www.b-reed.org

B-REED Introdução

Brazil Rural Energy Enterprise DevelopmentDesenvolvimento de Empresas de Energia Rural no Brasil

Novembro, 2002

2

O que é o B-REED

Parceria do Programa das Nações Unidas para o Meio Ambiente (PNUMA) e a E+Co ($$ da Fund. Nações Unidas)– Surgiu do A-REED (UNF) na África; FENERCA (USAID)

– BRASUS e do Instituto Eco-Engenho (parceiros locais)

Procuramos desenvolver e financiar empresas que usem tecnologias de energia limpas, eficientes e/ou renováveis– Projetos com potencial para expansão ou replicação– Foco no nordeste (e.x. Bahia e Alagoas, Ceará)

Objetivos: Fomentar empresas de ER e EE que são economicamente viáveis para:– Reduzir consequências negativas sobre o meio-ambiente e

a saúde derivadas das padrões energéticos em vigor – Estimular crescimento econômico local com energia

3

O que o B-REED tem a oferecer – 5 Componentes

1) Serviços de Desenvolvimento Empresarial (EDS) +– Treinamento e instrumentos para auxiliar a iniciar e

desenvolver negócios (eg. planejamento, estruturação, etc.)

2) Capital inicial (empréstimo, patrimônio, mezzanine, fundo de aval), geralmente até US$100.000 (máximo $250.000)

Parcerias com varios tipos de instituições financeiras co-fi

Parcerias com outros atores interessados em desenvolvimento sustentável, tais como ONGs, instituições governamentais, e o setor privado:

– Facilitar desenvolvimento de projetos integrados (eg. reflorestamento, créditos de carbono, educação) sinergias

Intervenções na pólitica para promover legislação prática

4

Nossa abordagem é focada na empresa, mas abrange vários atores interessados

Empresas de Energia Sustentável

Capital inicial (B-REED / E+Co)

Serviços deDesenvolvimentoEmpresarial

Governo/ Políticas

Ferramentas/Trenamento

Empreendedores

Capital para estágios futuros(Instituiçõesfinanceiras e E+Co)

Micro-finanças

Usos Produtivos/Geração de Renda

E+Co / BRASUS & IEE

ClientesRurais

PNUMA / UCCEE

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BenefBenefííccios ios SociaisSociais Saude melhorSaude melhor Tempo para educaTempo para educaçãoção Oportunidades paraOportunidades para mulheres mulheres e crian e criançasças

Meio AmbienteMeio Ambiente Qualidade do arQualidade do ar Local (terra, ar, agua)Local (terra, ar, agua) Global (emissGlobal (emissççõesões de gases de de gases de efeita estufa) efeita estufa)

ENERGIA MODERNA é o fator chave para eliminar a pobreza (círculos virtuosos sinergísticas)

Desenvolvimento Desenvolvimento EconômicoEconômico GeraGeraçãoção de emprego de emprego Maior produtividadeMaior produtividade Aumenta geraAumenta geraçãoção de renda de renda

EnergiaEnergia

6

B

R

E

E

D

FERRAMENTAS

IdéiaIdéia

Coleta de dadosColeta de dados

ViabilidadeViabilidade

Plano de NegócioPlano de Negócio

ImplementaçãoImplementação

ExpansãoExpansão

EMPREENENDEDOR

EDS

A Guia de Ferramentas (Toolkit) ajuda os empreendedors fazer um plano de negócios

7

O que é serviços de desenvolvimento empresarial (EDS)

Disenho de Estudo de Mercado e do Projeto Piloto

Criação do Modelo de Negócios

Análise dos Riscos e medidas para reduzí-los

EDSSuporte com Suporte com Assuntos Regu-Assuntos Regu-latórios e Legais latórios e Legais

Contatos e Negocia-Contatos e Negocia-ção com Parceriasção com Parcerias

Análise de Viabilidade e Financeira Preparação e

contatos para conseguir co-financiamento

Assistência na elaboração do plano de negócios / expansão

Estruturação e Assess. Financeira

Formalização de parcerias /alianças estaté-gicas chaves

8

B-REED tem um conceito de empresa bastante abrangente

Organização de qualquer natureza jurídica, geralmente de direito privado, cujo projeto:

Enquadra-se nos propósitos do programa B-REED

Apresente viabilidade econômica e financeira

Aberto a financiar empreendedores: Com capacidades diferentes Desde só com planos de negócios até aqueles expandirão

seu uso de ER ou reduzir / limpar seu uso de energia Utizando várias tecnologias (geralmente provadas)

Tipos de empresas Micro, pequenas e médias empresas

Cooperativas, OSCIPs, associações, etc.

