Brazilian Investments Partnerships Program – PPI

June, 2020

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▪ Governance, coordination,

monitoring and oversight

▪ Transparency, dialogue,

credibility and predictability

▪ Well-designed projects

▪ Technical and legal framework

enhancement

Adds on efficiency and value to the process

PPI works as a hub for investments

Concessionaries

Embassies

PPI

National and

internationalinvestors

SectorialMinistries

RegulatoryAgencies

LegislativeBranch

ControlEntities

LicensingEntities

SubnationalGovernments

MultilateralOrganizations

FinancialAgents

(banks, investment funds, etc)

SectorialUnions

2

How Covid-19 impacted the power market, Discos effects and Covid account

Brasília, junho de 2020

How Covid-19 impacted the power market?

Brazil

Fonte: CCEE

Fonte: CCEE, EPE e ONS

How Covid-19 impacted the power market? Next 5 years

Discos effects

Fonte: CCEE (modificado)

Main Economic / Operational Measures in the Power Sector (mitigating the risk of insolvency in the entire industry chain)

• Exemption from the Social Energy Tariff for 10 million low-income consumers withrevenues of up to 220 kWh/month (cost of 1.2 billion Reais, out of which 900 million Reaisfrom the Treasury and 300 million Reais from the CDE).

• Authorization of credit operations for Distributors (R$ 15 to R$ 17 billion), to be deferred in tariff processes over the next 4-5 years (including interest and charges) – Covid account

• Release of the System Service Charge resources, in the total amount of 2 billion Reais for the consumer segment.

COVID ACCOUNT

Fonte: CCEE (modificado)

R$ 16.25 billion (US$ 2.98 billion)

Temporary emergency measures to address the

Covid 19 pandemic impacts on the power

sector

01Presidential

Decree950/2020

4/8/2020

Provided for the creation of the Covid

Account

02 Decree10.350/2020

5/18/2020

Public Hearing on ANEEL's Draft Resolution

03 NormativeResolution Draft

5/27/2020

Covid AccountRegulation

04Normative

Resolution 885

6/23/2020

Fonte: CCEE

COVID Account Operation - Steps

*CAFT - Custos Administrativos, Financeiros e Tributários

BILL 5.877/2019 – Privatization of ELETROBRAS

STEPS OF ELETROBRAS PRIVATIZATION PROCESS

Concession

fee payment

Half 1/2019

Model

Definition

Half 2/2020

Approval of

the Draft Bill

Half 1/2021

Corporate

approval of

the

capitalization

model

Half 2/2021

Approval by the

Federal Court of

accounts

Capital

increase

carried out

Concession

contract

signature

Bill Main Goals

• Changing the quota regime

for independent production

• Removing consumer

hydrological risk

• Earmarking part of the

concession fee for reduction

of charges (CDE)

CHANGING SHAREHOLDING

CORPORATION

• Privatization via issing new

shares through a holding

company (Federal

Government not included)

• Pulverizing shares (Cap on

the shareholders’ voting

power - 10%)

WHAT STILL REMAINS

• Public holding company of

Eletronuclear and Itaipu

• Government Programs

• Light for All

• Procel-National

Electricity

Conservation Program

• BUSA-Federal

government goods

under Eletrobras

Management

• Proinfa-Incentive

Program to

alternative sources

CHANGINGLAW 10.848/2004

• Revoking the provision

that excluded

Eletrobras and its

subsidiaries from the

National Privatization

Program - PND

CORPORATE GOVERNANCE

Private Entity

PublicEntity

GovernmentPrograms

Current PPI PortfolioPOWER SECTOR

Railways – 114 PPP renewals2 new PPP 4 investments in strategicrailway1 privatization - Ferroeste

Airports – 24

22 airports in 3 clusters2 rebids: Natal + Campinas

Highways – 20

11 PPP

2 Feasibilty assessments(8,373 km)

7 Licensing processes

Ports – 35

4 Privatizations30 Port Terminals1 Waterway (Licensing)

Defense and Security(PPP’s) - 2

1 Air force Communications 1 Police Communications

Economy – 5

4 Privatizations ( ABGF, EMGEA, Serpro and Dataprev)

1 Lottery (Fixed ratio)

Energy – 14

2 Transmission Lines Auctions2 Privatizations (Eletrobrás and Nuclep)6 Licensings2 Existing Energy Generation(A-4 and A-5)2 New Energy Generation (A-4 and A-6)

