1. Associação Brasileira da Infraestrutura e Indústrias de Base BUSINESS OPPORTUNITIES IN INFRASTRUCTURE AND THE WORLD CUP 2014 FLAVIO MACHADO FILHO Director of International Relations Seoul – South Korea September 17, 2009

2. 2 INFRASTRUCTURE AND BASIC INDUSTRY ELECTRICAL POWER OIL, GAS AND PETROCHEMICAL TRANSPORT SANITATION STEELPAPER/PULP TELECOM ABDIB’s AREA COVERAGE MINING

3. 3 GOODS AND SERVICES FOR INFRASTRUCTURE AND BASIC INDUSTRY ENGINEERING SYSTEMS / EQUIPMENTS CONSTRUCTION ASSEMBLY OTHER SERVICES OPERATORSINVESTORS INTERRELATED AREAS

4. 4 ABDIB MEMBER COMPANIES REVENUE 2008 172 US$ BILLION (15% GDP) (15% GDP)EMPLOYEES 318,000 MEMBERS 144 144

5. 5 ABDIB PERMANENT AGENDA CREATE ALTERNATIVE MECHANISMS TO ATTRACT FINANCING AND INVESTMENT CLEAR AND STABLE INSTITUTIONAL RULES CONSOLIDATE REGULATION AGENCIES WITH AUTONOMY AND INDEPENDENCE DEFINE A SET OF STRUCTURING PROJECTS REITERATE IMPORTANCE OF PRIVATE CAPITAL PARTICIPATION IN INFRASTRUCTURE

6. 6 INFRASTRUCTURE: REGULATION ENVIRONMENT AND CURRENT AND REQUIRED INVESTMENT

7. 7 Concession Rules (Law 8,987/1995) Regulation Agencies  7 Agencies at Federal Level (Telecom, Electric Power, Oil & Gas, Ground Transport, Water Transport, Air Transport, Hydro resources)  21 agencies at state level and  5 at municipal level PPP – Public Private Partnerships CURRENT LEGAL AND REGULATION ENVIRONMENT

8. 8 Specific Rules for each infrastructure sector Arbitrage Private Equity Infrastructure Funds – “FIPs”  Federal Instructions CURRENT LEGAL AND REGULATION ENVIRONMENT CONT’D

9. 9 US$ Billion 2008 prices : Figures updated by using IPCA indicator over the period 1US$ = 1.97 R$ 2008 PRICES EVOLUTION OF CURRENT INVESTMENT IN INFRASTRUCTURE

10. 10 Public & Private (Share % ) CURRENT INVESTMENT IN INFRASTRUCTURE (2003 / 2008)

11. 11 ANNUAL INVESTMENT REQUIREMENT IN INFRASTRUCTURE ELECTRIC POWER 14.4 14.4 OIL AND GAS (*) 38.2 38.2 TRANSPORT/ LOGISTICS 12.2 12.2 BASIC SANITATION 6.9 6.9 TELECOMMUNICATIONS (**) 10.0 10.0 TOTAL 81.7 81.7 Notes: Requirement valid for the next 5 years (*) E&P, downstream, Gas and Energy (**) Fixed and mobile telephony 1 US$ = 1.97 R$ US$ Billion

12. 12 ELECTRIC POWER 10-years Plan (2008 – 2017) SegmentUS$ Billion Total US$ Billion GenerationHydro Plants 43,053 MW67.5 72.1 Thermo Plants 6,621 MW4.6 TransmissionTransmission lines 36,388 Km 12.7 19.8 Transformation capacity 71,357 MVA 7.1 Total91.9 Note: for Distribution, a projected investment of US$ 4 billion/year Source : EPE SECTOR CHALLENGES AND OPPORTUNITIES SECTOR CHALLENGES AND OPPORTUNITIES

13. 13 RENEWABLE ENERGY A total of 156 projects (3,299.40 MW) were selected and contracted by Eletrobrás, distributed as follows: Small Hydroelectric Plants ( < 30 MW) ProjectsMW 631,191.24 Biomass ProjectsMW 27685.24 Wind Power ProjectsMW 541,422.92 SECTOR CHALLENGES AND OPPORTUNITIES SECTOR CHALLENGES AND OPPORTUNITIES

14. 14 OIL and GAS INVESTMENT REQUIREMENT FOR E&P, DOWNSTREAM, GAS AND ENERGY (2009-2013) US$ Billion US$ Billion Petrobras153.2 Private Investors 35.6 35.6 Total188.8 Source: Petrobras, ABDIB, IBP SECTOR CHALLENGES AND OPPORTUNITIES SECTOR CHALLENGES AND OPPORTUNITIES

