Apresentação do PowerPoint - Greener · *MWac, correspondent to the inverters output power. **data brought up to date in November, 2017. Completion Probability High • Investor-backed

Strategic Study

Utility Scale – Brazilian PV Market 2017 / 2018

Revision: January 2018 Brazil

Introduction

This Strategic Study developed by Greener aims to evaluate the current market development regarding the

contracted Large Scale PV Projects in Brazil. This Study also creates references for current and future

entrepreneurs according to the Market dynamics and the impact on the projects’ profitability.

Main points of the Study:

STATUS OF THE CONTRACTED

PROJECTS

OPPORTUNITIES IN UTILITY SCALE

PHOTOVOLTAIC MARKET

THE MACROECONOMIC DYNAMICS AND ITS

IMPACTS

KEY DRIVERS

VS.

ENERGY PRICING

Highlights

1 Evolution of Projects contracted in the Auctions of 2014 and 2015

2 Utility Scale PV Market Opportunities

3 Contracted Projects’ Profile

4 Market Share and Equipment Ranking (PV Modules, Inverters, Structures, EPC)

5 Hypothetical Case: 90 MW PV Power Plant

6 CAPEX structure for a 90 MW PV Power Plant

7 PV Modules: How may the future prices impact the projects profitability?

8 Imported Modules vs. Local Modules, how does it affect the IRR?

9 Scenarios of 2017, 2018, 2019 and 2020 for deployment of PV Power Plants

10 PPA Pricing vs Key Drivers for a hypothetical 90 MW Power Plant

ANEEL'S AUCTIONSStatus of the Contracted Projects

Auctions Timeline

2014 2015 2016 2017

6th LER* 7th LER 8th LER25th LEN A-4/2017 **

First ANEEL’s Auction for

solar source. 1,048 MWp

were contracted.

2,159 MWp were

contracted in two Reserve

Energy Auctions.

The 2 Reserve Energy

Auctions announced for

2016 were cancelled. No

new projects of solar

source were contracted.

New Energy Auction A-4 in

December/2017. 790,6 MWp of

PV were contracted.

* LER – Leilão de Energia de Reserva ( Reserve Energy Auction ) **LEN – Leilão de Energia Nova ( New Energy Auction )

Summary of ANEEL Auctions

6th Reserve Energy Auction

(2014/Oct-31)LER 2014


(2015/Aug-28)1th LER 2015


(2015/Nov-13)2th LER 2015

25th New Energy Auction

(2017/-Dez-18)LEN A-4

Contracted Power (MWp) 1,048.2 1,043.7 1,115.9 790.6

Contracted Power (MWac) 889.7 833.8 929.3 574

Average Sale Price(R$/MWh)

R$ 215.12/MWh R$ 301.79/MWh R$ 297.75/MWh R$ 145.60/MWh

Average Sale Price(US$/MWh)

US$ 87.80/MWh US$ 85.98/MWh US$ 78.77/MWh US$ 44.25/MWh

Exchange Rate R$ 2.45/US$ R$ 3.51/US$ R$ 3.78/US$ R$ 3.29/US$

Start of Energy Supply 01/10/2017 01/08/2017 01/11/2018 01/01/2021

Capex* Average (R$/MWp)

R$ 3,953,660.56 R$ 4,162,392.44 R$ 3,940,245.77 R$ 4,874,861.17

Capex* Average (US$/MWp)

US$ 1,613,739.00 US$ 1,185,866.79 US$ 1,042,393.06 US$ 1,481,720.72

*CAPEX reported in auctions registration at EPE, not the execution price. Source: EPE.

Probability of Project Completion

*MWac, correspondent to the inverters output power. **data brought up to date in November, 2017.

Completion Probability

High • Investor-backed• EPC contracted• Equipment Suppliers Contracted

Medium• Investor-backed• Contract with Suppliers (not

necessarily)

Low • Nothing set570

828,8

350

1748,8

544,3

544,3

70

5 35

110

249,7

249,7

6 TH R E SE R VE E N E R G Y AU CTIO N O CT/ 2 0 1 4

7 TH R E SE R VE E N E R G Y AU CTIO N AU G / 2 0 1 5

8 TH R E SE R VE E N E R G Y AU CTIO N N O V/ 2 0 1 5

CU MU LATIVE

MW

AC

High Medium Low De-contracted

Projects Completion Expectation

*MWac, correspondent to the inverters output power. **data brought up to date in November, 2017.

Classification of Enterprises

High Probability

Medium Probability• Investor-backed• Contract with Suppliers (not

necessarily)

Low Probability• Nothing set

• Investor-backed• EPC contracted• Equipment Suppliers Contracted

880 868,8

424,3

120

5

105

2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1

MW

AC

High Probability Medium Probability2 Low Probability3

New Auctions are key to keep the pipeline of future projects!

???

Regarding PV Projects contracted in 2014 and 2015.

Projects in Operation,Test or Construction

Completion Expected for 2018 Projects under Construction

30 MW

270 MW

430 MW

150 MW

80 MW

90 MW

89.7 MW

300 MW

150 MW

Completion Expected in 2017 Projects in Operation, under test or

Construction

*data brought up to date in November, 2017.


Project Overload %

En

terp

ris

es

Overload (%) [MWp/MWac]

Overload

Relation between DC power and AC powerof the Power Plant.

UsageIncrease the power generation with low CAPEX raise.

Ideal OverloadThere is no ideal Overload. Each project must seek the best balance between DC and AC power according to its IRR. It is observed that a significant portion of the contracted projects obtained an Overload between 20% and 25%.

Overload Histogram of the Contracted Projects

Capacity Factor %

Proje

cts

CF (%)

Capacity Factor (%)

Relationship between the amount of power generated by the power plant according to its potential of generation (if the power plant operates 100% of the time under maximum capacity).

UsageComparison between power plants in different locations and/or with different technologies.

Ideal CFThere is no ideal CF, but the higher CF, the greater is the power generated (often without a high increase in CAPEX). Evaluate sites of greater productivity and use technologies that increase the generation and/or reduce losses in the power plant. Those measures are key to achieve more profitable projects.

CF (Capacity Factor) Histogramof the Contracted Projects

BUSINESSOpportunities in the Brazilian Utility Scale PV Market

Introduction

High

Probability

The first solar power plants in Brazil are being constructed, creating many opportunities for various sectors of the PV chain.

This report points out business opportunities for projects contracted in the 3 auctions in 2014 and 2015 considering its development stages.

PV Plants in Operation

PV Plants under Test

PV Plants under Construction

PV Plants which has Not Started Construction

Opportunities to buy assets. Opportunities forOperation & Maintenanceservices.

Opportunities for

Owner's Engineering and

Certificationservices.

Opportunities forsecondary suppliers andoutsourced services.

PV Projectswithout EPC contract andSuppliers*

PV Projects with medium probability have not contracted the EPC andthere may be opportunities for various services and equipment suppliers.

PV Projects with no Investors, EPC or

Suppliers

Low probability PV Projects have not defined their suppliers, not contracted EPC and, inparticular, have not yet signed an investment agreement/contract for the plant construction.

