TRACTEBEL INVESTOR DAY 2015 PROSPECTS, EXPANSION AND NEW WAYS AHEAD FOR ELECTRICITY São Paulo (SP), May 20, 2015
PART 1: PROSPECTS FOR THE ELECTRIC ENERGY MARKET Marcos Keller Amboni Manager – Regulatory and Market Matters
Growth in demand 80000 75000 70000 65000 60000 MWavg 55000 50000 45000 40000 35000 30000 Demanda de Energia Energy Demand Média Móvel de 12 meses Rolling 12-month Average Source: ONS 3
Government view on expansion of supply December 2013: 124 GW December 2023: 194 GW Nuclear Solar Nuclear Nuclear Nuclear Wind Solar SHP Wind Wind 3 2 3 3,5 2 3 3.5 5 22 22 2% 2% 2% 2% 2% 2% 2% 4% Biomass 11% 11% 10 SHP SHP 8% 7 7 4% 4% Thermal 18 Biomass Biomass 15% 14 14 Hydro Hydro 7% 7% 117 Hydro 117 86 60% 60% Thermal Thermal 69% 28 28 14% 14% Hydroelectric power will continue with a dominant role in the matrix, although its share will decline in relative terms (from 73% to 64%) while renewable sources will increase (from 10% to 19%). The share of electricity from thermal sources will remain virtually unchanged. PDE forecasts growth of 7,500 MW by 2023 in thermoelectrics with a VUC below R$ 250/MWh. Investments of about R$ 143 bi in new generation plants. Source: EPE 4
Rum of the river power plants Evolution of SIN storage capacity 5 Reservoir fill-up time (months) 4.4 17 GWavg 15 GWavg 22 GWavg 20 GWavg GWavg 4 52 GWavg 52 GWavg Addition in 7 GWavg (2% ) 3.2 3 204 GWavg 201 GWavg 2 SE/ C-W NE S N By 2023: an increase of 2% in the reservoirs against an increase of 40% in consumption. Source: EPE 5
R$/MWh 100 200 300 400 500 600 700 800 Consequence: PLD will remain volatile and at high levels 0 Jan/06 jan/06 Jul/06 jul/06 Jan/07 jan/07 Mensal Jul/07 Montly jul/07 Jan/08 jan/08 Jul/08 jul/08 Jan/09 jan/09 MM12meses MM12Months Southeast Spot Prices Jul/09 jul/09 Jan/10 jan/10 6 Jul/10 jul/10 Jan/11 jan/11 MM36meses MM36Months jul/11 Jul/11 jan/12 Jan/12 jul/12 Jul/12 Jan/13 jan/13 jul/13 Jul/13 MM60meses MM60Months jan/14 Jan/14 Jul/14 jul/14 jan/15 Jan/15 388.48 267.99 584.21 404.95
Regulated tariffs Sep/12: MP 579 promised a 20% tariff reduction During 2013 and 2014: circumstantial pressures resulted in emergency measures for reducing the distributors’ financial exposure and containing tariffs (tariff control) 2013: R$ 9.9 bi provided by the Treasury, to be repaid in 5 years 2013 and 2014: R$ 4.5 bi provided by the Treasury as a non-repayable cash grant 2014: CCEE loan of R$ 11.2 bi, to be repaid in 2 years 2014: 2 nd CCEE loan of R$ 6.6 bi , to be repaid in 2 years 2015: 3 rd CCEE loan of R$ 3.1 bi , to be repaid in 2 years Recent energy auctions: A-0 (6 years): 2,046 avMW @ R$ 268.3/MWh Reserve 2014 (20 years): 535.7 avMW @ R$ 169.82/MWh A-5 2014 (20-25-30 years): 2,742.5 avMW @ R$ 196.11/MWh A-1 2014 (3 years): 622 avMW @ R$ 197.09/MWh LFA 2015 (20 years): 97 avMW @ R$ 199.99/MWh A-5 2015 (25-30 years): 1,146 avMW @ R$ 259.19/MWh 7
Tariff evolution Effects on tariffs are expected to persist for some years Costs have begun to be incorporated into tariffs Since 2014: Costs per Availability Modality Contracts and exposure to the short term market Feb/15: Distributors’ tariffs suffer extraordinary readjustment (generalized tariff increase) to incorporate: Increased costs with Itaipu Increase in CDE (ending of treasury subsidies) Introduction and subsequent increase of Tariff Flags Existing Energy Auctions at high prices TE TUSD wire TUSD charges TF × Energy Tariff TUSD wire TUSD charges × Retail Tariff 8
1.000 1,000 1,000 1.500 1,500 1,500 2.000 2,000 2,000 2.500 2,500 2,500 3.000 3,000 3,000 3.500 3,500 3,500 4,000 4,000 4.000 4.500 4,500 4,500 5.000 5,000 5,000 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000 500 500 500 500 Volume (MWavg) Volume (MWavg) Reserve Auction New Energy Auction New Energy Auction Key: Key: 0 0 0 0 2.997 2.997 203,2 203,2 Dec 2005 Dec 2005 Dez 2005… Dez 2005… 211,6 211,6 1.556 1.556 Jun 2006 Jun 2006 Jun 2006… Jun 2006… I ncrease in prices for the latest new energy auctions 206,4 206,4 1.104 1.104 Out 2006 Out 2006… Out 2006… Oct 2006 214,6 214,6 1.097 1.097 Jun 2007 Jun 2007 Jun 2007… Jun 2007… 202,9 202,9 2.312 2.312 Sep 2007 Sep 2007 Set 2007… Set 2007… 193,4 193,4 96 96 Aug 2008 Aug 2008 Ago 2008… Ago 2008… 675 675 195,6 195,6 Ago 2008… Ago 2008… Aug 2008 Aug 2008 205,9 11 