1. Todos los derechos reservados para XM S.A E.S.P. 2007 APEx Conference October 14 to October 17 Paris, France Interaction between adjacent markets in South America Luis Alejandro Camargo S. Wholesale Market Manager XM S.A. E.S.P.

2. 2 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

3. 3 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

4. 4 Resources 15,185 (22%) Nordpool Reference 19,528 (22%) Latin America Situation South AmericaMesoamerica 4,269 (3.4%) 460 (1.2%) Interconnection MW (%Demand) Latin America 4,729 (4.3%) 65,625 (35%) Reserve MW [%Cap. Inst.] 19,522 (34%) 79,811 (42%) Net 58,263189,595189,37388,921 38,741123,970109,562 69,393 Cap. Installed [MW] Demand [MW] MER (Central America) ITX Méx - Guat Market coupling (Col – Ecu) ITXs Other countries Common Market Interconnection situation

5. 5 Natural Gas Reserves TFC: Trillion Cubic Feet 152 TCF 67% 12 TCF 5% 26 TCF 12% 2 TCF 1% 4 TCF 2% 12 TCF 5% 15 TCF 7% 1 TCF 1%

6. 6 Complementarity (Central América - Colombia) Demand Hydrology

7. 7 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

8. 8 Interconnection capacities (MW) 336 MW 500 MW 200 MW 100 MW 6,300 MW 900 MW 70 MW 2,000 MW 600 MW 120 MW 80 MW 100 MW 200 MW 300 MW Central America Policies and processes that facilitate the development of regional infrastructure 300 MW Andean Community Possible participation of Chile, Venezuela and Panama Agreement CAN 536 (2002) Mercosur- The Southern Common Market Countries with high electricity demand Many interconnections Scenery of integration (present) Scenery of integration (future) Physical interconnection (future) Physical interconnection (present)

9. 9 INTERCONNECTION CAPACITY ALLOCATION E E F F F F F F E E E E E E E Bilateral Long term bilateral contracts Market Coupling Implicit Auctions Decoupled Systems Implicit Auctions Centralized PX Market Splitting 1 2 3 E F Existing Future

10. 10 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

11. 11 Andean Region 336 MW 500 MW 100 MW CAN 536 Act. Col - Ecuador TIE Ecuador - Peru (TIE in progress) Col - Ven Contracts National networks CAN 536 Act. Dec. 2002 TIE Colombia – Ecuador March 2003 TIE Colombia – Ecuador - Peru In progress

12. 12 Electricity Interchanges between Colombia and Ecuador Date Energy (GWh)Value (Million of US$) Col → EcuEcu → ColCol → Ecu 20041,68135135 20051,75716151 20061,6081127 500MW

13. 13 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

14. 14 MER Transactions País/ GWh Guatemala Imp Exp El Salvador Imp Exp Honduras Imp Exp Nicaragua Imp Exp Costa Rica Imp Exp Panamá Imp Exp Total 2005322 1422 3002 588 2269 8 0104 54.2530.0 200670 08 1211 70.3 4226 10483 34201.0 Source: Regional Operator -EOR- www.enteoperador.orgwww.enteoperador.org National networks 100 MW 80 MW 120 MW 300 MW (2009) Annual transactions

15. 15 Framework Treaty (1995) Transitory regulations of Operation and Trading (2002) Regulator, ISO and PX Regional MER Regulation (2005) Framework Treaty (1995) Transitory regulations of Operation and Trading (2002) Regulator, ISO and PX Regional MER Regulation (2005) Lago Nicaragua Panamá Aguacapa Nejapa Cañas Ticuantepe Parrita Aguacaliente Veladero Cajón Río Lindo Panaluya Ahuachapán Planta Nicaragua Guate Norte Palmar Norte 15 de Sept. T Río Claro SIEPAC Network Interconnection substation 230 KV line National substation 300 MW capacity 15 substations Cable OPGW CountryKMS Guatemala 281 Salvador Honduras Nicaragua Costa Rica Panamá Total 230 KV, single circuit Cost M US385 285 270 321 490 150 1,797 Operation date April 2009 80 MW 120 MW 80 MW 100 MW Common Electricity Market www.eprsiepac.com

16. 16 Contents Regional situation Regional interconnections Andean Community Central America Region The Southern Common Market (MERCOSUR)

17. 17 Interchanges electricity - Mercosur PS: Regional interchanges included of the following binational generators: Itaipú (Brazil – Paraguay) Yacyretá (Argentina – Paraguay) Salto Grande (Argentina – Uruguay) Source: Olade 200 MW 6,300 MW 900 MW 70 MW 2,000 MW 600 MW High physical integration Low market integration Capacity networks

18. 18 CONCLUSIONS

19. 19 Conclusions  Net benefits for coupled markets  However:  Political interference (subsidies, congestion surplus)  Policy of self-supplying  Price formation asymmetries: (fixed costs recovery)  Arbitration and Conflict Dispute Resolution  New interconnections in progress  CAN 536 Act application Andean Countries

20. 20 Conclusions  Regional electricity market with common rules  Interchange reduction  High fuel prices  Technical restrictions  Regional interconnection under construction (2009) MER – Central American Market MERCOSUR  Bilateral physical contracts …

21. 21 Links and information source Argentina Regulator http://www.enre.gov.ar/ Transmission http://www.transener.com.ar/ ISO http://www.cammesa.com.ar/ Power Exchange Bolivia Regulator http://www.superele.gov.bo/ Transmission http://www.tde.com.bo/ http://www.isa.com.bo/ ISO http://www.cnb.net/cndc/ Power Exchange Brazil Regulator http://www.aneel.gov.br/ Transmission http://www.eletrobras.gov.br/ http://www.eletrosul.gov.br/ ISO http://www.ons.org.br/ons/ Power Exchange http://www.mae.org.br/index.jsp Colombia Regulatorhttp://www.creg.gov.co/ Transmission http://www.isa.com.co/ http://www.transelca.com.co/ ISOhttp://www.xm.com.co/ Power Exchange Ecuador Regulator http://www.conelec.gov.ec/ Transmission http://www.transelectric.com.ec/ ISO http://www.cenace.org.ec/ Chile Regulatorhttp://www.cne.cl/ Transmission http://www.transelec.cl/ http://www.cgetransmision.cl/ ISO Power Exchange http://www.cdec-sic.cl/ http://www.cdec-sing.cl/ Peru Regulator http://www.osinerg.gob.pe/ Transmission http://www.isa.com.pe/ http://www.rep.com.pe/ http://www.redesur.com.pe/ ISO http://www.coes.org.pe/ Paraguay Regulator http://www.ande.gov.py/ Transmission ISO Uruguay Regulator http://www.ursea.gub.uy/ Transmission http://www.ute.com.uy/ ISO http://www.dncu.gub.uy/ Power Exchange http://www.adme.com.uy/ El Salvador Regulator http://www.siget.gob.sv/ ISO Power Exchange http://www.ut.com.sv/ GuatemalaRegulatorhttp://www.cnee.gob.gt/ Honduras Regulator http://www.cne.gob.hn/ Transmission ISO http://www.enee.hn/ Nicaragua Regulator http://www.ine.gob.ni/ Transmission http://www.entresa.com.ni/ ISO http://www.cndc.org.ni/ Panama Regulator http://www.enteregulador.gob.pa/ Transmission http://www.etesa.com.pa/ ISO http://www.cnd.com.pa/index.htm ISO Power Exchange http://www.amm.org.gt/

22. Todos los derechos reservados para XM S.A E.S.P.