Medium

Probability

Low

Probability

Project Status

360

60

460

709,7

424,3

159,1

120

5

105

2017 2018 2019

MW

ac

Operation Testing Construction High Probability – Not Initiated Medium Probability Low Probability


Opportunities

High

Probability

PV Projects status and its financial impact in the chain.

In Operation

Under Test

Under Construction

Construction Not Started

360 MW

R$ 1.495 Billion

Projects without EPC contract and

Suppliers*

Projects with no Investors, EPC or

Suppliers

Medium

Probability

Low

Probability

60 MW

R$ 249 Million

1,169.7 MW

R$ 4.858 Billion

159.1 MW

R$ 661 Million

544.3 MW

R$ 2.261 Billion

110 MW

R$ 457 Million

Financials based on the average CAPEX (local and imported modules) set in R$ 3,436/Wp

and Average Overload of 20,87% (excluding de-contracted). Such a assumption was set

based on the proportion of PV Plants in operation and/or under construction using Local or

imported modules and on the basis of the CAPEX structure presented in the next chapter of

this study.

Assumptions


Financial Activity

Financial projections of the Utility Scale PV market according to the pipeline presented previously. It was considered that the enterprises concluded

during the year will handle the financial activity of the photovoltaic chain of that year.

R$3.654,72

R$5.391,13

R$934,45

2017 2018 2019

MIL

LIO

NS

R$


Financial Activity

R$1,495.11

R$1,910.42

R$249.19

R$2,449.08

R$1,159.13

R$1,762.16

R$498.37

R$20.77

R$436.07

2017 2018 2019

MIL

LIO

NS

R$

Operation Testing Construction High Probability - Not Yet Initiated Medium Probability Low Probability


PV Plants in Operation, Testing or under Construction.The following analysis refers to the operational, under testing or construction PV Projects, addressing some themes regarding the total capacity

contracted (excluding the rescinded contracts) and the market share of the main equipment and services.

9,41%

59,93%

Contracted Capacity

De-contracted(249.7 MW)

30,66%

Operation, Testing, or Construction (1,589.7 MW)

Construction Not Started (813.4 MW)

6º RPA

53.95% of the contracted capacity inthe Auction are in Operation, Testing, orunder Construction.

7º RPA

91.11% of the contracted enterprisesin the Auction are in Operation, Testing,or under Construction.

8º RPA

37.66% of the contracted enterprisesin the Auction are in Operation, Testing,or under Construction.*

* The deadline for the enterprises completion of the 8º LER has not yet expired, which implies a low enterprises completion rate.

Photovoltaic ModulesRegarding PV Plants in Operation, Testing or under Construction.

32,85%

67,15%

PV Modules Manufacturing

Local

Imported

Price The Local assembled Modules aresubstantially more expensive. Ingeneral the price is between 35%and 45% more expensive thanthe imported module in samecomparison basis.

Among the main modules suppliersfor utility scale enterprises, only 2have local manufacturing.

Manufacturers

Local

Availability The national production capacitylimits the supply of modules forthe contracted PV Projects, one ofthe main bottlenecks nowadays isthe delivery time, for both localand international delivery.

Note.: Enterprises with signed contracts, but that are not under construction, were not accounted for.

25.59%

21.29%

12.99%

Trina

3.80% 1.30%5.64% 1º Jinko

29.40% 2º Canadian Solar

3º

4º

BYD

JA Solar

5º GCL

6º First Solar

7º

PV ModulesRegarding Projects in Operation, under test or Construction, 2017.

PV Modules Supply (1,955.4 MWp)

Note.: Projects with signed Modules supply contracts, but that are not constructed or under construction, were not accounted.

25.79%

9.44%

5.66%3.77% 1.89%

GE

Fimer

1º

2º

40.24% 3º

4º

SMA

Ingeteam

13.21% 5º WEG

6º Power Eletronics

7º Siemens

PV InvertersRegarding Projects in Operation, under test or Construction, 2017.

Inverters Supply(1,589.7 MWac)

Note.: Projects with signed Inverter supply contracts, but that are not constructed or under construction, were not accounted.

8,75%

91,25%

Structure Type

Fixed

Single Axis Tracker

Advantages • The use of single axis trackersimproves the power generation,even in conditions of lowlatitude (most enterprises inBrazil).

• Reduce the accumulation of dirton the modules.

Disadvantages • Greater complexity to assembly.

• Increase mechanical assembly cost.

• They occupy greater area due tothe greater spacing between thetables (shading).

StructuresRegarding Projects in Operation, under test or Construction, 2017.

Note.: Projects with signed Structure supply contracts, but that are not constructed or under construction, were not accounted.

42.17%

21.62%

16.36%

7.52%

4.37%

4.37%

3.59%

Soltec

NEXTracker

Convert Italia

STI Norland

Brafer

Nclave

PVH

1º

2º

3º

4º

5º

6º

7º

Note.: Projects with signed Structure supply contracts, but that are not constructed or under construction, were not accounted.

.

PV Structures / TrackingRegarding Projects in Operation, under test or Construction, 2017.

Structure Supply(1.955,4 MWp)

25.64%

21.62%

15.06%

12.54%

8.75%

3.37%

3.59%

5.64%

1.92% 1.88%

Prodiel

Biosar

Enerray

SNEF

Grupo Cobra

WEG

GRS

ATP

Quebec

Araxá Solar

1º

2º

3º

4º

5º

6º

7º

8º

9º

10º

Note.: Enterprises with signed contracts, but that are not under construction, were not accounted for.

EPC (Engineering, Procurement and Construction)

Regarding Projects in Operation, under test or Construction, 2017.

EPC(1,955.4 MWp)

DRIVERSHow Macroeconomic and other key drivers can affect the PV Projects

Introduction

This chapter shows the impact of the main drivers on the viability and profitability of a PV Plant. A proper balance of CAPEX/OPEX, an optimal capital

structure and a realistic vision of the macroeconomic conditions have a direct impact on the project profitability. A proper evaluation of the scenarios

and the market trends can make a difference in a safe bid in the auctions.

Macroeconomics

Scenarios2017, 2018,

2019 and 2020Plant Location Local Modules

Technical

Characteristics

CAPEX Composition

Productivity, Grid

Connection

Price

Scenarios

Brazilian Economics

Selic Rate,

Inflation,

Exchange

Technologies

Modules,

Inverters,

Structure

FinancingDevelopment

Banks, Private

Funding

Operation & Maintenance of

OPEX,

Exchange

Inverters

Imported Modules

Price

Scenarios

Cost StructureCAPEX:

Local Modules &

Int’l Modudles

MacroeconomicsMain Drivers

Understanding the impact of each driver:

Selic Rate

The Selic rate (basic interest rate in Brazil) is an important reference

for the definition of the PV Project capital cost. Lower reference rates

tend to make the return on infrastructure investment more

attractive.

Inflation

(IPCA)

Inflation is directly linked to the consumption balance with the

productive capacity of the country. When the inflation grows and the

interests rate remains stable, the real capital gain is reduced.

In general, with a booming economy the inflation is higher, but

in our scenarios, we considered a inflation target set for 2019 and 2020. As

the economy activity is expected accelerate again, we considered a higher

Selic rate to contain the excessive consumption and do not reduce the real

capital gain.

