E LECTRICIDAD A NDINA Carbon Finance Risk Management Workshop Peruvian small hydros 19 th November 2003 Project Presentation Peru Hydros Strictly Private and Confidential

Peru Hydros Graton Hydro E LECTRICIDAD A NDINA

Peru Hydros Project Summary Company:  Formed in October 2001  SIIF Energies has 80% of the Capital of SIIF-Andina  SIIF Energies is 80% owned by Electricite de France (EDF)  Electricidad Andina (G Cox / JM Cardenas) has 20%  Based in Lima: Av. La Paz 535 Of. 303 – Miraflores  Telephones: (511) and Core Business:  To develop, build and operate small hydroelectric power plants in Peru.  To invest in electricity producing plants as an Independent Power Producer.  To sell electricity to Utilities or private end users.

Peru Hydros Project Summary - Andina Company:  Electricidad Andina formed Dec 1996 by Guillermo Cox Zapater and Juan Manuel de Cardenas.  Specializes in the identification, basic engineering design, financial structuring and development of small to medium size hydro power projects in Peru. Experience:  Guillermo Cox - vast experience in the engineering, design, manufacture, construction and commissioning of small hydro plants in Peru, with more than 40 hydro plants with a combined capacity of 50 MW in operation.  Juan Manuel de Cardenas has 25 years of experience in financial engineering and advisory services, with over 20 projects financed throughout the Caribbean, Central and South America. A former IFC-World Bank Senior Investment Officer at BAS/ IFC.

Peru Hydros Project Summary Project features  Solid and well documented hydrology  Well known geology, with similar infrastructure works built in the area.  Good access to project site, roads, telephone, etc. already built or installed.  Capacity available on the transmission lines to transport energy and capacity produced by the power plant.  Adequate transmission lines near to the powerhouse,  Project close to the market to be attended.  No evident environmental problems.  All projects lower than $US 900kw installed

Peru Hydros First stage projects Graton 5.0MW Moche I12.0MW Moche II 8.0MW El Sauce10.0MW Total35.0MW

Peru Hydros Project Summary Peru Graton Moche 1 and 2 Tanguche 1 and 2 El Sauce

Peru Hydros Graton Summary LocationSan Mateo, Province of Huarochiri, 92 km East of Lima. Power house 3200 meters above sea level. Water Rímac River. Type:Run of the River, parallel to the National Grid Capacity:Graton 5.0 MW Design Flow:Graton 13 m3/sec Gross Head:Graton 46 meters Est cost:US$ 4,500,000 IRR:Project 19.90% - Equity 28% Engineering:Basic Engineering Designs and feasibility report finished Permits:Water Rights obtained - Generation authorization obtained - Environmental Impact studies performed – Tunnel study done

Peru Hydros Project Summary - Graton Graton intake design Designs done Permits obtained Project ready to go

Peru Hydros Project Summary - Graton Site downstream of intake at Graton Tunnel Simple project – only 1km of tunnel through good rock

Peru Hydros Project Summary – Moche 1 Location:Otuzco, 56 km East of Trujillo. Powerhouse 1400m above sea level. Water:Moche River, 2200 meters above sea level. Project:Run of the River; parallel to the National Grid. Capacity:12.0 MW Design Flow:2 m3/seg Gross Head:800 m Est Cost:US$ 8,500,000 IRR:Project %, Equity 25% Engineering:General Scope of the Project. Permits:Water Rights obtained - Generation Authorization not presented, Water studies adequate

Peru Hydros Project Summary – Moche 2 Location:6 km downstream Moche I, 50 km East of Trujillo. Powerhouse 900 m above sea level. Water:Moche River. Project:Run of the River; parallel to the National grid. Capacity:8.0 MW Design Flow:2 m3/seg Gross Head:500 m. Est Cost:US$ 6,700,000 IRR:Project % - Equity 23% Engineering:General Scope of the Project. Permits:Water Rights presented, waiting for authorization. Generation Authorization not presented. Environmental Impact studies not required Water studies adequate to start

Peru Hydros Project Summary – Moche 1 Powerhouse site

Peru Hydros Project Summary – Moche 1 and 2 Water intakes

Peru Hydros Project Summary – Moche 1 ands 2 Old irrigation canal Penstock will run parallel

Peru Hydros Project Summary – El Sauce Location:Province of San Martin, in North Central Peru 1200 km from Lima. Powerhouse at 600m above sea level Water:Natural discharges of Lake El Sauce Project:Run of the River Capacity:9.6 MW Design Flow:3 m3/seg Gross Head:400 m Est Cost:US$ 11,000,000 IRR:Project % Equity 27% Engineering:Pre-feasibility Study done by SNC Lavalin available. Permits:Water Rights obtained, Generation Authorization not presented,Environmental Impact studies not required. Long water history

