Strategic Study. Brazil. Utility Scale Brazilian PV Market 2017 / Revision: January 2018

Transcription

1 Strategic Study Utility Scale Brazilian PV Market 2017 / 2018 Revision: January 2018 Brazil

2 Introduction This Strategic Study developed by Greener aims to evaluate the current market development regarding the contracted Large Scale PV Projects in Brazil. This Study also creates references for current and future entrepreneurs according to the Market dynamics and the impact on the projects profitability. Main points of the Study: STATUS OF THE CONTRACTED PROJECTS OPPORTUNITIES IN UTILITY SCALE PHOTOVOLTAIC MARKET THE MACROECONOMIC DYNAMICS AND ITS IMPACTS KEY DRIVERS VS. ENERGY PRICING

3 Highlights 1 Evolution of Projects contracted in the Auctions of 2014 and Utility Scale PV Market Opportunities 3 Contracted Projects Profile 4 Market Share and Equipment Ranking (PV Modules, Inverters, Structures, EPC) 5 Hypothetical Case: 90 MW PV Power Plant 6 CAPEX structure for a 90 MW PV Power Plant 7 PV Modules: How may the future prices impact the projects profitability? 8 Imported Modules vs. Local Modules, how does it affect the IRR? 9 Scenarios of 2017, 2018, 2019 and 2020 for deployment of PV Power Plants 10 PPA Pricing vs Key Drivers for a hypothetical 90 MW Power Plant

4 ANEEL'S AUCTIONS Status of the Contracted Projects

5 Auctions Timeline 6 th LER * 7 th LER 8 th LER 25 th LEN A-4/2017 ** First ANEEL s Auction for 2,159 MWp were The 2 Reserve Energy New Energy Auction A-4 in solar source. 1,048 MWp contracted in two Reserve Auctions announced for December/ ,6 MWp of were contracted. Energy Auctions were cancelled. No PV were contracted. new projects of solar source were contracted. * LER Leilão de Energia de Reserva ( Reserve Energy Auction ) **LEN Leilão de Energia Nova ( New Energy Auction )

6 Summary of ANEEL Auctions 6 th Reserve Energy Auction (2014/Oct-31) LER th Reserve Energy Auction (2015/Aug-28) 1 th LER th Reserve Energy Auction (2015/Nov-13) 2 th LER th New Energy Auction (2017/-Dez-18) LEN A-4 Contracted Power (MWp) 1, , , Contracted Power (MWac) Average Sale Price (R$/MWh) Average Sale Price (US$/MWh) R$ /MWh R$ /MWh R$ /MWh R$ /MWh US$ 87.80/MWh US$ 85.98/MWh US$ 78.77/MWh US$ 44.25/MWh Exchange Rate R$ 2.45/US$ R$ 3.51/US$ R$ 3.78/US$ R$ 3.29/US$ Start of Energy Supply 01/10/ /08/ /11/ /01/2021 Capex* Average (R$/MWp) Capex* Average (US$/MWp) R$ 3,953, R$ 4,162, R$ 3,940, R$ 4,874, US$ 1,613, US$ 1,185, US$ 1,042, US$ 1,481, *CAPEX reported in auctions registration at EPE, not the execution price. Source: EPE.

7 MWAC Probability of Project Completion High Medium Low De-contracted 249, ,3 Completion Probability High Investor-backed EPC contracted Equipment Suppliers Contracted 249, ,3 828, ,8 Medium Investor-backed Contract with Suppliers (not necessarily) Low Nothing set 6 TH R E SERVE ENERGY AUCTION O CT/ TH R E SERVE ENERGY AUCTION AUG/ TH R E SERVE ENERGY AUCTION N O V/2015 CUMU LATIVE *MWac, correspondent to the inverters output power. **data brought up to date in November, 2017.

8 MWAC Projects Completion Expectation Regarding PV Projects contracted in 2014 and High Probability Medium Probability2 Low Probability ,3 New Auctions are key to keep the pipeline of future projects! Classification of Enterprises High Probability Investor-backed EPC contracted Equipment Suppliers Contracted ,8??? Medium Probability Investor-backed Contract with Suppliers (not necessarily) 105 Low Probability Nothing set *MWac, correspondent to the inverters output power. **data brought up to date in November, 2017.

9 Projects in Operation,Test or Construction Regarding PV Projects contracted in 2014 and MW 30 MW 80 MW 90 MW 430 MW 89.7 MW 150 MW 300 MW 150 MW Completion Expected in 2017 Projects in Operation, under test or Construction Completion Expected for 2018 Projects under Construction *data brought up to date in November, 2017.

10 % Enterprises Project Overload Overload Histogram of the Contracted Projects Overload Relation between DC power and AC power of the Power Plant. Usage Increase the power generation with low CAPEX raise. Overload (%) [MWp/MWac] Ideal Overload There is no ideal Overload. Each project must seek the best balance between DC and AC power according to its IRR. It is observed that a significant portion of the contracted projects obtained an Overload between 20% and 25%.

11 % Projects Capacity Factor Capacity Factor (%) CF (Capacity Factor) Histogram of the Contracted Projects Relationship between the amount of power generated by the power plant according to its potential of generation (if the power plant operates 100% of the time under maximum capacity). Usage Comparison between power plants in different locations and/or with different technologies. CF (%) Ideal CF There is no ideal CF, but the higher CF, the greater is the power generated (often without a high increase in CAPEX). Evaluate sites of greater productivity and use technologies that increase the generation and/or reduce losses in the power plant. Those measures are key to achieve more profitable projects.

12 BUSINESS Opportunities in the Brazilian Utility Scale PV Market

13 Introduction The first solar power plants in Brazil are being constructed, creating many opportunities for various sectors of the PV chain. This report points out business opportunities for projects contracted in the 3 auctions in 2014 and 2015 considering its development stages. High Probability PV Plants in Operation PV Plants under Test PV Plants under Construction PV Plants which has Not Started Construction Opportunities to buy assets. Opportunities for Operation & Maintenance services. Opportunities for Owner's Engineering and Certification services. Opportunities for secondary suppliers and outsourced services. Medium Probability Low Probability PV Projects without EPC contract and Suppliers* PV Projects with no Investors, EPC or Suppliers PV Projects with medium probability have not contracted the EPC and there may be opportunities for various services and equipment suppliers. Low probability PV Projects have not defined their suppliers, not contracted EPC and, in particular, have not yet signed an investment agreement/contract for the plant construction.