Instituições sem fins lucrativos

9

O que tipo de empreendimento podemos financiar

Abrange: 1) eletrifição rural, 2) geração de ER ligado a rede, 2) fabricação, montagem, ou distribuição de equipamentos, 3) usos produtivos, 4) eficiência energética, e 5) subsituição de combustível mais limpa

Para pequenos e médios empreendimentos capital pode lançar / provar modelos de negócios, facilitar expansão / profissionalização

Para projetos de grande porte capital catalizador pode ser crucial no estágio de pré-investimento (eg. para financiar os estudos ambientais e de viabilidade, projeto básico, etc.)

10

B-REED oferece uma filosofia diferenciada, mais próximo a um parceiro

Fornecer EDS (vs. só due diligence) facilita nosso financiamento no estágio inicial, com maior risco

Não temos necessidades de retornos de 20%+ em dólares

– Entretanto, não financiaremos a taxas reais negativas

– Produto financeiro diferenciado; não tentamos concorrer

Abordagem mais flexível; desenhamos estruturas financeiras, avaliando cada oportunidade caso por caso

Não temos regras rígidas ou categorias como banco

Financiaríamos com dívida, mezzanine ou patrimônio

Objetivo é criar estruturas apropriados com flexibilidade para antecipar a possibilidade de eventos externos

Avaliamos os benefícios ambientais e sociais também

Mais flexível em termos de garantias exigidas

11

B-REED utiliza uma abordagem de financiamento flexível, mais próximo a um parceiro

Nosso papel: fornecer capital de estágio cedo a um custo razoável, quando não seria disponível

– Tentamos financiar o projeto em estágios (eg. estudo de mercado, de viabilidade, ou um projeto piloto)

Estamos dispostos a aceitar risco, mas acreditamos em compartilhar o risco e o sucesso do empreendimento

– Usamos criteria de analisis sistemático (eg. documentação legal adequada)

– Empreendedor deve investir proprio capital (eg. 30% num novo negócio)

12

B-REED oferece capital a um custo mais razoável, considerando os riscos que aceitamos

US$ Retorno (%)

Risco

5 15 25 35

Dívida

(Mezzanine)

Participação

Capitalde Risco

B-REED

Ordem de financia

mento

Fluxo de Caixa +

Start-Up

Estagio Inicial/Alto crecimento

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Aprovação e liberação do financiamento

Passos do processo de investimento

Elaboração do plano de negócio usando as ferramentas

Negociação do termos de investimento

Preparação e elaboração do cadastro e proposta preliminar

Formalização do processo de EDS

Processo de diligência

www.b-reed.org

E+Co Introdução (www.energyhouse.com)

Setembro, 2002

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2.4 billion people lack clean, safe cooking fuels and depend on traditional biomass sources; 1.7 billion lack electricity1

Time spent gathering wood and water prevent education development

Traditional infrastructure has ignored them

Their basic energy sources are being depleted, slowly worsening their livelihood

Hence, their ability to escape from the poverty cycle is limited, making increases in quality of life and economic impossible

The “Energy Poor” spend an exorbitant amount of resources to obtain inefficient forms of energy . . . keeping them trapped in the vicious poverty cycle

The harsh reality

1 World Energy Assessment (2000). Chapter 2, Energy and Social Issues, edited by Amulya Reddy

The resulting environmental degradation has both local and global consequences

16

Not only could they afford to pay for modern energy . . .but the poor are paying more for crude energy today

The poor spend much more time and effort obtaining energy

The poor pay more per unit of energy (eg. light from a kerosene lamp costs 100 times more than from electricity)

The poor spend a substantial portion of their household income on energy just for basic survival (cooking, heating, etc.)

