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©Real Infrastructure 2017 REAL INFRASTRUCTURE 50 Main Street, White Plains, NY 10606 United States of America For Inquiries: [email protected] Platts 20th Annual Central American Energy Conference Panama, June 16, 2017

Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

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Page 1: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

©Real Infrastructure 2017

REAL INFRASTRUCTURE

50 Main Street, White Plains, NY 10606

United States of America

For Inquiries: [email protected]

Platts 20th Annual Central American Energy Conference Panama, June 16, 2017

Page 2: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF

2

WHO WE ARE • Established in 2011, REAL Infrastructure Capital Partners is a private equity investment

firm.

• REAL is an independent firm 100% owned by its management team.

• Currently investing its LRIF fund and its LRIF Mexico Fund, REAL is focused in the renewable energy sector in Latin America and the Caribbean.

FUND INVESTORS • REAL’s LRIF I and LRIF

Mexico are private equity funds with a mandate to invest in renewable energy generating assets in Latin America and Caribbean countries.

Page 3: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

REAL TEAM

3

Juan F. Paez

Managing Partner Origination, Investment, Portfolio Management,

General Management

Stephen M. Pearlman

Managing Partner Portfolio Management, E&S Officer, CFO

Susana Lopez

Partner Investment, Compliance Officer, Valuation

Sebastian Libkind

VicePresident Origination, Investment

Ruben Martinez

Senior Associate Investment, Portfolio Management

Lachezar Tolev

VicePresident Portfolio Management, Administrative

Trident Services

Outsourced Administrative, Accounting, Financial

Reporting

Todd Hanson

Outsourced E&S

Bob Hart

Outsourced Independent Investment Committee

Member

Page 4: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

Caribbean: Strategy focused on wind, biomass, WTE and solar

Colombia: Strategy focused on small hydro, wind and biomass

Peru: Strategy focused on small hydro, wind and biomass

Mexico:

Opportunities on small hydro, wind and biomass for self supply to large customers.

INVESTMENT REGION & TARGET PROJECTS

4

Target Region & Focus Countries

Focus countries - Priority

Area of investment opportunities

Central America: Strategy focused on hydro, wind, solar and biomass to take advantage of high economic growth and high electricity prices.

Page 5: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CURRENT PORTFOLIO ACTIVITIES

5 Strictly Private & Confidential

El Salvador Solar PV - 17 MW In Construction

El Salvador Solar PV - 10 MW 5 MW Operational 5 MW Projects in construction

Guatemala Hydro: 22 MW Greenfield project pre construction.

Mexico Wind: 50 MW 50 MW in operation

El Salvador Solar PV - 27 MW Ready to Build Q3/17

Mexico Wind: 50 MW 50 MW in operation

El Salvador Solar PV - 13 MW Permitting

Page 6: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

EL SALVADOR INVESTMENT STRATEGY

6

Why El Salvador?

• Sound regulatory environment

• Solid track record of IPP participation

• No incumbent in renewable market

• High cost of energy

• Availability of PPAs Acquired PPAs Acquired 5.56 MW AC out of 11.12 MW AC 2013 CAESS bid

Acquired 20 MWAC 2013 Delsur Bid Won PPAs 14 MWAC from Delsur 2013 international tender 10 MWAC from Delsur 2016 international tender

Page 7: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

OVERVIEW EL SALVADOR SOLAR PV PORTFOLIO

7

Project Location Power

[MWn]

Peak Power

[MWp

PPA

[%output]

