Hydro Power Concessions in Emerging Markets

HYDRO POWER CONCESSIONS IN EMERGING MARKETS
Velcan Energy
Hydro Power Concessions in Emerging Markets
December 2015
Page 1
Hydro Power Concessions in Emerging Markets
Hydroelectricity has been exploited profitably for more than a hundred years in developed countries. Emerging
markets are now also starting to use significantly this source of cheap reliable power. Hydropower is capital
intensive but in many cases does not need subsidies to compete with fossil fuel.
China has led the way for the other emerging markets as it has installed more than 220 GW over the last 20
years.
The amount of capital needed has pushed many emerging countries to develop hydro power using
concessions.
Velcan Energy started its operations by working in India and Brazil in 2005.
The daily life of the teams often means going to remote places and living an adventurous life. At the Corporate
level, the company is managed in a conservative style with shareholder value in mind.
Page 2
Overview of Velcan Energy and its proven track record in project portfolio expansion
 Velcan focuses on the development, financing and operation of small

to mid-size (30-200 MW) hydroelectric concessions in high growth
x2 896 MW
markets. MW
900
 Incorporated in Luxemburg and listed on the NYSE-Euronext stock
146
exchange in Paris. 128
750
 Successfully built and has been running a 15 MW hydro Power 93
93
facility in Brazil since 2009.
600 60 60 68 86
 Successfully developed two projects in Laos (93 MW total). 25
Disposed of at pre-concession stage with capital gain. 434 MW 68 68 68
 After years of diligent prospection and selection, Velcan has 450

narrowed its portfolio to a limited number of projects in India and 75 91 91
Indonesia.
300 571 571
 Launch of Construction activities for Suka Rame 7 MW hydro in
500 500 500
Indonesia in September 2015.
359 359 359
 Beyond that, further final contracts (PPA and Construction contract) 150
are being negotiated and financing is raised, in particular for
Meureubo 2, in consortium with PT-PLN.
0
 Main offices in Singapore, New Delhi, Jakarta, Sao Paulo and 2007 2008 2009 2010 2011 2012 2013 2014
Luxemburg.
Concessions in India Concessions in Brazil
 Strong financial position: Total cash (current and non-current Concessions in Laos Concessions in Indonesia
financial assets) of 110 MUS$ and no debt as of 30 June 2015
Page 3
A team led by entrepreneurs combined with an overqualified technical team
 After graduating with a MSc from Ecole Supérieure d’Electricité (SUPELEC), Jean-Luc started his career at Schlumberger and then
Jean-Luc RIVOIRE PricewaterhouseCoopers
 He co-founded or was the first investor in 23 high tech start-ups between 1998 and 2001. These were, successfully sold to IBM Corp, Cisco,
Co-founder and Co-
etc. Jean-Luc spearheaded Velcan Energy’s effort in Brazil and oversaw the construction of the Rodeio Hydro Power concession (2008-2009)
CEO Velcan Energy
 He also led negotiations to obtain the 571 MW Yarjeep concessions In India in 2007
 After graduating with a MSc from Ecole Nationale Polytechnique Antoine started his career at PricewaterhouseCoopers
Antoine DECITRE
 He co-founded or was the first investor in 23 high tech start-ups between 1998 and 2001. These were successfully sold to IBM Corp, Cisco,
Co-founder and Co- etc…
CEO Velcan Energy
 Antoine led the IPO of Velcan in 2005 and the subsequent fund raising totaling €150m between 2005 and 2007
 35+ years of experience in planning, management, investigation, design and supervision of engineering works of hydropower projects globally
Ian McALISTER
 He spent 23 years in international engineering consultancy firm SMEC and 10 years at the Nam Theun 2 (1,070 MW) project in Laos (last
Group Technical position as Construction Director)
Director
 Ian is a Fellow to the Institution of Engineers, Australia and he is a graduate of Monash University, Australia
Jean-Paul
 Master of Engineering from Ecole Nationale Supérieure des Arts et Métiers
HURAUT
 Former Head of Hydroelectric Practice of international engineering firm SOGREAH
Senior Hydro
 Jean-Paul Huraut has participated in the design and building of over 60 hydro power plants, totaling several thousand MW of installed capacity
Advisor
Jacques  Prior to joining Velcan Energy in 2010, he was Head of Marketing and Sales at Alstom Power
REBAUDO
 Jacques has lived in Indonesia since 1987
Director - Indonesia  He is a graduate of SupAéro, the National Higher School of Aeronautics and Space in Toulouse, France
Page 4
An experienced team with conservative equity background / A well-timed equity strategy
 With proceeds from their 1st venture, Jean-Luc Rivoire and Antoine Decitre researched a number of opportunities between
2002 – 2004 and started investing in renewable energy.
 They rapidly listed Velcan Energy in 2005 and decided to fund it aggressively.
 Between Oct 2005 and Sep 2007, they raised equity for a total of 150m Euros.
 During the financial crisis, the company bought back 25% of its shares.
Euros Sep 2007 Oct 2007 Velcan’s capital raising & share buybacks
48 Price: €38 Price: €42
46 Raised: Raised:
44 €60m €20m
42 Feb 2009 – Apr 2013
40 May 2006
Weighted Avg. Buyback Price: €8.5
38 Price: €29
Total shares bought: 1.8m
36 Raised:
34 €50m
32
30
28
26 Feb 2009 – May 2010 Feb 2012 – Apr 2013
24 Weighted Avg. Buyback Weighted Avg. Buyback
22 Price: €8.2 Price: €9.7
20 Total shares bought: +1.35m Total shares bought: +426k
18
16
14
12 Oct 2005
10 Price: €12.46
8 Raised:
6 €20m
4
2 IPO: €8.5
0
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Page 5
Project Development Stages (8 year example)