Energy poverty is not merely a rural

Inadequate technology is not the problem

Dispelling the myths – they would pay

17

Fornecer financiamento de primer estagagio a empresas de ER, mostrando a viabililidade e eficiência desta abordagem, estimulando o fluxo de mais capital para este setor

E+Co promove a visão de um mundo onde todo mundo tem direito a energia moderna, confiável e limpa

Missão

Desenvolvimento social via a criação de oportunidades econômicas, melhorando a padrão de vida e elimando a pobreza

Preservação ambiental

Returno razoável sobre o capital investido reinvestmento

O resultado

18

O que significa ser um “non-profit”

O que significa ser non-profit / 501-C3 ( “empresa” sem fins lucrativos)?

– Isenção de impostos EUA; facilita conseguir fundos de fundações para cubrir custos

– No existe dono da empresa; nossos lucros seria reciclados crescer e para financiar outras empresas

– Não operamos fundos não-reembolsáveis; procuramos retornos para cubrir custos operacionais

19

Mais do que um financiador de ER; promovemos o crecimento do setor

Valorizamos os retornos ambientais e sociais também

Estimular co-financiamento de IF’s e estratégicos

Compartilhar experiência via seminarios; disseminar materiais

Intervenções na pólitica para promover legislação prática

Adaptar o modelo aos vários países (ONGs locais), compartilhando experiências, conhecimentos e tecnologias

20

E+Co: Os resultados durante uma década . . .

Currently invested in 60+ enterprises in 30+ developing countries. Over 80 investments (~$9 million) since 1995 in 37 countries

24 investments now delivering clean energy services to more than 200,000 people

E+Co investment has leveraged $40 million of investment from other public and private sources 500 jobs

Exemplos

3 hydro facilities – 23 MW of new clean electricity in Bolivia, Guatemala and the Philippines

12 Rural Energy Services Cos – serving 29,000 previously unelectrified households in Bangladesh, Brazil, Costa Rica, Dominican Republic, El Salvador, The Gambia, Honduras, India, Lesotho, Morocco, Nepal, and Vietnam– ~1.4 MW of new renewable electricity

21

E+Co: Os resultados . . .

1 small wind turbine manufacturing facility in China

3 biomass plants – 6 MW of new clean electricity in Bolivia, Thailand and the Philippines

A biogas manufacturing company in Vietnam - 2,900 household biogas digestors; 2.2 million m3 of biogas

A treadle pump manufacturing company in Bangladesh – selling more than 200,000 pumps/year, displacing previously used diesel and generating ~$100 more per year per farmer

30 brick production micro-enterprises converted from a sawdust-based and used lubrication oil fuel to clean, efficient natural gas – Bolivia

Exemplos cont.

22

Os resultados . . .

www.b-reed.org

E+Co: 3 Estudos de Caso

Setembro, 2002

24

E+Co Case Study:Soluz Honduras – Project overview

Company overview and strategy Photo of a PV SHS in Honduras

Soluz Honduras S.A. de C.V (“Soluz Honduras”) is a Honduran corporation and a majority-owned subsidiary of SOLUZ Inc. Soluz Honduras began operations in 1998, seeking to leverage experience gaining from the operations of Soluz Dominicana, which began operating in 1995.

It is a pioneer in the implementation o rural photovoltaic (PV) solar home system (SHS) delivery through the rental (“fee for service” model) of different-sized PV SHS systems. By maintaining ownership of the systems, Soluz is able to provide energy at affordable monthly rents and deliver its product to a greater penetration of the population. These prices are equivalent to what villagers would pay for kerosene, dry cell batteries, or recharging car batteries for TV usage.

Soluz Honduras’ strategy has been to attain sufficient scale in order to cover fixed costs; the company is also looking to diversify into other products in order to accelerate reaching a cash flow positive state.

E+Co relationship Social and environmental impact

Honduras has an estimated population of 2.2 million rural residents, of which 40,000 households have no electricity; it is also estimated that approximately 80% of these households have monthly incomes of less than US$137, with current energy expenditures of about $4.50.

