Maria Cecília Amaral - Executive Manager eficienciaenergetica.br mcamaral@abesco.br

1. ABESCO - Associação Brasileira das Empresas de Serviços de Conservação de Energia (Brazilian Association of Energy Saving Service Companies) Maria Cecília Amaral - Executive Manager www.eficienciaenergetica.org.br mcamaral@abesco.com.br Munich – February, 2008

2. ABESCO Mission: “Promote the Brazilian Energy Efficiency Industry, increasing the competitiveness of the Brazilian economy by means of sustainable development”. Founded in 1997, by 15 associates.  Currently constituted of more than 58 associates.

5. CONSUMER MARKET PRESS SOCIETY Association Associated Companies ACADEMIC CIRCLE FINANCIAL MARKET PRODUCERS’/ SUPPLIERS’ MARKET OTHER ENTITIES/ INSTITUTIONS GOVERNMENTAL BODIES UTILITIES Co.

6. SWOT ANALYSIS OF THE EE MARKET IN BRAZIL STRONG ASPECTS WEAK ASPECTS OPPORTUNITIES THREATS

7. Strong Aspects of the Brazilian Esco’s  Geographic distribution throughout Brazil is compatible with market opportunities.  Excellent technical qualification.  Fast decision-making – Generally it is the owner who conducts business.  Good integration among them.  Specialization by accumulated know-how which facilitates market segmentation.

8. Weak Aspects of the Brazilian Esco’s  Company management.  Lack of strategic view of the market.  Lack of capital for financing its own projects.  Lack of legal and financial background to adapt Performance Contracts to client’s characteristics.  Means of reducing risks in financing.

9.  Threats: Critical success factors • Lack of knowledge concerning the Brazilian industrial market in relation to qualitative and quantitative aspects of the use of energy and the potential for its reduction and psychological barriers for such. • Lack of knowledge in the market concerning EE projects. • Laws which secure contracts for Public Services. • Lack of promotion and disclosure.

10.  Opportunities: Motivating Factors • Rise in energy tariffs. • Possibilities of a new energy crisis. • Investment of resources in Energy Efficiency. • Pressure of the competitive market for cost reductions. • World concern with sustainable development and environmental impact – issuance of carbon gases. • New mechanism of guaranteeing provision for financial operations and special lines of financing – PROESCO.

11. Opportunities: Motivating FactorsRegulation of the energy and EE markets • Adequacy of legislation which allows Performance Contracts for Public Buildings – work developed between Abesco and Ministry of Mines and Energy. • Recent law of the municipality of São Paulo obliging the installation of solar heating systems in new edifications. • Regulation for Volunteer Tagging of EE Level for Commercial and Public Service Buildings: lighting system, air conditioning and thermo performance

12. Abesco’s strategic plan to reduce the existing barriers and develop the market

13. Image of the Association and Esco’s Site: Available as from December 2004.  - www.eficienciaenergetica.org.br  www.abesco.com.br Weekly Electronic Bulletin: Mailing 12,000 names – 10% average monthly increase. Energy Efficiency Magazine: Issued every four months – 10,000 copies Issued on June 2005

14. Events 10 Regional Energy Business Meetings : Numbers of the State of São Paulo – October/07 to April/08. Carried out by Abesco and Conpet/Petrobras. Mobilization of the industry and dissemination of advantages of Energy Efficiency. Identification Projects to PROESCO V National Congress of Energy Efficiency and EnergyCo-Generation – June 2008

15. Partnerships Regional and National Commercial Industry Federations / Eletrobrás - Procel / Petrobras - Conpet / IPT / Finep / Sebrae / Canadian Government / CIDA / World Bank (UNF&UNEP) Other associations connected to Abesco Other associations from other countries – expansion of limits. Contacts with academic circles – development of technological innovations

16. Esco’sQualification and Training Partnership with sponsors,for several courses concerning the following themes: Management - Strategic planning for Esco’s - Identifying market opportunities - Sales and closing of Performance Contracts - Performance Contracts  Legal Aspects  Set up of financial Architectures which enable performance contracts.  Qualification in specific and innovative techniques.