Exchange Rate(R$/USD)

A significant part of the CAPEX is directly impacted by the

exchange rate. For this reason, the currency fluctuation is

often one of the main risks in the project modeling and

pricing strategy .

Understanding the macroeconomic dynamics is fundamental for future projects, as well as knowing the correct “timing” to come up with the project.

Four scenarios will be evaluated throughout the study considering different moments for the power plants construction.

Scenarios 2017 2018 2019 2020

Selic( interest rate reference)

7.50%(Boletim Focus Oct/2017)

7.00%(Boletim Focus Oct/2017)

8.00%(Greener Estimation)

8.50%(Greener Estimation)

Inflation (IPCA)

4.50%(Boletim Focus

Oct/2017, inflation target)

4.25%(Boletim Focus

Oct/2017, inflation target)

4.00%(Inflation target)

4.00%(Inflation target)

Exchange Rate (R$/US$)

R$ 3.19(Boletim Focus Oct/2017)

R$ 3.30(Boletim Focus Oct/2017)

R$ 3.30(Greener Scenario)

R$ 3.30(Greener Scenario)

PV Plant Construction

Start and conclusion in2017




Note.: It was considered that all the disbursement of the enterprise is made in its year of construction.

MacroeconomicsScenarios

Boletim Focus: Monthly Report published by Brazilian Central Bank.

Another crucial issue is to understand the possible ways to compose the capital structure. We will evaluate 2 possible scenarios: Financing provided by

development banks and private funding.

Equity

(Own Capital)

20%

Financing

(Private source)

80%

Private

Financing

Invested Capital (100%)

Equity

(Own Capital)

40%

Financing(Development bank

Funding)

60%

Development

Bank

Invested Capital (100%)

MacroeconomicsCapital Structure

What is the difference between the two capital structures and what are they for?

Private Funding Development Bank

The capital structure with private resources (banks, funds, etc) is an

alternative for those investors who do not wish to make 100% of the contribution in

order to reduce the contribution of capital. A financing operation generally increases the Cost of Capital (WACC) of the project and does not offers flexible

conditions for payment if compared to a development bank. However the financing operation reduces the contribution of the

investor.

The capital structure with development banks aims to reduce the Weighted

Average Cost of Capital (WACC), leveraging the operation with a cheaper

capital and with an extended amortization period. Development

banks have requirements regarding the project's documentation. Also, the amount borrowed must meet the

minimum percentage of local content.

MacroeconomicsCapital Structure

Scenarios 2017 2018 2019 2020

Opportunity Cost(%/y)

(Selic+2,5%)10.19% 9.68% 10.70% 11.21%

Equity (%) 20% 20% 20% 20%

Financed (%) 80% 80% 80% 80%

Interest Rate (%/y)(Selic+4.5%) 12.34% 11.82% 12.86% 13.38%

Period 10 years 10 years 10 years 10 years

Grace Period 0 years 0 years 0 years 0 years

MacroeconomicsPrivate Funding

Scenarios 2017 2018 2019 2020

Opportunity Cost (%a year)

(Selic+2,5%)

10.19% 9.68% 10.70% 11.21%

Equity (%) 40% 40% 40% 40%

Financed (%)60% 60% 60% 60%

Interest Rate(% a year)(Selic+1.0%)

8.58% 8.07% 9.08% 9.58%


Grace Period 1 year 1 year 1 year 1 year

MacroeconomicsDevelopment Bank

Technical Characteristics


Plant Location

The choice of the power plant location should be associated with

some fundamental factors to ensure the success of the project. Among the

main considerations, a good PV Project should be located in an area

with good solar radiation and favorable grid connection (preferably

a few kilometers away from the substation and at the lowest possible

voltage level) and the area should have environmental approval.

Technologies

The selection of power plant technologies will affect the project

competitiveness.

A proper choice of the modules technology (crystalline or thin film), as well as the inverters (central or string)

and the structure (fixed or with tracker) will influence the project CAPEX,

productivity, required land and O&Mcost.

Operation and Maintenance

Beyond the impact of the choice of technologies in the Operation &

Maintenance cost, other factors are crucial to guarantee an efficient and

low O&M cost. The frequency of cleaning should be considered, as well as the availability of hydric

resources, scale of the power plant for dilution of the fixed costs and

concerns about the plant security .

Technical CharacteristicsPlant Location

The location where the PV Plant is developed and installed is one of the key factors for the viability and attractiveness of the Project.

Productivity

Locations with high productivity are always preferred for deployment of PV

plants, however the availability of grid connection must be first evaluated,

followed by the potential environmental restrictions.

Grid Connection

The Grid access has been a major bottleneck for the development of projects in

Brazil. Significant part of the distribution and transmission networks of the

northeast regions are overloaded (region with high solar irradiation), with no

availability of energy transmission, which often makes the project unfeasible.

Environmental Licensing

Environmental licenses can take a long time in a bureaucratic process, if not

properly prepared its can be easily denied by State organs.

The choice of a technology for an enterprise must take into account not only its initial investment, but also its secondary gains and long term costs.

Remember that the technology adopted in the project will remain for more than 20 years.

Crystalline Tracker

Crystalline modules in

general provide greater

efficiency and lower Wp-

cost. However this

technology has major

losses due to warmer

local temperatures, its

choice must be

evaluated.

Thin Film

Thin Film modules in

general provide lower

efficiency and take up

more area, raising the

costs with structure

wiring system and

workforce. On the other

hand, this technology

presents loss reduction in

high temperature

conditions.

Central

Central inverters have

been the most used

topology in Utility Scale PV

plants as they’re cost

competitive at the moment

of the initial investment.

String

String Inverters are

becoming a competitive

technology and important

option for large size plants.

Its great advantage are the

low operational costs, as

they allow a fast

replacement in case of

failure, requiring less

specialized technicians.

Fixed

The fixed structure is the

option with lower initial

costs as well as during

the operational period.

Although the higher costs

(initial and operational), the

energy production increase

can be significant even in

low-latitude regions.

Technical CharacteristicsTechnology

Operation and maintenance is crucial to the profitability of the enterprise. Its improper sizing can create risks to assets or jeopardize the power plant

productivity.

It is essential to evaluate the availability of water resource at the power plant location. An PV

Plant uses a significant amount of water for cleaning the modules, specially in dry areas where

the resource is scarce.

The PV plant are usually located in remote places and have fragile and vulnerable equipment

which may be vandalized. An adequate monitoring and security are important and can increase

the operation and maintenance costs significantly.

Production loss by dirt/dust can be significant, especially in arid regions. An efficient plan for

cleaning the modules is important.

Technical CharacteristicsOperation and Maintenance

CAPEX Composition


Local Modules Imported Modules Cost Structure

Local produced modules are an option for the current and future entrepreneurs in the sector. As

the costs are 35% to 45% higher than the imported modules, the PV projects using local modules

requires favorable financing conditions provided by

development banks.

Used by most Utility Scale Projects, imported modules feature

substantially lower costs than the local modules, however they limit or

prevent access to resources of development banks.