The alternative of obtaining energy services on a “fee-for-service” is in the short-term the only option available for these families, where there is no alternative for them to get connected to the grid and where the households cannot afford credit or cash sales of such PV energy systems.

PV solar home systems have neutral environmental impact, creating electricity from sunlight and producing no emissions. The use of PV substitutes the use of dry cell batteries, kerosene and in some other cases, the use of diesel generators from rural electrical energy services.

In June 1998, E+Co granted the first US$100,000 loan to Soluz Honduras. The second US$100,000 loan was subject to the compliance of certain covenants, including conducting a market development study and securing additional funding (either equity or debt) amounting to at least US$500,000.

Despite the fact that at the time when the second disbursement was approved the two last covenants were pending, E+Co decided to approve the second loan on June 1999. This was due to the fact that Soluz Honduras needed these funds for working capital to cover its inventory and operating expenses.

Due to E+Co’s timely financing, Soluz Honduras in 2000 was able to secure several loans and equity investments from IFC, CFA and the SIF. These loans totalized US$525,000 and the equity investments US$225,000.

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1999 2000 2001Total customers served 938 1,197 1,740 Total Fee-for-Service (FFS) 404 636 1,156 FFS Customers added 40 63 91 FFS collection rate 96% 92% 98%FFS customers on wait list 31 2 15

Communities served with FFS 109 152 259 Installed FFS kW equivalent 160 250 460 Total Number of Employees 15 16

Soluz Honduras – Investment overview

Key terms of financing Financial highlights

Type: Senior Debt

Amount: US$200,000

Tenor and payment schedule: The total loan was made through two disbursements. The first was for $100,000 with a grace period for loan amortizations of 12 months; the second disbursement had a grace period of 6 months. The average loan term was of six years, elapsing 5.5 years after the second disbursement.

Guarantee: First pledge over Soluz Honduras shares; indirect pledge on SHS

Key covenants: Test market installation of 100 SHS units ($50,000), market development ($50,000) and installation of 200 SHS units ($100,000).

Interest rate: 7% per annum

Sponsor equity contributed at time of investment: US$55,296

Operational metrics Management & Ownership

[Ownership table]

Statistics on as of September :

(US$) 1998 1999 2000 2001

Revenues 51,330 131,331 138,949 211,906

Growth NA 155.9% 5.8% 59.4%

EBITDA (106,100) (43,535) (88,795) (92,903)

CAPEX 145,324 94,348 367,002 199,013

Interest expense 11,657 19,885 28,544 679,945

Loan amortizations 0 17,083 195,781 195,390

Total debt 171,645 264,562 466,289 684,289

Equity invested 287,268 287,268 346,131 474,089

Debt / (Debt + Equity2) 37% 48% 57% 59%

1 B/S items as of September 2001 and I/S nine months annualized.2 Invested equity

Management (Soluz Inc.) Title

President Richard HansenVice-president John Rogers

Management (Soluz Honduras) Title

General Manager Loyda AlonsoInstitutional Relations Director Diana Solís

Shareholder Ownership

Soluz Inc. 76.74%Corporación Financiera Ambiental 8.31%International Finance Corporation 6.65%Stichting Solar Investment Fund 8.30%

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The “Red Ceramics” natural gas fuel substitution project, initiated in 1995, was developed by the Red Ceramics Association (“ACR”) in Alpacoma, La Paz. The Association consisted of 40 members, each with a kiln for the manufacture of construction bricks. ACR is located, on the western ledge of La Paz, close to the poorest residential areas.

The fuels used in the ovens, before the fuel substitution, were sawdust, used lubrication oil and scrap wood. However, the severe air pollution caused by using these materials and the incompliance with local environmental regulations implied the risk of closure of the business.

ACR hired an engineering consulting firm to design a new system using natural gas that would comply with environmental regulations.

After obtaining the municipal and environmental permits, implementation of the project began in October 2000. This was particularly arduous given that most of the ACR members, as rural emigrants to La Paz and of indigenous descent, have only minimal education; they hence experienced some cultural barriers in dealing with local authorities.

E+Co Case Study: Red Ceramics – Project overview

Company overview and strategy Photo of brick manufacturers

E+Co relationship Social and environmental impact

The social benefits targeted in this project were primarily focused on preserving the jobs of 30 families facing closure due to the threat of environmental restrictions on use of sawdust and used lubrication oil in the manufacturing process.

