THE FIRST WTE IN BRAZIL Sergio Guerreiro Ribeiro President, WTERT-Brasil
Table of Contents 1. Location of WTE Power Plant 2. Current State of Waste Management in Brazil 3. Electric Sector in Brazil 4. BARUERI, SP First WTE Project in Brazil 5. Financial Model
6,500,000 inhab 12,000,000 inhab São Paulo Rio de Janeiro
STATE OF SAO PAULO (INDUSTRY, AGRICULTURE, FINANCIAL,SERVICES) STATE OF RIO DE JANEIRO 400 km APPROX US$ 540 Billion (35% of Brazil)
APPROX US$ 14 Billion Per capita GDP ~ US$ 53,000 WTE PLANT 25 km
MSW GENERATION APPROXIMATELY 80,000,000 Mt/year ONLY 59% OF COLLECTED MSW TO SANITARY LANDFILLS (91%)
Currently only Landfill Gas No WTE (incineration) Caieiras Landfill, São Paulo 29.5 MWe Salvador Landfill, Bahia 20.0 MWe Bandeirantes Landfill, São Paulo 20.0 MWe MOST SANITARY LANDFILLS IN BRAZIL BURN THE BIOGAS IN FLARES - NO ENERGY GENERATION
RECYCLING IN BRAZIL Most recycling is done before official collection by informal recyclers Statistics not accurate Only a few streams have reliable numbers from the Industry 51% ANNUAL PAPER RECYCLING in BRAZIL 2015 (ibá/anap) PET BOTTLES RECYCLING EVOLUTION IN BRAZIL (x 1,000 Mt) (ABIPET) Aluminum Cans 98% recycling high value + low income people
ELECTRIC SECTOR IN BRAZIL GUIDELINES OVERSEEING PRESIDENT PLANNING REGULATION COMMERCIALIZATION SYSTEM OPERATION VERY WELL ORGANIZED
REGULATED MARKET FREE MARKET COMMERCIALIZATION ANEEL AUCTIONS + RENEWABLE /WTE(LIMIT) PPA BETWEEN GENERATORS AND TRADERS/COSTUMERS GENERATORS CANNOT DELIVER ENERGY SOLD. THEY BUY IN THE FREE MARKET (SPOT PRICES)
TOTAL INSTALLED CAPACITY 140.8 GW HYDROTHERMAL SYSTEMS HIGHLY DEPENDENT ON WATER STORAGE NG/OIL ARE STAND BY AND DISPACHED (VERY EXPENSIVE) ONLY WHEN RESERVOIRS ARE LOW LEVEL BIOMASS/NUCLEAR/WTE ARE INFLEXIBLE THERMAL PLANTS
14.7 MW X 8,000 h
18% of Brazil s MSW -6 States including Rio de janeiro
IN USA LHV ~ 11,000 kj/kg 64 MWth ~ 500 TPD 908 TPD LHV 6090 kj/kg POINT H* 27,51 ton/h = 660 TPD LHV 8374 kj/kg
POWER CALCULATION HEAT INPUT = 64 MWth NET EFFICIENCY = 23%
Key Assumptions General Information Project Greenfield Operation Start February/2020 Contract PPP PPP period 30 years Revenues Gate fee and energy sale (PPA) Projections period 2017-2046 Installation License issued November/2015 Taxes Regime Presumed/Real Construction Start April/2017 Model base Nominal terms Macro Assumptions 2017 2018 2019 2020 2021... 2046 Impact on Model IPCA 4.80% 4.50% 4.50% 4.50% 4.50%... 4.50% IGP-M 5.00% 5.00% 5.00% 5.00% 5.00%... 5.00% CPI 2.00% 2.00% 2.00% 2.00% 2.00%... 2.00% Inflation index to adjust gate fee (Barueri / Energy Price Spot) and PPA / costs and expenses Inflation index to adjust gate fee (Carapicuiba and Jundiai) Inflation index to adjust carbon credits price / IFC supervision fee TR 1.12% 0.75% 0.50% 0.50% 0.50%... 0.50% Loan index of Caixa loan CDI 11.09% 8.68% 8.41% 8.35% 8.27%... 8.27% Loan index of IFC loan IMRT* 5.00% 5.00% 2.50% 0.00% 0.00%... 0.00% Index to adjust energy price PPA FX Avg 3.50 3.80 3.89 3.98 4.08... 7.48 Carbon credits price / IFC supervision fee *Average Index Tariff Readjustment defined in the PPA agreement between the URE-Barueri and CEMIG, applied in April of each year (beyond inflation) based on COMERC estimatives. Source: Santander 10/28/2016. Note: All assumptions & projections per Company model/bf Capital