17. National Event yearly carried out 800 registered participants 78% of energy industries and companies. Average daily flow of 500 people 60 lecturers 15 sponsoring companies 17 supporting institutions

18. Energy Service CompanyESCOMaincharacteristics

19. ESCO – ENERGY SERVICE COMPANY The difference between an ESCO and an Advisory Company is that the ESCO divides risks with the end Client. Not only in terms of investment (sometimes shared), but also in terms of non remuneration due to an occasional non achievement of results. ESCO

20. ESCO – Commercial Approach Opportunities Search and analysis of the existing situation Technical-economical feasibility analysis Auto financed Concessionaires Investment funds Suppliers Partners Resources Implementation Execution of approved projects

21. Hospitals Middle marketing Hotels Supermarkets COMMERCIAL & SERVICES INDUSTRIAL Shopping's Office buildings Marketing Target PPP’s Public RESIDENCIAL Public Buildings Condominiums Sanitation

22. Performance ContractPhases & Characteristics

23. Contracts’ Operation $ Current Cost Cost Reduction Savings Shared with ESCO Final Expense Financing Payment Years Execution of Saving Measures Guaranteed Savings In Force Period

24. PEE FLOWCHART“ENERGETIC EFFICIENCY PROGRAM” Project Development Financing & Guarantees Project Implementation M&V Savings & Guarantees • PRE-FEASIBILITY – Preliminary identification of the saving potential and investment; • PROJECT FINANCING – Performance Contract; • FEASIBILITY – Detailing of initiatives to be implemented in case the feasibility is confirmed; • PROJECT AND IMPLEMENTATION; • MONITORING AND VERIFICATION;

25. ADVANTAGES AND RESULTS • INCREASE the “Competitive Advantage” of the industry through the optimization of energetic performance, obtaining: • Lower costs with Energy • Lower environmental impact of production • Higher Productivity • Improve financial result

26. PROJECT PHASES FLOWCHART ESCO 0 or - PRE-FEASIBILITY ESCO AND/OR COMPANY 0 or - FINANCING 0 or - ESCO FEASIBILITY ESCO 0 or - PROJECT IMPLEMENTATION ESCO + MONITORING AND VERIFICATION

27. Market Dimensioning • The selected sectors don’t correspond to the totality of the electrical energy consumed in the Country, representing, for the 2004 base, the equivalent to 66% of the national consumption. • The residential sector, excluding residential condominiums, don’t compose the calculation base once they don’t represent priority, due to current perspectives, related to the ESCOs’ presence market • The rural sector wasn’t considered

28. Sectors 2006 Commercial 58.866.443 Industrial 169.887.660 Sanitation 11.274.435 Public Power 10.355.276 Residential Cond 4.294.318 Total 254.678.132 Market DimensioningMarket Sectors Consumption in MWh/year

29. Sectors 2006 Commercial 6,615,763,444 Industrial 17,838,200,000 Sanitation 1.886.970.613 Public Power 1,264,270,311 Residential Cond 559,137,648 Total 28,164,342,016 Market Dimensioning Market Sectors: Consumption in US$/year

30. Sectors 2006 Commercial 10.007.295 Industrial 20.386.519 Sanitation 2.029.399 Public Power 2.174.097 Residential Cond 772.976 Total 35.370.286 Market Dimensioning Market Sectors: Saving Technical Potential in MWh/year

31. Sectors Saving Potential (US$ - 2006) Commercial 1,124,679,785 Industrial 2,140,584,000 Sanitation 283.045.591 Public Power 301.887.998 Residential Cond 125.180.071 Total 3,975,377,445 Market Dimensioning Market Sectors: Saving Technical Potential in US$/year

32. CREDIT LINES FOR ESCOS AND ENERGY CONSUMERS PROESCO Support to Energetic Efficiency Projects

33. PROESCO • Finances civil works (including studies) and equipment; • ESCOs or their Clients can be financed; • Term up to 6 years, including grace period up to 2 years; • TJLP* Cost + 5% per year; • Performance Contract can be the guarantee in financing to ESCO. * TJLP – Taxa de Juros de Longo Prazo – Long Term Interest Rate

34. PROESCO MODALITIES: • INDIRECT OPERATION: PROJECTS WITH TOTAL RISK OF THE FINANCIAL AGENT • SHARED RISK: BNDES* AND THE MANDATORY FINANCIAL AGENT TAKE THE PROJECT’S RISK; BNDES’ PARTICIPATION LIMITED TO 80%. *BNDES – Banco Nacional de Desenvolvimento Econômico e Social Social and Economic Development National Bank

35. PROESCO INDIRECT OPERATION

36. PROESCO SHARED RISK

37. PROESCO SHARED RISK A technical opinion is necessary, from a recognized independent entity, regarding the adequacy of the adopted technology for the obtention of the expected results.

38. PROESCO SHARED RISK In order to execute shared risk operations, the Bank shall sign a mandate contract in order to operate on behalf of BNDES.

39. PROESCO Project • BORROWER • (ESCO or Consumer) Signed contract no Approves? Contract Forwarding BANK yes Approves? yes Project Contract Minute BNDES no

40. Thank you ! Maria Cecília AmaralABESCO – Executive ManagerAv. Paulista, 1313 / 908 01311-923 - São Paulo/SP - Brazilphone : +55 11 3549-4525mcamaral@abesco.com.br