14 MWac Project Status Regarding PV Projects contracted in 2014 and Operation Testing Construction High Probability Not Initiated Medium Probability Low Probability 5 424,3 159, ,

15 Opportunities Regarding PV Projects contracted in 2014 and PV Projects status and its financial impact in the chain. High Medium Low Probability Probability Probability In Operation 360 MW R$ Billion Projects without EPC contract and Suppliers* MW R$ Billion Projects with no Investors, EPC or Suppliers 110 MW R$ 457 Million Under Test 60 MW R$ 249 Million Under Construction Construction Not Started 1,169.7 MW R$ Billion MW R$ 661 Million Assumptions Financials based on the average CAPEX (local and imported modules) set in R$ 3,436/Wp and Average Overload of 20,87% (excluding de-contracted). Such a assumption was set based on the proportion of PV Plants in operation and/or under construction using Local or imported modules and on the basis of the CAPEX structure presented in the next chapter of this study.

16 MILLIONS R$ Financial Activity Regarding PV Projects contracted in 2014 and Financial projections of the Utility Scale PV market according to the pipeline presented previously. It was considered that the enterprises concluded during the year will handle the financial activity of the photovoltaic chain of that year. R$5.391,13 R$3.654,72 R$934,

17 MILLIONS R$ Financial Activity Regarding PV Projects contracted in 2014 and Operation Testing Construction High Probability - Not Yet Initiated Medium Probability Low Probability R$20.77 R$1, R$1, R$1, R$ R$1, R$2, R$ R$

18 PV Plants in Operation, Testing or under Construction. The following analysis refers to the operational, under testing or construction PV Projects, addressing some themes regarding the total capacity contracted (excluding the rescinded contracts) and the market share of the main equipment and services. Contracted Capacity De-contracted (249.7 MW) 9,41% 6º RPA 53.95% of the contracted capacity in the Auction are in Operation, Testing, or under Construction. Operation, Testing, or Construction (1,589.7 MW) Construction Not Started (813.4 MW) 30,66% 59,93% 7º RPA 8º RPA 91.11% of the contracted enterprises in the Auction are in Operation, Testing, or under Construction % of the contracted enterprises in the Auction are in Operation, Testing, or under Construction.* * The deadline for the enterprises completion of the 8º LER has not yet expired, which implies a low enterprises completion rate.

19 Photovoltaic Modules Regarding PV Plants in Operation, Testing or under Construction. PV Modules Manufacturing Price The Local assembled Modules are substantially more expensive. In general the price is between 35% and 45% more expensive than the imported module in same comparison basis. Local 32,85% Local Manufacturers Among the main modules suppliers for utility scale enterprises, only 2 have local manufacturing. 67,15% Imported Availability The national production capacity limits the supply of modules for the contracted PV Projects, one of the main bottlenecks nowadays is the delivery time, for both local and international delivery. Note.: Enterprises with signed contracts, but that are not under construction, were not accounted for.

20 PV Modules Regarding Projects in Operation, under test or Construction, PV Modules Supply (1,955.4 MWp) 3.80% 1.30% 5.64% 1º Jinko 12.99% 21.29% 29.40% 2º Canadian Solar 3º 4º BYD JA Solar 5º GCL 6º First Solar 7º Trina 25.59% Note.: Projects with signed Modules supply contracts, but that are not constructed or under construction, were not accounted.

21 PV Inverters Regarding Projects in Operation, under test or Construction, % 5.66% 3.77% 1.89% 1º 2º 40.24% 3º Inverters Supply (1,589.7 MWac) 4º GE Fimer SMA 13.21% 5º WEG Ingeteam 6º Power Eletronics 7º Siemens 25.79% Note.: Projects with signed Inverter supply contracts, but that are not constructed or under construction, were not accounted.

22 Structures Regarding Projects in Operation, under test or Construction, Fixed Structure Type 8,75% Advantages The use of single axis trackers improves the power generation, even in conditions of low latitude (most enterprises in Brazil). Reduce the accumulation of dirt on the modules. Single Axis Tracker 91,25% Disadvantages Greater complexity to assembly. Increase mechanical assembly cost. They occupy greater area due to the greater spacing between the tables (shading). Note.: Projects with signed Structure supply contracts, but that are not constructed or under construction, were not accounted.

23 PV Structures / Tracking Regarding Projects in Operation, under test or Construction, % 4.37% 4.37% 3.59% Structure Supply (1.955,4 MWp) 1º 2º Soltec NEXTracker 42.17% 3º 4º Convert Italia STI Norland 16.36% 5º 6º Brafer Nclave 21.62% 7º PVH Note.: Projects with signed Structure supply contracts, but that are not constructed or under construction, were not accounted..

24 EPC (Engineering, Procurement and Construction) Regarding Projects in Operation, under test or Construction, % 3.59% 5.64% 8.75% 1.92% 1.88% 25.64% EPC (1,955.4 MWp) 1º 2º 3º 4º 5º 6º Prodiel Biosar Enerray SNEF Grupo Cobra WEG 12.54% 21.62% 7º 8º 9º 10º GRS ATP Quebec Araxá Solar 15.06% Note.: Enterprises with signed contracts, but that are not under construction, were not accounted for.

25 DRIVERS How Macroeconomic and other key drivers can affect the PV Projects

26 Introduction This chapter shows the impact of the main drivers on the viability and profitability of a PV Plant. A proper balance of CAPEX/OPEX, an optimal capital structure and a realistic vision of the macroeconomic conditions have a direct impact on the project profitability. A proper evaluation of the scenarios and the market trends can make a difference in a safe bid in the auctions. Macroeconomics Technical Characteristics CAPEX Composition Scenarios 2017, 2018, 2019 and 2020 Plant Location Productivity, Grid Connection Local Modules Price Scenarios Brazilian Economics Selic Rate, Inflation, Exchange Technologies Modules, Inverters, Structure Imported Modules Price Scenarios Financing Development Banks, Private Funding Operation & Maintenance OPEX, Exchange Inverters of Cost Structure CAPEX: Local Modules & Int l Modudles

27 Macroeconomics Main Drivers Understanding the impact of each driver: Selic Rate The Selic rate (basic interest rate in Brazil) is an important reference for the definition of the PV Project capital cost. Lower reference rates tend to make the return on infrastructure investment more attractive. Inflation (IPCA) Inflation is directly linked to the consumption balance with the productive capacity of the country. When the inflation grows and the interests rate remains stable, the real capital gain is reduced. In general, with a booming economy the inflation is higher, but in our scenarios, we considered a inflation target set for 2019 and As the economy activity is expected accelerate again, we considered a higher Selic rate to contain the excessive consumption and do not reduce the real capital gain. Exchange Rate (R$/USD) A significant part of the CAPEX is directly impacted by the exchange rate. For this reason, the currency fluctuation is often one of the main risks in the project modeling and pricing strategy.

