Harvest 4 Energy Fundamentals Dec 2014 EU

INTRODUCTION TO GLOBAL ENERGY BUSINESS

DECEMBER 2014

Presented by: Andy Varoshiotis BSc, MBA, IAFP, MSDT, EITCEnergy & Strategy Advisor - Licenced Investment Manager

Harvest 4 Energy LtdEnergy - Innovation - Strategy – New Technologies - Market Research - Global Investment Management

Exclusive Economic Zone Defense UAV Systems – Commercial & Technical Diving Services

New York -London - Nicosia - Athens -Tel Aviv – Hong Kong

PRIVATE & CONFIDENTIAL REPORT

Controlled Copy Number 211013V1,2Not for Public Domain – Removable Media Password Protected Competition SensitivePresentation 2

H4E (Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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(Global Energy Trends)

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Energy Market Components

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Energy Market Components

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Financial Marketsi.e. markets for claims on cash flows of a businessi.e. markets for debt and markets for equity

Why are Financial Markets particularly important for energy business?

significant share of costs are fixed (economies of scale) => energy business is capital intensiveenergy business is risky

Political Marketspolitical agents – make decisions that structure exchange among participants in real markets, financial marketsTaxesRegulationpermittingpolitical decisions are influenced through political marketsElectionsLobbyingcomments contributed during legislativedebate and regulatory rulemakingcourt cases

FUEL MIX

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FUEL MIX

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Energy | and Trends

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Energy | Trends

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Energy | Trends

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Typology of primary energy resources

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Typology of primary energy resources

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Energy resources Use

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Coal Production and Use

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Energy Suppliers

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Oil Producers

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Non Traditional Oil Producers

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Global Solar

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Global Wind

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Determinants of Supply

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• What motivates producers to supply a particular level of primary energy resources?

A: benefits and costs of production

- price

- costs

- labor, operating expenses, etc.

- weather disruptions

- technology

Supply: the Free Cash Flows

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value of operations = free cash flows available to financial claims holders (i.e. equity and debt)

• operating revenue

• - cost of good sold

• - other operating expenses

• - taxes

• - capital expenditures

• Free Cash Flows from Operations

Supply: the Free Cash Flows

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Equilibrium in energy markets

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• What determines a particular level of price and output for a particular good?

A1: what is a good?

a product (or service) of

- a particular quality

- at a particular place

- at a particular time

A2: market price is that which equates quantity demanded with quantity supplied

Equilibrium in energy markets

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• What determines the price of natural gas?

A1: what is ‘natural gas’? – need to be specific – e.g. if quoting ‘Henry Hub’ gas

• traded in 10,000 MMBtu increments, quoted in MMBtu’s

• a particular quality:

– energy content (BTU’s), typically determined via in-line GC

– also in-line measures to verify no H2S, little moisture

• at a particular place:

– Henry Hub = Sabine Pass Pipe Line LLC, near Erath, LA

• at a particular time:

– spot market

– futures contracts for various months, up to 10 yrs out

Wind POWER Generation and loss

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PV Generation loss

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PV Generation and Drawbacks

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Future Smart Grids

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We hope for a better and Brighter Future

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Contact Us

THANK YOU FOR YOUR ATTENTION

Harvest 4 Energy LtdP.O.Box 160 90

1907NicosiaCyprus

Mob: +357 - 99689961

Andy@harvestgroup.com.cyavaroshiotis@cyoilgas.org

THIS REPORT IS NOT TO BE PUBLISHED ON ANY PUBLIC DOMAIN

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