15. 15 ANP TENDER ROUNDS Blocks Year1999200020012002200320042005200620072008 1999 / 2008 Round12345678910 Tendered272353549089131,134*271103,513 Awarded12213421101154251*11754711 New Agents10121172513*19678 PRIVATE PARTICIPATION OIL AND GAS Note: (*) 8th. Round (2006) fully suspended ANP is the Regulatory Agency for Oil & Gas

16. 16 TRANSPORTATION TRANSPORTATION SECTOR CHALLENGES AND OPPORTUNITIES Projected investment of National Transportation and Logistic Plan 2008 - 2023 SectorsTotal Estimate (US$ Billion) Roadways 40.6 Railways 30.7 Ports 13.2 Airports 15.2 Waterways and River Harbors 6.5 Total106.2

17. 17 AIRPORT MODALITY - 2008 Infraero is a state-owned national company that:  Manages 67 airports 32 load terminals 80 units in support of air navigation  Transports Approx. 110 million passengers Approx. 1.3 million tons. of load (imports, exports and domestic) Approx. 97% of regulated air transport in Brazil TRANSPORTATION Source: Infraero INFRASTRUCTURE PROFILE

18. 18 BASIC SANITATION Notes: 1)Investment required to universalize services in 20 years. 2)Represents 0,60% GDP 3)Average Investment:  1991-94 –> 0,13% GDP  1995-00 -> 0,25% GDP  2001-04 -> 0,18 % GDP SECTOR CHALLENGES AND OPPORTUNITIES Annual investment requirement for the next years Segment(US$ billion/year) Water2.5 Sewage Collection3.1 Sewage Treatment1.3 Total6.9

19. 19 TELECOMMUNICATIONS Anatel projects that companies from this sector will invest US$ 127 billion over the next 10 years. This projection is part of the Telecommunication Update General Plan – a set of short, medium and long range goals. This projection includes investment in segments such as cable TV, wide band, fixed and mobile telephony. Source: Anatel SECTOR CHALLENGES AND OPPORTUNITIES

20. 20 PRIVATE PARTICIPATION TELECOMMUNICATIONS YearPopulation (million)Installed Accesses (million) Density (Access / 100 inhabitants) 1996157.116.510.5 2008189.641.127.7 YearPopulation (million)Installed Accesses (million) Density (Access / 100 inhabitants) 1996157.12.71.7 2008189.6148.178.1 Fixed Telephony Mobile Telephony

21. 21 PAC GROWTH ACCELERATION PROGRAM

22. 22 Last update January 2009 US$ Billion Segment 2007 – 2010 Increment up to 2010 2007 - 2010 Logistics30.719.850.5 Energy144.610.6155.3 Social & Urban 89.944.3134.2 TOTAL265.274.7340 Source : Federal Government PAC (2007 – 2010) PAC (2007 – 2010)

23. 23 RAILWAYS – HIGH SPEED TRAIN Preliminary project contemplates a connection between Rio - São Paulo – Campinas (503 Km) Key dates: Public hearings until September 15th, 2009 Bid announcement: October 2009 Bid results: July 2010 Projected investment: Up to US$ 17 billion (20% public + 80% private) Source: Halcrow Consultants PAC (2007 – 2010)

24. 24 RAILWAYS – HIGH SPEED TRAIN Source: Halcrow Consultants PAC (2007 – 2010) Route: 403 km + 100 km between São Paulo – Campinas Maximum speed: 360 km/h Average speed: 285 km/h Trip time: 1 hour and 25 minutes Price of the ticket: US$ 63 Capacity: 855 passengers Investments: US$ 17 billion Frequency of trains: one departure every 15 minutes

25. 25 US$ Billion 20012002200320042005 200620072008 YTD 2009 Jan – Jun. Agribusiness1.52.4 3.62.21.82.62.91.6 Industry57.4 6.99.710.39.515.85 Basic Industry1.81.711.42.53.33.533.1 Commerce and Services 1.51.81.91.82.42.94.66.13.5 Infrastructure3.46.54.87.388.726.619.98.7 Total13.219.817.52124.82746.847.721.9 Share of basic industry (%) 13.58.65.76.510.012.110.26.314.1 Share of infrastructure (%) 25.832.927.534.832.232.341.041.739.5 % FINANCING: BNDES Outlays by Activity Source: BNDES Elaboration: ABDIB Activity (2001 – 2009)

26. Pág. 26 WORLD CUP 2014

27. Pág. 27 Summary Summary Technical Cooperation Agreement (ABDIB+CBF+GVMT) Methodology Main results Next steps Phase II WORLD CUP 2014

28. Demand for the cities Demand for stadiums Required actions Political and legal requirements Legacy / Heritage of the cities WORLD CUP 2014 28

29. Required Actions in 9 areas City Requirements 6. Hotel network Able to meet demand 9. Public Security 7. Tourist and economic potential in the region 8. Hospital network (public and private) 5. Telecommunications 4. Power 2. Infrastructure for roads Enabling connections among airport / hotel / stadium 1. Infrastructure for airports and ports Allowing transfer of delegations, tourists and supporters in a fast and efficient way 3. Sanitation WORLD CUP 2014 29