The strong rise in current market prices draws special attention, as well as limitations on availability reported by some entrepreneurs.

The modules represent the main component in the range of CAPEX costs. The recent volatility as well

as the uncertainties in the international PV chain makes the cost projection of this component

an important risk factor. The CAPEX is mostly exposed to Exchange Rate

variations. This, in turn, heavily influenced by the political and

economic scenario.It is worth remembering that 2018, year of elections in the

country, and 2019, beginning of a new government, the scenarios

become even more complex.

Composition of CAPEXLocal Modules

Although locally assembled, the local modules depend on imported parts which is subject to the direct impact of the exchange rate.

Scenarios 2017 2018 2019 2020

LocalModules

(US$/Wp)

US$ 0.660/Wp(include taxes)




LocalModules (R$/Wp)

R$ 2.106/Wp(dollar base R$3.19)




Note. 1: polycrystalline

modules were evaluated, due to

the fact of being the only

nationally produced module on

a large scale.

Note. 2: the prices already include taxes.

There was a module price

increase in 2017 due to high

demand and raw material

supply deficit.

The expectation is that the module prices will decrease

in the following years, but it's hard to foresee when it

will reach the same prices as in the beginning of 2017.

What is the prices expectation for imported modules in the evaluated scenarios?

Scenarios 2017 2018 2019 2020

Imported Modules

(US$/Wp)





Imported Modules (R$/Wp)





Note. 1: polycrystalline

modules were evaluated, due to

the fact of being the only

nationally produced module on

a large scale.

Note. 2: the prices already include

taxes.

There was a module price

increase in 2017 due to high

demand and supply deficit.

The expectation is that the module prices will decrease

in the following years, but it's hard to foresee when it

will reach the same prices as in the beginning of 2017.

Composition of CAPEXImported Modules

To understand the impact of module costs in a PV Plant, a CAPEX composition for a hypothetical project will be presented.

DC Power: 106.2 MWp

AC Power: 90 MW

Modules: Polycrystalline 330 Wp

Inverters: Central 2 MW

Structure: Single Axis Tracker +50°/-50°

Connection: 10 km Line at 69kV, connection to 69 kV Bay

Substation: 3 smaller substations and a central,

with central power transformer.

Power plant: 3 solar fields of 30 MW.

CAPEX CompositionHypothetical Case Study: 90 MW PV Power Plant

Values in R$/Wp Imported Module % Local Module %

Modules R$ 1.504 47.10% R$ 2.106 55.51%

Inverters R$ 0.287 8.99% R$ 0.287 7.57%

Structure R$ 0.383 11.99% R$ 0.383 10.09%

Substations(3 smaller and one central, without

transformer)

R$ 0.287 8.99% R$ 0.287 7.57%

Central Transformer R$ 0.026 0,81% R$ 0.026 0,67%

Transmission Line R$ 0.200 6.26% R$ 0.200 5.27%

Works and Engineering R$ 0.300 9,40% R$ 0.300 7.91%

Management R$ 0.080 2.51% R$ 0.080 2.11%

Development R$ 0.006 0,19% R$ 0.006 0,14%

Others R$ 0.120 3.76% R$ 0.120 3.16%

TOTAL( R$/Wp) R$ 3.193 R$ 3.794

Composition of CAPEXCAPEX Structure 90 MW PV Plant (106.2 MWp) - 2017 Scenario

Scenarios 2017 2018 2019 2020

CAPEXLocal

Modules (R$/Wp)

R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp

CAPEXImported Modules (R$/Wp)

R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp

Exchange (R$/US$)

R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

Note. 1: Not only the modules were considered influenced by US Dollar and affected by the exchange rate.

Note. 2: it was considered that all items, except the modules, had their prices stable in the 4 scenarios, varying only according to the exchange rate.

CAPEX CompositionCAPEX 90 MW Power Plant (106.2 MWp) - All Scenarios

Energy PricingScenarios for a hypothetical 90 MW PV Plant

Introduction

This chapter aims to demonstrate the scenarios for 2017, 2018 and 2019 (for the PV Projects already contracted) and the 2018, 2019 and 2020

scenarios for new PV Projects demanded by future Auctions , in different CAPEX conditions and funding sources.

The energy prices are hypothetical as they can vary significantly according the project Capital Structure and the investor return and risk

profile.

Scenarios 2017 2018 2019 2020

Power plants already contracted, with adjusted PPA.



New power plants from LEN A-4 / 2017.

New power plants from LEN A-4 / 2017, with adjusted PPA.

New power plants from LEN A-4 / 2017, with adjusted PPA.

6th, 7th and 8th LER

LENA-4/2017 & 2018

Boundary Conditions:

As presented previously, some premises will be reopened to compose the scenarios of the study. The macroeconomic conditions for the scenarios of

2017, 2018, 2019 and 2020 will be kept. The funding conditions presented will be addressed in 2 Cases (one with Private Funding and another with

Development Bank), as well as the initial cost composition (CAPEX) considering use of local modules and imported modules.

Assumptions

Economic Scenarios

2017, 2018,

2019 and 2020

Costs Composition

CAPEXLocal Modules

Imported Modules

FinancialFundraising

Development

Banks, Private

Funding

The 90 MW PV Plant

The 90 MW Power Plant

The following PV Plant configuration will be used in Study Case for the pricing models.

Technical Characteristics

• Modules: Polycrystalline 330 Wp

• Inverters: Central 2 MW

• Structure: Single Axis Trackers of -50°/+50°

• Grid Connection: 69 kV

• Transmission Line: 10 km in 69 kV

• Power plant: 3 solar fields of 30 MW

• DC Power: 106.2 MWp

• AC Power: 90 MW

• Overload: 18%

• Inverters exchange: year 10 and year 20 (20 and 10

Million R$ respectively)

35.2 MWp

30 MW

106.2 MWp

90 MW35.2 MWp

30 MW

35.2 MWp

30 MW

The 90 MW Power Plant

Generation Characteristics

• Productivity :2.200 kWh/kW /year

(considered the tracker gain)

• Capacity Factor: 25.11%

• Generated power/year: 233,640 MWh/year

• Electrical Loss: 3,5%

• Modules degradation year 1: 2,5%

• Modules degradation coming years: 0.85%/year

35.2 MWp

30 MW

106.2 MWp

90 MW35.2 MWp

30 MW

35.2 MWp

30 MW

Other Features

• Operation and Maintenance: 1.50% of CAPEX a year.

• Administration costs: 0.10% of CAPEX /year.

• Insurance costs: 0.10% of CAPEX /year.

• Taxes: Assumed Profit

• Contract Duration: 20 years

Cases

In the next pages the impact of main investment drivers on the 90MW Plant will be presented, considering that it could be constructed in different years

between 2017 and 2020. The pros and cons among the possible strategies adopted in a PV Project and the impact in the IRR (Internal Rate of Return)

were highlighted.

2017 2018 2019 2020

Scenarios

Pre-established macroeconomic conditions.

