(D) Business Potential Analysis, full

SAMPLE

REPORT

BUSINESS POTENTIAL IN CHILE FOR

INDUSTRIAL BOILERS AND HEATERS

Index

Introduction

PART 1

p. 6

Current Situation and Trends in Energy and Environment in Chile,

highlighting its relationships with the segments and applications of interest

to CLIENT

1. Energy

1.1 Energy overview

a) Primary Energy

b) Secondary Energy

Disruptions on the gas supply from Argentine

1.3 Electrical generation and non-conventional sources

1.4 Perspectives

1.5 Learnings

2. Environmental restraints

2.1 Current regulations and perspectives

a) Overview

b) Legal Frame

c) Key Issues

2.2 Other issues of interest

2.3 Learnings

7

8

8

10

11

14

17

18

19

22

25

Availability in Chile for biomass, agricultural wastes, oil, gas and coal,

in quantitative and qualitative terms and for the short and medium

term

3. Fuels

3.1 Fuels sources

3.2 Current situation and trends regarding fuels use

3.3 Learnings

-Conclusions Part 1

26

27

27

33

46

48

PART 2

4 Market potential

4.1 Market size

a) Local manufacturing

b) Imports and exports

c) Current market size (2006)

-by broad end user segment

-by broad fuels types

-by broad tonnage range across the targeted end users segments

4.2 Industry Challenges, Market drivers and Restraints, Legislations

4.3 Future market potential for 2006-2010

a) Total

b) Particular case: Solid fuels fired boilers

4.4 Learnings

49

50

55

55

56

5 Competitive Analysis

5.1 Major Players

5.2 Product range offerings & technical collaborations

5.3 Fuel types in greater demand and eu segments going for the same

5.4 Revenues from the base year spread across critical eu segments

5.5 OEM’s

5.6 Revenues from the base year from exports /countries of destiny

5.7 Swot Analysis of leading manufacturers catering the broad eu segment

5.8 Key Competitive Factors

5.9 End User Segments Driving the Demand

a) Inside the Metropolitan Region

b) Outside the Metropolitan Region

5.10 Manufacturer’s views on the future

5.11 Possible markets in Chile

5.12 Learnings

58

59

60

61

62

63

63

64

65

65

69

69

69

6 Customer Mapping

-End Users:

6.1 Equipments in use

6.2 Satisfaction levels

6.3 Preference for domestic vs imported

6.4 Specific decision making criteria while selecting a supplier

-Epc Contractors:

6.5 Decision making

6.6 Buying from manufacturers vs distributors

6.7 Views on the technological aspects of the product

6.8 Procedure adopted with respect to procurement for the clients.

-Steam & Heat Services Providers:

6.9 Other important players: the Steam & Heat Services providers

6.10 Fuel & Steam Costs (10 real cases)

6.11 Learnings

7 Marketing Strategies Catering Market Segments

7.1 Demand Potential by end user segment

a) Inside the Metropolitan Region


7.2 Easy of Account Penetration

7.3 Competitive Position Should Client

a)Inside the Metropolitan Region


7.4 Pricing Strategy

7.5 Customer account /segments should Client target

a) In the long term

b) In the short term

7.6 Learnings

70

71

72

72

74

74

75

76

77

78

79

81

82

84

85

85

86

86

8 Conclusions & Recommendations

8.1 Business potential in Chile for Client’s industrial boilers

8.2 Recommendations on what to do and how to proceed

8.3 Potential Partners for Client to enter

Annexes to this report:

Chilean Imports

1.

2. List of Interviewed Companies

3.

4. Annexes (other):

5. Chile, Statistical Synthesis

6. Chilean Imports & Exports for Boilers 2002 - 2006

7. Inventory of Boilers at the Metropolitan Region & Great Concepcion

8.

87

88

89

90

93

100

INTRODUCTION

Chile’s gross domestic product (GDP)1 grew by 5.7% in 2005, 4.0% in 2006 and the

estimated values2 for 2007, 2008, 2009 and 2010 are 5.7%, 5.2%, 5.2% and 5.0%

respectivelly. There is more information about Chile’s main indicators in the Annexes.

The principal drivers of these growth rates are booming prices for Chile’s mineral

exports especially copper as state-owned copper mining firm Corporacion Nacional del

Cobre de Chile (CODELCO) is the world's largest copper producing company. But,

while copper and other minerals remain the mainstays of Chile’s exports, trade of other

non-traditional products such as agricultural and forestry products have also grown

considerably over the past two decades.

To support this growth, the country must import the bulk of its energy consumption as it

has limited domestic conventional energy resources. Chile's reliance on energy imports,

particularly on natural gas from Argentina, has not been without consequences.

In April 2004, Argentina began restricting natural gas exports to Chile, with cuts

reaching nearly 50 percent of contracted volumes on some days. Chile, in turn, began to

reconsider its energy policy, which, prior to the import restrictions, had assumed an

increased use of natural gas and power imports from Argentina.

In fact, Chile has begun to pursue other sources of natural gas, such as liquefied natural

gas (LNG), piped gas from other countries and also a fast development of NCRE.

Additionally several international commercial compromises as been assigned that

obligates Chile to apply severe environmental regulations to producers, in order to

accomplish clean production standards developed market expect from its providers.

All the above results in a complex situation for most Chilean industries as the strong

uncertainty in the natural gas supply press them to return to the use of oil or other more

contaminant fuels to produce heat and steam while new regulation punish them for this.

Currently most boilers have already been installed with dual-type burners prepared to

burn natural gas or the much more expensive Diesel oil, but this is not a comfortable

situation for the end users that look at the cheaper solid fuels coal and biomass hoping

for better solutions.

In synthesis the scenario in Chile is near ideal for a manufacturer like Client, capable to

offer solutions based on any fuel but specialy on solid fuels.

This report provides a significative amount of hard data and recommendations on how

to proceed to insert the company deeper in the market.

1 http://www.bcentral.cl/publicaciones/estadisticas/actividad-economica-gasto/pdf/CCNN2003-2006.pdf

2 http://www.bcentral.cl/estadisticas-economicas/series-indicadores/index_ee.htm

-CURRENT SITUATION AND TRENDS IN ENERGY AND ENVIRONMENT

IN CHILE, HIGHLIGHTING ITS RELATIONSHIPS WITH THE SEGMENTS

AND APPLICATIONS OF INTEREST TO CLIENT

1.-ENERGY

Schedule

1.1 Energy Overview

a) Primary Energy

b) Secondary Energy

1.2 Disruptions on the gas supply from Argentina


1.4 Perspectives

1.5 Learnings

______________________________________________________________________

1.1 Energy Overview

a) Primary Energy

Along the last ten years the Chilean primary energy consume increased at an annual

average rate of 4.5%. In 2005 the total primary energy consumed by the country was

286,049 Tcal. Crude oil representing a 39% (on energy base), Natural gas 27%,

Firewood and others (Firewood, vegetable coal, wood wastes and black liquor) 16%,

Coal 10% and Hydroelectricity 8%.