30. National integration REQUIREMENTS Public Security Telecommunications Power Infrastructure for airports and ports Infrastructure for roads Infrastructure for railways Infrastructure for Tourism WORLD CUP 2014 30

31. Process and methodology Process and methodology Number of indicators used in each area Area*Number of indicators Transport – Airports3 Transport - Ports1 (*) Transport – Urban Mobility6 Hotel Network6 Hospital Network5 Basic sanitation8 Security10 Power7 Telecommunications3 Total49 Pág. 31 (*) For passenger terminals only WORLD CUP 2014

32. Pág. 32 URBAN MOBILITY Selected and used indicators IndicatorUnitIdeal LevelMinimum Level No. of passengers carried by day – railway system Pass/day, vehicle1,5002,000 Avg. occupied area in each transport unit Pass/m3 46 No. of passengers carried by day – bus Pass/day, vehicle 400500 Saturation level of passenger terminals in inter-municipal bus stations %8090 Avg. speed at rush hoursKm/h3022 No. of inhabitants by taxiInhabit./taxi300430 WORLD CUP 2014

33. A B Actual status Estimated status in 2014 with existing projects Gap still open to be closed with recommended additional projects Urban Mobility Hotel network Power Telecomm. Hospital network Sanitation AB AB AB AB Security AB AB Airports Ports AB AB AB Key Indicators- Minimum level - 2014 18 Candidate cities Key Indicators - Ideal level - 2014 Explanation Minimum Level Ideal level Minimum level of requirements to be a host city for 2014 World Cup Ideal level to enable a city to host any game in 2014 World Cup, independently of the phase 33 GAP ANALYSIS WORLD CUP 2014

34. Main results: Main results: First report to Government in February 2009 Selection by FIFA of the 12 host cities in May 2009 Set up for Project Phase II, focusing the selected 12 host cities. WORLD CUP 2014 34

35. FIFA 12 Host cities 1.Belo Horizonte 2.Brasília 3.Cuiabá 4.Curitiba 5. Fortaleza 6.Manaus 7. Natal 8.Olinda (Recife) 9.Porto Alegre 10.Rio de janeiro 11. Salvador 12. São Paulo WORLD CUP 2014 35

36. Next Steps ABDIB is making available specific reports on the study to all 18 candidate cities ABDIB disseminates all key results for each city together with each local Authority ABDIB setting up a new specific structure for Phase II of the World Cup 2014 project Pág. 36 WORLD CUP 2014

37. PHASE II “Even more important than the strategic plan is to materialize the necessary investment” Focus on : detailing all identified projects financially developing the executive projects (engineering, financing, environmental licensing) modeling partnerships between public and private investors managing implementation and timeframes actions required to eliminate possible risks and obstacles to investment Pág. 37 WORLD CUP 2014

38. Legacy Legacy Promotion of a huge investment in infrastructure and public services, required for the country’s development and growth, will be accelerated because of the World Cup. Considerable improvement in public urban transport, sanitation and tourism, in both large cities and tourist locations. Improvement of infrastructure services in airports, ports, energy and transport at large. Pág. 38 WORLD CUP 2014

39. Legacy Legacy Pág. 39 WORLD CUP 2014 Reduction of diseases tied to lack of sanitation because of heavy investment in critical areas. Installation of a set of multi-use arenas in almost all key regions helping to put Brazil into the international route for entertainment. Brazil in the international tourism destinations thanks to a new visibility about its locations, nature, history, culture, society. Promotion of a better sustainable environment by expanding sanitation and urban transportation.

40. 40 FINAL MESSAGES

41. 41 FINAL MESSAGES Investors in Private Equity Funds are expected to inject more resources into the emerging markets for the next 5 years. Brazil is considered no. 2 among the preferred ones Preference Global Ranking for Investors Capital of Brazilian Funds, in US$ Billion Source: EMPEA and FGV - Cepe

42. 42 Country owns the most organized and developed financial system among the BRICs; Interest rate is decreasing (favorable environment to private investment); Favorable macroeconomic aspects:  Economic stability  External Accounts going relatively well;  Brazil was given the “investment grade” (S&P);  Legal frame in place, as laws for PPPs and Funds FINAL MESSAGES Brazil offers a promising business environment to investors in Infrastructure :

43. 43 Investors in World Cup 2014 are twice welcome: They can cooperate to a very important event from both social and economic point of view Legacy will equally benefit society and those who accomplished projects or helped in their accomplishment FINAL MESSAGES

44. ASSOCIAÇÃO BRASILEIRA DA INFRAESTRUTURA E INDÚSTRIAS DE BASE www.abdib.org.br abdib@abdib.org.br