in several areas to help rectify this situation. Most notably, we have created templates and processes to more carefully track costs, we have hired a new General Manager, we have installed an incentive-based pay program within this segment, and we have also asked the MPUC for relief from corporate holding company cost allocations which we believe unfairly burden this subsidiary.

We continue to believe that a growth component of our strategy corresponds well with the stable annuity provided by the regulated utility, and offers potential upside to our shareholders.

Discontinued Operations

As noted in prior filings, all operations of TMG, TMGC, MTI, and Mecel, were discontinued near the end of 2006. During the first half of 2007, substantially all of the assets of these entities were sold and liabilities settled. In 2008, few transactions flowed through discontinued operations and we do not expect any material transactions during 2009.

In October 2008, public notice was posted in Nova Scotia, Canada, for the dissolution of TMGC. Under Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation," the currency translation adjustment accumulated in Other Comprehensive Income ("OCI") within Shareholders' Equity is realized upon complete or substantially complete liquidation of the foreign entity. The accumulated balance totaled $997,000 for TMGC. Simply stated, this amount resulted from purchasing assets in Canada when the U.S. dollar was worth significantly more than the Canadian dollar. As the Canadian dollar strengthened, when the final dissolution occurred in the fourth quarter of 2008, those Canadian investments were worth more and a gain was realized. With the dissolution completed in the fourth quarter, MAM's foreign investment in TMGC was completely liquidated, and this accumulated OCI was recognized as a Gain on Foreign Exchange from Liquidation.

Dividend Policy

As described in our 2007 Annual report, we anticipated solid cash flow in 2008, an increase in consolidated earnings for 2008, and the related paydown of total debt. We have achieved these goals which put the Company in a position to reinstitute a common dividend. A $0.05 per share fourth quarter dividend was announced in December 2008, signifying a return of a dividend payment which was suspended in 2005 after 78 consecutive quarters.

As was stated in the 2007 10-K, dividends are subject to quarterly declaration by the Board, which establishes the amount of each quarterly Common Stock dividend and fixes the record and payment dates. A

dividend would be considered for declaration to Common shareholders when adequate cash flows are available and when fiscally prudent after careful consideration of all cash priorities. Although dividend payments are subject to discontinuance by our Board at any time, we expect a quarterly dividend payment of at least the present amount to continue for the foreseeable future.

Cash Flows

Cash Flows Provided by Operating Activities reflect the consolidated operations of MAM as the holding company, which is comprised of MPS, the regulated electric transmission and distribution utility, as well as MAM USG, which offers electrical contracting, engineering, planning, procurement, and project management services to developers, generators, and others in the private and public sectors.

Cash flows from operations at MPS will remain higher than our net income would indicate, due to the collection of previously deferred regulatory costs being collected primarily through 2012. The reason these collections do not affect our net income is that there is a regulatory mandated increase in the amortization of our regulatory stranded cost asset on our balance sheet. These cash flows, which we call "stranded cost free cash flows," will be collected through 2016, with the majority collected during the period from January 1, 2007 through December 31, 2012. An estimated table of these net cash flows after payment of deferred taxes is listed below through 2012 (in thousands of dollars).

2008 2009 2010 2011 2012 $5,433 $5,941 $6,179 $6,683 $1,645

After the majority of our stranded cost free cash flows are collected through 2012, we will be mandated to file rate proceedings with the MPUC to determine any necessary rate adjustments. Depending on items such as our capital expenditures being included as income-earning regulated assets, costs of providing our regulated services, and competitiveness of rates at the time, there may be rate changes for our customers.

Cash flows provided by MAM USG will depend on our ability to win construction bids, and manage our costs on projects. While we are developing a sales pipeline of projects, we cannot predict how successful our bids to win this work will be. We do not have a significant backlog of projects which we have already won.

Other than cash for funding normal operations, the utility capital plan, and payment of dividends as mentioned above, the only other significant impact on cash flows anticipated for 2009 is contributions to our defined benefit pension plan. MAM has reduced our overall market risk as we have frozen participation as of January 1, 2006, and frozen any future salary and service cost accruals for participants as of December 31, 2006. Similar to many other plans, future contributions under our plan may be more or less depending on market conditions. As of December 31, 2008, approximately $122,000 had been contributed to the pension plan for plan year 2008. During 2009, we anticipate contributing an additional $341,000 for plan year 2008, as well as $600,000 for plan year 2009.