28 Macroeconomics Scenarios Understanding the macroeconomic dynamics is fundamental for future projects, as well as knowing the correct timing to come up with the project. Four scenarios will be evaluated throughout the study considering different moments for the power plants construction. Scenarios Selic ( interest rate reference) 7.50% (Boletim Focus Oct/2017) 7.00% (Boletim Focus Oct/2017) 8.00% (Greener Estimation) 8.50% (Greener Estimation) Inflation (IPCA) 4.50% (Boletim Focus Oct/2017, inflation target) 4.25% (Boletim Focus Oct/2017, inflation target) 4.00% (Inflation target) 4.00% (Inflation target) Exchange Rate (R$/US$) R$ 3.19 (Boletim Focus Oct/2017) R$ 3.30 (Boletim Focus Oct/2017) R$ 3.30 (Greener Scenario) R$ 3.30 (Greener Scenario) PV Plant Construction Start and conclusion in 2017 Start and conclusion in 2018 Start and conclusion in 2019 Start and conclusion in 2020 Boletim Focus: Monthly Report published by Brazilian Central Bank. Note.: It was considered that all the disbursement of the enterprise is made in its year of construction.

29 Macroeconomics Capital Structure Another crucial issue is to understand the possible ways to compose the capital structure. We will evaluate 2 possible scenarios: Financing provided by development banks and private funding. Private Financing Invested Capital (100%) Development Bank Invested Capital (100%) Equity (Own Capital) 20% Financing (Private source) 80% Equity (Own Capital) 40% Financing (Development bank Funding) 60%

30 Macroeconomics Capital Structure What is the difference between the two capital structures and what are they for? Private Funding Development Bank The capital structure with private resources (banks, funds, etc) is an alternative for those investors who do not wish to make 100% of the contribution in order to reduce the contribution of capital. A financing operation generally increases the Cost of Capital (WACC) of the project and does not offers flexible conditions for payment if compared to a development bank. However the financing operation reduces the contribution of the investor. The capital structure with development banks aims to reduce the Weighted Average Cost of Capital (WACC), leveraging the operation with a cheaper capital and with an extended amortization period. Development banks have requirements regarding the project's documentation. Also, the amount borrowed must meet the minimum percentage of local content.

31 Macroeconomics Private Funding Scenarios Opportunity Cost (%/y) (Selic+2,5%) 10.19% 9.68% 10.70% 11.21% Equity (%) 20% 20% 20% 20% Financed (%) 80% 80% 80% 80% Interest Rate (%/y) (Selic+4.5%) 12.34% 11.82% 12.86% 13.38% Period 10 years 10 years 10 years 10 years Grace Period 0 years 0 years 0 years 0 years

32 Macroeconomics Development Bank Scenarios Opportunity Cost (%a year) (Selic+2,5%) 10.19% 9.68% 10.70% 11.21% Equity (%) 40% 40% 40% 40% Financed (%) Interest Rate (% a year) (Selic+1.0%) Period Grace Period 60% 60% 60% 60% 8.58% 8.07% 9.08% 9.58% 19 years 19 years 19 years 19 years 1 year 1 year 1 year 1 year

33 Technical Characteristics Understanding the impact of each driver: Plant Location Technologies Operation and Maintenance The choice of the power plant location should be associated with some fundamental factors to ensure the success of the project. Among the main considerations, a good PV Project should be located in an area with good solar radiation and favorable grid connection (preferably a few kilometers away from the substation and at the lowest possible voltage level) and the area should have environmental approval. The selection of power plant technologies will affect the project competitiveness. A proper choice of the modules technology (crystalline or thin film), as well as the inverters (central or string) and the structure (fixed or with tracker) will influence the project CAPEX, productivity, required land and O&M cost. Beyond the impact of the choice of technologies in the Operation & Maintenance cost, other factors are crucial to guarantee an efficient and low O&M cost. The frequency of cleaning should be considered, as well as the availability of hydric resources, scale of the power plant for dilution of the fixed costs and concerns about the plant security.

34 Technical Characteristics Plant Location The location where the PV Plant is developed and installed is one of the key factors for the viability and attractiveness of the Project. Productivity Locations with high productivity are always preferred for deployment of PV plants, however the availability of grid connection must be first evaluated, followed by the potential environmental restrictions. Grid Connection The Grid access has been a major bottleneck for the development of projects in Brazil. Significant part of the distribution and transmission networks of the northeast regions are overloaded (region with high solar irradiation), with no availability of energy transmission, which often makes the project unfeasible. Environmental Licensing Environmental licenses can take a long time in a bureaucratic process, if not properly prepared its can be easily denied by State organs.

35 Technical Characteristics Technology The choice of a technology for an enterprise must take into account not only its initial investment, but also its secondary gains and long term costs. Remember that the technology adopted in the project will remain for more than 20 years. Crystalline Thin Film Central String Fixed Tracker Crystalline modules in general provide greater efficiency and lower Wpcost. However this technology has major losses due to warmer local temperatures, its choice must be evaluated. Thin Film modules in general provide lower efficiency and take up more area, raising the costs with structure wiring system and workforce. On the other hand, this technology presents loss reduction in high temperature Central inverters have been the most used topology in Utility Scale PV plants as they re cost competitive at the moment of the initial investment. String Inverters are becoming a competitive technology and important option for large size plants. Its great advantage are the low operational costs, as they allow a fast replacement in case of failure, requiring less specialized technicians. The fixed structure is the option with lower initial costs as well as during the operational period. Although the higher costs (initial and operational), the energy production increase can be significant even in low-latitude regions. conditions.

36 Technical Characteristics Operation and Maintenance Operation and maintenance is crucial to the profitability of the enterprise. Its improper sizing can create risks to assets or jeopardize the power plant productivity. It is essential to evaluate the availability of water resource at the power plant location. An PV Plant uses a significant amount of water for cleaning the modules, specially in dry areas where the resource is scarce. The PV plant are usually located in remote places and have fragile and vulnerable equipment which may be vandalized. An adequate monitoring and security are important and can increase the operation and maintenance costs significantly. Production loss by dirt/dust can be significant, especially in arid regions. An efficient plan for cleaning the modules is important.

37 CAPEX Composition Understanding the impact of each driver: Local Modules Imported Modules Cost Structure Local produced modules are an option for the current and future entrepreneurs in the sector. As the costs are 35% to 45% higher than the imported modules, the PV projects using local modules requires favorable financing conditions provided by development banks. Used by most Utility Scale Projects, imported modules feature substantially lower costs than the local modules, however they limit or prevent access to resources of development banks. The strong rise in current market prices draws special attention, as well as limitations on availability reported by some entrepreneurs. The modules represent the main component in the range of CAPEX costs. The recent volatility as well as the uncertainties in the international PV chain makes the cost projection of this component an important risk factor. The CAPEX is mostly exposed to Exchange Rate variations. This, in turn, heavily influenced by the political and economic scenario. It is worth remembering that 2018, year of elections in the country, and 2019, beginning of a new government, the scenarios become even more complex.