Probability Cumulative Capex
100% 100
Pre- %
feasibility Project Approval
study Pre-
Concession
Concession
Agreement
negociation
Detailed PPA Agreement
50%
50% Feasibility Debt Financing Construction
Development Studies Study
Building and
Environmental
Permits
Project Implementation
0%
0%
6 months 6 months 2 years 3 years 3 years
Time
1st Survey of river Start of commercial

operations
PROJECT DEVELOPMENT PHASE OPERATION PHASE
8-12 YEARS 25 - 40 YEARS
Page 6
Concession Portfolio
Page 7
Rain availability and company projects - Average annual precipitation (mm)
Brazil
15 MW in Operation
71 MW in Development
India
571 MW in
Development
Indonesia
7 MW under Construction
139 MW in Development
Page 8
Rodeio Bonito concession / 15 MW / Brazil
 Velcan Energy started its hydropower activities in

Brazil in 2006. Jean-Luc Rivoire relocated there to
jump start the business.
 Velcan acquired the rights of the Rodeio Bonito

concession in December 2006
 Velcan Energy then set up a team using very

experienced Brazilian engineers, including Ruiter
Netto Campos who was one of civil engineers in
charge of the construction of Itaipu (18 000 MW)
 The construction started in August 2007 and finished

in Q4 2009
 Commissioning was conducted in Q4 2009, as

planned.
Page 9
Rodeio Bonito concession / 15 MW / Brazil
 As it was the first hydropower project of the company

the management decided to finance it with full equity
funding.
 The plant has been running very smoothly since

then. It is now completely remotely controlled with
only a security staff outside.
 Main metrics :
 Capex: €26m
 Ebitda ~ €2.0-3.5m/year
 Plant Type: Run Of River
 Capacity : 15 MW
 Location: Santa Catarina
 Dam height: 28m
 Dam crest length : 300 meters
 Concession until 2034 with 30 years renewal
option
Page 10
Yarjeep concession in the State of Arunachal Pradesh / 571 MW / India
 Cascade of 3 hydro power plants, concession

obtained in July 2007 for 200MW.
 Successive Technical evaluations revealed a potential

for an additional 351 MW, approved in principle April
2010 and October 2011 by environmental authorities.
 Total 571 MW of capacity for the 3 projects.
 Hydrology and power potential approved by Central