Case 1

• 90 MW PV Plant• Imported

Modules• Private

Funding

• 90 MW PV Plant• Local

Modules• Develop

ment Bank

Case 2


Modules• Private

Funding


Modules• Develop

ment Bank


Modules• Private

Funding


Modules• Develop

ment Bank


Modules• Private

Funding


Modules• Develop

ment Bank

Case 1 - 90 MW - Imported Modules

90 MW PV Plant using imported modules and financed by private funding, according to the assumptions presented previously.

Macroeconomic Assumptions

Scenarios 2017 2018 2019 2020

Selic 7.50% 7.00% 8.00% 8.50%

Inflation (IPCA) 4.50% 4.25% 4.00% 4.00%


R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

Construction & Startup

Start and conclusion in 2017 Start and conclusion in 2018 Start and conclusion in 2019 Start and conclusion in 2020

CAPEX Assumptions

Scenarios 2017 2018 2019 2020

CAPEXLocal Modules

(R$/Wp)R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp


R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp

Exchange Rate (R$/US$) R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

Case 1 - 90 MW Imported Modules

Private Funding Assumptions

Scenarios 2017 2018 2019 2020

Opportunity Cost (% a year)(Selic+2,5%)

10.19% 9.68% 10.70% 11.21%

Equity (%) 20% 20% 20% 20%

Financing (%) 80% 80% 80% 80%


12.34% 11.82% 12.86% 13.38%


Grace Period 0 years 0 years 0 years 0 years

Case 1 - 90 MW Imported Modules

PPA Prices (R$/MWh)

R$ 170/MWh R$ 180/MWh R$ 190/MWh

R$ 200/MWh R$ 210/MWh R$ 220/MWh

R$ 230/MWh R$ 240/MWh R$ 250/MWh

R$ 260/MWh R$ 270/MWh R$ 280/MWh

R$ 290/MWh R$ 300/MWh R$ 310/MWh

R$ 320/MWh R$ 330/MWh R$ 340/MWh

We analyze how energy price (R$/MWh) and CAPEX impact the PV Project IRR (Internal Rate of Return).

The high volatility of PV Modules in the coming years brings uncertainty over the project CAPEX. We considered modules price variation by +10%,

+20%, -10% and -20%.

CAPEX Variation

( all scenarios)

Imported Module Price

2017 R$/Wp*

Price VariationImported Module

Project CAPEX

R$ 1.504 /Wp 0% R$ 3,19 /Wp

R$ 1.654 /Wp +10% R$ 3.34 /Wp

R$ 1.805 /Wp +20% R$ 3.49 /Wp

R$ 1.354 /Wp -10% R$ 3.04/Wp

R$ 1.203 /Wp -20% R$ 2.89/Wp

* Values include taxes and nationalization costs.

WACC CAPEX -20% module CAPEX -10% module Nominal CAPEX CAPEX +10% module CAPEX +20% module

10,24% R$ 2.89/Wp R$ 3.04/Wp R$ 3.19/Wp R$ 3.34/Wp R$ 3.49/Wp

Investment R$ 306.9 Millions R$ 323.1 Millions R$ 339.0 Millions R$ 355.0 Millions R$ 371.0 Millions

R$ 170/MWh 7.89% 6.68% 5.58% 4.57% 3.64%

R$ 180/MWh 9.36% 8.08% 6.92% 5.87% 4.89%

R$ 190/MWh 10.84% 9.48% 8.26% 7.14% 6.13%

R$ 200/MWh 12.32% 10.88% 9.59% 8.42% 7.35%

R$ 210/MWh 13.83% 12.30% 10.92% 9.69% 8.56%

R$ 220/MWh 15.37% 13.73% 12.27% 10.96% 9.78%

R$ 230/MWh 16.93% 15.18% 13.63% 12.25% 11.00%

R$ 240/MWh 18.54% 16.66% 15.01% 13.54% 12.22%

R$ 250/MWh 20.19% 18.18% 16.42% 14.86% 13.47%

R$ 260/MWh 21.89% 19.74% 17.86% 16.20% 14.72%

R$ 270/MWh 23.64% 21.34% 19.33% 17.57% 16.00%

R$ 280/MWh 25.45% 22.98% 20.84% 18.97% 17.30%

R$ 290/MWh 27.32% 24.68% 22.39% 20.40% 18.63%

R$ 300/MWh 29.26% 26.43% 23.99% 21.86% 19.99%

R$ 310/MWh 31.26% 28.24% 25.63% 23.37% 21.39%

R$ 320/MWh 33.34% 30.11% 27.33% 24.92% 22.81%

R$ 330/MWh 35.48% 32.03% 29.08% 26.52% 24.28%

R$ 340/MWh 37.69% 34.03% 30.88% 28.16% 25.79%

How to read the results table?

The WACC represents the capital cost of the project, comprising the equity cost and the funding capital cost. The WACC is the reference rate to which the project has a minimal expected outcome in line with the rate of risk adopted on own capital.

IRR of the project obtained under the conditions of energy sales price and evaluated CAPEX condition.

Green cells are those conditions where the IRR of the project exceeds the WACC of the project, presenting a

positive gain (NPV > 0).

Energy Prices are illustrative, as it varies according the each projectdrivers and assumptions


