1. Energy Contracting in Brazil Under the New Regulations: Challenges and Opportunities Track 3B, Nov 13th 2013, 9:30 to 11:30 Rafael Herzberg
Rafael Herzberg

2. Energy contracting in Brazil
Challenges & opportunities
Rafael Herzberg

3. Rafael Herzberg Consulting partner @ Interact since 1991
Energy contracting
Onsite power projects & energy efficiency projects
Industrial, commercial energy users
ELTEC from 1987 to 1991
ELTEC in 1976 (electrical engineer)
Rafael Herzberg

4. Agenda The Brazilian electrical power sector
The Brazilian business environment
Energy contracting & risks at stake
Decision making & new challenges
Where are the opportunities?
Rafael Herzberg

5. Where is the money? 30% kW demand, wire fees 70% MWh commodity, energy
50% Taxes
Rafael Herzberg

6. The electric energy supply chain
Commodity (MWh)
Wire (kW)
Commodity (35%)
Wire (15%)
Taxes (50%)
Total (100%)
Private
20% (7%)
80% (12%)
19%
State
80% (28%)
20% (3%)
100% (50%)
81%
Rafael Herzberg

7. The challenges
The State …  Gets most of the revenues  Controls the regulator (ANEEL)
  The Global Competitiveness Index Brazil’s Rank: 48 (out of 144 countries)
Among the most expensive power prices in the world
Rafael Herzberg

8. Worrying signals
Industrial energy users relocating to  Paraguay  Mexico  Eastern Europe
As opposed to locally producing, importing from  China  India
Rafael Herzberg

9. Worrying signals
Contractual demand increase  Energy users to pay for the associated investments
Deteriorating energy quality  More than 20 h/year of unplanned interruptions  Voltage fluctuations   Hidden costs have become important
Rafael Herzberg

10. Worrying signals The market value of the energy companies is sinking
Rafael Herzberg

11. Worrying signals
Rafael Herzberg

12. The SPOT (PLD) is not market driven
Thermal power plants
Weighted average [70% H, 30% T]
Hydro power plants
Rafael Herzberg

13. How to close a good price?
2013 prices 
1,400 MWh/month Plastic Recycling R$ 110/MWh
2,800 MWh/month Packaging R$ 250/MWh
1,500 MWh/month Textile R$ 92/MWh
Rafael Herzberg

14. How to make a difference?
Is energy an account that gets corporate attention?
Are CEOs and COOs committed?
Is energy handled as if it were any other account of the same value?
Rafael Herzberg

15. How to turn around? Upper management leading the contracting affairs
Looking at the future and not at the rearview mirror
Prospecting market prices well in advance of the current contract termination
Having clarity about risks at stake and mitigation tools
Rafael Herzberg

16. Important factors The take or pay nature of the contracts
Required volume flexibility
Changes  New technologies (products, production)  Make or buy  Strength of the economy
Rafael Herzberg

17. Where are the opportunities
Portfolio of energy contracts  Gas, power, biomass
Onsite power projects  Generation, Cogeneration, HV connection
Energy efficiency projects  ASD, EMS, TOU, thermal insulation, lighting
Rafael Herzberg

18. It is about a structured process
Technical  What makes sense for each site?
Financial  Buying assets or contracting services/commodities?
Management  In-house or outsourcing?
Rafael Herzberg

19. Recommendations of your consultant
Decisions  Board  Management
Analyses  Alternatives  Risks  Mitigation tools
Info  Energy uses  Scenarios  Energy sources
Rafael Herzberg

20. Thanks. Rafael Herzberg rafael@interact-energia. com. br www
Thanks! Rafael Herzberg
Rafael Herzberg