11 205,9 Aug 2009 Aug 2009 Ago 2009… Ago 2009… 135,8 135,8 327 327 Jul 2010… Jul 2010 Jul 2010 Jul 2010… 968 968 90,0 90,0 Dez 2010… Dez 2010… Dec 2010 Dec 2010 130,3 130,3 1.544 1.544 Large Dam Auction Complementary Source Auction Aug 2011 Aug 2011 Ago 2011… Ago 2011… 121,4 121,4 555 555 Dez 2011… Dec 2011 Dez 2011… Dec 2011 108,4 108,4 302 302 Dec 2012 Dec 2012 Dez 2012… Dez 2012… 142,7 142,7 691 691 Aug 2013 Aug 2013 Ago 2013… Ago 2013… 139,7 139,7 333 333 Nov 2013 Nov 2013… Nov 2013… Nov 2013 123,4 123,4 1.600 1.600 Dez 2013… Dez 2013… Dec 2013 Dec 2013 9 135,3 135,3 206,7 206,7 395 395 Jun 2014… Jun 2014 Jun 2014 Jun 2014… 2.743 2.743 Nov 2014… Nov 2014… Nov 2014 Nov 2014 258,8 258,8 218,4 1.147 1.147 Apr 2015 Apr 2015 Abr 2015… Abr 2015… 184,9 186 Jun 2007 Jun 2007 Jun 2007… Jun 2007… 714 Jul 2010 Jul 2010… Jul 2010… Jul 2010 200,0 Apr 2015 Apr 2015 97 Abr 2015… Abr 2015… 208,8 Aug 2008 Aug 2008 Ago 2008… Ago 2008… 231,5 548 179,6 Dec 2009 Dec 2009 Dez 2009… Dez 2009… 753 Jul 2010 Jul 2010… Jul 2010 Jul 2010… 445 126,7 Aug 2011 Aug 2011 Ago 2011… Ago 2011… 460 227,9 126,2 Aug 2013 Aug 2013 Ago 2013… Ago 2013… 676 Out 2013… Out 2013… Out 2013 Out 2013 535 123,5108,7 Nov 2007 Nov 2007 Nov 2007… Nov 2007… 1.553 Apr 2008 Apr 2008 Abr 2008… Abr 2008… 1.383 Price (R$/ MWh) Price (R$/ MWh) Base data: Apr/15 Base data: Apr/15 107,5 Apr 2010 Apr 2010 Abr 2010… Abr 2010… 3.200 R$ - R$ 50.00 R$ 100.00 R$ 150.00 R$ 200.00 R$ 250.00 R$ 300.00 R$ - R$ 50.00 R$ 100.00 R$ 150.00 R$ 200.00 R$ 250.00 R$ 300.00 R$- R$- R$50,00 R$50,00 R$100,00 R$100,00 R$150,00 R$150,00 R$200,00 R$200,00 R$250,00 R$250,00 R$300,00 R$300,00
Next scheduled auctions for 2015 Beginning Source/ regulated Auction Date Requirements Cap price of supply market contract type * Q 30: SHP e HPP TPP: VUC < R$ 250/MWh A 25: gas-fired TPP and A-3 New Energy Jul/24 Jan/01/18 and inflexibility < 50% biomass-fired (any VUC) A 20: wind VUC = zero and Aug/14 Aug/01/17 Q 20: solar Reserve 1 Capacity > 5 MW VUC = zero and Nov/13 Nov/01/18 Q 20: solar and wind Reserve 2 Capacity > 5 MW May/29 Jan/01/16 A 20: gas-fired TPP R$ 581/MWh Reserve 3 * Q = Quantity-type auction; A = Availability-type auction 10
Prospects Load growth has been resilient: uncertainty surrounds the impact of rationalization measures and short-term outlook for tariffs Scenario strongly influenced by current circumstances Hydroelectric generators much affected Higher market price Stimulus for contracting thermoelectric power plants, principally those with a low VUC Consolidation as a hydrothermal system Growing participation of complementary sources Important increase in the participation of thermoelectric generation, now with efficient thermal power plants Hydroelectric power plants without reservoirs Distributors’ tariffs will remain high for a long period 11
PART 2: OPPORTUNITIES IN EXPANSION Guilherme Slovinski Ferrari Manager – Business Development
Our asset base Increase in installed capacity Generator sources (7 GW) Location of the plants 5% 16% 1 79% Hydroelectric 1998 2015 Complementary Thermoelectric Legend Hydroelectric Thermoelectric Complementary Under construction 13
What is our growth strategy To maintain a portfolio of projects in different phases of development and using various power sources. Focus on sites with major potential in installed capacity and with a high performance factor, allowing for the possibility of gains in synergy. Acquisition of the best projects and assets in the market. To pursue growth in renewable sources in the regulated and free markets. 14
Basic development structure Principal themes Challenges Action plan Prior negotiation with owners Negotiation with several owners, 1 regularization of documentation, Monitoring registration in real estate Land ownership property registration with public registry offices issues: departments and issue of DUP (Public Clear and objective rules for Utility Declaration). negotiation In loco measurement of resources 2 Measurement and evaluation of the Evaluation of necessary resources: wind, water, coal, Study of existing and necessary the necessary gas, biomass, access, existing infrastructure resources: infrastructure and works logistics. Long term fuel supply agreements 15
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