38 Composition of CAPEX Local Modules Although locally assembled, the local modules depend on imported parts which is subject to the direct impact of the exchange rate. Scenarios Local Modules (US$/Wp) US$ 0.660/Wp (include taxes) US$ 0.633/Wp (include taxes) US$ 0.624/Wp (include taxes) US$ 0.614/Wp (include taxes) Local Modules (R$/Wp) R$ 2.106/Wp (dollar base R$3.19) R$ 2.088/Wp (dollar base R$3.30) R$ 2.058/Wp (dollar base R$3.30) R$ 2.027/Wp (dollar base R$3.30) Note. 1: polycrystalline modules were evaluated, due to the fact of being the only nationally produced module on a large scale. Note. 2: the prices already include taxes. There was a module price increase in 2017 due to high demand and raw material supply deficit. The expectation is that the module prices will decrease in the following years, but it's hard to foresee when it will reach the same prices as in the beginning of 2017.

39 Composition of CAPEX Imported Modules What is the prices expectation for imported modules in the evaluated scenarios? Scenarios Imported Modules (US$/Wp) US$ 0.472/Wp (include taxes) US$ 0.452/Wp (include taxes) US$ 0.445/Wp (include taxes) US$ 0.439/Wp (include taxes) Imported Modules (R$/Wp) R$ 1.504/Wp (dollar base R$3.19) R$ 1.491/Wp (dollar base R$3.30) R$ 1.470/Wp (dollar base R$3.30) R$ 1.448/Wp (dollar base R$3.30) Note. 1: polycrystalline modules were evaluated, due to the fact of being the only nationally produced module on a large scale. Note. 2: the prices already include taxes. There was a module price increase in 2017 due to high demand and supply deficit. The expectation is that the module prices will decrease in the following years, but it's hard to foresee when it will reach the same prices as in the beginning of 2017.

40 CAPEX Composition Hypothetical Case Study: 90 MW PV Power Plant To understand the impact of module costs in a PV Plant, a CAPEX composition for a hypothetical project will be presented. DC Power: MWp AC Power: 90 MW Modules: Polycrystalline 330 Wp Inverters: Central 2 MW Structure: Single Axis Tracker +50 /-50 Connection: 10 km Line at 69kV, connection to 69 kv Bay Substation: 3 smaller substations and a central, with central power transformer. Power plant: 3 solar fields of 30 MW.

41 Composition of CAPEX CAPEX Structure 90 MW PV Plant (106.2 MWp) Scenario Values in R$/Wp Imported Module % Local Module % Modules R$ % R$ % Inverters R$ % R$ % Structure R$ % R$ % Substations (3 smaller and one central, without transformer) R$ % R$ % Central Transformer R$ ,81% R$ ,67% Transmission Line R$ % R$ % Works and Engineering R$ ,40% R$ % Management R$ % R$ % Development R$ ,19% R$ ,14% Others R$ % R$ % TOTAL( R$/Wp) R$ R$ 3.794

42 CAPEX Composition CAPEX 90 MW Power Plant (106.2 MWp) - All Scenarios Scenarios CAPEX Local Modules (R$/Wp) CAPEX Imported Modules (R$/Wp) R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp Exchange (R$/US$) R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30 Note. 1: Not only the modules were considered influenced by US Dollar and affected by the exchange rate. Note. 2: it was considered that all items, except the modules, had their prices stable in the 4 scenarios, varying only according to the exchange rate.

43 Energy Pricing Scenarios for a hypothetical 90 MW PV Plant

44 Introduction This chapter aims to demonstrate the scenarios for 2017, 2018 and 2019 (for the PV Projects already contracted) and the 2018, 2019 and 2020 scenarios for new PV Projects demanded by future Auctions, in different CAPEX conditions and funding sources. The energy prices are hypothetical as they can vary significantly according the project Capital Structure and the investor return and risk profile. Scenarios th, 7 th and 8 th LER Power plants already contracted, with adjusted PPA. Power plants already contracted, with adjusted PPA. Power plants already contracted, with adjusted PPA. LENA-4/2017 & 2018 New power plants from LEN A-4 / New power plants from LEN A-4 / 2017, with adjusted PPA. New power plants from LEN A-4 / 2017, with adjusted PPA.

45 Boundary Conditions: As presented previously, some premises will be reopened to compose the scenarios of the study. The macroeconomic conditions for the scenarios of 2017, 2018, 2019 and 2020 will be kept. The funding conditions presented will be addressed in 2 Cases (one with Private Funding and another with Development Bank), as well as the initial cost composition (CAPEX) considering use of local modules and imported modules. Assumptions The 90 MW PV Plant Economic Scenarios 2017, 2018, 2019 and 2020 Costs Composition CAPEX Local Modules Imported Modules Financial Fundraising Development Banks, Private Funding

46 The 90 MW Power Plant The following PV Plant configuration will be used in Study Case for the pricing models MWp Technical Characteristics 30 MW 35.2 MWp 30 MW 35.2 MWp MWp 90 MW Modules: Polycrystalline 330 Wp Inverters: Central 2 MW Structure: Single Axis Trackers of -50 /+50 Grid Connection: 69 kv Transmission Line: 10 km in 69 kv Power plant: 3 solar fields of 30 MW DC Power: MWp AC Power: 90 MW Overload: 18% Inverters exchange: year 10 and year 20 (20 and 10 Million R$ respectively) 30 MW

47 The 90 MW Power Plant 35.2 MWp 30 MW 35.2 MWp 30 MW 35.2 MWp 30 MW MWp 90 MW Generation Characteristics Productivity :2.200 kwh/kw /year (considered the tracker gain) Capacity Factor: 25.11% Generated power/year: 233,640 MWh/year Electrical Loss: 3,5% Modules degradation year 1: 2,5% Modules degradation coming years: 0.85%/year Other Features Operation and Maintenance: 1.50% of CAPEX a year. Administration costs: 0.10% of CAPEX /year. Insurance costs: 0.10% of CAPEX /year. Taxes: Assumed Profit Contract Duration: 20 years

48 Cases In the next pages the impact of main investment drivers on the 90MW Plant will be presented, considering that it could be constructed in different years between 2017 and The pros and cons among the possible strategies adopted in a PV Project and the impact in the IRR (Internal Rate of Return) were highlighted. Scenarios Pre-established macroeconomic conditions Case 1 90 MW PV Plant Imported Modules Private Funding 90 MW PV Plant Imported Modules Private Funding 90 MW PV Plant Imported Modules Private Funding 90 MW PV Plant Imported Modules Private Funding Case 2 90 MW PV Plant Local Modules Develop ment Bank 90 MW PV Plant Local Modules Develop ment Bank 90 MW PV Plant Local Modules Develop ment Bank 90 MW PV Plant Local Modules Develop ment Bank