11.91% R$ 2.89/Wp R$ 3.04/Wp R$ 3.19/Wp R$ 3.34/Wp R$ 3.49/Wp


R$ 170/MWh 7.89% 6.68% 5.58% 4.57% 3.64%

R$ 180/MWh 9.36% 8.08% 6.92% 5.87% 4.89%

R$ 190/MWh 10.84% 9.48% 8.26% 7.14% 6.13%

R$ 200/MWh 12.32% 10.88% 9.59% 8.42% 7.35%

R$ 210/MWh 13.83% 12.30% 10.92% 9.69% 8.56%

R$ 220/MWh 15.37% 13.73% 12.27% 10.96% 9.78%

R$ 230/MWh 16.93% 15.18% 13.63% 12.25% 11.00%

R$ 240/MWh 18.54% 16.66% 15.01% 13.54% 12.22%

R$ 250/MWh 20.19% 18.18% 16.42% 14.86% 13.47%

R$ 260/MWh 21.89% 19.74% 17.86% 16.20% 14.72%

R$ 270/MWh 23.64% 21.34% 19.33% 17.57% 16.00%

R$ 280/MWh 25.45% 22.98% 20.84% 18.97% 17.30%

R$ 290/MWh 27.32% 24.68% 22.39% 20.40% 18.63%

R$ 300/MWh 29.26% 26.43% 23.99% 21.86% 19.99%

R$ 310/MWh 31.26% 28.24% 25.63% 23.37% 21.39%

R$ 320/MWh 33.34% 30.11% 27.33% 24.92% 22.81%

R$ 330/MWh 35.48% 32.03% 29.08% 26.52% 24.28%

R$ 340/MWh 37.69% 34.03% 30.88% 28.16% 25.79%

Case 1 - Scenario 2017 Imported Module




R$ 170/MWh 7.91% 6.72% 5.63% 4.63% 3.71%

R$ 180/MWh 9.39% 8.12% 6.98% 5.93% 4.97%

R$ 190/MWh 10.87% 9.53% 8.32% 7.22% 6.21%

R$ 200/MWh 12.36% 10.94% 9.66% 8.50% 7.43%

R$ 210/MWh 13.88% 12.36% 11.00% 9.77% 8.66%

R$ 220/MWh 15.42% 13.80% 12.35% 11.06% 9.88%

R$ 230/MWh 16.99% 15.26% 13.72% 12.35% 11.11%

R$ 240/MWh 18.60% 16.75% 15.12% 13.66% 12.35%

R$ 250/MWh 20.26% 18.28% 16.53% 14.99% 13.60%

R$ 260/MWh 21.97% 19.84% 17.98% 16.34% 14.87%

R$ 270/MWh 23.73% 21.45% 19.46% 17.71% 16.16%

R$ 280/MWh 25.54% 23.10% 20.98% 19.12% 17.47%

R$ 290/MWh 27.42% 24.81% 22.55% 20.56% 18.81%

R$ 300/MWh 29.37% 26.57% 24.15% 22.04% 20.18%

R$ 310/MWh 31.38% 28.39% 25.81% 23.56% 21.59%

R$ 320/MWh 33.46% 30.27% 27.52% 25.13% 23.03%

R$ 330/MWh 35.61% 32.21% 29.28% 26.74% 24.51%

R$ 340/MWh 37.83% 34.21% 31.10% 28.39% 26.03%




Investment R$ 307.7 Million R$ 323.4 Millions R$ 339.0 Millions R$ 354.6 Millions R$ 370.2 Millions

R$ 170/MWh 7,40% 6.25% 5.20% 4.23% 3.33%

R$ 180/MWh 8.84% 7.62% 6.51% 5.50% 4.56%

R$ 190/MWh 10.28% 8.99% 7.82% 6.75% 5.77%

R$ 200/MWh 11.73% 10.36% 9.12% 8.00% 6.97%

R$ 210/MWh 13.20% 11.74% 10.43% 9.25% 8.17%

R$ 220/MWh 14.69% 13.13% 11.75% 10.50% 9.36%

R$ 230/MWh 16.21% 14.55% 13.08% 11.75% 10.56%

R$ 240/MWh 17.76% 15.99% 14.42% 13.02% 11.76%

R$ 250/MWh 19.36% 17.46% 15.79% 14.31% 12.97%

R$ 260/MWh 21.00% 18.97% 17.19% 15.61% 14.20%

R$ 270/MWh 22.69% 20.52% 18.62% 16.95% 15.45%

R$ 280/MWh 24.43% 22.11% 20.09% 18.30% 16.72%

R$ 290/MWh 26.24% 23.75% 21.59% 19.70% 18.02%

R$ 300/MWh 28.10% 25.44% 23.14% 21.12% 19.34%

R$ 310/MWh 30.03% 27.19% 24.73% 22.59% 20.70%

R$ 320/MWh 32.03% 28.99% 26.37% 24.09% 22.09%

R$ 330/MWh 34.10% 30.86% 28.06% 25.64% 23.51%

R$ 340/MWh 36.24% 32.78% 29.81% 27.23% 24.98%





R$ 170/MWh 7.25% 6.12% 5.08% 4.13% 3.24%

R$ 180/MWh 8.68% 7.48% 6.39% 5.39% 4.47%

R$ 190/MWh 10.11% 8.84% 7.69% 6.64% 5.67%

R$ 200/MWh 11.54% 10.20% 8.98% 7.88% 6.86%

R$ 210/MWh 12.99% 11.56% 10.28% 9.11% 8.05%

R$ 220/MWh 14.47% 12.94% 11.58% 10.35% 9.23%

R$ 230/MWh 15.97% 14.34% 12.90% 11.60% 10.42%

R$ 240/MWh 17.51% 15.77% 14.23% 12.85% 11.61%

R$ 250/MWh 19.08% 17.23% 15.59% 14.13% 12.82%

R$ 260/MWh 20.70% 18.72% 16.97% 15.42% 14.04%

R$ 270/MWh 22.37% 20.25% 18.39% 16.74% 15.27%

R$ 280/MWh 24.09% 21.82% 19.84% 18.09% 16.53%

R$ 290/MWh 25.88% 23.44% 21.32% 19.46% 17.82%

R$ 300/MWh 27.72% 25.11% 22.85% 20.88% 19.13%

R$ 310/MWh 29.63% 26.84% 24.43% 22.32% 20.47%

R$ 320/MWh 31.60% 28.62% 26.05% 23.81% 21.84%

R$ 330/MWh 33.64% 30.47% 27.73% 25.35% 23.26%

R$ 340/MWh 35.76% 32.37% 29.45% 26.92% 24.71%


Case 2 - 90 MW Local Modules

90 MW PV plant using Local modules and financed by development bank, according to the premises presented previously.

Macroeconomic Assumptions

Scenarios 2017 2018 2019 2020

Selic 7.50% 7.00% 8.00% 8.50%

Inflation (IPCA) 4.50% 4.25% 4.00% 4.00%


R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30

Construction & Startup

Start and conclusion in 2017 Start and conclusion in 2018 Start and conclusion in 2019 Start and conclusion in 2020

CAPEX Assumptions

Scenarios 2017 2018 2019 2020

CAPEXLocal Modules

(R$/Wp)R$ 3.79/Wp R$ 3.81/Wp R$ 3.78/Wp R$ 3.75/Wp


R$ 3.19/Wp R$ 3.21/Wp R$ 3.19/Wp R$ 3.17/Wp

Exchange Rate (R$/US$) R$ 3.19 R$ 3.30 R$ 3.30 R$ 3.30


Development Bank Funding Assumptions

Scenarios 2017 2018 2019 2020

Opportunity Cost (% a year)(Selic+2,5%)

10.19% 9.68% 10.70% 11.21%

Equity (%) 40% 40% 40% 40%

Financed (%) 60% 60% 60% 60%


8.58% 8.07% 9.08% 9.58%


Grace Period 1 year 1 year 1 year 1 year


PPA Price (R$/MWh)

R$ 170/MWh R$ 180/MWh R$ 190/MWh

R$ 200/MWh R$ 210/MWh R$ 220/MWh

R$ 230/MWh R$ 240/MWh R$ 250/MWh

R$ 260/MWh R$ 270/MWh R$ 280/MWh

R$ 290/MWh R$ 300/MWh R$ 310/MWh

R$ 320/MWh R$ 330/MWh R$ 340/MWh

We analyze how energy price (R$/MWh) and CAPEX impact the PV Project IRR (Internal Rate of Return).

The high volatility of PV Modules in the coming years brings uncertainty over the project CAPEX. We considered modules price variation by +10%,

+20%, -10% and -20%.

CAPEX Variation

(all scenarios)

Local Module Price 2017 R$/Wp*

Price VariationImported Module

Total CAPEX

R$ 2.106/Wp 0% R$ 3.79/Wp

R$ 2.317 /Wp +10% R$ 4.00 /Wp

R$ 2.527 /Wp +20% R$ 4.22 /Wp

R$ 1.895 /Wp -10% R$ 3.58 /Wp

R$ 1.685 /Wp -20% R$ 3.37 /Wp

* Values include taxes.