Revenue Drivers Boiler Capacity MSW Operational Assumptions Plant Availability Days per month (average) 825 tons/day 8,000 hours/year 30.42 Months per year 12 Hours per day 24 Approximately 40% of the MSW comes from Barueri Municipality, through a PPP contract of 30 years period, and the other 60% comes through shorter term contracts or Waste Supply Agreement with Tecipar (Carapicuíba and Jundiaí Municipalities) (R$ / ton) Gate Fee By Municipality 115.4 122.0 106.9 Barueri Jundiaí Carapicuíba The Gate fee considers only the cost of final disposal, i.e. discounted the collection and transportation costs (in the case of Jundiaí and Carapicuíba) Pricing data as of 2017 Source: FoxxHaztec. Note: All assumptions and projections per Company model Energy Operational Assumptions Installed Capacity Gross Power Generation Capacity Internal Power Consumptions 20 MW 17.3 MW 12.14% Power Loss 3.00% Net Power Generation (for sale) 14.7 MW Consider the sale of energy generated beyond that sold to CEMIG (11,5MW) to the market at R$ 230/MWh Energy Production and Price PPA Agreement with CEMIG (11,5MW - 15 years - until 2032) Date: April 2017 Price: R$285.85 / MWh Quantity of Energy sold: 100.740 MWh/ year Market (energy beyond the PPA requirement (approx. 3.2MW) Date: 2016 Price: R$230.00 / MWh Quantity of Energy sold: 17.212 MWh/ year Carbon Credits Carbon credits revenues represent only 0.1% of total revenues of the SPV Price US$ 2,70 per tco2 Year tco2 3 4,994 4 43,441 5 70,204 6 89,068 7 102,577 8 112,439 9 119,803 10 125,443 11 129,880 12 127,472 Carbon credit generation curve defined in the PDD (Project Design Document) prepared by the World Bank
Barueri Revenue Breakdown Revenues (R$ Millions) Energy revenues in 2018 and 2019 refers to energy purchased in the market to sell to CEMIG to comply with the contract PPA total of 11.5MW Approximately 50% energy / 50% tipping fee 96 92 88 1 1 92 79 1 88 82 1 74 44 46 48 41 34 101 1 96 50 106 1 101 53 111 2 105 55 116 2 110 57 121 2 115 60 31 30 33 31 34 37 43 45 47 49 52 54 57 59 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 MSW Energy Carbon Credits Net Revenues Source: FoxxHaztec/BF Capital Note: All assumptions and projections per Company model
Barueri Breakdown of Costs & Expenses O&M Costs (R$ millions) The cost in 2018 relates to the purchase of 100% incentivized energy in the market at R$ 230/MWh to meet the PPA agreement with CEMIG Variations in O&M costs are most due to variations in maintenance cost curve which was developed by RESA Fitchner, a well known engineering company 31 30 30 1 2 27 27 2 26 0 5 5 0 25 24 2 5 1 20 21 21 1 5 4 1 1 1 5 4 4 6 15 14 12 11 25 27 10 9 8 8 7 7 8 8 8 9 9 10 10 10 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Variable Costs Fixed Costs Other Variable Costs Other Expenses Source: FoxxHaztec./BF Capital Note: All assumptions and projections per Company model
Profitability 90 80 70 60 50 40 30 20 10 0 70 60 50 40 30 20 10 0-10 -20 EBITDA and % Margin The EBITDA in 2018 relates to the purchase of 100% incentivized energy in the market at R$230/MWh and sale to CEMIG in order to meet the PPA Contract EBITDA EBITDA Margin 72% 74% 76% 73% 75% 70% 74% 72% 74% 80.0% 70.0% 60.0% 50.0% 61 66 67 72 78 79 85 40.0% 71 30.0% 19% 15% 54 20.0% 5 6 10.0% 0.0% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Net Income and % Margin 100.0% Net Income Net Margin 80.0% 60.0% 39% 25% 26% 33% 34% 40.0% 11% 13% 17% 19% 45 35 38 20.0% (2) 24 26 (9) 8 11 15 17 0.0% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028-20.0% (7%) (26%) -40.0% Source: FoxxHaztec. Note: All assumptions and projections per Company model