PPA term

[Years] Tender Status

PVGEN Tecoluca 1.20 1.44 100% 15 CAESS-CLP-RNV-

001-2013 In operation

Grupo Roca Tecoluca 1.20 1.44 100% 15 CAESS-CLP-RNV-

001-2013 In operation

RESU San Luis Talpa 1.20 1.51 100% 15 CAESS-CLP-RNV-

001-2013 In operation

Trinidad Acajutla 8.00 10.16 100% 20 DELSUR-CLP-RNV-

001-2013 In construction

Marquez Acajutla 6.00 7.62 100% 20 DELSUR-CLP-RNV-

001-2013 In construction

Alpha Solar San Juan Opico 0.76 0.97 100% 15 CAESS-CLP-RNV-

001-2013 In construction

Suno Power San Juan Opico 1.20 1.54 100% 15 CAESS-CLP-RNV-

001-2013 In construction

Sol de Opico San Juan Opico 3.02 3.87 0% N/A N/A In construction

Los Remedios Acajutla 20.00 25.60 100% 20 DELSUR-CLP-RNV-

001-2013 In permitting

Sonsonate Acajutla 10.00 13.00 100% 20 DELSUR-CLP-RNV-

001-2016 In permitting

Phase 1

Phase 2

Page 8: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

OVERVIEW EL SALVADOR SOLAR PV PORTFOLIO

8

Suno Power Alpha Solar Opico

RESU PVGEN Grupo Roca

La Trinidad Marquez Los Remedios Sonsonate

Page 9: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CHALLENGES IN DEVELOPMENT AND INVESTMENT

9

Financing – Financial Closing Expected During Q3/2017

• Issues of SCALE in the Region – Individual Markets as Opposed to Regional

Market

• Small projects too small for project financing – built on all-equity

• Significant projects in Central America mostly rely on DFI/Multilateral institutions

• Bigger projects too big for local/regional lenders

Lack of depth – Too exposed to energy in region already

Lack of appetite – El Salvador (reached country limits)

Terms not competitive enough for competitive tenders

Page 10: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CHALLENGES IN DEVELOPMENT AND INVESTMENT

10

Development Issues – Leading to Additional Cost (Overruns)

• Delay in response times

• Permitting (environmental, interconnection)

• Regulator (Overburdened)

Electricity sector

Telecoms

Fair

• Significant Credit deterioration

✓ Raises cost of capital

✓ Narrows pool of potential lenders

Page 11: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

11

Recent History

Page 12: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

12

• Government & Regulators Created the Right Conditions

✓ Fiscal incentives

✓ Regulatory framework

✓ Prioritize renewables in expansion plans

✓ Launched RFPs

• Conditions Ripe for Private Market Participants

• Economic Conditions Created Alignment of Interests - Win-Win Situation

Market Responded Accordingly

Page 13: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

13

Fiscal and Regulatory Incentives for Renewable Energy demonstrates counties’ commitment to

attract private capital to this industry

Country Income Tax

benefits Exemption of Import Duties

Preferential VAT treatment

Price Support RPS (Renewable

Mandate)

Costa Rica

El Salvador

Guatemala

Honduras

Nicaragua

Panama

Page 14: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

14

Significant progress has been made

Costa Rica

2010

2,614 MW

Costa Rica

2016

3,467 MW

El Salvador

2010

1,481 MW

El Salvador

2016

1,759 MW

Guatemala

2010

2,534 MW

Guatemala

2016

4,210 MW

Honduras

2010

1,635 MW

Honduras

2016

2,439 MW

Nicaragua

2010

1,073 MW

Nicaragua

2016

1,395 MW

Panama

2010

1,987 MW

Panama

2016

3,339 MW

30% 17%

46% 43%

54%

61% 40%

37% 65% 35%

53% 36%

Page 15: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

15

Overall change in installed capacity (in MW) in Central American Region from 2010 through 2016:

Renewable

51%

Thermal

49%

Central America 2010

11,324 MW

Renewable

65%

Thermal

35%

Central America 2016

16,610 MW

Significant progress has been made

Page 16: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

16

Renewable

65%

Thermal

35%

Central America 2010

40,668 GWh

Renewable

65%

Thermal

35%

Central America 2016

52,231 GWh

Electricity consumed (in GWh) by generation type in the Central American Region from 2010

through 2016:

Significant work still remains!

Page 17: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

CENTRAL AMERICA RENEWABLES

17

Recent trends in Spot Prices suggest a downward trend and the establishment of a virtual price cap hovering at around $100/MWh

Page 18: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? - RE CATALYZERS

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Renewable Energy Catalyzers/Momentum Supporters • Climate Change

✓Region very susceptible to climate effects ✓Paris agreement/commitments

• Political Support - Popular

✓Keeps cost of electricity Low - predictable

✓Green implications (clean/efficient)

✓Local – abundant local resource ✓Smart – helps with trade balance - keeps hard earned dollars at home for reinvestment

• Ample Resources still to be developed

• No one will Finance COAL (or unnecessary thermal)

Renewable Energy Will Win !

