Antonio Fonseca, Brookfield

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Regional Leadership Forum
Advancing Sustainable Hydropower in Latin America and the Caribbean

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  • I may make some forward-looking statements in today’s presentation and would ask you to bear in mind the various risk factors which you can find more clearly laid out in our regulatory filings.
  • 180 power facilities1,200 employees in 3 countries10 markets in North and South America2,000 MW in development pipelineFacilities on 68 river systems5,800 miles of transmission under management or in construction
  • Antonio Fonseca, Brookfield

    1. 1. Brookfield Renewable Energy GroupFocusing on Renewable Power Generation HYDROPOWER A TOOL FOR REGIONAL DEVELOPMENT
    2. 2. Cautionary Statement on Forward-Looking Information This presentation contains forward-looking statements and information within the meaning of the Canadian securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements in this presentation include statements regarding Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) and its anticipated ratings, the quality of Brookfield Renewable’s assets and the resiliency of the cash flow they will generate, Brookfield Renewable’s anticipated financial performance, the future growth prospects and distribution profile of Brookfield Renewable, the listing and liquidity of the Brookfield Renewable units, Brookfield Renewable’s access to capital and the approval, successful completion and timing of the transaction. Forward-looking statements can be identified by the use of words such as “will”, “expected”, “intend”, “continue”, and targets, or variations of such words and phrases. Although Brookfield Renewable believes its anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, they can give no assurance that such expectations will prove to have been correct. The reader should not place undue reliance on forward-looking statements and information as such statements and information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Brookfield Renewable to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to the risk that the conditions precedent to be met, and the regulatory and third party approvals to be obtained, for the combination to occur, are not met or obtained, the fact that Brookfield Renewable units will not be eligible for inclusion on any index, changes to hydrology at Brookfield Renewable’s hydroelectric stations or in wind conditions at Brookfield Renewable’s wind energy facilities, the risk that counterparties to Brookfield Renewable’s contracts do not fulfill their obligations, and as Brookfield Renewable’s contracts expire, it may not be able to replace them with agreements on similar terms, Brookfield Renewable’s operations being highly regulated and exposed to increased regulation which could result in additional costs, the risk that Brookfield Renewable’s concessions and licenses will not be renewed, the risk that a portion of Brookfield Renewable’s hydroelectric portfolio is subject to re-contracting and may become subject to price risk, the risk that Brookfield Renewable may fail to comply with the conditions in, or may not be able to maintain, its governmental permits, the risk that future acquisitions may subject Brookfield Renewable to additional risks, the risk that Brookfield Renewable may experience equipment failure, and other risks and factors detailed from time to time in Brookfield Renewable’s public filings. We caution that the foregoing list of important factors that may affect future results is not exhaustive. Except as required by law, Brookfield Renewable undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise. Non-GAAP Measures This presentation contains references to “EBITDA” and “FFO”, which do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures used by other companies. Management believes that EBITDA and FFO are useful supplemental measures that may assist investors in assessing financial performance and the cash generated that is available to unitholders for distribution. EBITDA and FFO should not be considered as the sole measure of performance and should not be considered in isolation from, or a substitute for, analysis of the financial statements prepared in accordance with GAAP. All amounts in U.S. dollars unless otherwise specified.2 | Brookfield Renewable Energy Group
    3. 3. Brookfield Renewable Energy Group Canada • 32 hydropower stations • 1 thermal station • 3 wind farms • 1 hydro station under construction • 560 km of 44k to 230kV United States • 103 hydropower stations • 1 thermal station Colombia • 4 wind farms • Distribution utility serving 350,000 customers • 39 km operating HVDC submarine cable; • 600 km of 345kV under construction Chile • 8,800 km serving 98% of the population Brazil Generation • 36 hydropower stations • 2 hydro stations under constructionTransmission/Distribution3 | Brookfield Renewable Energy Group