9.22% R$ 3.37/Wp R$ 3.58/Wp R$ 3.79/Wp R$ 4.00 /Wp R$ 4.22 /Wp


R$ 170/MWh 6.05% 4.30% 2.66% 1.09% -0.42%

R$ 180/MWh 7.75% 5.99% 4.35% 2.80% 1.32%

R$ 190/MWh 9.39% 7,60% 5.95% 4.39% 2.92%

R$ 200/MWh 10.97% 9.15% 7.47% 5.90% 4.43%

R$ 210/MWh 12.51% 10.64% 8.93% 7.35% 5.86%

R$ 220/MWh 14.01% 12.10% 10.35% 8.74% 7.24%

R$ 230/MWh 15.49% 13.52% 11.73% 10.08% 8.56%

R$ 240/MWh 16.95% 14.92% 13.08% 11.40% 9.85%

R$ 250/MWh 18.39% 16.30% 14.41% 12.68% 11.10%

R$ 260/MWh 19.82% 17.66% 15.71% 13.95% 12.33%

R$ 270/MWh 21.25% 19.01% 17.01% 15.19% 13.53%

R$ 280/MWh 22.66% 20.35% 18.29% 16.42% 14.72%

R$ 290/MWh 24.07% 21.69% 19.56% 17.64% 15.89%

R$ 300/MWh 25.48% 23.02% 20.82% 18.85% 17.05%

R$ 310/MWh 26.88% 24.34% 22.08% 20.05% 18.20%

R$ 320/MWh 28.28% 25.66% 23.33% 21.24% 19.35%

R$ 330/MWh 29.68% 26.98% 24.58% 22.43% 20.48%

R$ 340/MWh 31.09% 28.30% 25.83% 23.61% 21.61%

Case 2 - Scenario 2017 Local Modules




R$ 170/MWh 6.25% 4.53% 2.91% 1.36% -0.13%

R$ 180/MWh 7.96% 6.22% 4,60% 3.07% 1,60%

R$ 190/MWh 9.59% 7.83% 6.20% 4.66% 3.21%

R$ 200/MWh 11.17% 9.37% 7.72% 6.17% 4.72%

R$ 210/MWh 12.71% 10.87% 9.18% 7.62% 6.15%

R$ 220/MWh 14.21% 12.32% 10.60% 9.01% 7.52%

R$ 230/MWh 15.69% 13.75% 11.98% 10.36% 8.85%

R$ 240/MWh 17.15% 15.15% 13.33% 11.67% 10.14%

R$ 250/MWh 18.59% 16.53% 14.66% 12.96% 11.39%

R$ 260/MWh 20.02% 17.89% 15.97% 14.22% 12.62%

R$ 270/MWh 21.44% 19.24% 17.26% 15.47% 13.82%

R$ 280/MWh 22.85% 20.58% 18.54% 16.70% 15.01%

R$ 290/MWh 24.26% 21.91% 19.81% 17.92% 16.19%

R$ 300/MWh 25.67% 23.24% 21.08% 19.12% 17.35%

R$ 310/MWh 27.07% 24.57% 22.33% 20.33% 18.50%

R$ 320/MWh 28.47% 25.89% 23.59% 21.52% 19.65%

R$ 330/MWh 29.86% 27.20% 24.84% 22.71% 20.78%

R$ 340/MWh 31.26% 28.52% 26.08% 23.90% 21.92%

Case 2 - Scenario 2018 Local Modules




R$ 170/MWh 5.46% 3.76% 2.15% 0.61% -0.88%

R$ 180/MWh 7.17% 5.45% 3.84% 2.32% 0.86%

R$ 190/MWh 8.79% 7.05% 5.43% 3.91% 2.47%

R$ 200/MWh 10.37% 8.59% 6.95% 5.42% 3.98%

R$ 210/MWh 11.90% 10.08% 8.41% 6.86% 5.41%

R$ 220/MWh 13.39% 11.53% 9.82% 8.25% 6.78%

R$ 230/MWh 14.86% 12.94% 11.20% 9.59% 8.10%

R$ 240/MWh 16.31% 14.34% 12.54% 10.90% 9.38%

R$ 250/MWh 17.74% 15.71% 13.86% 12.18% 10.63%

R$ 260/MWh 19.16% 17.06% 15.16% 13.44% 11.86%

R$ 270/MWh 20.57% 18.40% 16.45% 14.68% 13.06%

R$ 280/MWh 21.98% 19.74% 17.72% 15.90% 14.24%

R$ 290/MWh 23.38% 21.06% 18.99% 17.11% 15.41%

R$ 300/MWh 24.77% 22.38% 20.24% 18.32% 16.56%

R$ 310/MWh 26.16% 23.70% 21.49% 19.51% 17.71%

R$ 320/MWh 27.56% 25.01% 22.74% 20.70% 18.85%

R$ 330/MWh 28.95% 26.32% 23.98% 21.88% 19.98%

R$ 340/MWh 30.34% 27.63% 25.22% 23.06% 21.10%

Case 2 – Scenario 2019 Local Modules




R$ 170/MWh 5.21% 3.52% 1.92% 0.39% -1.09%

R$ 180/MWh 6.91% 5.21% 3.61% 2.10% 0.65%

R$ 190/MWh 8.54% 6.81% 5.21% 3.70% 2.26%

R$ 200/MWh 10.12% 8.35% 6.73% 5.20% 3.77%

R$ 210/MWh 11.64% 9.84% 8.18% 6.65% 5.20%

R$ 220/MWh 13.14% 11.29% 9.60% 8.03% 6.57%

R$ 230/MWh 14.61% 12.70% 10.97% 9.38% 7.90%

R$ 240/MWh 16.06% 14.10% 12.32% 10.69% 9.18%

R$ 250/MWh 17.49% 15.47% 13.64% 11.97% 10.43%

R$ 260/MWh 18.91% 16.82% 14.94% 13.22% 11.65%

R$ 270/MWh 20.32% 18.16% 16.22% 14.46% 12.85%

R$ 280/MWh 21.72% 19.50% 17.50% 15.69% 14.03%

R$ 290/MWh 23.12% 20.82% 18.76% 16.90% 15.20%

R$ 300/MWh 24.52% 22.14% 20.02% 18.10% 16.36%

R$ 310/MWh 25.91% 23.46% 21.27% 19.30% 17.51%

R$ 320/MWh 27.31% 24.78% 22.52% 20.49% 18.65%

R$ 330/MWh 28.70% 26.09% 23.76% 21.67% 19.78%

R$ 340/MWh 30.10% 27.40% 25.01% 22.85% 20.91%

Case 2 – Scenario 2020 Local Modules

Using the Tables

The tables simulate various scenarios for current and future entrepreneurs who wish to structure centralized generation photovoltaic Projects. With the

tables it is possible to check the advantages and disadvantages of some strategic enterprises, in addition to simulate the best timing for construction of

the power plants.

Then we will use an example of power plant simulation to predict the highest bid for an auction, in addition to the strategies that could be adopted to

reduce the bid for energy sale.

Example: Hypothetical 90 MW Power Plant to bid for LEN A-4 2017.

