INSIDE ENGIE BRASIL ENERGIA 2017 May 31, 2017
DISCLAIMER This publication may include forward-looking statements The information and opinions contained herein should not on events or results pursuant to Brazilian and international be understood as a recommendation to potential investors securities’ regulations. These forward-looking statements and no investment decision should be based on the are based on certain assumptions and analyzes made by veracity, topicality or completeness of this information or ENGIE Brasil Energia S.A. (“ENGIE Brasil Energia”, these opinions. None of the advisors to ENGIE Brasil “Company” or “EBE”), - previously denominated Tractebel Energia or the parties related thereto or their Energia S.A. -, in accordance with its experience and the representatives shall accept responsibility for any losses, economic scenario, market conditions and expected which may occur as a result of the use or the content in events, many of which are outside the control of ENGIE this presentation. Brasil Energia. Important factors which can lead to This material includes forward-looking statements as to significant differences between effective results and the events subject to risks and uncertainties, which based on forward-looking statements with respect to events or existing expectations and forecasts on future events and results, include the business strategy of ENGIE Brasil tendencies, may affect the businesses of ENGIE Brasil Energia, economic and international conditions, Energia. These forward-looking statements include technology, financial strategy, development of the forecasts of economic growth and energy supply and government services industry, hydrological conditions, demand as well as information on competitive position, the conditions in the financial markets, uncertainty surrounding regulatory environment, growth potential opportunities and the results of its future operations, plans, objectives, other matters. Innumerous factors can affect adversely the expectations and intentions and other factors. In the light estimates and assumptions on which these statements are of these factors, the effective results of ENGIE Brasil based. Energia may differ significantly from those indicated or implicit in the forward-looking statements with respect to events or results. 2 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
AGENDA 1st Panel Changes at ENGIE and in the Energy Industry Portfolio Management 2nd Panel Jirau HPP 3rd Panel Assets Transfer Model 4th Panel
Changes at ENGIE and in the Energy Industry
ENGIE IN THE WORLD Energy Revolution Drivers – The 3 Ds DECARBONIZATION DECENTRALIZATION DIGITALIZATION Growth in additional Decentralized Digitalization has renewable solutions will have changed energy worldwide energy more than doubled systems and capacity forecasted by 2030 improved supply of at 70% by 2030 services to clients compared with 2015 5 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
ENGIE IN THE WORLD Strategy and transformation plan aligned with the Energy Revolution TO BE THE WORLD LEADER OF THE ENERGY ambition TRANSITION TO REDUCE EXPOSURE TO Contracted / Regulated Businesses COMMODITY PRICES * EBITDA > 85% objectives HORIZONTE 2018 DEVELOP SOLUTIONS FOR FOCUS ON ACTIVITIES WITH LOW CO 2 EBITDA growth > 50% EBITDA > 90% CLIENTS EMISSIONS ** CONSTRUCT THE REDESIGN AND pillars for the 2016- INCREASE ADAPT THE PATH TO THE SIMPLIFY THE EFFICIENCY GROUP 2018 FUTURE PORTFOLIO transformational plan * Excludes energy generation in the spot market, E&P and supply and sale of LNG / ** Generation of energy with low CO 2 emissions, gas and LNG infrastructure, downstream 6 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
Are you ready? � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 05/31/2017