Another objective of the project was to increase the income of the families and improve their working and living conditions around the project zone, with the reduction of noxious gas emissions.

The environmental impacts associated with the use of clean fuel not only benefit the local neighborhood of the Red Ceramics Association, but also the large and densely populated urban areas of La Paz, where air pollution is a significant problem.

Due to the cultural and socioeconomic background of the ACR members, E+Co’s role extended beyond that of a typical lender; it included advisory to assure that the proper legal, administrative and technical decisions were made, as well as help securing the supply and construction contracts.

After receiving a financing request, E+Co contacted Caja Los Andes (“CLA”), a local micro credit bank, to be a co-financier. CLA extended credit on the basis of the technical and economical evaluation performed by E+Co.

In September 1999, the loan was made by E+Co for US$ 160,534, together with a debt service collection service contract with CLA.

In September 2000, the loan amount was increased by US$ 41,625, given unforeseen additional costs to complete the project.

Due to lower brick demand and prices in 2001, E+Co granted a 10 month debt service reduction, lowering monthly payments by 40%. In 2002, a term extension of 12 months was also granted. As of March 2002, 30% of the debt had been repaid and ACR continues on debt payment schedule.

27

Red Ceramics – Investment overview

Key terms of financing Financial highlights

Type: Debt

Amount: US$202,160

Interest rate: 9% per annum

Tenor and payment schedule: 64 month tenor with 12 month grace for interest payments and loan amortizations

Guarantee: Each debtor registered the mortgage of his real estate in to E+Co. In addition, ACR committed itself to take disciplinary measures in case of default of any of its members.

Sponsor equity contributed at time of investment: Of the total investment of US$260,000, ACR contributed US$57,840 as in-kind equity through the provision of labor for the excavation and filling of ditches, as well as for other masonry works.

Operational benefits Management & Ownership

ACR is equally owned by its 40 members

The ownership of the natural gas distribution system, from the main gas pipeline to each member’s property gates, belongs to the ACR, which contributed with in-kind labor for its construction and installation.

The assets installed on the property of each associate member belong entirely to that individual.

The maintenance of the civil works and the maintenance of the distribution system is the responsibility ACR.

The Natural Gas Distribution Company (YPFB) is responsible for the main gas connection feeding ACR, the distribution system, as well as for gas provision, pressure regulation, measurement, and billing and collection.

The most remarkable quantitative impact was the decrease in brick losses due to overcooking and smelting of bricks; production losses were reduced from 14% to 5%.

Another efficiency gain was the 14.6% increase in total net loading of each batch, due to reduction of unused space in the new ovens. These advantages afforded by the new fueling system were important in maintaining the viability of the business, as in 2001 there was an unexpected decline in brick demand and a fall in local brick prices.

The total production increased from an estimated 15.8 million bricks in 2000 to about 20 million bricks in 2001.

The total pollution, mainly from the use of sawdust and used lubrication oil, was reduced by more than 80%. Moreover, the bricks manufactured with natural gas are of higher quality and hence more competitive than the ones that had been produced with traditional fuels.

(US$) 2000 2001 2002F 2003F

Revenues 652,079 706,863 680,682 680,682

Growth (%) 8.4% -3.7% 0.0%

EBITDA 15,680 124,736 121,610 121,610

EBITDA Margin 2.4% 17.6% 17.9% 17.9%

Interest Expenses 13,685 14,731 10,954 7,455

Loan Amortization 10,716 44,010 41,582 50,002

Total Debt (e.o.p.) 191,444 147,435 105,853 55,850

Equity invested NA NA NA NA

Debt / EBITDA 12.2x 1.2x 0.9x 0.5x

EBITDA / Interest Exp. 1.1x 8.5x 11.1x 16.3x

EBITDA / Debt Service 0.6x 2.1x 2.3x 2.1x

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E+Co Case Study: Kanata Hidroelectric Plant – Project overview

Company overview and strategy Power house and lower reservoir

In 1993, SYNERGIA S.R.L., a small Bolivian company, was founded to develop a 7.5 MW hydropower plant, using an existing water supply reservoir located at an altitude of 4,350m on a mountain watershed above the historic town of Cochabamba on the edge of Lake Titicaca.