Peru Hydros Project Summary - Tanguche I Location:Chavimochic Irrigation, 80 km from Chimbote. Powerhouse located 200m above sea level Water:Irrigation canal with capacity for 95 m3seg. Project:Run of the River, operation parallel to the National grid. Capacity:20 MW Design Flow:65 m3/seg Gross Head:45 m Est Cost:US$ 16,500,000 IRR:Project % Equity 30% Engineering:Pre-feasibility Study done by El Proyecto Especial Chavimochic available. Permits:Water Rights obtained by the irrigation Project. Lands and service roads granted to the irrigation project. Generation Authorization not presented. Environmental Impact studies not presented. Water study very good

Peru Hydros Project Summary – Tanguche 1 and 2

Peru Hydros Project Summary

Peru Hydros Project Summary – Tanguche 2 Location:Chavimochic Irrigation, 80 km from Chimbote. Powerhouse located at 120 meters above sea level Water:Water discharged from Tanguche II not used for agriculture. Project:Run of the River, operation parallel to the national grid. Capacity:30 MW Design Flow:55 m3/sec Gross Head:70 m Estimated Cost:US$ 24,500,000 IRR:Project % Equity 30% Engineering:General Scope of the Project Permits:Water Rights obtained by the irrigation Project. Lands and servitude granted to the irrigation projecteneration Authorization not presented. Environmental Impact studies not presented.

Peru Hydros Project Summary – Carbon Credits Key points:  SIIF Andina’s Project Concept Notes for 65 MW, approved by World Bank.  Carbon Credits for SIIF Andina will generate US$ 800,000 per year for a 7 year period, renewable for a second and third period of 7 years, subject to base line approval.  The World Bank mission to Peru 06 January to 14 January visited all project sites and as result of the visit, the WB has confirmed that all projects are Category “B” under World Bank Environmental Guidelines.  Environmental Impact Studies for all projects need to be started before 31 st March 2003 to qualify for the first round of Carbon Credits.  The cost of these studies are SIIF – Andina’s responsibility. The estimated cost of this studies is estimated at US$20,000 to $25,000 per project.  Phase 1 projects for carbon credits are Graton (6.5MW), Moche 1(12 MW), El Sauce (10 MW) and Cerro Mulato (8 MW) if its acquisition is agreed by SIIF.  Phase 2 projects are Moche II (8 MW), Tanguche II and III (50 MW combined) and Santa Rita (170 MW)  All Phase 1 and 2 projects comprise a total of MW

Peru Hydros Project Summary – state of completion  All projects delivered to pre-feasibility stage  Water analysis performed for all projects  System pricing modelled for each  Investment returns analysed – sensitivities performed  Detailed design completed for Graton  Project model completed for each  All water rights held  Information memorandum prepared for Graton – rest in progress

Peru Hydros Project Summary – what next  Working on replacement of strategic investor  Working on term funding  Lease finance offer received from Peruvian banks  Finalizing models and consolidated returns  Closing development on Graton

Peru Hydros Project Summary Banco de Crédito del Peru has presented a financing proposal for Graton Hydro Project, based on the following conditions:  Amount:Up to US$ 4,500,000  Type of Credit:Leasing  Term:5 years  Interest Rate:6.5%  Guarantee:Stand By Letter of Credit of a First Bank valid until the Plant has been operating satisfactorily for 6 months.

Peru Hydros Project Summary Energy Supply and Terms  Supply: Up to 5MW and all the associated energy to said capacity.  Luz del Sur Obligations: to buy all capacity delivered and all the associated energy to said capacity.  Delivery Point: San Mateo Sub-Station  Delivery timetable: 18 months from the signature of the PPA contract.  Duration the the PPA Contract: 10 years, with an automatic renewal for 2 year periods.

Peru Hydros Project Summary Capacity and Energy Prices PRICE = EAHP +EAFP + PHP EAHP = Energy measured during peaks plus secondary toll charge between Chosica Bus Bar and San mateo Sub-Station, multiplied by the peak energy price at the Santa Rosa Bar, 220 KV EAFP = Energy measured outside peaking plus secondary tolling charge between Chosica Bus Bar and San Mateo Sub-Station, multiplied by the non- peak energy price at the Santa Rosa Bar, 220 KV PHP =Monthly maximum demand measured at peak hour multiplied by the Santa Rosa Bus Bar price 220 KV, which includes tolling charges of the principaltransmission system

Peru Hydros Project Summary Payment Terms  Billing: Monthly  All payments within the Peruvian Electricity System are settled in US$.  Payment: Luz del Sur shall pay invoices within 8 days of receipt of the invoice.  Delays in payments: two months of delays shall give right to the generator to cut the supply of energy.  Cut in the supply: Luz del Sur shall pay the generator for all the capacity under contract until the contract is sorted out or cancelled.

Peru Hydros Project Summary Project:SIIF Andina S.A Installed Capacity:35.0 MW Timetable:2 years Estimated Investment:31.5 million Development Costs:1.5% of total project cost underUS$500,000 (1) Total Investment:$35 million (Estimated) Max. cost/ KW US$900,000 (1)Consists of direct costs and Andina’s operating expenses