A 68% of the total primary energy consumed was imported (98% of Crude Oil, 73% of

Natural gas and 88% of Coal). Exports were null.

Primary energy balance Year 2005 (Tera-calories)

Gross National

Production

Imports

Var.

Stock + Loss Gross Consume

Energetic Tcal % Tcal % Tcal % Tcal %

Crude Oil 1,752 2 110,974 57 2,360 45 110,365 39

Natural Gas 21,428 22 58,667 30 1,782 34 78,313 27

Coal 3,536 4 26,027 13 795 15 28,768 10

Hydroelectricity 22,924 24 0 0 308 6 22,616 8

Firewood and others 45,988 48 0 0 0 0 45,988 16

TOTAL 95,627 100 195,667 100 5,245 100 286,049 100

Total. % 33.4% 68.4% 1.8 100%

Source: National Commission of Energy (CNE) Chile, “National Balance of Energy 2005”. October

2006. Equivalency: 860Kcal/KWh

Imports of primary energy increased from 48% in 1990 to 68% in 2005.

4854

69 67 66 6973

68

0

10

20

30

40

50

60

70

80

90

100

1990 1995 2000 2001 2002 2003 2004 2005

Year

Pri

mary

en

erg

y im

po

rted

, %

Evolution of percentage of Primary energy imported. 1990-2005

Source: “Statistics Energy Industry Chile: 1990-2004”; “National Balance of Energy

2004”; “National Balance of Energy 2005”. CNE Equivalency: 860Kcal/KWh

Historically, low domestic production of Natural gas constrained its consumption, only

constituting 8% of total energy consumption in 1996. A combination of increasing

energy demand, environmental concerns, and the unreliability of hydropower prompted

the Chilean government to re-consider its energy policy and encourage the use of

natural gas. To that end, Chile began large-scale imports of natural gas for the first time

in 1997; since then, the country’s natural gas consumption has increased by an average

of 21.7% per year, reaching 27% of total energy consumption in 2005.

Production and consume of natural gas, 1994-2004.

Source: Energy Information Administration USA: “International Energy Annual Country

Analysis Briefs, Chile”. Sept. 2006

b) Secondary Energy

Through energy conversion processes performed in transformation centers, the primary

energies are transformed to more convenient forms of energy called secondary energies.

Secondary Energy Balance, Year 2005 (Teracalories)

Energetic Gross Production

Imports Exports Var. Stock + loss

Consume Final

Consume Transf.

Centers

Consume

Total

Oil derivates 108,668 35,065 18,359 3,099 118,335 3,940 122,275

Electricity 45,136 1,851 0 3,904 43,083 0 43,083

Coal (*) 28,768 0 0 0 9,118 19,650 28,768

Coke 6,639 4,275 273 580 2,202 7,859 10,061

Tar (**) 207 0 0 37 170 0 170

Current Gas 1,322 0 0 19 1,303 0 1,303

Blast Furnace Gas 1,411 0 0 210 1,201 0 1,201

Natural Gas (*) 77,579 0 0 0 45,510 32,069 77,579

Methanol 16,394 0 15,637 757 0 0 0

Firewood & others 45,988 0 0 0 40,278 5,710 45,988

Biogas 0 0 0 0 0 0 0

TOTAL 332,113 41,191 34,270 8,606 261,199 69,228 330,427

(*) The Imports –Exports are considered in the Primary Energetic step.

(**) Tar for energetic use (produce in Steel industry)

Source: National Balance of Energy 2005, CNE

The total secondary energy consume in 2005 was 330,427 Tcal. The main ones were Oil

derivates, 37%; Natural gas, 24%; Firewood and others, 14% and Electricity, 13%.

TOTAL OIL

DERIVATIVES

37%

ELECTRICITY

13%COAL

9%

COK

3%

NATURAL GAS

24%

FIREWOOD

14%

Energetic consume as secondary energy, 2005.


The main economic sectors and consumers of energy are Transport (24%) and Industry

and Mining (24%).

Transport

24%

Ind. and Min.

24%Com.Púb.Res.

18%

Energetic

13%

Cent.deTransf.

21%

Percentage distribution of secondary energy by economic

sector, 2005 Note: Com.Púb.Res= Sector Commercial, Public and Residential.


1.2 Disruptions in gas supply from Argentine

In recent years, repeated disruptions in the supplies of natural gas from Argentina to

Chile have strained relations between the two countries. In 2004, Argentina underwent

an energy crisis, forcing it to cut natural gas exports to Chile. Since then, exports to

Chile have been fluctuating between 20-50 percent below contracted volumes, with

natural gas flows ceasing completely on some occasions. The import cuts have caused

shutdowns at power plants and methanol facilities, as well as forced consumers to

switch to costlier fuels. Along with the cuts in volumes, Argentina has also increased

natural gas prices: in July 2006, Argentina increased its natural gas export tax to 45%,

from 20 %. Chronic structural difficulties in Argentina’s natural gas sector could lead to

chronic supply problems in the future.


Chilean Government interest in the adoption of Non-Conventional Renewable Energies

NCRE (self commitment to achieve a NCRE 15% share of the whole demand increase

in 2010) is explained by the high dependence of electric generation on low reliable

availability non-hydric sources (natural gas) and /or higher costs (Diesel Oil).

From the total installed electricity generating capacity of 12.3 TW, the Hydro sources

represent a 39% and Thermal represents a 61%. The contribution of conventional

thermal sources grew rapidly since the start of natural gas imports from Argentina in the

late 1990s.

Hydroelectricity

39.43%Coal

17.91%

Gas natural/Diesel

29.22%

Natural gas

8.11%Fuel oil

3.90%

Eolic

0.02%Biomass

1.40%

Energetic used in electrical generation. 2005


The country has four separate electric systems:

The Central Interconected System (SIC) (Sistema Interconectado Central), which

serves the central part of the country.

The Norte Grande Interconected System (SING) (Sistema Interconectado del Norte

Grande), which serves the desert mining regions in the north; and

The Aysen and Magallanes Systems (Aysen and Magallanes systems), which serve

small areas of the extreme southern part of the country.

Unlike the SIC, the large majority of the electricity supply of the SING comes from

thermal sources, chiefly imported natural gas from Argentina. In the SIC, conventional

thermal sources constitute about half of the total electricity supply, while in the SING

they constitute almost all of the supply.

Installed Capacity of Electrical Generation, by system

Total Capacity: 12,326 MW. 2006. Source: CNE

All the above explains why many of the proposed gas-fired power projects shall also

have the ability to run on fuel oil or diesel. Also why coal-fired power plants have

begun to receive renewed attention (Chile has two existing coal-fired facilities) and

why, in the longer term, it is expected liquid natural gas (LNG) provide the country with

fresh source for electricity generation.

