The Mahagnao project is located at the west foot of the volcanic range, consisting of Mt. Perker, Mt. Noburas and Mt. Gumdalita in Barangay Mahagnao, Burauen. The power plant is situated half kilometer downstream from the outlet of Mahagnao Lake within the buffer zone of Mahagnao Volcano Natural Park.

The Mahagnao Micro-hydro Demonstration project is unique in that the system can operate as either a run or river or a storage type power station, depending on the demand for power and hydrological conditions at the time. The plant ordinarily operates as a run of river power station, but switches to storage mode when demand for electricity exceeds run of river capacity.

The ability to switch modes of operation is facilitated by the construction of a trench to carry water to the power station intake, rather than the more traditional weir structure across the Lake outlet.

The project aims to demsonstrate that off-grid micro-hydro schemes are economically feasible for small remote communities if a simplified maintenance program is adhered to. The scheme was commissioned in 2002 and supplies off-grid electricity to 3 upland baragays comprising a total of approximately 300 households