RENEWABLE ENERGY IN BRAZIL. EVP International Power, Mr. Jürgen Tzschoppe BNCC Business Breakfast 22 November 2017

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1 RENEWABLE ENERGY IN BRAZIL EVP International Power, Mr. Jürgen Tzschoppe BNCC Business Breakfast 22 November 2017

2 Statkraft today NORWAY MW SWEDEN MW Installed capacity MW Power production 66 TWh 97% renewable energy employees UK THE NETHERLANDS 279 MW GERMANY MW FRANCE TURKEY 122 MW USA San Francisco NEPAL 34 MW ALBANIA 72 MW SOUTHEAST EUROPE INDIA 136 MW PERU 446 MW CHILE 221 MW BRAZIL 257 MW 2

3 Strategic directions EUROPEAN FLEXIBLE GENERATION MARKET OPERATIONS INTERNATIONAL POWER WIND POWER DISTRICT HEATING NEW BUSINESS DEVELOPMENT NORWAY 3

4 Growth within international power Increasing demand for renewable energy in emerging markets More than 20 hydropower plants and four wind farms in operation in Southeast Europe, South-Asia and South America Evaluating hydro-, wind- and solar opportunities in selected markets Banja hydropower plant, Albania Bahia wind farm, Brazil 4

5 Statkraft in Brazil With a platform to grow in renewable technologies Barra dos Coqueiros 35 MW (95%) Hydro power 188 MW Macaúbas Novo Horizonte Seabra 3x30 MW (100%) Wind power 128 MW Moinho 14 MW (100%) Monjolinho 74 MW (100%) Esmeralda 22 MW (100%) CERAN Complex 360 MW (5%) Passos Maia 25 MW (50%) Dona Francisca 125 MW (2%) Santa Rosa 30 MW (100%) Rio office Santa Laura 15 MW (100%) Florianópolis office Power production TWh/ year Energy contracts TWh/ year * * Statkraft Energias Renováveis equity share

6 Statkraft in Brazil Trading Activities Financial Strength Reputation Strong balance sheet, strong credit rating Trustworthy, high-integrity, 120+ year history 900MWavg negotiated per month One of the main players in terms of volumes Risk Tolerance Corporate mindset of long-term value creation, tolerance for risk associated with long-term transactions Expertise Collaboration across geographies and business areas, leverage expertise in European market operations 6

7 Brazil is on a bumpy road to recovery xx TWh Market size Gen. mix SK assets Prosecution of Petrobras corruption scandal (Lava Jato) paralyzed leading companies and initiated shift in business ethics attitude Political turmoil following Lava Jato still ongoing national elections decisive for direction of Brazil 570 TWh (2016) Hydro Solar/wind Other Large hydro construction projects in amazon proven more challenging than expected Excellent wind resource in north east of Brazil triggered boom in wind investments Solar lags behind Strict economic policy addressed inflation and devaluation Initial sights of economic recovery Several dry years highlighted vulnerability of hydro dominated generation base 7 Source: EPE, Ministry of MME, Global Insights, Statkraft analysis

8 Efficient auctioning systems Wind the most competitive technology Since the introduction of wind power in the auctions, prices have fallen 60 % and contracted capacity has risen 8-fold Solar power the next success story? 8 Source: EPE

9 Significant opportunities for investors in renewables going forward Acquisition driven by: opportunities Expansion led by renewables Ongoing consolidation and distressed sellers Average Annual New Capacity ( ) Privatizations, Eletrobras, Cemig, CESP 9

10 and moving towards market-based mechanisms will help improve the efficiency of the system Proposed design changes. will improve the system going forward Liberalization of the free consumer market Unbundling of capacity and energy End of subsidies to renewables Hourly based prices Moving from cost-based to bidbased model Increased transparency through actual economic value of energy from different sources and locations Improved market rewards for assets with different capabilities (e.g flexibility, ancillary services) Key to secure a smooth transition and predictability for all parties

11 Geographical focus for Statkraft Synergies with our assets. Avoid CSR-environmental issues Focus in the Northeast and South part of the country to obtain Operating Synergies (P) with existing assets Disregard the North part of the country to avoid CSR and environmental issues Location existing assets Location indigenous reserves Location of tropical forrest Source: Statkraft Brasil Source: Instituto Socioambiental 2008 Source: World Atlas 11

12 Statkraft will bring industrial competence and a long term perspective A market oriented and adaptable organization capable of assuming market, and hydrology risk Experience in managing large assets, including refurbishment and dam safety Combining expertise and insight from local teams with global experience and methodologies to ensure in depth insight on value drivers and risks Long term perspective and ability to secure financing Sustainable, safe and efficient production methods, acting in a responsible and ethical manner.

13 THANK YOU Jürgen Tzschoppe EVP International Power