SING (29.2%)

SIC (70 %)

Magallanes (0.52%)

Aysen (0.27%)

3,596 MW

(99.6% Thermal;

0.04% Hydroelectric)

8,632 MW

(45% Thermal;

55% Hydroelectric)

33.5 MW

(41% Thermal;

53% Hydroelectric;

6% Eolic)

64.7 MW

(100% Thermal)

With regards to the use of Eolic plants, the System of Aysen (Southern) has one Eolic

plant in the center Alto Baguales, of the company EDELAYSEN S.A. that generates

1.98 MW in 2006 (0.02% of the total electrical energy system).

With regards to Biomass: According to official data from CNE, there are 9 generation

plants delivering Biomass electricity in the SIC. The process with forestal waste as fuel

generated 103.9MW and black liquor (lignite, a sub-product of cellulose industry) 73

MW. Comments from Industry sources state that the additional biomass capacity could

amount to 225 MW in 2007.

Center that use biomass as fuel, for electric generation. 2006

Name Center Owner Year in

process

Turbine type Nº

units

TOTAL

MW

Laja E. Verde S.A. 1995 Steam-forestall waste 1 8.7

Constitución E. Verde S.A. 1995 Steam-forestall waste 1 8.7

Cholguán Arauco Generacion S.A. 2003 Steam-forestall waste 1 9.0

Valdivia Arauco Generacion S.A. 2004 Steam-forestall waste 1 61.0

Licantén Arauco Generacion S.A. 2004 Steam-forestall waste 1 5.5

Nueva Aldea I Arauco Generacion S.A. 2005 Steam-forestall waste 1 13.0

Arauco Arauco Generacion S.A. 1996 Steam-black liquor 5 33.0

Celco Arauco Generacion S.A. 1996 Steam-black liquor 2 20.0

Nueva Aldea III CENELCA 2006 Steam-black liquor 1 20.0

TOTAL 176.9

Source: Statistics-Electrical installs capacity-CNE. 2006

Other strong factor influencing the development of NCRE’s is naturally the increase of

imported fuel prices. As for example, between the years 2003 and 2005 imports of

crude oil went from USD2.125 to USD3.779 millions with an average 77.7% price

increase; Diesel imports went from USD 187 to USD 910 millions where price affected

in 88.8% and Thermal Coal imports went from USD 38 to USD 181 millions with an

average 69.8% price increase.

CIF Prices variation of some fuels between 2003-2005 years.

Quantity Value CIF (USD millions) % Variation

on CIF price

2003 2005 2003 2005 2005 to 2003

Crude Oil (millions

barrels)

74.5 74.6 2,125 3,777 77.7

Diesel (thousands m3) 756 1,948 187 910 88.8

Liquid gas (thousands

Ton)

519 629 157 301 58.9

Gas Oil (thousands m3) 672 829 160 346 75.0

Thermal Coal (thousands

Ton)

1,937 2,531 67 181 69.8*

Metallurgycal Coal

(thousands Ton)

710.3 820.8 38 82 84.2

Total 2,734 5,597

Source: “Energetic situation faced by Chile”, by Jorge Rodríguez G. Dean of the Economy end Business

Faculty of Alberto Hurtado University, Santiago November 2006. * Our calculus on the % Variation on

CIF unitary price for Thermal Coal results in a 106.7% of growth.

Projections of the Demand of Electrical Energy

The following table shows the CNE projections of demand for the SIC and SING

systems until the year 2009. The total increase in demand in 2009 year (1,020 MW)

should be composed among other sources by a 15% corresponding to NCRE which

amounts to 150MW. In a recent Wokshop about Science Earth, a value of 320 MW was

estimated for the additional requeriments of NCRE for 2010 year. (Source: “Energetic

source and sustainable development: Ecologic Consequences”. Chilean Academy of

Science: Workshop “Present Situation of Science Earth in Chile: Energy and Fuel to

sustainable development in the country”. Santiago, October 2006)

Estimated rate growth of install capacity of SIC and SING systems.

SIC SING SIC+SING

Year Growth, % MW Growth, % MW Total increment,

MW

2005 (actual values) 8,288 3,596

2006 7.1 8,877 8.4 3,898 890.52

2007 7.7 9,560 5.6 4,116 901.79

2008 8.1 10,335 5.2 4,330 988.42

2009 7.7 11,130 5.2 4,555 1,020.94

Source: CNE (National Comission of Energy).

If the Industry projections, concerning the feasibility of 225 MW Biomass Generation

Capacity in the year 2007, become true then the goal of the Chilean Government could

be achieved easily. This could encourage other industries to increase the use of biomass

in the production of heat and steam.

1.4 Perspectives

The Global Context:

It seems methodologically convenient to review what is being done by the developed

countries to approach the problems of the increase of oil price, energetic dependence

and pollution, ever since those practices will eventually become local practices in Chile

adopted both by the Government and Industrial operators.

-High prices of Oil lead to its substitution by Coal, Natural Gas or NCRE. The

projections made by the USA Ministry of energy make that assumption in their

estimates for the increased share of coal, natural gas and renewable sources including

water (from 56% in 2003 to 62% in 2030) in the matrix of the world energetic balance

and as a counterpart, the relative weight of oil will tend to decrease from 39% in 2003 to

33% in 2030.

-In the the search of strategic independence, the American government has provided

considerable amounts of resource to promote the development of oil and natural gas

saving technologies and those using some other kind of fuels.

The USA initiative funded USD 2.1 billions in 2007 for this ends.

These kinds of initiatives are also being implemented in Europe, Japan and China. The

inversion in NCRE amounts to 25% of the total of investment in the energy sector in

2005 (30,000 USD millions).

The next table, The Renewable Power Capacities in EU, shows Top 5 countries, and

Development Word, 2004. In USA the power capacity based in Biomass was

approximately 8 GW (from the graphic of Fig. 2.11). Compare this value with the 176.9

MW generated by biomass in Chile.

Renewable Power Capacities in EU- Top 5 countries, and Development Word, 2004.

Source: “Energetic source and sustainable development: Ecologic Consequences”

Chilean Academy of Science: Workshop “Present Situation of Science Earth in Chile: Energy and Fuel to

sustainable development in the country”. Santiago, October 2006

b) Support Programs to Renewables Energies use.

The inestability in the supply of Natural Gas form Argentina has lead the Chilean

Government to promote a Sustainable Energy Security Plan and the need for a saving of

energy led it to promote a Country Energetic Efficiency Program.

Sustainable Energy Security Plan

This Plan is mainly based on:

-Boost development of new generation sources, both traditional and non-traditional.

-Create a framework for the energetic interchange among countries of the region.

- Ease clerical procedures environmental impact studies without affecting

environmental requirements

-The assurance of the compatibility of new coal thermal generation plants consistent

with environmental policies

-Instruments leading to a 15% increase share of the electric generation in the year 2010

come from NCRE.

-National plan implementation for the use of efficient energy (Country Program for

Energetic Efficiency). See details in the following paragraph.

Government Policies to support the attainability oft these goals in the NCRE real are:

i) Small Sized Energy Projects based on renewable sources.

Grants for studies pre-investment studies or specialized consultory during the stage of

pre-investment for projects related to NCRE.