Water Commission and Central Electricity Authority.
 Public Hearings completed for the 3 projects in 2013.
 Clear acceleration of momentum in the past 12

months.
 Significant progress on HVDC line to main demand

centres (>1,700km) bodes well for projects in
Arunachal Pradesh. 
Page 11
Yarjeep concession in the State of Arunachal Pradesh / 571 MW / India
 Stage 1 Forest Clearances for all 3 projects received

in October 2015
 Environmental Clearances for all 3 projects received
in November 2015.
 Techno-Environmental Clearances (TEC) received in
2015 for both Heo (240 MW) and Tato-1 (186 MW).
 Pauk (145 MW) DPR to be submitted.
 Expected Completion: November 2020 as per TEC [1]
 CEA Levelized tariff (November 2020) for Heo: 3.80
rupees/kWh, Tato-1: 4.40 rupees/kWh.
 Guidance: Combined revenues (Heo & Tato-1) USD
97m p.a; EBITDA: USD 81m p.a. at current FX rate.
 Capex: USD 700m
 40 years concession from the day of electricity
production
 Project ROE fixed by Law at 16% for 60% of power,
free market upside option for balance
[1] Indicative date, has historically been subject to delays on previous projects
in the Indian power market
Page 12
Laos : Successful Development and Disposal of Two Projects
 Two projects, Nam Phouan (52 MW) and Nam Ang (43
MW), developed since 2009.
 Environmental permit granted in March 2013.

Feasibility Studies completed and approved by the Lao
Government in April 2013. Project Development
Agreement signed May 2014.
 Disposal of stake for USD 7m in September 2015 with

a profit
 The valuation of Velcan’s 75% share (70 MW) in the

projects at USD 100,000 / MW at pre-PPA stage
confirms that the Group generates value through its
project development capability.
 The disposal shows that Velcan’s Final Investment

Decisions are always subject to satisfying internal
hurdle rates.
Vientiane
Page 13
Indonesia / A Significant Opportunity
 High potential for Hydropower: 75,000 MW. So far, installed capacity is <4,000 MW
 Investment grade country & bankable off-taker (PLN / the State-owned utility)
 Manageable competition so far, a few Korean competitors have proven the model
 Total portfolio 146 MW
 Includes:
 Meureubo-2, a 59 MW project in Joint Venture with PLN
 Suka Rame, a 7 MW project under construction
 For <10MW : New Power Purchase Agreement (PPA) and Feed-in tariff in USD.
 For >10MW : Authorized IRR of 12-14% in USD over 30 years PPA
Page 14
Very selective process to identify opportunities in Indonesia
5,000 MW analysed throughout Indonesia since 2010
Hydrology
Monitoring
2,000 MW sites selected and surveyed
LIDAR
8 million EUR invested Topography
over 5 years Survey
5 carefully selected
projects with a good
probability of success
Geotechnical
Studies
Start of 1st project

construction: Q3
2015
Page 15
Overview of Velcan Energy’s Projects in Indonesia
Redelong
18 MW Bilah
40 - 60 MW
Meureubo-2
59 MW
Aceh
North Sumatra
Lampung
Sukarame
7 MW
Page 16
Suka Rame Project (Under Construction) / Indonesia
 First phase of Construction (site access) for 7 MW

capacity project started in September 2015
 Second phase of Construction to start in 2016

following signing PPA with PLN
 Velcan Energy owns 92% of the project, with the

remaining shares owned by a local partner.
 New Tariff : 13.2 USD cents per KW/H for eight years
and at 8.25 USD cents per KW/H for 12 years.
[Ministry of Energy and Mineral Resources (ESDM)
Regulation No.19 of 2015]
 CAPEX: USD 15-20m
 Expected construction length: 2 years. Estimated