Consolidated Capital and Construction Program

Cash expenditures for capital improvements, additions, replacements and
equipment for the years ended December 31, 2008, 2007, 2006, and 2005, along
with estimated expenditures for 2009 are as follows (in thousands of dollars):



                                        2009        2008      2007      2006      2005
                                     (Unaudited
                                     Estimates)
       Maine Public Service         $      7,158   $ 6,709   $ 6,178   $ 3,502   $ 4,822
       MAM Utility Services Group              -        63         -         -         -
       The Maricor Group                       -         -         -        49       238
       Maricor Technologies, Inc.              -         -         -       244       446
       Other Subsidiaries                      -         -         -        30        23

       Total                        $      7,158   $ 6,772   $ 6,178   $ 3,825   $ 5,529

The significant increase in MPS's projected capital expenditures that began in 2007 and continued through 2008 and into 2009 is due to the necessary improvements identified by the distribution and transmission inspection programs, which have been and will continue to be partly funded by the stranded cost free cash flows. MPS anticipates that its system will require such higher levels of capital expenditures for the next several years.

Detailed Analysis of Changes in Financial Condition by Operating Segment

Regulated Utility Operations

The following discussion includes the operations of MPS and Me&NB:



                                                               2008      2007
       Net Income-Regulated Electric Utility (in thousands)   $ 4,909   $ 3,732
       Earnings Per Share from Regulated Electric Utilities   $  2.93   $  2.24

Regulated Utility Operations provided $0.69 or 30.8% more per share in 2008 than 2007 on lower operating and interest expense. These expense reductions more than compensated for the decrease in revenue for the segment, down approximately $400,000, due to reductions in volume.

Regulated Utility Operating Revenue

Consolidated revenues and Megawatt Hours ("MWH") for the years ended
December 31, 2008 and 2007 are as follows (in thousands of dollars):



                                                  2008                 2007
                                           Dollars      MWH     Dollars      MWH
       Residential                         $ 15,168   177,574   $ 15,318   179,865
       Large Commercial                       4,739   146,416      5,110   170,376
       Medium Commercial                      5,670   103,497      5,789   107,577
       Small Commercial                       7,297    92,699      7,397    93,846
       Other Retail                             917     3,391        919     3,392

       Total Regulated Retail                33,791   523,577     34,533   555,056

       Other Regulated Operating Revenue      3,260                2,918

       Total Regulated Revenue             $ 37,051             $ 37,451

Residential customer sales were 2,291 MWH or 1.3% below 2007, the primary driver of the $150,000 decrease in residential operating revenue. Small commercial volume decreased a similar amount, down 1,147 MWH or 1.2%. These reductions in volume appear to be due to conservation efforts.

Medium and large commercial customer sales are down more, reflecting the cutbacks in operations of some of our larger customers. Medium commercial volume decreased 4,080 MWH or 3.8%, while large commercial volume is down 23,960 MWH or 14.1%. These decreases combined reduced revenue approximately $490,000. These reductions in volume are the continuation of the trend that began in 2007.

MPS revenue dollars were partly protected from these decreases in volume. In the Company's most recent stranded cost rate case, 2006-506, MPS agreed to reconcile the projected sales volume on which the stranded cost rates were based to the actual sales volume. With volume down significantly, MPS recognized revenue and established a regulatory asset to reflect the stranded cost revenue allowed in rates. The estimated adjustment for 2008 was $754,000.

Other retail revenue consists of area and street lighting. This revenue is stable, with constant volume and a $2,000 decrease in sales dollars.

Other regulatory operating revenue is up approximately $342,000. Transmission wheeling revenue was up approximately $431,000. Similar to the increase in 2007 over 2006, this additional revenue will be a reduction of the transmission revenue requirement in the next OATT. Miscellaneous service revenue is down approximately $135,000. MPS performed a market study of its rates for these services during 2008, and reduced its rates to be more competitive. Smaller changes in other electric and unbilled revenue account for the remaining change.

Regulated Utility Expenses

For the years ended December 31, 2008 and 2007, regulated operation and
maintenance are as follows (in thousands of dollars):



                                                         2008       2007
           Regulated Operation and Maintenance
           Labor                                       $  5,098   $  5,060
           Benefits                                       1,705      1,968
           Outside Services                               1,307      1,199
           Holding Company Management Costs               1,149      1,901
           Insurance                                        490        548
           Regulatory and Licensing                       1,105      1,160
           Transportation                                   707        855
           Maintenance                                      572        566
           Other                                          1,458      1,541

           Total Regulated Operation and Maintenance   $ 13,591   $ 14,798

Regulatory utility expenses are down approximately $1.2 million or 8.2% year over year. The largest categories of decreases included:

• Benefits decreased $263,000, due to lower pension expense and MPS labor used by the MPC project and MAM USG;

• Holding company management costs are down $752,000, due to a combination of a smaller pool of management costs and more costs allocated to MAM USG;

• Insurance expenses are general liability, property and other insurance . . .