Co-Funding up to 50% of the total cost of the study or consultory activity

The amount to be subsidied will be up to 2% of the estimated total value of the project

investment with a maximum of $US 60,000 per project. So far, 3 calls for propposals

have been done.

ii) Innova Chile – Public Interest Innovation – National 2007

Funding channels to support projects aimed to improve conditions of markets and

contexts for the innovation and technological development. The results of these

initiatives must have high impact and involves significant work in research and

development.

Companies and institutions must provide 20% of the value of the project. Innvova

Chile provides 80% of the money with no return. Typically bids are USD 1 million.

Country Energy Efficiency Program

As during the last ten years the Chilean primary energy consume increased at an annual

average rate of 4.5% while GDP of the country grew at a 3.6% per year in average, the

Government started in 2005 the design a energetic efficiency program

(/www.programapaiseficienciaenergetica.cl/). The estimated impact of the Energy

Efficiency Program is an annual 1.5% of consume decrease.

To achieve these goals, besides the finnancial instruments already mentioned above,

CORFO (Corporación de Fomento), the National Institution for Industrial Promotion,

sponsors the Energetic Efficiency Pre-Investment Program which allows companies to

hire a consultant to do all or some of the following tasks:

-Energetic Efficiency Audits.

-Implementation plans for the energetic efficiency measures.

-Formal Formulation of the Investment Project to be presented before a finnancing

source. Corfo funds 70% of the total cost of the consultancy with a maximun of USD

10,000.

1.5 Learnings

a) Chile has limited domestic energy resources and relies on imports (68% of total

primary energy consumption) to meet its rapidly growing energy demand, driven

by its economic development.

b) In terms of primary energy consumption, the share per energetic is: Crude oil,

39%; Natural gas, 27%; Firewood, vegetable coal, wood wastes and black liquor,

16%; Coal, 10%; and Hydroelectricity, 8%.

c) In terms of secondary energy consumption, the share per energic is: Oil

derivates, 37%; Natural gas, 24%; Firewood and others, 14%; Electricity, 13%;

Coal, 9%; and Coke, 3%.

d) Most of Chile’s electricity supplies come from Hydroelectricity, 39.4%; Diesel,

29.2%; Coal, 17.9%; Natural gas, 8.1%; Fuel oil, 3.9%; Biomass, 1.4%; and Eolic,

0.02%.

e) For almost all of its natural gas needs the country depends upon imports and the

repeated disruptions in the supply from Argentina and the increase of its price,

drove local operators to look for substitutes.

f) The Chilean Government is committed to achieve a 15% of the whole increment

of the energetic demand by the year 2010 be supplied by NCRE through the

execution of a plan to develop these resources.

g) Also, for security reasons, environmental sustainability and energetic

efficiency, the Chilean Government has commited itself to achieve an annual

1.5% of energy saving in the medium and long term.

6. CUSTOMER MAPPING

Schedule

-End Users:

6.1 Equipments in use

6.2 Satisfaction levels

6.3 Preference for domestic vs imported

6.4 Specific decision making criteria while selecting a supplier

-Epc Contractors:

6.5 Decision making

6.6 Buying from manufacturers vs distributors

6.7 Views on the technological aspects of the product

6.8 Procedure adopted with respect to procurement for the clients.

-Steam & Heat Services Providers:


6.10 Fuels and Steam Costs (10 real cases)

6.11 Learnings

______________________________________________________________________

6.1 Equipments in use: Thermal Oil Heaters&Industrial Boilers /brands,

capacities, type of equipment, fuel type, year of installation, etc.

In Chile there are two powerful data sources to understand on a per company basis the

current situation of these equipments: The inventories of pollution emission sources

managed by the sanitary authorities from each Region and the imports and exports

registers availables from the local Customs.

Inventories of emission sources show variables like Company name and location; Boiler

registry number, year of fabrication, operative status, maker, fuel and cubic meter of gas

per hour delivered, and additional complementary analytic columns with Industry of

pertinence of the every company and classification with respect to target Size range

have been inserted. Along this research, the two of more important inventories for this

project were found: Metropolitan Region and the VIII Region. Following tables show

synthetically their profiles:

In Out Total

Out, disabled - - 821

Currently Inactive - - 1,188

Currently Operative 561 2,212 2,773

Total 561 2,212 4,782

Source: Sanitary Authority from the Metropolitan Region

PROFILE OF RM BOILERS DATABASE

Equipment status:

Target size range

In Out Total

Currently Operative 106 28 134

Total 106 28 134

Source: Sanitary Authority from the VIII Region

PROFILE OF GREAT CONCEPCION BOILERS DATABASE

(operative units only)

Equipment status:

Target size range

And imports and exports registers show variables like: Importer (exporter) name and tax

code; Boiler maker, values in USD Fob and USD Cif, freight and insurance costs, net

weight in kilograms, country of origin (destiny), etc; also in this case additional

complementary analytic columns with Industry of pertenence of the every company and

classification with respect to target Size range between others have been inserted

Because the extension of these databases it is not possible to insert it here in complete

appart from the tables this report already presents and it is strongly suggested to consult

the Excel files in Annex for valuable informations. In the case of imports database, it

can be consulted also the Annex in Word corresponding to an actualization of advance

report-chapter four.

6.2 Satisfaction levels: With respect to equipments performance and the service aspects

The performance of actual equipments is not a matter of preoccupation for the Chilean

end users today. In part this is probably related with the huge fuel provision problem

they are daily facing because the shortage in Argentine natural gas.

Also the pre and post sales services are not specialy complex issues for the Chilean end

users. In part this could be associated with the fact that companies directly perform the

boilers maintenance through internal teams (except in case of bigger interventions like

burner changing).

Sugar Bever. Foods Dairy Noodles Candy Meats Fruits Chem. Oils Textile Metall. Wood Rubber Paper

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Problems with current equipment /s? 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0% Rest (97%) is satisfyed with current equipment

Problems with current service quality? 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0% Rest (97%) is satisfyed with current services

1 = Yes

0 = No

SATISFACTION OF CHILEAN END USERS END USERS

sample of leading companies

Sample

Foods Non foods

Comments:

%

o

f

c

a

s

e

s

Source: A.Valladares & Asociados, based on set of Interviews performed

6.3 Preference for domestic vs imported brands & specific brand /company

preferences

Local boilers manufacturers are preferred providers for just a 13% of leading end users

in the table from below.


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Preference for local

provider?0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 13%

Preference for local providers is low and out-of -

the-record comments dealt with the notorious

differences existing

1 = Yes

0 = No

PREFERENCES OF CHILEAN END USERS S


Sample

Foods Non foods

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Consistently Chilean companies qualify the importance of providers’s country of origin

with just a Somewhat Important and link this relative importance to the fact that some

names of countries are more associated to good manufacturing than others.


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Supplier’s country of origin 5 6 6 7 3 7 4 5 4 5 6 5 5 6 6 6 5 2 3 5,3 5.3

Somewhat Important. The country of origin has certain

importance principally as an indirect reference for quality,

because countries like USA and Germany for example are

associated with good manufacturing.