For over 40 years, these waters had been channeled through an open canal to a reservoir located at the mountain pass and, from there, to the bottom of the mountain through a gully along 7.5 km. However, this existing viaduct system resulted in water losses of about 30% (about 2.38 million m3), hence limiting the potable water supply of the town.

The Kanata plant sought not only to provide an important source of on-grid electricity to the local community, but also to increase the amount of potable water to the community.

From 1995 and 1997, SYNERGIA obtained the legal concession, obtained the necessary land and corresponding rights of way, secured project partners, and raised the necessary financing. The construction of the project started in 1997 and was completed in April 1999.

E+Co relationship Social and environmental impact

The original water conveyance through the gully of Thola Pujro, due to its steep slope (1,350 m in 7 km), provoked significant erosion for more than 40 years, causing occasional landslides and polluting the water, both physically and bacteriologically; the new water conveyance through the penstock eliminated such erosion and pollution.

The water losses (by evaporation, infiltration and pulverization along the gully) were significant, representing about 30% of the total flow. As this was the main source of potable water for the growing town, this was a detrimental loss. The project resulted in savings of 2.4 million m3 of water per year, supplying another 40,000 inhabitants (at 150 liters per inhabitant per day). SYNERGIA provides this additional water at no cost.

The electricity production, incorporated in the distribution grid, is sufficient to provide enough electricity to about 50,000 households. Moreover, the hydro energy does not produce any greenhouse gasses.

In August 1995 SYNERGIA S.R.L. initially requested a US$ 250,000 financing from E+Co, contingent upon the availability to find other co-financing sources to fully fund the project. The loan contract was signed on September 19, 1997.

E+Co early financing commitment was crucial in helping the project demonstrate its viability and consequently successful raise the additional debt and equity financing needed.

The loan has since been fully repaid.

29

Kanata – Investment overview

Key terms of financing Financial highlights

Type: Debt

Amount: US$250,000

Interest rate: 9% per annum

Tenor and payment schedule: 18 month grace period followed by three year repayment period (with bimonthly payments)

Key covenants: Use of an escrow account receiving the monthly payments from the power sales to the interconnected system (with E+Co debt service payment as as primary obligation for the account)

Sponsor equity contributed at time of investment: US$ 1.86 million

Operational metrics Ownership

Annually, the project produces 20.4 to 24 GWh and a net capacity output of 7.4 MW, not including the consumption for the internal operation of the plant.

From May 1999 to March 2002, the plant operated during about 12,000 hours, with only a 0.01% outage rate.

Besides this performance reaching 99.99% reliability, the plant provides 7.94 million m3 of clean water per year to the town of Cochabamba, delivered via the local water supply and distribution company (SEMAPA).

(US$ 000s) 1998 1999 2000 2001 2002F 2003F

Revenues (w/out VAT) 163 618 1,044 905 883 889Growth (%) 278.2% 69.0% -13.3% -2.8% 0.7%

Expenses* 123 340 471 367 343 334EBITDA 40 278 574 538 540 554

EBITDA Margin 24.8% 45.0% 54.9% 59.4% 61.2% 62.4%Capex 4,339 1,725 NA NA NA NAInterest Expenses 161 168 347 325 300 274Loan Amortization 0 98 149 392 291 256Total Debt (e.o.p.) 4,273 4,175 4,151 3,325 3,034 2,778Equity invested 1,760 1,858 1,858 2,533 2,653 2,653

Debt / (Debt+Equity) 70.8% 69.2% 69.1% 56.8% 53.4% 51.2%Debt / EBITDA 105.6x 15.0x 7.2x 6.2x 5.6x 5.0xEBITDA / Interest Exp. 0.3x 1.7x 1.7x 1.7x 1.8x 2.0xEBITDA / Debt Service 0.3x 1.0x 1.2x 0.8x 0.9x 1.0x

Shareholder OwnershipSYNERGIA S.R.L 60%STYRCON G.m.b.H 20%Continental Visions Ltd. 20%