49 Case 1-90 MW - Imported Modules 90 MW PV Plant using imported modules and financed by private funding, according to the assumptions presented previously. Macroeconomic Assumptions Scenarios Selic 7.50% 7.00% 8.00% 8.50% Inflation (IPCA) 4.50% 4.25% 4.00% 4.00% Exchange Rate (R$/US$) Construction & Startup R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30 Start and conclusion in 2017 Start and conclusion in 2018 Start and conclusion in 2019 Start and conclusion in 2020 CAPEX Assumptions Scenarios CAPEX Local Modules (R$/Wp) R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp CAPEX Imported Modules (R$/Wp) R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp Exchange Rate (R$/US$) R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

50 Case 1-90 MW Imported Modules Private Funding Assumptions Scenarios Opportunity Cost (% a year) (Selic+2,5%) 10.19% 9.68% 10.70% 11.21% Equity (%) 20% 20% 20% 20% Financing (%) 80% 80% 80% 80% Interest Rate (% a year) (Selic+4.5%) 12.34% 11.82% 12.86% 13.38% Period 10 years 10 years 10 years 10 years Grace Period 0 years 0 years 0 years 0 years

51 Case 1-90 MW Imported Modules We analyze how energy price (R$/MWh) and CAPEX impact the PV Project IRR (Internal Rate of Return). The high volatility of PV Modules in the coming years brings uncertainty over the project CAPEX. We considered modules price variation by +10%, +20%, -10% and -20%. PPA Prices (R$/MWh) CAPEX Variation ( all scenarios) R$ 170/MWh R$ 180/MWh R$ 190/MWh Imported Module Price 2017 R$/Wp* Price Variation Imported Module Project CAPEX R$ 200/MWh R$ 210/MWh R$ 220/MWh R$ /Wp 0% R$ 3,19 /Wp R$ 230/MWh R$ 240/MWh R$ 250/MWh R$ /Wp +10% R$ 3.34 /Wp R$ 260/MWh R$ 270/MWh R$ 280/MWh R$ /Wp +20% R$ 3.49 /Wp R$ 290/MWh R$ 300/MWh R$ 310/MWh R$ /Wp -10% R$ 3.04/Wp R$ 320/MWh R$ 330/MWh R$ 340/MWh R$ /Wp -20% R$ 2.89/Wp * Values include taxes and nationalization costs.

52 How to read the results table? Energy Prices are illustrative, as it varies according the each project drivers and assumptions WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 10,24% R$ 2.89/Wp R$ 3.04/Wp R$ 3.19/Wp R$ 3.34/Wp R$ 3.49/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 7.89% 6.68% 5.58% 4.57% 3.64% The WACC R$ 180/MWh represents the capital cost of the 9.36% project, 8.08% 6.92% 5.87% 4.89% comprising the equity cost and the funding capital cost. R$ 190/MWh 10.84% The WACC is the reference rate to which the project has 9.48% 8.26% 7.14% 6.13% a minimal R$ 200/MWh expected outcome in line with the 12.32% rate of risk 10.88% 9.59% 8.42% 7.35% adopted on own capital. R$ 210/MWh 13.83% 12.30% 10.92% 9.69% 8.56% R$ 220/MWh 15.37% 13.73% 12.27% 10.96% 9.78% R$ 230/MWh 16.93% 15.18% 13.63% 12.25% 11.00% R$ 240/MWh 18.54% 16.66% 15.01% 13.54% 12.22% R$ 250/MWh 20.19% 18.18% 16.42% Green cells are those 14.86% conditions where the IRR of 13.47% the R$ 260/MWh 21.89% 19.74% 17.86% project exceeds the WACC of the project, presenting a positive 16.20% gain (NPV > 0) % R$ 270/MWh 23.64% 21.34% 19.33% 17.57% 16.00% R$ 280/MWh 25.45% 22.98% 20.84% 18.97% 17.30% R$ 290/MWh 27.32% 24.68% 22.39% 20.40% 18.63% R$ 300/MWh 29.26% 26.43% 23.99% 21.86% 19.99% R$ 310/MWh 31.26% 28.24% 25.63% 23.37% 21.39% R$ 320/MWh 33.34% 30.11% 27.33% 24.92% 22.81% R$ 330/MWh 35.48% IRR 32.03% of the project obtained under the 29.08% conditions of energy sales 26.52% 24.28% R$ 340/MWh 37.69% 34.03% price and evaluated CAPEX 30.88% condition % 25.79%

53 Case 1 - Scenario 2017 Imported Module WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 11.91% R$ 2.89/Wp R$ 3.04/Wp R$ 3.19/Wp R$ 3.34/Wp R$ 3.49/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 7.89% 6.68% 5.58% 4.57% 3.64% R$ 180/MWh 9.36% 8.08% 6.92% 5.87% 4.89% R$ 190/MWh 10.84% 9.48% 8.26% 7.14% 6.13% R$ 200/MWh 12.32% 10.88% 9.59% 8.42% 7.35% R$ 210/MWh 13.83% 12.30% 10.92% 9.69% 8.56% R$ 220/MWh 15.37% 13.73% 12.27% 10.96% 9.78% R$ 230/MWh 16.93% 15.18% 13.63% 12.25% 11.00% R$ 240/MWh 18.54% 16.66% 15.01% 13.54% 12.22% R$ 250/MWh 20.19% 18.18% 16.42% 14.86% 13.47% R$ 260/MWh 21.89% 19.74% 17.86% 16.20% 14.72% R$ 270/MWh 23.64% 21.34% 19.33% 17.57% 16.00% R$ 280/MWh 25.45% 22.98% 20.84% 18.97% 17.30% R$ 290/MWh 27.32% 24.68% 22.39% 20.40% 18.63% R$ 300/MWh 29.26% 26.43% 23.99% 21.86% 19.99% R$ 310/MWh 31.26% 28.24% 25.63% 23.37% 21.39% R$ 320/MWh 33.34% 30.11% 27.33% 24.92% 22.81% R$ 330/MWh 35.48% 32.03% 29.08% 26.52% 24.28% R$ 340/MWh 37.69% 34.03% 30.88% 28.16% 25.79%