Page 19: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? – OPPORTUNITIES AS AN INVESTOR

19

Country (RE Electricity use

Share, 2016)

Energy Plan Goals and Targets

Costa Rica (98%) VI Plan Nacional de Energía 2012–2030

(Ministry of the Environment and

Energy)

• Become carbon-neutral by 2021 (re-emphasizing commitment in Second Communication to the UNFCCC, 2009)

• Reduce residential energy consumption 7.8 percent between 2012 and 2030

• Equip 10 percent of households with distributed solar generation by 2020

• Provide 100 percent of population with access to energy by 2030

• Reduce electricity consumption in industry 8.5 percent by 2020

• Transform the vehicular fleet to be 39 percent high efficiency, 9 percent electric and hybrid plug-in, and 2 percent natural

gas by 2030

El Salvador (54%) Política Energética Nacional 2010–2024

(National Energy Council)

• Provide affordable and continuous power supply

• Build institutional capacity

• Reduce oil dependence

• Minimize detrimental environmental and social impacts of energy, considering climate change

Guatemala (59%) Politica Energética 2013-2027 (Ministry

of Energy and Mines)

• Cover current and future energy demand

• Strengthen electric power transmission

• Diversify the energy mix and reduce oil dependence

• Generate 80 percent of electricity from renewable sources by 2027

Honduras (50%) Visión del País 2010–2038

Plan de Nación 2010–2022 (Technical

Secretariat for Planning and External

Cooperation)

• Reduce reliance on hydrocarbons

• Mitigate and adapt to climate change

• Expand country-wide electricity coverage to 85 percent by 2015 and 90 percent by 2020

• Generate 60 percent of electricity from renewable sources by 2022 and 80 percent by 2038

• Invest $1.5 billion in renewable and hydroelectric sources by 2022

Nicaragua (50%) Plan Estratégico del Sector Energético

2007–2017 (Ministry of Energy and

Mines)

Plan Nacional de Desarrollo Humano

2009–2011

• Diversify the energy mix

• Promote renewables

• Maximize energy efficiency

• Promote competitive markets and policies to ensure coverage and access to energy

• Provide a regulatory framework

• Identify 4,500 MW of renewable energy capacity, including hydro, geothermal, wind, solar, and biomass

• Supply between 95.2 and 98.1 percent of the estimated electricity demand with renewable sources by 2017

Panama (67%) Plan Nacional de Energia 2009–2023

(National Secretary of Energy)

• Ensure domestic energy supply through renewable energy and energy efficiency

• Maximize the energy sector’s contribution to sustainable development

• Increase energy access

• Promote capacity building

• Develop biofuels in the transportation sector, and wind and hydropower in the electricity sector

Page 20: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

OPPORTUNITIES AS AN INVESTOR IN NEAR TERM

20

Page 21: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

Curva horaria media mensual de un Proyecto eólico típico durante el primer semestre del año

WHAT LIES AHEAD? – OPPORTUNITIES AS AN INVESTOR

21

Curva horaria media mensual de un Proyecto fotovoltaico típico durante el primer semestre del

año

Portfolio of Renewables

Page 22: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? – OPPORTUNITIES AS AN INVESTOR

22

Know Your Customer

Page 23: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? – OPPORTUNITIES AS AN INVESTOR

23

Generación portafolio mixto mes de Noviembre (típico invierno).

Effects of Seasonality

Generación portafolio mixto mes de Mayo (típico verano).

Page 24: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? - OPPORTUNITIES AS AN INVESTOR

24

Opportunities as an investor

Distributed Energy Batteries

New Technology Renewables

Page 25: Platts 20th Annual Central American Energy … · Platts 20th Annual Central American Energy Conference Panama, June 16, 2017 . REAL INFRASTRUCTURE CAPITAL PARTNERS AND LRIF 2

WHAT LIES AHEAD? – OPPORTUNITIES AS A GOVERNMENT /REGULATOR

25

Opportunities as a Government/Regulator

• CR goal to be 100% renewable by 2020

• Opportunity of a lifetime – Why not make the entire region 100% renewable? We believe it is possible to achieve similar goals in the next 10 years

• Can get there on a country by country basis – but why? goal whole regional market

• Create Regulatory Environment promoting RE

✓ SIEPAC not enough

✓ Operate as a truly integrated regional electricity market

✓ Maximize available resources