COD : Early 2018.
 Projected EBITDA: USD 4m for 8 years then USD

2.5m for 12 years.
 No right of return to the State after the PPA

Lampung
Sukarame
7 MW
Page 17
Meureubo-2 Project / Indonesia
 59 MW Capacity project
 Velcan Energy (70%) and PT PJB (25%) formed a

consortium in November 2013 to co-develop the
project. PT PJB is a 100% wholly-owned subsidiary of
PLN (state-owned utility company).
 << Direct Appointment >> (exclusive right) has been

issued by the Ministry of Energy in August 2014
 << Procurement Process >> (PPA negotiations) have

started in November 2014 with PLN. Meureubo-2 59 MW
 Start of construction is expected in Q4 2016-Q1 2017.
Aceh
Page 18
Financial Snapshot
 Income Statement: (excluding FX variations)
 Annual Operation and Development cost: ~ €4.5m (FY 2014)
 Annual expected income from financial assets: ~ €2m
 Annual expected cash flow from Rodeio Bonito : €2.0m-3.5m
 Number of shares and significant shareholders: Management has a lot at stake & large float
 Issued 7.8 million, 1.8 million as Treasury : 6 million shares outstanding
 Vested stock-options: 0.5 million
 Market float: 70%
 Management and Credit Agricole: 30%
Page 19
Balance Sheet: Solid with no debt
ASSETS EUR M USD M LIABILITIES EUR M USD M
Rodeio Bonito (Brazil) € 16 $18 Equity € 136 $155
Water rights and projects in development € 22 $24
Other assets €2 $2 Total Equity € 136 $151
Financial Assets and Cash equivalents € 100 $111 Provisions and others €4 $4
Total Assets € 140 $155 Total Liabilities €140 $155
Restated Balance Sheet at 30 Jun 15 BVPS – adjusted for Treasury shares €22.8 $25.3
Company accounts in EUR
USD rate (converted at 30/06/2015 rate) $1.1097
Page 20
Contact
Jean-Luc Rivoire (Co-CEO)

rivoire@velcan.lu
Antoine Decitre (Co-CEO)

decitre@velcan.lu
Investor Relations Asia konialidis@velcan.lu

Investor Relations Europe investor@velcan.lu
Velcan SA
11, avenue Guillaume
L-1651 Luxemburg
www.velcanenergy.com
Velcan Energy is listed in Paris (Euronext ALVEL)
Page 21
Disclaimer
At Velcan Energy, we are convinced that hydropower concessions in Emerging Markets provide superior long term equity returns once the plants are running. However,
we also recognise that these attractive returns entail significant risks. Investors should bear in mind that:
1) Until Velcan starts construction of the facility, the concession is always at risk of being modified or cancelled. Concessional contracts usually contain strict and
short-term deadlines and conditions as a way to put the maximum possible pressure on the developers. In practice, technical studies and investigations on the field
often take longer than stipulated. This, in turn, requires us to extend the study rights and the concession. While negotiating this extension, the developer routinely
keeps working and the concessional authority de facto accepts this by exchanging written documents acknowledging the ongoing work. However, the granting of the
extension is never guaranteed. In case of an adverse outcome, judicial recourse may be limited and compensation may only amount to a fraction of forgone
earnings. This legal risk is probably the most significant one we face.
2) During the construction phase, unexpected problems can lead to cost overruns. These overruns may erode the overall IRR of the concession. Velcan Energy strives
to minimize the execution risk attached to construction.
By having a balanced portfolio of project across a number of countries and by systematically keeping only the most promising projects, Velcan Energy tries to minimize the
overall risk attached to its business in order to extract superior long-term returns. However, some significant risks are inherently part of Velcan’s activities and cannot be
eliminated. Thus, investors are advised to consider the suitability of investing in this business before doing so.
This document has been prepared by Velcan Energy to provide background information only.
This document is not an offer of securities in the United States or in any other jurisdiction/country. It is not related to any kind of offer and it does not intend to solicit any
kind of investment in any kind of securities issued by the Velcan Energy SA, whether through sale, exchange or subscription. No offer, whether public offering, invitation to
the public or to qualified investors is being made.
This document is for information purposes only and is not intended to provide the basis of any investment decision and must not be considered as a recommendation by
Velcan Energy, or any of its respective connected persons, to any recipient of this document, to invest in securities. The securities issued by Velcan Energy have not and
will not be registered according to the 1933 U.S. Securities Act, as modified, and cannot be offered or sold in the United States of America.
Velcan Energy is listed on a non regulated market and has not solicited any approval from the French market authorities (Autorité des Marchés Financiers) or any other
stock-exchange regulator, in any country. Previous issuances of shares of the Company did not require submission of a prospectus to AMF.
Shares of the Company cannot be distributed directly or indirectly to the public in France otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L.
621-8 to L. 621-8-3 of the French financial and monetary code.
Significant risks are attached to Velcan Energy group business. The previous performance of the company does not allow to foresee future results. This document
contains information on the objectives of Velcan Energy, along with some projections. The reader’s attention is drawn to the fact that the fulfilment of these objectives and
forecasts depends on circumstances and events that will not necessarily take place. By their very nature, these objectives may not be fulfilled, and the forecasts on which
they are based may prove either completely or partially erroneous.
This document is being furnished to you on a confidential basis and may not be reproduced, redistributed or passed, in whole or in part, to any other person. Except if
already public, information contained in this document is strictly private and confidential and is the property of Velcan Energy SA.
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HYDRO POWER CONCESSIONS IN EMERGING MARKETS