    4. 4. Brookfield Renewable Energy Group - BRAZIL Hydroelectric Power Plant Locations ~ 300 employees  Brookfield one of the largest privately owned small hydroelectric energy producers in Brazil  36 power generating facilities in operation (626 MW)  First hydro electric generator to commercialize carbon credit certificates in Brazil Mato Grosso Goiás Minas Gerais  Focused on low social and environmental impact Mato Grosso do Sul Rio de Janeiro assets Paraná  ~325 MW in greenfield projects in the pipeline Santa Catarina Rio Grande do Sul Head offices Operating plants SHPP Anna Maria, Minas Gerais SHPP Guary, Minas Gerais4 | Brookfield Renewable Energy Group For Institutional Use Only
    5. 5. Poverty, sustainability and energy – developing hydropower – developing the country BRAZIL – FIGHTING POVERTY IS THE PATH TO SOCIAL AND ECONOMIC DEVELOPMENT • The worst enemy of the nature is misery, and you can eliminate poverty only with sustainable social and economic growth • Hydropower with strong commitment for its sustainable construction and operation is a powerful tool for economic and social development • Hydropower is responsible for 85% of all renewable energy sources around the world • Brazil is gifted with huge hydrographic basins and has a enormous hydropower potential estimated in 260 GW • So Brazil has chosen its path to fight poverty and reach a sustainable social and economic development, and the power behind it is clearly for us Brazilians Hydropower • Today in Brazil from the 115 GW of installed capacity, 88GW are hydropower which represents more than 70% of renewable in our electric matrix (one of the cleanest in the world)5 | Brookfield Renewable Energy Group
    6. 6. Poverty, sustainability and energy – developing hydropower – developing the country BRAZIL – FIGHTING POVERTY IS THE PATH TO SOCIAL AND ECONOMIC DEVELOPMENT • Brazil is developing big hydropower projects in the north region showing the world a new approach to work, minimizing the impacts and maximizing the benefits to the local communities • Regarding small hydropower there is a remaining potential of approximately 18 thousand MW to be developed • Brazilian industry has reach a mature situation regarding Hydropower having achieved conditions of financing, services and equipment supply and energy market already well consolidated • An opportunity like building a power plant can and must be used by the country as a tool for local/regional development, bringing economical and social advantages for the local population in the way to the real sustainable development of remote regions • Companies that want to build and operate a power plant have to use a high degree of social and environmental responsibility as a strategy for implementation and operation of the projects6 | Brookfield Renewable Energy Group
    7. 7. Traditional Triple Bottom Line Analysis Economic Social Environmental7 | Brookfield Renewable Energy Group
    8. 8. Traditional Triple Bottom Line Analysis X Multiple Bottom Line Analysis ECONOMIC BOTTOM LINE CRITERIA • Payback (typically months or years) • Benefit / Cost ratio (BCR) • Net present Value (NPV) • Rate of Return (RoR) • Cash Flow ENVIRONMENTAL BOTTOM LINE CRITERIA • Watershed-wide issues and impacts • Project area issues and impacts • Specific fauna and flora species issues (threatened or endangered)8 | Brookfield Renewable Energy Group
    9. 9. Traditional Triple Bottom Line Analysis X Multiple Bottom Line Analysis SOCIAL BOTTOM LINE CRITERIA • Reliable Electricity • Water Issues – Water Supply, Flood Control, Transportation, Irrigation • Aboriginal (First Nations) Issues • Sports & Recreation Issues – Fishing, Boating, Swimming • Employment – local human resources • Social and economic development POSSIBLE BOTTOM LINE CRITERIA IN A MULTIPLE ANALYSIS • Regulatory • Dam Safety • Sustainability • Other major criteria appropriate to project owner / stakeholders / public9 | Brookfield Renewable Energy Group
    10. 10. Traditional Triple Bottom Line Analysis X Multiple Bottom Line Analysis Regulatory ? Economic Dam Safety ? Other Public ? Social Environmental10 | Brookfield Renewable Energy Group
    11. 11. Traditional Triple Bottom Line Analysis X Multiple Bottom Line Analysis Regulatory ? Economic Dam Safety ? Other Public ? Sustainability Social Environmental11 | Brookfield Renewable Energy Group
    12. 12. Multiple Bottom Line Analysis MULTIPLE BOTTOM LINE CRITERIA TOOL REGIONAL DEVELOPMENT12 | Brookfield Renewable Energy Group
    13. 13. Multiple Bottom Line/Regional Development Approach – Advantages COMPETITION AMONG DEVELOPERS FOR THE BEST SITES • The discussions with the main stakeholders (mainly local communities, first nations, rural workers and land owners) set the stage for the need of a multiple bottom line/regional development approach in the development of hydropower plants in the country • In these discussions a Company want to have the stakeholders as partners playing in the same side, once in the public hearings it can make the difference if company will implement the project • The Governmental Agencies/Environmental Authorities (filled with NGO people) tend to speed the licensing process to companies that are used to work with some kind of multiple bottom line /regional development approach in the development of hydropower plants FINANCING THE PROJECTS • Companies that use a multiple bottom line/regional development approach, and for that can be considered “transparent” or “sustainable” or “green” have access to better interest rates and grace periods in the project financing • Multilateral agencies and Local Development Banks offer not only better financing conditions but also a fast track lane analysis process (that is the case of Brazilian BNDES – National Bank for Economic and Social Development), also financing with special conditions the voluntary local development projects13 | Brookfield Renewable Energy Group