54 Case 1 - Scenario 2018 Imported Module WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 11.39% R$ 2.91/Wp R$ 3.06/Wp R$ 3.21/Wp R$ 3.36/Wp R$ 3.51/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 7.91% 6.72% 5.63% 4.63% 3.71% R$ 180/MWh 9.39% 8.12% 6.98% 5.93% 4.97% R$ 190/MWh 10.87% 9.53% 8.32% 7.22% 6.21% R$ 200/MWh 12.36% 10.94% 9.66% 8.50% 7.43% R$ 210/MWh 13.88% 12.36% 11.00% 9.77% 8.66% R$ 220/MWh 15.42% 13.80% 12.35% 11.06% 9.88% R$ 230/MWh 16.99% 15.26% 13.72% 12.35% 11.11% R$ 240/MWh 18.60% 16.75% 15.12% 13.66% 12.35% R$ 250/MWh 20.26% 18.28% 16.53% 14.99% 13.60% R$ 260/MWh 21.97% 19.84% 17.98% 16.34% 14.87% R$ 270/MWh 23.73% 21.45% 19.46% 17.71% 16.16% R$ 280/MWh 25.54% 23.10% 20.98% 19.12% 17.47% R$ 290/MWh 27.42% 24.81% 22.55% 20.56% 18.81% R$ 300/MWh 29.37% 26.57% 24.15% 22.04% 20.18% R$ 310/MWh 31.38% 28.39% 25.81% 23.56% 21.59% R$ 320/MWh 33.46% 30.27% 27.52% 25.13% 23.03% R$ 330/MWh 35.61% 32.21% 29.28% 26.74% 24.51% R$ 340/MWh 37.83% 34.21% 31.10% 28.39% 26.03%

55 Case 1 - Scenario 2019 Imported Module WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 12.43% R$ 2.90/Wp R$ 3.04/Wp R$ 3.19/Wp R$ 3.34/Wp R$ 3.49/Wp Investment R$ Million R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 7,40% 6.25% 5.20% 4.23% 3.33% R$ 180/MWh 8.84% 7.62% 6.51% 5.50% 4.56% R$ 190/MWh 10.28% 8.99% 7.82% 6.75% 5.77% R$ 200/MWh 11.73% 10.36% 9.12% 8.00% 6.97% R$ 210/MWh 13.20% 11.74% 10.43% 9.25% 8.17% R$ 220/MWh 14.69% 13.13% 11.75% 10.50% 9.36% R$ 230/MWh 16.21% 14.55% 13.08% 11.75% 10.56% R$ 240/MWh 17.76% 15.99% 14.42% 13.02% 11.76% R$ 250/MWh 19.36% 17.46% 15.79% 14.31% 12.97% R$ 260/MWh 21.00% 18.97% 17.19% 15.61% 14.20% R$ 270/MWh 22.69% 20.52% 18.62% 16.95% 15.45% R$ 280/MWh 24.43% 22.11% 20.09% 18.30% 16.72% R$ 290/MWh 26.24% 23.75% 21.59% 19.70% 18.02% R$ 300/MWh 28.10% 25.44% 23.14% 21.12% 19.34% R$ 310/MWh 30.03% 27.19% 24.73% 22.59% 20.70% R$ 320/MWh 32.03% 28.99% 26.37% 24.09% 22.09% R$ 330/MWh 34.10% 30.86% 28.06% 25.64% 23.51% R$ 340/MWh 36.24% 32.78% 29.81% 27.23% 24.98%

56 Case 1 - Scenario 2020 Imported Module WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 12.95% R$ 2.88/Wp R$ 3.03/Wp R$ 3.17/Wp R$ 3.31/Wp R$ 3.46/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 7.25% 6.12% 5.08% 4.13% 3.24% R$ 180/MWh 8.68% 7.48% 6.39% 5.39% 4.47% R$ 190/MWh 10.11% 8.84% 7.69% 6.64% 5.67% R$ 200/MWh 11.54% 10.20% 8.98% 7.88% 6.86% R$ 210/MWh 12.99% 11.56% 10.28% 9.11% 8.05% R$ 220/MWh 14.47% 12.94% 11.58% 10.35% 9.23% R$ 230/MWh 15.97% 14.34% 12.90% 11.60% 10.42% R$ 240/MWh 17.51% 15.77% 14.23% 12.85% 11.61% R$ 250/MWh 19.08% 17.23% 15.59% 14.13% 12.82% R$ 260/MWh 20.70% 18.72% 16.97% 15.42% 14.04% R$ 270/MWh 22.37% 20.25% 18.39% 16.74% 15.27% R$ 280/MWh 24.09% 21.82% 19.84% 18.09% 16.53% R$ 290/MWh 25.88% 23.44% 21.32% 19.46% 17.82% R$ 300/MWh 27.72% 25.11% 22.85% 20.88% 19.13% R$ 310/MWh 29.63% 26.84% 24.43% 22.32% 20.47% R$ 320/MWh 31.60% 28.62% 26.05% 23.81% 21.84% R$ 330/MWh 33.64% 30.47% 27.73% 25.35% 23.26% R$ 340/MWh 35.76% 32.37% 29.45% 26.92% 24.71%

57 Case 2-90 MW Local Modules 90 MW PV plant using Local modules and financed by development bank, according to the premises presented previously. Macroeconomic Assumptions Scenarios Selic 7.50% 7.00% 8.00% 8.50% Inflation (IPCA) 4.50% 4.25% 4.00% 4.00% Exchange Rate (R$/US$) Construction & Startup R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30 Start and conclusion in 2017 Start and conclusion in 2018 Start and conclusion in 2019 Start and conclusion in 2020 CAPEX Assumptions Scenarios CAPEX Local Modules (R$/Wp) CAPEX Imported Modules (R$/Wp) R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp Exchange Rate (R$/US$) R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

58 Case 2-90 MW Local Modules Development Bank Funding Assumptions Scenarios Opportunity Cost (% a year) (Selic+2,5%) 10.19% 9.68% 10.70% 11.21% Equity (%) 40% 40% 40% 40% Financed (%) 60% 60% 60% 60% Interest Rate (% a year) (Selic+1.0%) 8.58% 8.07% 9.08% 9.58% Period 19 years 19 years 19 years 19 years Grace Period 1 year 1 year 1 year 1 year

59 Case 2-90 MW Local Modules We analyze how energy price (R$/MWh) and CAPEX impact the PV Project IRR (Internal Rate of Return). The high volatility of PV Modules in the coming years brings uncertainty over the project CAPEX. We considered modules price variation by +10%, +20%, -10% and -20%. PPA Price (R$/MWh) R$ 170/MWh R$ 180/MWh R$ 190/MWh Local Module Price 2017 R$/Wp* CAPEX Variation (all scenarios) Price Variation Imported Module Total CAPEX R$ 200/MWh R$ 210/MWh R$ 220/MWh R$ 2.106/Wp 0% R$ 3.79/Wp R$ 230/MWh R$ 240/MWh R$ 250/MWh R$ /Wp +10% R$ 4.00 /Wp R$ 260/MWh R$ 270/MWh R$ 280/MWh R$ /Wp +20% R$ 4.22 /Wp R$ 290/MWh R$ 300/MWh R$ 310/MWh R$ /Wp -10% R$ 3.58 /Wp R$ 320/MWh R$ 330/MWh R$ 340/MWh R$ /Wp -20% R$ 3.37 /Wp * Values include taxes.