Location of Supplier’s

manufacturing plant2 5 6 7 2 6 4 4 4 5 1 2 7 2 1 4 3 4 3 3,9 3.8 Neither important nor unimportant.

Qualifications:

1 Least important 2 Unimportant 3 Somewhat Important 4 Neither Important nor Unimportant 5 Somewhat Important 6 Important 7 Very Important

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PREFERENCES OF CHILEAN END USERS RS

Qualifications given to factors by a sample of leading companies al

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6.4 Specific decision making criteria while selecting the supplier

By far the more important factors Chilean end user consider to build decision regarding

providers of boilers are compliance to pollution and safety norms as well as guarantee

/warranty terms. And, on the contrary, the location of supplier’s manufacturing plant is

the less important issue for them.


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Compliance to pollution and

safety norms7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7.0 Very important, specially in the Metropolitan Region.

Guarantee /Warranty terms 7 6 6 6 7 7 7 7 7 7 7 6 6 7 7 6.7 Very important, in special for a new player in Chile.

Use of branded components in

the equipment6 6 7 6 7 6 7 7 5 7 7 6 6 6 7 6.4

Important, as for example valves and control systems are

evaluated as key components.

Quality certifications of Supplier 7 6 7 6 6 7 6 6 7 7 4 7 7 7 4 6.3Important, but all suppliers actually would present similar

quality certifications.

Deviations to technical

specifications6 4 7 6 6 6 6 6 7 6 6 6 6 6 6 6.0 Important.

After-sales network 7 6 6 7 6 7 7 5 5 1 7 7 6 6 7 6.0Important. It can even be outside the country, but spare parts

and components shall be provided very fastly

Standarisation 6 6 4 6 5 5 6 5 5 7 5 6 6 7 5.6 Important.

Supplier’s country of origin 5 6 6 7 3 7 4 5 4 5 6 5 5 6 6 5.3

Somewhat Important. The country of origin has certain

importance principally as an indirect reference for quality,

because countries like USA and Germany for example are

associated with good manufacturing.

Reference installations within the

country4 6 6 7 7 4 5 6 5 7 1 7 6 2 1 4.9 Somewhat important.

Pre-sales service 4 5 6 6 6 7 6 5 6 1 4 7 6 4 4 5.1 Somewhat important.

Reference inst. within the country

& in the same industry4 3 5 7 5 6 4 6 3 7 1 7 7 2 1 4.5 Somewhat important.

Location of Supplier’s

manufacturing plant2 5 6 7 2 6 4 4 4 5 1 2 7 2 1 3.9 Neither important nor unimportant.

Qualifications:

1 Least important 2 Unimportant 3 Somewhat Important 4 Neither Important nor Unimportant 5 Somewhat Imp. 6 Important 7 Very Important

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IMPORTANCE CHILEAN END USER GIVE TO A SET OF BUYING FACTORS S

Qualifications given to factors by a sample of leading companies al

Sample

Foods Non foods

Comments:


6.5 Decision making: Who decides on the type of equipment viz Thermal Oil Heaters

as well as Industrial Boilers to be installed at the site or is it the client?

EPC Contractors as well as all end users reported that in the case of Chile is the end

user who makes the decisions regarding boilers acquisitions. Main reason is most

Chilean EPC Contractors are rather small and avoid become involved in finantial

operations that could even compromise their business stability.

6.6 Buying: From manufacturers or distributors

In Chile the buying is performed directly with the manufacturer as when boilers are

locally manufactured the distributors don’t participate at all and according the table

from below in the period 2002 - 2006 the buying of imported boilers was performed in

an 89% of the total value by end users dealing directly with the manufacturers from

overseas -distributors explaining just a 7% of the total figure.

End User Distributor Packager Manufacturer Steam & Heat

Services

Other & not

ident.

Total %

GERMANY 5.265.040 8.376 15.502 5.752 5.294.670 24%

BRAZIL 4.820.678 374.696 89.247 5.284.621 23%

U.S.A. 3.388.133 794.978 111.345 4.294.455 19%

ITALY 1.574.663 376.567 92.573 12.836 2.056.638 9%

SPAIN 1.849.990 9.934 196.377 2.056.300 9%

ARGENTINA 858.075 102.873 10.000 11.778 982.725 4%

FRANCE 751.348 751.348 3%

DENMARK 535.915 535.915 2%

URUGUAY 402.700 402.700 2%

CANADA 239.773 30.683 270.456 1%

NEW ZEALAND 180.703 180.703 1%

SOUTH KOREA 95.479 63.379 158.859 1%

NORWEG 126.028 126.028 1%

MEXICO 58.000 58.000 0%

BELGIUM 22.277 22.277 0%

TAIWAN 20.000 20.000 0%

PERU 11.000 11.000 0%

NETHERLAND 3.017 3.017 0%

Total 20.053.774 1.667.423 417.995 15.502 10.000 345.019 22.509.713 100%

89% 7% 2% 0% 0% 2% 100%

CHILEAN IMPORTS OF BOILERS - PER COUNTRY OF ORIGIN OF ORIGIN

Fob USD

Country of origin:

Main activity of the importer

Source: A.Valladares & Asociados, based on Customs data

6.7 Views on the technological aspects of the products.

According the expressions from EPC Contractors, End users that leads industrial areas

as for example the Wood, paper & cellulose and the Agroindustry & food processing

industries, tend to use top technology units from world players like Cleaver Brooks and

Loos.

And when they look for solids fired equipments in the neighborhood, go for brasilian

specialist like Biochamm and Engecass. Import data in the table from below confirms

the above.

Year: 2002 2003 2004 2005 2006 Total %

CLEAVER BROOKS 203.345 909.700 537.415 745.240 2.395.700 11%

BIOCHAMM 1.885.547 325.490 2.211.037 10%

ENGECASS 374.696 253.928 1.374.867 2.003.492 9%

IBAIONDO 1.481.795 1.481.795 7%

VAPORITA 995.663 995.663 4%

BREMER 994.170 994.170 4%

LOOS 408.316 30.193 251.223 689.732 3%

BURTON MECHANICAL 633.145 633.145 3%

COMPTE 582.614 582.614 3%

HAARSLEV 505.722 505.722 2%

GEA 481.915 481.915 2%

BROACH 468.310 468.310 2%

SALCOR S.A.C.E.I. 10.000 399.512 409.512 2%

TURBOFLOW 402.700 402.700 2%

Ferrostaal (packager) 3.794.989 3.794.989 17%

T. MAIN PROVIDERS 1.695.139 6.214.779 1.571.945 4.966.889 3.601.743 18.050.495 80%

OTHER 350.589 1.149.255 1.397.076 644.199 918.100 4.459.218 20%

TOTAL 2.045.728 7.364.034 2.969.020 5.611.088 4.519.843 22.509.713 100%

CHILEAN IMPORTS OF BOILERS - PER SIZE RANGE

Fob USD

Source: A.Valladares & Asociados, based on Customs data

On the other side, according comments received from some end users and also from

local Steam & Heat Services providers, there are companies that make firstly all efforts

to locate cheap used boilers able to be refurbished. However, the same comments

establish that there is a growing shortage of these used boilers.

