Reliability Charge Colombia, an investment oportunity Paris, Octuber 15-16th, 2007

Content 3.How to participate 4.Rights and Obligations 5.Schedule 2.An investment oportunity in the Colombian power market 1.Colombian Electric Sector

Colombian Electric Sector

Colombian Power Market data (2006) Generation 36 Transmission 11 Distribution 32 Retailing MW installed (64% hydro 33% thermal) Peak demand: 8762 MW (Growth: 1.42%) Energy demand: GWh (Growth: 4.07%) Firm energy (declared by suppliers): 60,6 TWh-year 12 years of operation Generators and retailers Centralized transactions

Spot and bilateral prices

Transactions in the wholesale energy market (2006) $ % $ % $ % $ % $ mlls

Delivery of energy in scarcity conditions Building and operation of power assets Constant payment ($/GWh) of Firm Energy Commitment period: up to 20 years Firm Energy Auction to allocate FEO What is the oportunity?

When? Supply-Demand Balance

How to participate? 1.To Inscribe a project of power generation in Colombia Requirements for the Inscription Feasibility studies Financial and management scheme Approval of Environmental Alternatives Diagnosis Information about land acquisition options Request of conection to the transport network Fuel acquisition scheme Designs in execution Presentation of environmental alternatives Studies Information about power generation projects in Colombia upme.gov.co

How to participate? 3.To build and operate the generation asset 2.To bid in the Firm Energy Auction P2P2 P3P3 Round 5 Round 4 P4P4 P5P = P 6 Round 3 Round 2 P1P1 Round 1 excess supply = P 6’ Aggregated supply Clearing price = CXC D D US$/MWh 26.8 = P 0 MWh Starting price

Energy to be auctioned and commitment period 2007 … GWh Demand Transition Period Energy to be auctioned years Commitment up to 20 years

Generator: Obligations and Rights 1.To have a generation asset to back the FEO 2.To have the fuel to generate 3.Deliver the energy when Spot > Scarcity prices as dispatch required it ObligationsRights 1.To receive the Reliability Charge, even if the FEO is not required, during the commitment period. 2.FEO protected by Colombian Laws and Regulation Spot price FEO is required

Demand: Obligations and Rights ObligationsRights To pay the reliability charge during the commitment period, even if the FEO is not required. To buy the energy up to the Scarcity Price when Spot Price>Scarcity Price

Legal Stability of CXC Electricity Law inforce to evaluate reliability each plant gives to SIN This regime is part of code of Wholesale Energy Market (MEM). CXC is one of transactions of the MEM The Firm Energy Commitment (OEF) is a legal relation as a result of the acution with well defined rigths and obligations CREG has defined integrally the regime of the transaction: Assignation of OEF, duration, responsability, risks, guarantees, settlement, billing and payment. There is a legal stability clause Each agent will be certify by ASIC for a legal stability of the transaction.

Guarantees 1.Entrance before commissioning period 2.Fuel availability 3.Declaration of firm energy higher than Base Firm Energy 4.Declaration of higher firm energy due to IHF improvements 5.Payment of commission to remunerate a succesful auction promotion.

Reconfiguration Auctions Security Rings Secondary Market Demand Response Last resource generator

Incentives Fixed CXC incomes –Up to 20 years for new plants –Up to 10 years for Closing Ciclo and Under cosntruction –Up to 5 for minor repowering in transition Alternatives for ensuring fuelContract or guaranties Legal stability. Improvment of availability.

Schedule 2007 –Transition period assignment 2008, 2011, –2013 Firm Energy Auction –2009 Firm Energy Assignment

Comisión de Regulación de Energía y Gas