    14. 14. Brookfield and BNDES – financing development projects • Brookfield as many others private investors in the energy sector in Brazil finances the construction of its power plants trough the BNDES – Brazilian National Bank for Social and Economical Development, a Federal Government Institution aimed to finance the development of the country • Since 2008, BNDES has been approaching several borrowers trying to create a partnership where in exchange of better financing conditions (smaller interest rates, better grace periods and fast track in the loan analysis and approval), the private investor would take a social loan to invest in social projects for the communities • These social projects financing would have a special interest rate, and the money had to be used in social responsibility actions (voluntary actions not linked with the impacts of the project)14 | Brookfield Renewable Energy Group
    15. 15. Brookfield Brazil – Barra do Brauna HPP • Barra do Braúna Hydroelectric Power Plant (49 MW) was the first one to use this social financing • From the total project finance (R$ 220 MI) Brookfield took 1% (R$ 2,2 MI) to implement social projects • As indicated by BNDES the projects should be located preferentially in the region close to the power plant, but it was not mandatory • 4 social projects were implemented, 3 in the southeast region (close to the power plant) and 1 in the south region Recreio’s town Waste and Residues Recycling Plant15 | Brookfield Renewable Energy Group
    16. 16. Brookfield Brazil – Barra do Brauna HPP Pomba River Valley Environmental Education Center Laranjal’s town Community and Citizens Center Dois Lajeados Municipal Hospital Geriatric Hall16 | Brookfield Renewable Energy Group
    17. 17. Brookfield Brazil – Pezzi and Serra dos Cavalinhos II HPP • With the success of the Barra do Braúna case BNDES invited Brookfield to replicate the process in the financing of a small hydro plant in the Brazilian southern region • So Serra dos Cavalinhos II (29 MW) was the second case where social projects were supported by BNDES • From the total project finance (R$ 162 MI) Brookfield took 1% (R$ 1,6 MI) to implement social projects • 3 projects were selected and will be implemented during 2012 and 201317 | Brookfield Renewable Energy Group
    18. 18. Brookfield Brazil – Pezzi and Serra dos Cavalinhos II HPP Volley ball Scholl for low income families children Agro forestry system producing organic food Sustainability project for a small farmers union18 | Brookfield Renewable Energy Group
    19. 19. Lessons learned: developing hydropower – developing the communities • Companies showing its will to be a partner of the local community during the environmental licensing process trough the early discussion and development of actions that will lead to local/regional development • Companies strongly believes that starting the process in partnership with the local people will enhance the chances of success of a project COMMUNITIES LOOKING FORWARD TO HAVE THESE INVESTMENTS IN ITS REGION19 | Brookfield Renewable Energy Group
    20. 20. Final Remarks – Conclusions FINAL REMARKS • Hydropower is the energy behind Brazilian social and economic development • The importance of a commitment to the development of sustainable hydropower in a country like Brazil • Private investment in development, construction and operation of Hydro Power Plants is one of the pillars of this commitment • Using the development, construction and operation of Hydro Power Plants as tool for regional development is fundamental to achieve this commitment20 | Brookfield Renewable Energy Group
    21. 21. Final Remarks – Conclusions CONCLUSION FOR A DEVELOPING COUNTRY SUCH AS BRAZIL, THE IMPLEMENTATION OF A HYDROPOWER PLANT IS NOT JUST A CONSTRUCTION OF A NEW POWER SOURCE (THAT IS VERY IMPORTANT AND NEEDED) BUT MORE THAN THAT IS A GOLDEN OPPORTUNITY TO BRING KNOWLEDGE AND DEVELOPMENT TO REMOTE REGIONS OTHERWISE OFTEN FORGOTTEN BY GOVERNMENTS AND POLITICS. THE PEOPLE LIVING IN THESE AREAS WITH THE COMPANIES AND PROFESSIONALS WORKING IN THIS FIELD ARE LEARNING HOW TO DEAL WITH THIS SITUATION BEING ALL PART OF THE PROCESS FOR THE SAKE OF THE PROJECT, THE ENVIRONMENT , THE COUNTRY AND THEIR OWN.21 | Brookfield Renewable Energy Group
    22. 22. THANK YOU Antonio Fonseca dos Santos Environment Land and Social Responsibility Director Brookfield Renewable Energy Group – Brazil antonio.fonseca@brookfieldenergia.com22 | Brookfield Renewable Energy Group

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