6.8 Procedure adopted with respect to procurement

It is very clear from the table from below that Chilean end users prefer to have a solid

influence over the procurement process and in a 93% of cases specify and buy by

themselves directly.


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Company directly specify and buys 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 93% Most used mode of procurement

EPC Contractor specify & comp. buys 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 7%

EPC Contractor did all, but civil work 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0%

EPC Contractor did all, incl civil work 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0%

EPC Contractor did all, Bot/Boot basis 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0%

1 = Yes

0 = No

BUYING PROCEDURES OF CHILEAN END USERS END USERS


Option

that best describes the mode of

procurement of boilers:

Foods Non foods

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Along the research, the following Steam & Heat Service companies were revealed as

relevant to this project:

Comercial Catamutun S.A. (www.catamutun.cl) that -appart from the above

mentioned services- imports and distributes coal. Also forms part of the Catamutun

Group that is now looking for ways to diversify from its original coal focus;

Vapores Industriales Ltda. (www.vaporesindustriales.cl) a family owned medium-

sized enterprise than operates togheter with Arrimac Ltda another company focused on

boiler rental from the same family;

Conade S.A., now Dalkia-Chile (www.dalkia.cl) that forms part of the Steam & Heat

Services French specialist Dalkia Group, and

Energía Verde S.A. (www.energiaverde.cl) that forms part of world player in energy

AES Gener Corp.

There is more information about these four companies on their web sites and in the

chapter 8 of this report.

http://www.catamutun.cl/

http://www.vaporesindustriales.cl/

http://www.dalkia.cl/

http://www.energiaverde.cl/

6.10 Fuels & Steam costs (10 real cases)

Most persons interviewed were necessarily from the technical area as for example Chief

Maintenance and in general refused to become involved in the delivery of company cost

data going furter than,as for example, qualitative expressions like “cost of fuels doulble

when changing from natural gas to diesel oil”.

Fortunately, an additional desk research permited to locate the following informations

about the current situation on fuels and steam costs in Chile.

Fuels costs:

By taking as a reference the fuels costs in USD/MMBTU from March 2007, the table

from below shows that when Chilean companies must change from Natural Gas to

Diesel oil, an increase of 70% in the fuel costs occurs. Same comparison performed

with prices from November 2006 shows the total jump in costs was of almost a 500%.

But when Chilean companies are able to change to solid fuels (Wood; Coal), their fuel

cost can diminish in around a 50%. This explains the interest in Chile for solid fuels.

Between the solid fuels, forest wastes are perceived as a fuel actually or potentially

controlled by the hugest companies from the Wood, paper and cellulose industry, while

agricultural wastes are considered as fuels requiring a complex logistic and involving a

risky dependence from small and unstable agricultural wastes producers. Coal, on the

contrary, is perceived as a very available fuel from overseas and this explains the

renewed interest in Chile for this material.


UNIT $/UNIT

Electricity Kwh 52,00 24,91 286

Diesel Lt 303,30 14,75 170 12,10 484

Liquified Gas Lt 179,39 13,70 157 4,50 180

Fuel Oil Nº 5 Kg 199,60 9,07 104

Natural Gas m3 176,61 8,70 100 2,50 100

Fuel Oil Nº 6 Kg 162,90 7,51 86

Wood Kg 45,00 4,99 57 2,40 96

Coal Kg 58,30 3,70 43 3,15 126

(1) Source: Dalkia Chile, March 07 2007

(2) Source: Energia Verde, November 14 2006

USD/MMBTU USD/MMBTTU

March 2007 (1) November 2006 (2)

FUEL

COST OF FUELS IN CHILE

6.10 Fuels & Steam costs (10 real cases)

Steam costs (10 real cases):

As the table from below shows, average steam cost for ten Dalkia centers in Chile using

diesel oil was 12,32 USD/m3 in 2005. It is interesting to note these Chilean companies

decided to pay Dalkia a Margin of 32.63% (48.5% mark-up); in other words, an average

price of 18.29USD/m3.

As since then the diesel cost has experienced important changes, the figures in the table

from belo shall be taken as an approximation to current situation.

Source: DALKIA CHILE – Presentation in a Seminar on Energy Efficience at Santiago

Loncoche Mar

Profundo

El Paico Cultivos

Marinos

Agro

Super

Chilem

pack

Frutos del

Maipo

Metso Indarroz Viña

Santa

Rita

Total

OPERATION

Fuel: Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil

Fuel consumption, lt 846.020 424.995 224.700 219.070 171.190 177.270 126.035 92.035 80.296 42.218 2.403.829 240.383

Steam production, m3 36.846 6.866 4.145 3.008 2.907 2.472 1.958 1.371 1.181 601 61.355 6.135

Fuel /steam, lt/m3 23,0 61,9 54,2 72,8 58,9 71,7 64,4 67,1 68,0 70,2 39,2

SALES, USD (1)

Variable 267.341 154.432 149.355 127.874 73.722 57.411 67.304 61.098 30.662 30.352 1.019.552 101.955 91%

Fix 14.171 7.801 7.880 12.804 11.671 5.017 9.827 7.880 12.898 10.779 100.726 10.073 9%

Other 0 0 581 0 226 0 0 0 0 1.038 1.845 184 0%

Total 281.513 162.233 157.815 140.678 85.619 62.428 77.131 68.978 43.560 42.169 1.122.123 112.212 100%

EXPENSES, USD (1)

Fuel, diesel oil 209.404 107.277 66.818 58.892 43.876 26.711 32.184 19.361 21.033 15.867 601.422 60.142 80%

Personnel 11.336 7.897 14.657 12.276 10.170 6.836 9.138 12.648 11.694 11.485 108.136 10.814 14%

Other 5.082 4.472 14.051 1.943 4.796 3.684 3.123 3.249 1.956 4.110 46.466 4.647 6%

Electricity 0 0 0 0 0 0 0 0 0 0 0 0

Maintenance 384 460 8.215 196 1.670 2.520 1.360 1.906 465 1.052 18.228 1.823 2%

Water treatment 3.939 2.650 3.706 1.208 928 76 699 134 207 2.153 15.699 1.570 2%

Others 494 540 1.052 449 2.033 913 652 1.044 494 631 8.302 830 1%

Leasing 0 0 948 0 0 82 241 0 601 173 2.045 205 0%

Communications 100 128 95 89 124 75 133 123 171 71 1.110 111 0%

Assessment 0 0 0 0 0 0 0 0 0 0 0 0 0%

Insurances 0 694 36 0 41 18 38 41 18 31 916 92 0%

Others 166 0 0 0 0 0 0 0 0 0 166 17 0%

Total 225.822 119.647 95.527 73.111 58.841 37.231 44.444 35.258 34.683 31.462 756.024 75.602 100%

MARGIN, USD (1)

Total 55.691 42.586 62.289 67.567 26.778 25.197 32.687 33.719 8.877 10.708 366.099 36.610