60 Case 2 - Scenario 2017 Local Modules WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 9.22% R$ 3.37/Wp R$ 3.58/Wp R$ 3.79/Wp R$ 4.00 /Wp R$ 4.22 /Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 6.05% 4.30% 2.66% 1.09% -0.42% R$ 180/MWh 7.75% 5.99% 4.35% 2.80% 1.32% R$ 190/MWh 9.39% 7,60% 5.95% 4.39% 2.92% R$ 200/MWh 10.97% 9.15% 7.47% 5.90% 4.43% R$ 210/MWh 12.51% 10.64% 8.93% 7.35% 5.86% R$ 220/MWh 14.01% 12.10% 10.35% 8.74% 7.24% R$ 230/MWh 15.49% 13.52% 11.73% 10.08% 8.56% R$ 240/MWh 16.95% 14.92% 13.08% 11.40% 9.85% R$ 250/MWh 18.39% 16.30% 14.41% 12.68% 11.10% R$ 260/MWh 19.82% 17.66% 15.71% 13.95% 12.33% R$ 270/MWh 21.25% 19.01% 17.01% 15.19% 13.53% R$ 280/MWh 22.66% 20.35% 18.29% 16.42% 14.72% R$ 290/MWh 24.07% 21.69% 19.56% 17.64% 15.89% R$ 300/MWh 25.48% 23.02% 20.82% 18.85% 17.05% R$ 310/MWh 26.88% 24.34% 22.08% 20.05% 18.20% R$ 320/MWh 28.28% 25.66% 23.33% 21.24% 19.35% R$ 330/MWh 29.68% 26.98% 24.58% 22.43% 20.48% R$ 340/MWh 31.09% 28.30% 25.83% 23.61% 21.61%

61 Case 2 - Scenario 2018 Local Modules WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 8.71% R$ 3.39/Wp R$ 3.60/Wp R$ 3.81/Wp R$ 4.02/Wp R$ 4.23/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 6.25% 4.53% 2.91% 1.36% -0.13% R$ 180/MWh 7.96% 6.22% 4,60% 3.07% 1,60% R$ 190/MWh 9.59% 7.83% 6.20% 4.66% 3.21% R$ 200/MWh 11.17% 9.37% 7.72% 6.17% 4.72% R$ 210/MWh 12.71% 10.87% 9.18% 7.62% 6.15% R$ 220/MWh 14.21% 12.32% 10.60% 9.01% 7.52% R$ 230/MWh 15.69% 13.75% 11.98% 10.36% 8.85% R$ 240/MWh 17.15% 15.15% 13.33% 11.67% 10.14% R$ 250/MWh 18.59% 16.53% 14.66% 12.96% 11.39% R$ 260/MWh 20.02% 17.89% 15.97% 14.22% 12.62% R$ 270/MWh 21.44% 19.24% 17.26% 15.47% 13.82% R$ 280/MWh 22.85% 20.58% 18.54% 16.70% 15.01% R$ 290/MWh 24.26% 21.91% 19.81% 17.92% 16.19% R$ 300/MWh 25.67% 23.24% 21.08% 19.12% 17.35% R$ 310/MWh 27.07% 24.57% 22.33% 20.33% 18.50% R$ 320/MWh 28.47% 25.89% 23.59% 21.52% 19.65% R$ 330/MWh 29.86% 27.20% 24.84% 22.71% 20.78% R$ 340/MWh 31.26% 28.52% 26.08% 23.90% 21.92%

62 Case 2 Scenario 2019 Local Modules WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 9.73% R$ 3.37/Wp R$ 3.57/Wp R$ 3.78/Wp R$ 3.99/Wp R$ 4.19/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 5.46% 3.76% 2.15% 0.61% -0.88% R$ 180/MWh 7.17% 5.45% 3.84% 2.32% 0.86% R$ 190/MWh 8.79% 7.05% 5.43% 3.91% 2.47% R$ 200/MWh 10.37% 8.59% 6.95% 5.42% 3.98% R$ 210/MWh 11.90% 10.08% 8.41% 6.86% 5.41% R$ 220/MWh 13.39% 11.53% 9.82% 8.25% 6.78% R$ 230/MWh 14.86% 12.94% 11.20% 9.59% 8.10% R$ 240/MWh 16.31% 14.34% 12.54% 10.90% 9.38% R$ 250/MWh 17.74% 15.71% 13.86% 12.18% 10.63% R$ 260/MWh 19.16% 17.06% 15.16% 13.44% 11.86% R$ 270/MWh 20.57% 18.40% 16.45% 14.68% 13.06% R$ 280/MWh 21.98% 19.74% 17.72% 15.90% 14.24% R$ 290/MWh 23.38% 21.06% 18.99% 17.11% 15.41% R$ 300/MWh 24.77% 22.38% 20.24% 18.32% 16.56% R$ 310/MWh 26.16% 23.70% 21.49% 19.51% 17.71% R$ 320/MWh 27.56% 25.01% 22.74% 20.70% 18.85% R$ 330/MWh 28.95% 26.32% 23.98% 21.88% 19.98% R$ 340/MWh 30.34% 27.63% 25.22% 23.06% 21.10%

63 Case 2 Scenario 2020 Local Modules WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module 10.24% R$ 3.34/Wp R$ 3.55/Wp R$ 3.75/Wp R$ 3.95/Wp R$ 4.15/Wp Investment R$ Millions R$ Millions R$ Millions R$ Millions R$ Millions R$ 170/MWh 5.21% 3.52% 1.92% 0.39% -1.09% R$ 180/MWh 6.91% 5.21% 3.61% 2.10% 0.65% R$ 190/MWh 8.54% 6.81% 5.21% 3.70% 2.26% R$ 200/MWh 10.12% 8.35% 6.73% 5.20% 3.77% R$ 210/MWh 11.64% 9.84% 8.18% 6.65% 5.20% R$ 220/MWh 13.14% 11.29% 9.60% 8.03% 6.57% R$ 230/MWh 14.61% 12.70% 10.97% 9.38% 7.90% R$ 240/MWh 16.06% 14.10% 12.32% 10.69% 9.18% R$ 250/MWh 17.49% 15.47% 13.64% 11.97% 10.43% R$ 260/MWh 18.91% 16.82% 14.94% 13.22% 11.65% R$ 270/MWh 20.32% 18.16% 16.22% 14.46% 12.85% R$ 280/MWh 21.72% 19.50% 17.50% 15.69% 14.03% R$ 290/MWh 23.12% 20.82% 18.76% 16.90% 15.20% R$ 300/MWh 24.52% 22.14% 20.02% 18.10% 16.36% R$ 310/MWh 25.91% 23.46% 21.27% 19.30% 17.51% R$ 320/MWh 27.31% 24.78% 22.52% 20.49% 18.65% R$ 330/MWh 28.70% 26.09% 23.76% 21.67% 19.78% R$ 340/MWh 30.10% 27.40% 25.01% 22.85% 20.91%

