Skadden, Arps, Slate, Meagher & Flom LLP

Brazilian-American Chamber of Commerce

Brazil Energy Conference2009

POWER & TRANSMISSION

Lance Brasher

Four Times SquareNew York, NY

October 15, 2009

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State of Electricity Generation in Brazil• The reliance on abundant

hydroelectric resources is beneficial for Brazil as this reduces the overall generation costs.

– However, Brazil’s dependence on hydropower makes the country especially vulnerable to supply shortages in low-rainfall years.

– Therefore, the government has made great efforts to diversify its sources of energy.

• The Brazilian government announced in April 2009 that it is reworking the country’s energy mix with more emphasis on renewable resources, continued expansion of gas and development of nuclear power.

Brazilian Electricity Matrix

Source: 2007 Ministério de Minas e Energia

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Hydroelectric Projects• Current composition in Brazil’s Electricity Matrix – 72.1%• The National Agency for Electricity (ANEEL) has commissioned feasibility

studies for several hydroelectric plants (small, medium and large) in the period 2006-2008.

• The Brazilian government is encouraging large and small hydro projects.– BNDES (Brazil's Economic and Social Development National Bank) has

provided loans to several small hydro projects (e.g. the Malagone project – 19 MW).

• Projects in Development– Jirau – 3300 MW (under construction)– Santo Antônio – 3150 MW (under construction)– Belo Monte – 11,000 MW (in planning)

• Proposed hydro projects are predominantly located in northern and eastern Brazil.

– These projects will require large transmission capacity to Rio de Janeiro and Sao Paulo in order to be viable.

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Fossil Fuel Powered Electricity Generation in Brazil

• Current composition in Brazil’s Energy Matrix – 15.0%

• Oil and Gas Journal reported that Brazil had 12.9 trillion cubic feet (Tcf) of proven natural gas reserves in 2009.

• Petrobras operates Brazil’s domestic 4,000-mile natural gas transport system.

– Major systems are currently not interconnected, which hinders domestic production and consumption.

– China’s Sinopec is currently constructing the 730-mile Gasene pipeline linking the northeast and southeast networks.

– Petrobas plans to bring several new natural gas projects online over the coming years. In the Mexilhao project, plans call for production to come online in May 2010 at 100 Bcf per year, eventually rising to 190 Bcf per year.

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Coal Power in Brazil

• Current composition in Brazil’s Electricty Matrix – 1.4%

• Coal use has decreased relative to biofuels, natural gas and renewable energy.– In 1998, coal was the source of 27% of Brazil’s thermal-

fired energy. This decreased to 17% by 2007.

• Recent Projects– Pecém I project - A financing agreement has been signed for

the Porto do Pecém I, a 360 MW coal-fired power project in the state of Ceara in northeastern Brazil.

– Pecém II project – The Pecém II project, a 365 MW coal-fired power plant, has reached financial close.

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Biomass Electricity Generation in Brazil

• Current composition in Brazil’s Energy Matrix – 3.6%• According to some analyses, Brazil's sugarcane bagasse used for power generation has reached 3.0 GW in 2007, and it is expected to reach 12.2 GW in 2014.

– One utility in São Paulo is buying more than 1% of its electricity from sugar mills, with a production capacity of 600 MW for self-use and 100 MW for sale.

– The energy is especially valuable to utilities because it is produced mainly in the dry season when hydroelectric dams are running low.

– In addition, President Luiz Inácio Lula da Silva wants to invest more heavily in biodiesel, biofuel and biomass energy sources.

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Wind Energy in Brazil

• Current composition in Brazil’s Energy Matrix – 0.2%• A major boost in the wind industry comes on November 25, when the

government holds its first wind power auction in which the government is expected to buy up to 1,000 MW in new generating capacity from competing firms.

– Brazil's wind energy association estimates the auction will generate investments worth about 5 billion reais ($2.4 billion).

• Recent Projects– AES purchased the 207 MW wind park in Ceará.– NuCapital is developing two wind projects totaling approx. 100 MW.

• Transmission of Wind Energy– Transmission lines need to be built in order to make wind farms viable.– With 522 MW already installed, the state of Ceará is planning to build over 1000 km of transmission lines.

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Transmission in Brazil• Transmission has remained almost

exclusively under government control through both federal (Electrobras) and state companies (mainly Sao-Paulo-CTEEP, Minas Gerais-Cemig, and Parana-Copel) until recently.

• Under the new sector regulatory model, there are about 40 transmission concessions in Brazil. Most of them are still controlled by the government, with subsidiaries under federal company Electrobras holding 69% of total transmission lines.

• Nevertheless, deregulation provides great opportunity for investment in Brazil:

– In 2008, ANEEL, Brazil’s power regulator, auctioned off the building and operation of $3.1 billion in transmission capacity from the Jirau Hydro project.

– ABB, the leading power and automation technology group, has won orders worth over $540 million from the Abengoa Group to deliver the key technology for the world’s longest power transmission link to be constructed in Brazil.

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For Further Information

• Lance Brasher– Telephone: 202-371-7402

– Email: lance.brasher@skadden.com

• Richard S. Aldridge Jr.– Telephone: +11 3708 1830

– Email: richard.aldridge@skadden.com

• Jorge Kamine– Telephone: 202-371-7263

– Email: jorge.kamine@skadden.com

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Energy at Skadden• Skadden “covers the waterfront in energy, fulfilling clients’ regulatory, litigation, finance

and corporate and M&A needs in the energy sector.” — Chambers USA 2008 • Project Development

– Extensive experience representing developers, contractors, operators, fuel suppliers, off-takers and other parties involved in greenfield and brownfield project ownership, development and construction, fuel supply and transportation, and operations and maintenance matters.

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