UIA- INVESTMENT IN ENERGY PROJECTS IN LATIN AMERICA B Y: L I S A D O M I N G U E Z PA N A M A - F E B R U A R Y 2 8,

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1 UIA- INVESTMENT IN ENERGY PROJECTS IN LATIN AMERICA B Y: L I S A D O M I N G U E Z PA N A M A - F E B R U A R Y 2 8,

2 A. PANAMA: LATEST INTERNATIONAL PUBLIC BIDS ORGANIZED BY THE REGULATOR 2015 No. Etesa No for thermal power plants MW: long term power purchase agreements (PPA): July 1, 2017 to June 30, 2027 (10 years) (i) Existing plants with provisional or definitive license granted by ASEP (Autoridad Nacional de los Servicios Públicos) for the operation of thermal power plants or (ii) application to increase a current capacity of an existing power plant.. No. Etesa No for thermal power plants- 350 MW: long term PPA: January 1, 2019 to December 31, 2033 (15 years) New plants with provisional or definitive license granted by ASEP No. Etesa No for Chan II Project- hydro power plant- 223 MW: Long term PPA- 20 years to 2019 based on a new regulation applicable to private/public entities. No. Etesa No for solar power plants - 66 MW: long term PPA - 20 years- (2017 to 2037) No. Etesa No for thermal power plants- 250 MW: short term PPA- 5 years to No. Etesa No for a natural gas power plant (still a project/asep has cancelled the definitive license and sponsor has filed legal action against such decision) Long term PPA- 665 MW including also the regasification plant.

3 A.1. PANAMA: MINIMUM REQUIREMENTS ADOPTED TO PARTICIPATE IN THE BIDS: Corporation: Bidders should be registered under the laws of Panama at the Public Registry Office (v.gr. Sociedad anónima) (Asep/Etesa). Identification of the owners of the bidders until de real identification of each natural person and the percentage of participation (Asep). On Demand Bid Bond: It should be issued by a recognized financial or insurance institution operating in Panama (Etesa). Evidence of funds: A local financial institution should also grant a certification indicating that the bidder has funds of 30% of the investment amount (Asep). Site: Lease/Ownership of the potential side (Asep/Etesa). Identification of the substation for the Interconnection to the grid (Asep/Etesa). In case of an award by Etesa in favor to the bidder: On Demand Performance Bond for the PPA Construction Bond to be valid during the construction period of the power plant which term is provided the license granted by Asep (new). It has the purpose to be executed in case of a delay of the COD.

4 A.2 AWARD: SOLAR POWER PLANTS (ETESA NO NOVEMBER 25, 2014)

5 A.3 AWARD FOR SHORT TERM PPA (ETESA NO SEPTEMBER 30, 2014)

6 B. PANAMA: MERGERS AND ACQUISITIONS (M&A): V. GR. > IN DECEMBER 2014, GDF SUEZ SOLD TO CELSIA THREE POWER PLANTS: 118 MW- HYDRO; 87 MW THERMAL (BUNKER), 120 MW THERMAL (COAL POWER PLANT) LOCATED RESPECTIVELY IN CHIRIQUÍ AND COLON PROVINCES > THERE IS NO LEGAL PROVISION OR LEGAL RESTRICTION FOR M&A.

7 B. 1- M&A: INVESTORS EPC Contractors and main contractors of the power plants are also participating in the equity of the projects and also supply electromechanical and/or civil works. Since January 2015, Private Funds and Stocks traded publicly are allowed to be owners of power plants or participate in the international public bids organized by the Regulator. In this case, it is necessary that participant reveals who has the control of the board of directors and of the Administration Committee.

8 C. LEGAL CASE NO. 1: BREACH OF A PPA BY A SELLER/GENERATOR Background. XX as any other generator assigned to the lenders the PPAs as part of the financing of the power plant. In 2014, XX was not able to comply with the terms of the PPAs and the lenders executed such assignment by appointing a third party which currently is in charge of the operation of the PPA. In addition, the generation license was also transferred by ASEP to such third party pursuant to a request of XX and lenders.

9 C.1 LEGAL CASE NO. 2: ENVIRONMENTAL AND SOCIAL CLAIMS BY LOCAL COMMUNITIES Background. YY is a 24MW hydro project financed by European lenders. The environmental impact study was also approved and the sponsor has already completed 95% of the civil and electromechanical works. Claim. However, since the project is located near to an indigenous-regulated area, the indigenous community has requested the total suspension of the Project because they consider that this type of project must be excluded from the comarca. In February 2015 and under the supervision of ONU, the Government of Panama, the local community and the sponsor initiate negotiations to define the future of this project.

10 D. NEW PROJECTS: TRANSMISSION LINE UP TO 400 MW FROM PANAMA TO COLOMBIA (UNDER EVALUATION)

11 CONCLUSIONS There are no legal limitations and strong requirements for international bidders to participate in the public bids for the supply of energy and capacity. There is no a pre evaluation of the participants of the international public bids to validate the financial, technical and commercial experiences. Consequently, as generator XX there is no certainty that participants and bidders will reach in due time the construction and operation phases of the projects as well as to perform efficiently the terms and conditions of the PPAs. When a client is looking for the acquisition of an existing project or power plant, it is advisable to evaluate if the commercial terms of the PPAs make the project financially feasible. (Case No. 3- termination of the PPA prior to the expiration date includes penalties imposed by the Regulator and the execution of the Performance Bond). We can see more opportunities in solar and wind projects due to their acceptance by local communities. Similarly, It will be interesting to see Central America looking for natural gas projects including also regasification plants.