Hydro Power Concessions in Emerging Markets

 Velcan focuses on the development, financing and operation of small

 After years of diligent prospection and selection, Velcan has 450

A team led by entrepreneurs combined with an overqualified technical team

An experienced team with conservative equity background / A well-timed equity strategy

Project Development Stages (8 year example)

1st Survey of river Start of commercial

PROJECT DEVELOPMENT PHASE OPERATION PHASE

8-12 YEARS 25 - 40 YEARS

Rain availability and company projects - Average annual precipitation (mm)

Rodeio Bonito concession / 15 MW / Brazil

 Velcan Energy started its hydropower activities in

 Velcan acquired the rights of the Rodeio Bonito

 Velcan Energy then set up a team using very

 The construction started in August 2007 and finished

 Commissioning was conducted in Q4 2009, as

Rodeio Bonito concession / 15 MW / Brazil

 As it was the first hydropower project of the company

 The plant has been running very smoothly since

Yarjeep concession in the State of Arunachal Pradesh / 571 MW / India

 Cascade of 3 hydro power plants, concession

 Successive Technical evaluations revealed a potential

 Total 571 MW of capacity for the 3 projects.

 Hydrology and power potential approved by Central

 Public Hearings completed for the 3 projects in 2013.

 Clear acceleration of momentum in the past 12

 Significant progress on HVDC line to main demand

Yarjeep concession in the State of Arunachal Pradesh / 571 MW / India

 Stage 1 Forest Clearances for all 3 projects received

Laos : Successful Development and Disposal of Two Projects

 Environmental permit granted in March 2013.

 Disposal of stake for USD 7m in September 2015 with

 The valuation of Velcan’s 75% share (70 MW) in the

 The disposal shows that Velcan’s Final Investment

Indonesia / A Significant Opportunity

 Total portfolio 146 MW

 Meureubo-2, a 59 MW project in Joint Venture with PLN

 Suka Rame, a 7 MW project under construction

 For >10MW : Authorized IRR of 12-14% in USD over 30 years PPA

Very selective process to identify opportunities in Indonesia

5,000 MW analysed throughout Indonesia since 2010

2,000 MW sites selected and surveyed

Start of 1st project

Overview of Velcan Energy’s Projects in Indonesia

Suka Rame Project (Under Construction) / Indonesia

 First phase of Construction (site access) for 7 MW

 Second phase of Construction to start in 2016

 Velcan Energy owns 92% of the project, with the

 CAPEX: USD 15-20m

 Expected construction length: 2 years. Estimated

 Projected EBITDA: USD 4m for 8 years then USD

 No right of return to the State after the PPA

Meureubo-2 Project / Indonesia

 Velcan Energy (70%) and PT PJB (25%) formed a

 << Direct Appointment >> (exclusive right) has been

 << Procurement Process >> (PPA negotiations) have

 Start of construction is expected in Q4 2016-Q1 2017.

 Income Statement: (excluding FX variations)

 Annual Operation and Development cost: ~ €4.5m (FY 2014)

 Annual expected income from financial assets: ~ €2m

 Annual expected cash flow from Rodeio Bonito : €2.0m-3.5m

 Issued 7.8 million, 1.8 million as Treasury : 6 million shares outstanding