Mining – 5

4 CPRM Mining RightANM Available Areas

Regional Development - 5

2 Privatizations (CBTU andTrensurb)2 assessments (PISF and IrrigationIrecê)1 PPP (line 2 – BH subway)

Supply – 102 Privatizations(Ceasaminas and Ceagesp)

8 Fishing Terminals(Cabedelo, Belém, Manaus, Aracaju, Natal, Santos, Cananeiaande Vitória)

National Parks andForests – 11

8 park PPPs (Lençóis Maranhenses, Iguazu Waterfalls, Jericoacoara, Aparados da Serra/Serra Geral, Canela, São Francisco de Paula, São Joaquim and Brasília)

3 forest PPPs (Humaitá, Iquiriand Castanho - AM)

Communications andTechnology – 5

3 Assessments for Privatization(Telebras, National Post, and EBC)1 Liquidation (Ceitec)

1 Auction 5G

Oil and Gas– 5

Round 17 concessionagreementShale Gas Fracking (Env. Licensing)ToR+ (Atapu and Sepia)Regular Offer

Health – 2

1 Assessment (FêminaHospital/Porto Alegre) 1 PPP (Guarulhos Hospital/SP)

H

Tourism – 44 PPPs of national heritagesites in PB, PE and SP

Brazilian Investments Partnerships Program – PPICurrent PPI Project Portfolio

Policies:• “Sea road” - Cabotage• TRIIP (Road passenger

transport)• PPP daycares• PPP prisions + correctional

facilities• Universalizing basic

sanitation + solid waste• PPP street lightening• The “projects factory”• Tourism• UBS (health basic units)• BidSim – Oil Auctions• Strategic minerals

158 PROJECTS + 13 policies

Energy

Energy portfolio

Existing Energy Generation (A-4 and A-5)

USD 2.15 billion*

New Energy Generation (A-4 andA-6)

USD 2.98 billion*

Transmission (# 1/20 and # 7/20) USD 2.29 billion

Total USD 7.42 billion

* Projection based on the replacement of 100% of the contracts due in 2024 and 2025, through greenfield plants** Reference based on the results of A-4 and A-6 auctions, held in 2019 16

17

Auctions on Existing Energy (LEE) A-4 and A-5/2020 ▪ Brownfield and/or greenfield projects

▪ Investiments: depend on the total demand claimed by buying DISCOS andthe size of winning plants

▪ Sources: Thermopower – national mineral coal and natural gas

▪ Contracts term for trading power (CCEARs): 15 years

▪ Auction criteria: lowest price for supplied energy (in R$/MWh), as pergood/source and/or technology

▪ Status: in both auctions the public hearing stage has been accomplished (CP042/2019)

▪ Attention points:

▪ Auctions have been suspended thorugh Ordinance MME 134, ofMarch 28,2020;

▪ MME will assess the need for demand from distributors to decidewhether to maintain the auctions later this year or postpone them to2021 (July / August).

o Features: Auctions on existing energy A-4 and A-5, undertaken at least 4 or 5years before supplying is due, aim to make up for contracts deriving fromnew energy auctions carried out in 2005/2007, as well as those remainingfrom the Thermopower Priority Program - PPT

o Model: Authorizationo Sectorial Ministry/Grantor: MMEo Regulator: ANEEL

Q4/19 Q1/20 Q2/20 Q3/20 Q4/21 Q1/21 Q2/21

LEE A-4/20LEE A-5/20

Qualifying at PPI Public HearingPostponing

Auctions

18

Auctions on New Energy Generation(LEN)A-4 and A-6/2020▪ Greenfield project

▪ Investments: depend on the total demand claimed by the purchasing DISCOSand the size of the winning plants

▪ Sources: hydropower, wind, solar and biomass power

▪ Contracts term for trading power in the regulated environment(CCEARs): 20 to35 years

▪ Auction Criteria: lowest price of supplied (in BRL/ MWh), as per good/sourceand /or technology

▪ Status: LEN A-4 (Public hearing accomplished – PC 002/2020); LEN A-6 (underassessment)

▪ Attention points:

▪ auctions suspended through MME Ordinance No. 134, of March 28,2020;

▪ MME will assess the need for demand from distributors to decidewhether to maintain the auctions later this year or postpone to 2021(July / August).