Steam price, USD/m3 7,64 23,63 38,07 46,77 29,45 25,25 39,39 50,31 36,88 70,17 18,29

Diesel unit. price, USD/lt 0,25 0,25 0,30 0,27 0,26 0,15 0,26 0,21 0,26 0,38 0,25

Steam cost-fuel, USD/m3 5,68 15,63 16,12 19,58 15,09 10,81 16,44 14,12 17,81 26,40 9,80 80%

Steam cost-total, USD/m3 6,13 17,43 23,05 24,31 20,24 15,06 22,70 25,72 29,37 52,35 12,32 100%

Profit /sales 19,78% 26,25% 39,47% 48,03% 31,28% 40,36% 42,38% 48,88% 20,38% 25,39% 32,63%

(1)Exchange rate, Ch$/USD : 525

COST PROFILE OF DALKIA STEAM CENTERS IN 10 CHILEAN COMPANIES

Data from each company correspond to 2 months of operation in 2005

Average

Source: DALKIA CHILE – Presentation in a Seminar on Energy Efficience at Santiago

Loncoche Mar

Profundo

El Paico Cultivos

Marinos

Agro

Super

Chilem

pack

Frutos del

Maipo

Metso Indarroz Viña

Santa

Rita

Total

OPERATION

Fuel: Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil Diesel oil

Fuel consumption, lt 846.020 424.995 224.700 219.070 171.190 177.270 126.035 92.035 80.296 42.218 2.403.829 240.383

Steam production, m3 36.846 6.866 4.145 3.008 2.907 2.472 1.958 1.371 1.181 601 61.355 6.135

Fuel /steam, lt/m3 23,0 61,9 54,2 72,8 58,9 71,7 64,4 67,1 68,0 70,2 39,2

SALES, USD (1)

Variable 267.341 154.432 149.355 127.874 73.722 57.411 67.304 61.098 30.662 30.352 1.019.552 101.955 91%

Fix 14.171 7.801 7.880 12.804 11.671 5.017 9.827 7.880 12.898 10.779 100.726 10.073 9%

Other 0 0 581 0 226 0 0 0 0 1.038 1.845 184 0%

Total 281.513 162.233 157.815 140.678 85.619 62.428 77.131 68.978 43.560 42.169 1.122.123 112.212 100%

EXPENSES, USD (1)

Fuel, diesel oil 209.404 107.277 66.818 58.892 43.876 26.711 32.184 19.361 21.033 15.867 601.422 60.142 80%

Personnel 11.336 7.897 14.657 12.276 10.170 6.836 9.138 12.648 11.694 11.485 108.136 10.814 14%

Other 5.082 4.472 14.051 1.943 4.796 3.684 3.123 3.249 1.956 4.110 46.466 4.647 6%

Electricity 0 0 0 0 0 0 0 0 0 0 0 0

Maintenance 384 460 8.215 196 1.670 2.520 1.360 1.906 465 1.052 18.228 1.823 2%

Water treatment 3.939 2.650 3.706 1.208 928 76 699 134 207 2.153 15.699 1.570 2%

Others 494 540 1.052 449 2.033 913 652 1.044 494 631 8.302 830 1%

Leasing 0 0 948 0 0 82 241 0 601 173 2.045 205 0%

Communications 100 128 95 89 124 75 133 123 171 71 1.110 111 0%

Assessment 0 0 0 0 0 0 0 0 0 0 0 0 0%

Insurances 0 694 36 0 41 18 38 41 18 31 916 92 0%

Others 166 0 0 0 0 0 0 0 0 0 166 17 0%

Total 225.822 119.647 95.527 73.111 58.841 37.231 44.444 35.258 34.683 31.462 756.024 75.602 100%

MARGIN, USD (1)

Total 55.691 42.586 62.289 67.567 26.778 25.197 32.687 33.719 8.877 10.708 366.099 36.610

Steam price, USD/m3 7,64 23,63 38,07 46,77 29,45 25,25 39,39 50,31 36,88 70,17 18,29

Diesel unit. price, USD/lt 0,25 0,25 0,30 0,27 0,26 0,15 0,26 0,21 0,26 0,38 0,25

Steam cost-fuel, USD/m3 5,68 15,63 16,12 19,58 15,09 10,81 16,44 14,12 17,81 26,40 9,80 80%

Steam cost-total, USD/m3 6,13 17,43 23,05 24,31 20,24 15,06 22,70 25,72 29,37 52,35 12,32 100%

Profit /sales 19,78% 26,25% 39,47% 48,03% 31,28% 40,36% 42,38% 48,88% 20,38% 25,39% 32,63%

(1)Exchange rate, Ch$/USD : 525

COST PROFILE OF DALKIA STEAM CENTERS IN 10 CHILEAN COMPANIES

Data from each company correspond to 2 months of operation in 2005

Average

8. CONCLUSIONES & RECOMMENDATIONS

Schedule

8.1 Business potential in Chile for Client’s industrial boilers


8.3 Potential Partners for Client to enter

______________________________________________________________________

8.1 Business potential in chile for Client’s industrial boilers

It was estimated that the Chilean market size in 2006 (base year) was USD 8.2Million

and 52 boilers and that will grow up to USD 13.7Million in 5 years (2011) including

USD 5.15Million in solid fired boilers.

Thermal oil based equipments, that had an almost negligible share in 2006, will

probably remain similar along the period as there are no signals of any inminent change;

Pyrotubular units, that in 2006 had a 13% of market share, shows a trend to grow and

they could represent in 2011 for example a 20% the rest corresponding to acuotubular

(60%) and mix systems (20%) and geographically the Metropolitan Region, that has

been representing around a 50% of total local markets for a lot of years, will probably

still represent approximately the same portion on the market in 5 years more..

Potential buyers will come principally from the driving sectors Wood, paper & cellulose

and Agroindustry & food processing.

Most boilers already have dual diesel-natural gas burners but solid fired boilers in 2011

will represent around a 40% of total market size in USD, so there is a solid potentiality

around this speciality. In this segment the main competition will come from Brasil but

also local manufacturers will be fighting on it.

And between solid fuels, coal will be receiving special attention from most end users all

the time of interest as the first liquefied gas plant will be operative only around the end

of the period while boimass from agriculture will suffer the lack of an industry

developed around the concept but end users that already produce wastes shall be targets

all the time.


The following table shows a brief synthesis of the suggested strategy for Chile.

1. Targets:

2. Products:

3. Prices:

MARKETING STRATEGIES CATERING POSSIBLE MARKET FOR INDUSTRIAL BOILERS IN THE TONNAGE RANGE UNDER STUDY

Inside the Metropolitan Region

Follow the suggested pricing strategy and price references provided.

Outside the Metropolitan Region

To give priority to leading companies from the Agroindustry & food

processing and Wood, paper & cellulose segments, located between

regions VI and X principally.

Same coment from the left regarding a tech differential is valid outside the

MR.Otherwise, both solid and oil/ gas fired equipments can be offered

outside the MR but up to the moment an agricultural waste based biomass

industry appears, only interesting targets for the company solid fired boilers

will be end users with processes that generate enough internal waste

as to use it like a fuel.