SOME INITIATIVES IN THE PAST 2 YEARS Storage R&D Medium size Heavy duty distributed centralized generation generation (UFSC & ENGIE (Power Plant) Client) 4 Objectives Battery-battery Small scale Fast Recharge distributed Station generation (Vehicles (Households) UFSC) � R$ 25 million � 36 months 8 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SOME INITIATIVES IN THE PAST 2 YEARS Hydrogen R&D � Goiás � Ceará � Roraima � São Francisco River Basin Natural Hydrogen � Selection of areas richest in H 2 ; � Installation of nanodetectors � Recovery of data via satellite � Quantification of the potential Potential for generating energy? Methodology for characterizing the performance of H 2 9 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SOME INITIATIVES IN THE PAST 2 YEARS LinkLab Connection between large companies, startups, funds and partners for promoting open innovation 640 m², located in the ACATE innovation center in Florianópolis – SC Thematics: STARTUPS Customer Journey Distributed Energy Resources Cybernetic Security IIoT (Industrial Internet of Things) Energy Efficiency Sustainable Urban Mobility Public Lighting 10 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SOME INITIATIVES IN THE PAST 2 YEARS Transmission Line Auction With the aim of making its debut in the transmission line segment, ENGIE participated in the ANEEL auction on April 24, 2017. Projects with investments worth R$ 2.5 bi Open-outcry in 3 lots Next auction - September/2017 11 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SOME INITIATIVES IN THE PAST 2 YEARS Management and Digitalization Planning and Strategy and Restructuring of Planning and Control Control Regulation Department Department Department Incorporation of the technology unit Regulatory and Planning and Market Affairs Regulation Creation of the strategy and innovation O.U. O.U. unit Portfolio Supply Planning and Planning and Managment Control O.U. O.U. Financial IT and Planning and Digitalization Control O.U. O.U. Strategy and Innovation O.U. Management with focus on Digitalization Environment of virtual collaboration Digitalization energy commercialization processes Historian Remote operations of plants 12 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
Portfolio Management
SUPPLY CHARACTERISTICS 2014: 133 GW 2024: 207 GW Share of Generation Sources Share of Generation Sources Dec/2014 +56% Dec/2024 14.5% Hydro – 117 GW 15.0% Hydro – 90 GW Thermal – 30 GW 1.4% Thermal – 20GW Nuclear – 3 GW 1.5% 8.7% 67.7% 56.5% Nuclear – 2GW Biomass – 18 GW 8.3% 3.9% 3.8% Biomass – 11 GW SHP – 8 GW 3.8% SHP – 5 GW 11.6% Wind – 24 GW Wind – 5 GW Source: EPE 3.4% Solar – 7 GW Total renewable sources will continue at 83% � – Priority for alternative sources: SHP, wind, biomass and solar: from 21 GW (16%) to 57 GW (27%) – Share of major hydros will decline from 68% to 57%, despite 27 GW in absolute growth Expansion in natural gas-fired thermal expansion is envisaged while no coal-fired TPPs � are forecast Investments (plants already contracted + planned) of approximately R$ 268 bi (baseline � date: May/15) Source: EPE (Ten Year Plan) 14 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
ENERGY BALANCE Sources: ONS/ ENGIE’s in- house studies Rate of Growth 2017 2018 2019 2020 2021 2022 on Demand (Engie Base Case) 3.2% 3.7% 4.2% 3.0% 2.8% 3.5% 15 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SYSTEM’S WHOLESALE SUPPLY by source Note: Information on an annual basis. Does not consider power and interchange restrictions. (Sources: ONS/ EBE in-house studies) 16 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
AFFLUENT NATURAL ENERGY and storage 28 Source: ONS 17 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
OPERATING BALANCE • Increase in renewable sources (wind, biomass, solar, SHP) combined with reduced consumption displace hydroelectric generation (GSF < 1). Source: EBE in-house studies (not considering unbid plants) 18 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
SIN OPERATING BALANCE x storage In the case of an ENA scenario equal to 90% MLT, the system will only reach a comfortable storage level in 2020. In the event of an ENA equal to 100% MLT during the course of 2018, the system would achieve secure levels in January 2019. ENA = 90% MLT ENA = 100% MLT Source: EBE in-house studies 19 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
THERMAL SUPPLY curve Significant volume of thermoelectric plants at high CVU increases volatility. 1.200 1.100 1.000 900 800 CVU (R$/MWh) 700 600 500 Current dispatch levels 400 300 200 100 Inflexibility 0 0 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 Availability (avg MW) Source: ONS (MOP for May 2017) 20 05/31/2017 INSIDE ENGIE BRASIL ENERGIA 2017
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