We will consider a power plant identical to the previously presented for construction of scenarios and find out which would be a good bid to energy sale

to the enterprise and the possible strategies.

2017 2018 2019

Condition 1

Condition 2

Auction

Auction

2020

Power Plant Construction

2021

Regulated Market Operation


Free Market Regulated Market Operation

Energy Prices are illustrative, as itvaries according the each projectdrivers and assumptions

Using the Tables

2017 2018 2019 2020

Condition 1

Condition 2

Auction

Auction

2021





For a power plant that will be built in 2020, we have to use the 2020 scenario and stipulate the CAPEX return and scenario to be adopted. A

comparison must be done between the two cases in order to see the advantages and disadvantages of local modules funding and purchasing.

Case 1 Imported Module and Case 2 Local Module

Scenario 2020

Case 1 Imported Module and Case 2 Local Module

Scenario 2019

Using the Tables

2017 2018 2019 2020

Condition 1

Condition 2

Auction

Auction

2021

Power Plant Construction Regulated Market Operation




Nominal CAPEX: $3.17/Wp

IRR Required: WACC+2%

WACC 2020: 12.95%

IRR in the Table: >15.21%

Case 2 - Scenario 2020 Local Module

Nominal CAPEX: $3.75/Wp IRR

Required: WACC+2% WACC

2020: 10.24%


Energy Sales Price in 2020:

250 R$/MWh


~240 R$/MWh

Energy Value in

2017 *:

230.58 R$/MWh

Energy Value in

2017 *:

~221.36 R$/MWh

*The corrected energy value for 2017 - auction date - recede the IPCA of 2019 and 2018. The IPCA of 2020 shall not be considered because the disbursement is made at the

beginning of the year and the model already considers the delivery of the corrected energy for 2021.

Using the Tables

2017 2018 2019

Condition 1

Condition 2

Auction

Auction

2020


2021


Power Plant Construction Free Market Regulated Market Operation

*The approach to the scenario was made to facilitate the demonstration of the impact of 1 year of the power plant in the free market in order to amortize part of the initial

investment, so is considered a lower CAPEX and the current scenario of the table is used only for a estimate.

Power Plant in the Free

market 1 year, energy sales

price: 120 R$/MWh

Revenue R$ 28 Million

Power Plant in the Free market 1 year,

energy sales price: 120

R$/MWh

Revenue R$ 28 Million

Close to the scenario with CAPEX of R$ 2.90/Wp*

Close to the scenario with CAPEX

of R$ 3,57/Wp*


Nominal CAPEX: R$ 3.19/Wp

TIR Required: WACC+2%

WACC 2019: 12.43%





WACC 2019: 9.73%


Using the Tables

2017 2018 2019

Condition 1

Condition 2

Auction

Auction

2020


2021





220 R$/MWh


~220 R$/MWh

Energy Value in

2017 *:

211.03 R$/MWh

Energy Value in

2017 *:

~211.03 R$/MWh

* The corrected energy value for 2017 - auction date - recede the IPCA of 2018 The IPCA of 2019 shall not be considered because the disbursement is made at the beginning of

the year and the model already considers the delivery of the corrected energy for 2021.




WACC 2019: 12.43%




TIR Required: WACC+2% WACC

2019: 9.73%


Using the Tables

Conclusions

It is noted that some strategies can help to reduce the energy sales price at the actions, considering some estimates. The intention of these analyses is

to compare the presented scenarios and evaluate the pros and cons of constructing and starting up the power plant before the delivery deadline, so it

can anticipate the energy generation, creating additional revenues to the project , in case it is allowed.

Other exercises can be made with the spread sheet. The worse CAPEX condition for private funding are similar to the best CAPEX conditions for funding

by development bank, which shows the advantages of the development bank.

Some points to be noted about some strategies:

• Constructing power plants before the deadline can be a good strategy to reduce the energy sales price at the auction, but should be consider the

feasibility of providing modules and EPC companies available to conduct the work within the time limit set.

• Consider the participation of development banks to guarantee a lower bid is also a risk, due to great uncertainty of approval

and availability of the resource.

• In our scenarios with funding provided by development bank was not considered the delay for credit concession, which often leads to a bridge loan

in order to cover the cash flow of the project. That implies a financial cost which was not considered in our scenarios.

GREENER INSIGHTSOur vision for cost-effective projects

!

Scenarios !

Although they reflect the current conditions, the considered scenarios for implementation of the power plants have high degree of uncertainty, especially in the period from 2019 to 2020.

The 2018 presidential elections in the country can significantly impact the macroeconomic conditions in 2019 and 2020.

Amongst the main Drivers, the exchange rate and the capital cost are the ones which present greater impact in the projects profitability and generates greater uncertainty to the projects.

Modules !

Due to large price volatility of the PV modules on the international market during 2017, there is still great uncertainty about future prices and availability of supply.

The prices variation reached, in 2017, up to +20%. The international market still presents a scenario of great uncertainties for the next years. The risk of eventual impacts in the CAPEX must be adequately priced according to the energy value.

Although a significant portion of the enterprises have used local modules so far, the financing conditions and the availability of resources through development banks are key items for the development of local production.

An important factor to be considered with respect to the modules supply is connected to the delivery availability, both in the local and international market. Price may not be the main driver in a short term scenario.

Funding !

With a great fall in the Selic Index throughout 2017, the conditions of financing and capital structure hadchanged significantly. Debentures issuance for capitalization was a solution found by entrepreneurs.

Although the development banks present competitive financial cost, an investor should consider therequirements for access and the uncertainty about the resources availability, which can limit the volume ofbenefited projects.

The lines practiced for the development banks finance a significant part - though not all - of the project.Therefore they are not adequately fulfilling their role to “foster” the local modules market in the currentmacroeconomic conditions. Since the local modules could represent around 55% of CAPEX of an PVProject, it is critical that the banks cover at least 80% of projects CAPEX, otherwise, the entrepreneursmay choose to raise less funds and finance all items of the power plant with local equipment, except themodules, because they increase the CAPEX by at least 18%, reducing the profitability of the project. If thebanks aim to promote the local PV Modules production chain, it is essential that they create favorableconditions for the purchase of the local modules.

Pricing !Various scenarios were presented to aid in the understanding of a PPA pricing, however it is emphasized thatin any way we consider the presented values as a "milestone" for the 90 MW projects.

It is crucial that entrepreneurs take a higher risk for a competitive pricing, guaranteeing a minimum expected profitability.

The scale of the projects is essential for an efficient cost structure and therefore a competitive pricing. Thescenarios presented to a 90 MW power plant provide just an order of magnitude, and should not be taken asa reference for the ideal size of a project.

If allowed, the construction of power plants prior to the auction delivery deadline, and the energy supply onthe free market, could be a good strategy to increase the amortization period of the enterprise and toguarantee a more competitive energy in the auction. It should be noted that to have the guarantee of sale ofthat energy on the free market, the energy generated must be considered cheap and low-risk.

January, 2018

Strategic StudyUtility Scale Brazilian PV Market 2017/2018

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Apresentação do PowerPoint - Greener · *MWac, correspondent to the inverters output power. **data brought up to date in November, 2017. Completion Probability High • Investor-backed