Follow the suggested pricing strategy and price references provided.

To give priority to leading companies from the Agroindustry & food

processing, Textile, Healthcare and Wood, paper & cellulose segments.

If because a clear tech differential Thermax's solid fired equipments are

prepared to accomplish emission restraints and the company open to

provide respective warranties, push solid fired boilers (coal specially)

as the company first line to position the brand and secure maximum

benefits. Otherwise only oil / gas fired product lines should be offered

inside the MR.

Regarding how to implement actions to enhance the company presence in the market, it

is recommended to develop a partnership with a good linkage with the market to secure

in all the possible to be present in most potential business and specialy at the minutes of

truth from each of them.

-In the next slides two possible partners are recommended.

8.3 Potential partners for Client in Chile

From the comparison between four potential parteners for Client in Chile exposed in the

table from below, we believe:

The first option for Client to perform a partnership in Chile should be XXXXXXXX

because XXXXXXXXXXX is very well know, has a complete contact network in the

market and additionally is able to secure the fuel provision (coal). This partner should

provide the company with the better results in the short and medium term.

The second option for Client should be the company YYYYYYYYYYYY a specialist

in steam and heat services provision by using solid fired boilers, specialy catering the

biomass fired boilers development in the long term.

Company Parent Group

Before 2005 -when it was bought by Dalkia-,

Conade could be an interesting potential

partner for Thermax.

.

Now that the company forms part of a

multinational entity, what we suggest is to

develop a close business relationship with

their local executives in order to be

recommended to end users exploring for a

new boilers provider. It would be ideal if

Thermax had previous experiences with

Dalkia in other markets around the world.

As long as we can see this is the less

interesting potential partner for Thermax in

Chile as it is extremely focused in the

provision of services for biggest wood and

cellulose companies and, because this, the

boilers Energia Verde uses are in addition out

of the desired size range of up to 30 tph.

POTENTIAL PARTNERS CATERING CHILEAN MARKETS

The company is able to guarantee the provision

of coal, the fuel most end users prefer because

its better cost (vs diesel) & availability (vs

nat.gas).

Catamutun shows a clear interest in to introduce

boilers prepared to fire other solid fuels and multi-

fuels.

As the Chilean coal is not competitive the

Catamutun Group is diverting from the coal

mining; in fact also acts in the provision of

imported coal, carbonate and Steam & Heat

Services provision. .

In 2006 the company imported 10 USD Million

in coals and sold same value in Steam & Heat

Services, meaning SHT is not merely a

secondary business. As long as we see this is

the best potential partner in Chile for

Thermax..

Catamutun could face some internal restraints

because it is related with a Group with focus in

coal business.

Catamutun Group

Major coal producer in Chile that

through filial Catamutun

Comercial S.A. also imports and

distributes coal from overseas. In

2006 Catamutun Comercial

imported an 8% of total thermal

coal imported to Chile.

Energías Industriales

It includes companies Vapores

Industriales Ltda. With focus in

Steam & Heat provision and

Arrical Ltda. The focus of Arrical

Ltda is to rent mobile & fixed

boilers for end users to cover

peaks and other needs that don't

justify to buy a unit.

AES Gener Corp. (USA)

Biggest electricity company in the

world that operates in Chile via

AES Gener Chile. AES Gener

Chile is the biggest

termoelectricity generator and the

biggest thermal coal importer

(over 50% of total imports in

2006).

Dalkia (France)

Leading European ESCO

(Energy Services Company) that

operates in Chile through Dalkia

Chile. Dalkia Chile is a company

fromed in 2005 by Dalkia France

and CONADE a local ESCO that

serve the Chilean market for 23

years.

+ Comment

Energía Verde is the strongest local player in

cogeneration & production of steam from forest

wastes that already provides for the biggest

users in Chile: Arauco and CMPC.

Because its interest in boiler price over

technology and less expedite accesss to fuel,

business potential with this player seems

smaller than with Catamutun.

.

However Vapores and Arrical conform a

cleaner boilers business centered Group that

in addition work togheter over the Chilean

market meaning an interestingly dense

contact network should exist. Considering all

this we also recommend Vapores as partner

(after Catamutun).

Vapores and its Group are more precisely

centered on the boilers business than any of the

other potential partner in this list.

Existence of sister company Arrimac working on

the same market enhance image of Vapores

and its business contacts as well.

Company has only 5 plants operating steadly,

while sister company Arrical would have

around 100 clients but most of them

occasional.

Both companies do all efforts to buy cheaper

used boilers according to the Production &

Finance Manager (a very non usual mix of

responsabilities here).

Vapores is the only family owned company in

this list of possible partners, meaning a more

flexible attitude would eventually result.

Conade is actually in charge for 100 boilers

owned by 70 local companies, a 50% inside and

a 50% outside the Metropolitan Region.

Catamutun is well know local player already

providing Steam & Heat from Regions IV to X,

with coal fired (80% of cases) and oil fired

boilers (rest).

COMERCIAL CATAMUTUN S.A.

Tax number: 96653630-6

Web site: www.catamutun.cl

Address: Santa Lucia 280 P.7, Santiago

City: Santiago

Region: Metropolitan

Telephone: +56 02 632 7355

Contact: Mr. Paulo Aravena

Charge: Commercial Manager - Steam Div.

VAPORES INDUSTRIALES LTDA


Web site: www.vaporesindustriales.cl

Address: Juan de la Fuente 734, Lampa

City: Santiago


Telephone: +56 02 784 2250

Contact: Mr. Luis Calvo

Charge: Production & Finantial Manager

While Conade serve industries Esener -also from

Dalkia Chile- serve Hospitals, Shoppings, Hotels,

etc. Together they sell app USD 40Million/year in

services.

Visibility of Conade is rather high as it

participates in Universitary Programs, Seminars

on Energy Efficiency, etc.

ENERGIA VERDE S.A.


Web site: www.energiaverde.cl

Address: O'Higgins 940, Concepción

City: Concepción

Region: VIII

Telephone: +56 41 24018900

Contact: Mr.Alejandro Pacheco

Charge: Responsible for fuels

CONADE S.A. (now DALKIA CHILE)


Web sitet: www.dalkia.cl

Address: Av. del Valle 945, Huechuraba

City: Santiago


Telephone: +56 02 580 9900

Contact: Mr. Sergio Burns

Charge: Operations Manager

As part of a big multinational entity, this

company should be the less flexible of this list.

This Company has probably the strongest

economic back up between all the players acting

in this services area.

Company performs all the investments needed

to provide the comprised services, from boilers

to buildings.

-

According the financial statements from AES

Gener Chile, in 2005 Energía Verde had USD

1,0 Million in loses and in 2006 USD 2,6 Million

(also negative).

Company does not invest in equipments of its

own, providing external services only

(Outsorcing).

Catamutun has only 20 boilers installed up to

this moment.

Vapores' focus is to use biomass as fuel and,

when client waste production is limited, must

buy it from diverse small and rather unstable

waste producers.

Client

Client

.