Session II: Key Elements of Structured Finance for Renewable Programs and Energy Efficiency

1. Session II: Key Elements of Structured Finance for Renewable Programs and Energy Efficiency “Financial Instruments to Promote Sustainability and Climate Change Mitigation Morelia, Mexico, Nov 29, 2012

2. Development and Energy are Intrinsically Linked Source: http://holtz.org/Library/Social%20Science/Geography%20and%20Economic%20Development%20by%20Gallup,%20Sachs/GDP%20Density%20Map.gif downloaded 12Nov2012 Source: http://www.cojoweb.com/earthlights_dmsp_big.jpg , downloaded 12Nov2012

3. Yet, Energy and the Biggest Threat to Development, Climate Change, are also Intrinsically Linked… Source: China’s Energy and Carbon Emissions Outlook to 2050, Nan Zhou, David Fridley, Michael McNeil, Nina Zheng, Jing Ke, and Mark Levine, Lawrence Berkeley National Laboratory, Report LBNL-4472E, April 2012

4. For a Good (?) Reason (So Far!)… Source: Levelized Cost of New Generation Resources in the Annual Energy Outlook 2011, http://www.eia.gov/oiaf/aeo/electricity_generation.html , downloaded 23Nov2012

5. Itaú Unibanco: Global Presence Itaú Unibanco has a strong presence in South America … Itaú BBA U.K. Securities Ltd. Banco Itaú BBA Intl S.A. (London) Banco Itaú BBA Intl Frankfurt Rep. Office Itaú Asia Securities Ltd. Tokyo Branch ItaúUnibanco Tokyo Branch Banco Itaú BBA Intl Paris Rep. Office Banco Itaú Europa Luxembourg S.A. Banco ItaúSuisse S.A. Switzerland Itaú BBA USA Securities Inc. Itaú BBA NY Rep. Office Itaú Unibanco NY Branch Banco Itaú Europa Intl (Miami) Itaú BBA Securities Inc Miami Banco Itaú BBA Intl S.A. (Lisbon)Banco Itaú BBA Intl Madrid Rep. Office Itaú Middle East Ltd. (Dubai) Itaú BBA Shanghai Rep. Office Itaú Ásia Securities Ltd. (Hong Kong) Itaú Unibanco S.A. Nassau Branch Itaú BBA Nassau Branch Itaú Bank & Trust Bahamas Ltd. Itaú Unibanco S.A. Cayman Branch Itaú Unibanco Holding S.A. Cayman Branch BIE Cayman Ltd. Banco ItaúBBA Colombia Banco Itaú BBA S.A. Peru Rep. Office Itaú Unibanco S.A. . (Brazil) Banco Itaú BBA S.A. (Brazil) Banco Itaú Paraguay S.A. Banco Itaú Uruguay S.A. Banco Itaú Chile Banco Itaú Argentina S.A. ... and global distribution capabilities. Our overriding purpose is to contribute decisively to the success of our clients, developing their business in order to achieve sustainable leadership, playing a significant role in the growth of the countries where we operate, and in the advancement of the people who are directly or indirectly served by the projects we support. (…) A great deal of certainty is dangerous. (…) We understand that even when we believe deeply in something we should still question it. The strength of our reputation springs from our capacity to do things better and differently (…)”

6. Keys to Successful Climate Change Strategies: Developed through a transparent partnership process involving stakeholders of different sectors Reflects national conditions and preferences, natural resources base, and institutional framework (“national policy goals and national circumstances”) Focus on long-term goals but recognizes short-term tradeoffs Allows for intermediate adjustments, if necessary

7. Green Standards Are Fundamental – But Not Enough • Large Events Like the 2014 World Cup Are a Great Opportunity to Upgrade Building standards • Engagement Between Develpment and Commercial Banks: Focus on Supply Chain

8. Social Issues: Low Income Households and the “Poverty Trap” – the Case of Power Distribuition in Brazil Improvement in Social Conditions Lead to Improvement in Economic and Financial Results!

9. Ethanol – from Proálcool to flex-fuel • Designed in the 70’s as a response for the Oil Crisis • Sugar cane production dates back to early XVI century • Incentives to increase sugar cane and ethanol production, develop technology, gain consumer support • Huge initial success • Major difficulties during 80’s, when oil prices fell • Solution: technological development (flex fuel), continued support for production • Issues: trade-off food x fuel? • Financial incentives for agriculture vs. fossil fuel subsidies

10. Birth, crisis and success: Technology is the Key Factor!

11. Biofuels: Energy X Food? Not if You Do It Properly... 481% growth 1979-2011!!! 292% growth 1979-2011!!!

12. Renewables – Wind Power • Booming industry worldwide • Very low environmental footprint • Brazil has estimated 143GW potential • Issue: high costs, and lack of local expertise • First Govt. Sponsored support program did not deliver • Solution: change incentives; support local production • Solution: technological development and increased scale of production => lower costs

13. A Global Success Story for Renewable Energy Global Windpower (installed) Forecast (2006) Actual Growth Perspectives on Windpower for the world and for Brazil – technical, economical and political questions, Jens Peter Molly, Deutsches Windenergie-Institut GmbH, April 2006 Source: Windpower.net

14. In Spite of Many Local Difficulties...Key to Success: Adjust to Local Conditions

15. Hydropower Environmental Footprint: Challenges Source: Aneel. Image from http://www.bicusa.org/es/Article.11709.aspx 16

16. Energy Sector – Large Hydro Challenges and Opportunities UHE Balbina Flooded Area: 3150 km2 Capacity: 250 MW (9,44 km2/MW) UHE Tucurui Flooded Area : 2430 km2 Capacity: 4240 MW (0,57 km2/MW) UHE Samuel Flooded Area : 560 km2 Capacity: 217 MW (2,58 km2/MW) 17

17. Energy Sector – Large Hydro Challenges and Opportunities UHE Balbina Flooded Area: 3150 km2 Capacity: 250 MW (9,44 km2/MW) UHE Tucurui Flooded Area : 2430 km2 Capacity: 4240 MW (0,57 km2/MW) UHE Samuel Flooded Area : 560 km2 Capacity: 217 MW (2,58 km2/MW) 18

18. Hydropower Environmental Footprint: Solutions and Opportunities Source: Legal Issues Guidebook to the Clean Development Mechanism, June 2004 19

19. Challenges and Opportunities Summing up… The benefits of strong, early action on climate change outweigh the costs. The effects of our actions now on future changes in the climate have long lead times (...)what we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next. No-one can predict the consequences of climate change with complete certainty; but we now know enough to understand the risks. Mitigation - taking strong action to reduce emissions - must be viewed as an investment, a cost incurred now and in the coming few decades to avoid the risks of very severe consequences in the future. If these investments are made wisely, the costs will be manageable, and there will be a wide range of opportunities for growth and development along the way. For this to work well, policy must promote sound market signals, overcome market failures and have equity and risk mitigation at its core. Stern Review, The Economics of Climate Change, 2006 Source: http://www.ethicalmarkets.com/2010/02/09/hoax-precautionary-principle-anyone-2/

20. Obrigado!