Brazil Solar Energy Development Dale Keyes Light Power LLC questions@lightpower.info +1-415-938-4684

1. PROPRIETARY & CONFIDENTIAL
BRAZIL SOLAR PV
INVESTOR
PRESENTATION
Briefing – Dale Keyes
Oct 2016

2. PROPRIETARY & CONFIDENTIAL
INVESTMENT THESIS
• STABILIZED AND GROWING ECONOMY
• OUTSTANDING RESOURCE
• GOVERNMENT COMMITMENT TO SOLAR
• STRONG DEMAND GROWTH & HIGH PRICES
• SUBSIDIZED FINANCING
• STRONG EQUITY RETURNS
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3. PROPRIETARY & CONFIDENTIAL
ECONOMY
> A $1.77 trillion economy (GDP), the 9th largest in the world (7th in 2014, before recession).
By reference, South Korea is $1.38 trillion and Mexico $1.14 trillion (15th) [IMF, April 2016]
> The last two years experienced the deepest economic recession ever recorded. 2015 GDP
y/y was -3.8%, and expect -3.5% for 2016. There are positive signs this has bottomed out.
> Political uncertainty has dissipated, encouraging signs of confidence suggest growth is likely
before the end of 2016. IMF increased GDP growth forecast to 1% for 2017. The Brazilian
Central Bank just revised 2017 GDP projections up to 1.5% growth and believes private
investment may surprise on the upside. Brazilian business sentiment is optimistic.
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4. PROPRIETARY & CONFIDENTIAL
POSITIVE INVESTOR CLIMATE
> The new administration (confirmed in Sep.) has shown strong commitment to fiscal consolidation
and structural reform. A constitutional amendment establishing a ceiling for fiscal expenditures at
all levels of government is expected to receive congressional approval this week. Social security
reform is being finalized and privatization and infrastructure projects are now receiving foreign direct
investment.
> Last year, during the recession (2015), Brazil received $75 billion in foreign direct investment. The
6th most attractive destination in the world after USA, China, Switzerland, Ireland, and Hong Kong.
(Mexico received $30 billion and was 15th). [Worldbank]
> "We operate in many countries, but Brazil is the most important investment outside of
China", says State Grid (world's largest electric utility) - Oct 2016. In 2016, State Grid made
the largest acquisition (USD $8 billion) of a Brazilian electric utility in 25 years (CPFL), and recently
announced plans to invest another $5 billion over three years.
> "China Three Gorges [who owns the world's largest hydro asset] buys Duke Energy Brazil assets
for USD $1.2 billion", Oct 10 2016.
> EDF Energies Nouvelles announced the acquisition of an 80% stake in a 192MW project from
Canadian Solar. “This confirms a strong ambition to strengthen and diversify the EDF Group
renewables assets portfolio in Brazil”, said CEO on Oct 11, 2016.
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5. PROPRIETARY & CONFIDENTIAL
OUTSTANDING SOLAR RESOURCE
> Brazil’s worst insolation is better than Germany’s best [uniform scale]
...and,
Germany
today has
38GW
of Installed
Solar PV
Capacity
[GTM]
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6. PROPRIETARY & CONFIDENTIAL
GOVERNMENT PLANS, AUCTIONS & LAWS
> New Net Metering Laws (2016): virtual & community, up to 5MW, 5yr credits
> New Tax Incentives (2016). No Import Duties. Discounted Transmission.
> Commits to increase Renewables (non-hydro) to 23%, from 16%, by 2030 (COP21)
> Annual Federal and State 20-25 year PPA Auctions: 1-2GW / year [7GW by 2020]
Non-Hydro
Renewables
+9%
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7. PROPRIETARY & CONFIDENTIAL
HIGH ENERGY PRICES
US $230
/ MWh, @
US$3.2/R$1
US $130
/ MWh, @
US$3.2/R$1
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8. PROPRIETARY & CONFIDENTIAL
HIGH PRICES AND DEMAND GROWTH
> High National Average Energy Prices USD$132/MWh (R3.2/1)
> National Average price increased 51% in 2015
> 30 million "new" middle class, buying TVs, computers, refrigerators, washers, etc.
> LT Load Growth of 4%/yr; currently approx. 140 GW total capacity
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9. PROPRIETARY & CONFIDENTIAL
EARLY STAGE GROWTH, LIKE USA (2007)
US Historical Installed
PV Capacity MW
US (2006) is comparable to Brazil (today)
> Utility installations will grow exponentially (2017 and 2018 are contracted).
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10. PROPRIETARY & CONFIDENTIAL
AUCTION WINNERS
Canadian Solar: One of the world's largest and currently Brazil's leading solar module
manufacturer (now building a 400MW plant in Sao Paulo, by Flextronics)
NOTE: 2014 Auction ("LER 2014") winners likely will not build out, due to unhedged FX losses
ENEL: Brazil's leading solar investor and one of the world's largest electric utilities (90GW
Capacity). Currently building largest brazilian solar plant (250MW).
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11. PROPRIETARY & CONFIDENTIAL
GROWTH PRECEDENT, WIND INDUSTRY
> Government auctions and incentives promoted high growth wind industry
> Brazil today is 4th largest global wind market by capacity additions (Global Wind Counsel)
Brazil 19GW Wind Capacity, Historical (2016) and Planned (based on PPA Auctions)
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12. PROPRIETARY & CONFIDENTIAL
SUBSIDIZED FINANCING
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> Interest = 9.5 - 11% (below commercial market rates)
> Multiple local development bank options with subsidized financing
> Some banks require minimum "local" content for construction costs
> Non-recourse
> Up to 10 - 15 years repayment
> Leverage = 60 - 80%; 1.3x DSCR on P90

13. PROPRIETARY & CONFIDENTIAL
EXCEPTIONAL INVESTMENT RETURNS
> Expected Real Returns (ROI) are 12-15%, after inflation, or 17-20% Nominal ROI expressed in
local currency ($ Real).
> Further upside potential, pending debt (leverage, amortization, rate) and EPC terms
> High margins expand capacity to hedge foreign currency risk
2016 - 2051 2016 - 2051
USD $,000 (Reais $,000)
Investment -$20,891 -$67,897
Project IRR (Local R$) 18.49%
Discounted Cash Flows 15.0% 17.0% 13.0%
Discount (after inflation) 10.0% 12.0% 8.0%
NPV (Equity, R$,000) $28,088 $10,211 $52,658
NPV in USD (@ 3.25/1 USD) $8,643 $3,142 $16,202
Assumptions:
R$ / USD$ 3.25
Concession 35 yr
20 year PPA (MWh, w/infl. adj.) R$323/US 100
Uncontracted Revenues R$150/US 50
Leverage (Debt / Capital) 68%
2016 inflation = 7.2%
2017 inflation = 5.1%
2018+ inflation = 4.5%
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14. PROPRIETARY & CONFIDENTIAL
SEIZING OPPORTUNITY
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Send your grain across the seas, and in time,
profits will flow back to you.
But divide your investments among many places,
for you do not know what risks might lie ahead.
Farmers who wait for perfect weather never plant.
If they watch every cloud, they never harvest.
Plant your seed in the morning and keep busy all
afternoon, for you don’t know if profit will come
from one activity or another—or maybe both.

15. PROPRIETARY & CONFIDENTIAL
EXHIBITS
> Electric System Overview
> Transmission Capacity / Strategy
> Brazilian Development Timeline
> Financing Alternatives
> Investment Options Please write or call for Exhibits
Dale Keyes, CFA
+1-415-905-0891
dkeyes@lightpower.info