64 Using the Tables Energy Prices are illustrative, as it varies according the each project drivers and assumptions The tables simulate various scenarios for current and future entrepreneurs who wish to structure centralized generation photovoltaic Projects. With the tables it is possible to check the advantages and disadvantages of some strategic enterprises, in addition to simulate the best timing for construction of the power plants. Then we will use an example of power plant simulation to predict the highest bid for an auction, in addition to the strategies that could be adopted to reduce the bid for energy sale. Example: Hypothetical 90 MW Power Plant to bid for LEN A We will consider a power plant identical to the previously presented for construction of scenarios and find out which would be a good bid to energy sale to the enterprise and the possible strategies Condition 1 Auction Power Plant Construction Regulated Market Operation Condition 2 Auction Power Plant Construction Free Market Regulated Market Operation

65 Using the Tables Condition 1 Auction Power Plant Construction Regulated Market Operation Condition 2 Auction Power Plant Construction Free Market Regulated Market Operation For a power plant that will be built in 2020, we have to use the 2020 scenario and stipulate the CAPEX return and scenario to be adopted. A comparison must be done between the two cases in order to see the advantages and disadvantages of local modules funding and purchasing. Case 1 Imported Module and Case 2 Local Module Scenario 2020 Case 1 Imported Module and Case 2 Local Module Scenario 2019

66 Using the Tables Condition 1 Auction Power Plant Construction Regulated Market Operation Condition 2 Auction Power Plant Construction Free Market Regulated Market Operation Case 1 - Scenario 2020 Imported Module Nominal CAPEX: $3.17/Wp IRR Required: WACC+2% WACC 2020: 12.95% IRR in the Table: >15.21% Energy Sales Price in 2020: 250 R$/MWh Energy Value in 2017 *: R$/MWh Case 2 - Scenario 2020 Local Module Nominal CAPEX: $3.75/Wp IRR Required: WACC+2% WACC 2020: 10.24% IRR in the Table: >12.44% Energy Sales Price in 2020: ~240 R$/MWh Energy Value in 2017 *: ~ R$/MWh *The corrected energy value for auction date - recede the IPCA of 2019 and The IPCA of 2020 shall not be considered because the disbursement is made at the beginning of the year and the model already considers the delivery of the corrected energy for 2021.

67 Using the Tables Condition 1 Auction Power Plant Construction Regulated Market Operation Condition 2 Auction Power Plant Construction Free Market Regulated Market Operation Case 1 - Scenario 2020 Imported Module Nominal CAPEX: R$ 3.19/Wp TIR Required: WACC+2% WACC 2019: 12.43% IRR in the Table: >14.68% Power Plant in the Free market 1 year, energy sales price: 120 R$/MWh Revenue R$ 28 Million Close to the scenario with CAPEX of R$ 2.90/Wp* Case 2 - Scenario 2020 Local Module Nominal CAPEX: R$ 3.78/Wp TIR Required: WACC+2% WACC 2019: 9.73% IRR in the Table: >11.92% Power Plant in the Free market 1 year, energy sales price: 120 R$/MWh Revenue R$ 28 Million Close to the scenario with CAPEX of R$ 3,57/Wp* *The approach to the scenario was made to facilitate the demonstration of the impact of 1 year of the power plant in the free market in order to amortize part of the initial investment, so is considered a lower CAPEX and the current scenario of the table is used only for a estimate.

68 Using the Tables Condition 1 Auction Power Plant Construction Regulated Market Operation Condition 2 Auction Power Plant Construction Free Market Regulated Market Operation Case 1 - Scenario 2020 Imported Module Nominal CAPEX: R$ 2.90/Wp TIR Required: WACC+2% WACC 2019: 12.43% IRR in the Table: >14.68% Energy Sales Price in 2019: 220 R$/MWh Energy Value in 2017 *: R$/MWh Case 2 - Scenario 2020 Local Module Nominal CAPEX: R$ 3.57/Wp TIR Required: WACC+2% WACC 2019: 9.73% IRR in the Table: >11.92% Energy Sales Price in 2019: ~220 R$/MWh Energy Value in 2017 *: ~ R$/MWh * The corrected energy value for auction date - recede the IPCA of 2018 The IPCA of 2019 shall not be considered because the disbursement is made at the beginning of the year and the model already considers the delivery of the corrected energy for 2021.

69 Using the Tables Conclusions It is noted that some strategies can help to reduce the energy sales price at the actions, considering some estimates. The intention of these analyses is to compare the presented scenarios and evaluate the pros and cons of constructing and starting up the power plant before the delivery deadline, so it can anticipate the energy generation, creating additional revenues to the project, in case it is allowed. Other exercises can be made with the spread sheet. The worse CAPEX condition for private funding are similar to the best CAPEX conditions for funding by development bank, which shows the advantages of the development bank. Some points to be noted about some strategies: Constructing power plants before the deadline can be a good strategy to reduce the energy sales price at the auction, but should be consider the feasibility of providing modules and EPC companies available to conduct the work within the time limit set. Consider the participation of development banks to guarantee a lower bid is also a risk, due to great uncertainty of approval and availability of the resource. In our scenarios with funding provided by development bank was not considered the delay for credit concession, which often leads to a bridge loan in order to cover the cash flow of the project. That implies a financial cost which was not considered in our scenarios.

70 ! GREENER INSIGHTS Our vision for cost-effective projects

71 Scenarios! Although they reflect the current conditions, the considered scenarios for implementation of the power plants have high degree of uncertainty, especially in the period from 2019 to The 2018 presidential elections in the country can significantly impact the macroeconomic conditions in 2019 and Amongst the main Drivers, the exchange rate and the capital cost are the ones which present greater impact in the projects profitability and generates greater uncertainty to the projects.

72 Modules! Due to large price volatility of the PV modules on the international market during 2017, there is still great uncertainty about future prices and availability of supply. The prices variation reached, in 2017, up to +20%. The international market still presents a scenario of great uncertainties for the next years. The risk of eventual impacts in the CAPEX must be adequately priced according to the energy value. Although a significant portion of the enterprises have used local modules so far, the financing conditions and the availability of resources through development banks are key items for the development of local production. An important factor to be considered with respect to the modules supply is connected to the delivery availability, both in the local and international market. Price may not be the main driver in a short term scenario.