Mounting Opportunities & Complexities of U.S.- Cuba Relations Cuban Energy Mounting Opportunities & Complexities of U.S.- Cuba Relations

Cuban Energy Snapshot

Notable Impact: Venezuela Oil production has declined significantly in Venezuela, down around 300,000 barrels per day (bpd) from 2014 to June 2016. Cuba was receiving a peak of 99,000bpd of Venezuelan crude oil in 2013. Recent figures from PDVSA show 53,500bpd of crude going to Cuba, a 40% drop from January to June 2015 total. The drop in crude shipments has been partially offset by an increase in refined products, but the overall drop is still ~20% y/y for the first half of 2016. Declining Production   (Thousand barrels per day) 2014 2015 3Q 2015 4Q 2015 1Q 2016 16-Mar 16-Apr 16-May 16-Jun 2014 - Jun16 Oil Production, Secondary Sources 2,361 2,357 2,354 2,309 2,286 2,257 2,188 2,095 -266 Oil Production, Direct Communication 2,683 2,654 2,631 2,587 2,515 2,490 2,370 2,364 -319 Local consultants IPD expect an avg for 2016 of 2.35mmbpd

FDI Opportunities in Renewables Cuba has made strides in reducing energy consumption (e.g. by replacing inefficient appliances and replacing incandescent light bulbs nationwide). However, there is significant need for foreign direct investment in order to make advances in reneweable energy generation, transmission, and distribution. Biomass: 19 bioelectric plants @ 1900 GWh/year Wind: 13 wind farms @ 1000GWh/year Solar: 1000GWh/year Hydroelectric: 74 plants @ 274GWh/year

Portfolio of Investment Opportunities 102 MW Wind Farm

U.S. – Cuba Relations & Regulatory Changes Four Rounds of Changes: January 2015 - September 2015 - January 2016 – March 2016 The coordinated regulatory changes made by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), respectively, are intended to implement the policy to engage and empower the Cuban people. Relevant for Renewable Energy: January 2015: General policy of approval for exports and reexports to Cuba of items for the environmental protection of U.S. and international air quality, and waters, and coastlines (including items related to renewable energy or energy efficiency). January 2016: Case-by-case review for exports and reexports of items for use in construction of facilities for supplying electricity or other energy to the Cuban people, or other infrastructure that directly benefits the Cuban people January 2016: Pending case-by-case review, authorization to export to some Cuban state-owned enterprises (SOEs) that “provide goods and services for the use and benefit of the Cuban people.” This includes items for agricultural production, education, food processing, public transportation, wholesale distribution, and construction of facilities for supplying energy (among others).

Complexities for U.S. Companies in Cuba On the U.S. side, companies must ensure compliance with U.S. regulatory regime (and obtain necessary licenses from OFAC & BIS). On the Cuban side, the first stop for U.S. companies is the Embassy of Cuba in Washington, D.C. Eventually, all FDI projects related to renewable energy in Cuba must be approved by the Council of Ministers. Approval process is faster within the Special Economic Development Zone (ZED) at the Port of Mariel.