Foto

o Features: The A-4 and A-6 new energy auctions are the basis forexpanding the Brazilian power system and aim to meet the demandclaimed by the DISCOS to face the growth in their consumer market,in the period of 4 and 6 years ahead

o Model: Concession/Authorizationo Sectorial Ministry/Grantor: Ministry of Mines and Energyo Regulator: ANEEL

Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21

LEN A-4/20LEN A-6/20

Qualifying at PPI Postponingauctions

19

Auctions on Transmission Lines #1 and #7/2020

▪ Status: Auction 1/20 - Public hearing 46/2019 has been reopened with therestructuring of the object of the event, under conditions defined by TN298/2020-SEL / SCT / ANEEL: expansion from 6 to 15 facilities, byincorporating new EVTEs (“feasibility assessments”, which would possiblyaccount for the object of Auction 7/20), covering transmission facilities in 11states (AM, BA, CE, ES, GO, MG, MS, PR, RS, SC and SP), with the generation ofabout 21,300 direct jobs

▪ Auction 7/20 – Under assessment

▪ Attention point:

▪ Auctions formally postponed through MME Ordinance No. 134, ofMarch 28, 2020.

▪ Public hearing 46/2019 ends on 6/29/2020.

o Features:

o Object : concession of transmission lines public service

o Grantor: ANEEL (by delegation)

o Sectorial Ministry: Ministry of Mines and Energy

o Regulator: ANEEL

o Brownfield and / or greenfield projects (Amazonas – GT)

o Contract term: 30 years

o Auction Criteria: lowest allowed annual revenue (RAP)

Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21

Auction #1/20Auction #7/20

Qualifying at PPIQualifying at PPI

Public hearingsuspended

Federal Court ofAccounts/Bidding

Notice

Auction Contract

Auction

Original Structuring

Number of

Facilities

TLs

(km)

SEs

(MVA)

Invest.

(R$ bi)Schedule

01/2020 6 300 2,100 2 Jul/20

07/2020 N/A 2,500 4,200 8 Dic/20

Restructuring and Reprogramming (in the face of the pandemic)

01/2020 15 3,690 7,160 10.2 Dic/20

07/2020 N/A N/A N/A N/A N/A

20

ELETROBRAS - Brazilian Power SOE

▪ Brownfield project

• Power generation capacity: 51.143 MW • Generators (total): 125 plants (68 Corporate and 67 SPVs)

• Hydropower : 46,259 MW• Nuclear power: 1,990 MW• Thermopower (other techonologies): 1,870 MW• Wind and Solar: 1025

• Transmission Lines: 71,154 km (64,894 km, voltage > 230 kV)

▪ Direct and indirect share of the Federal Government▪ ON – 72.22%▪ PN – 6.52%▪ Total – 61.69%

(Source: Eletrobras Financial Statements – 2019)

▪ Status: Awaiting bill 5877 / 2019 approval

▪ Attention point: closely assessing progress of Bill 5877/2019 in the Congress,evaluating the amendments presented and proposing remarks, with a view tomitigating any difficulties in the capitalization process

o Features: holding comprises a system of companies, such as EletrobrasCGT Eletrosul; Eletrobras Chesf; Eletrobras Eletronorte; EletrobrasEletronuclear; Eletrobras Furnas; and direct and indirect share in 136Special Purpose Entities (SPEs).

o Sectorial Ministry: Ministry of Mines and Energy

o Bill 5877/2019, about Eletrobras privatization, has been sent to theCongress in 11/5/2019

o Type of privatization: increasing social equity by issuing commonshares

Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21

Bill sent to Congress Bill in progress Bill in progress