1 EMERGING ENERGY & ENVIRONMENT, LLC TALLER DE PLANIFICACION DE LA DIRECCION DE MEDIO AMBIENTE CAF – Banco Latinoamericano de Desarrollo THE ROLE OF PRIVATE EQUITY FUNDS BY: JOHN PAUL MOSCARELLA FEBRUARY 2013

2 FUND CONCEPT – Emerging Energy Latin America Fund II EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY Emerging Energy Latin America Fund II focuses on renewable infrastructure investments in Latin America. The Fund will mainly invest in companies within the energy related sectors of hydroelectricity, wind power generation, and solar energy. The Fund will also invest in regional mid-market companies that provide support and energy services to the renewable and energy efficient sectors using market proven technologies. The Fund will benefit from the collective experience of the team in the region in local origination, project development, project finance, investment management, and exits. First closing occurred in 2012.

3 INVESTMENT HIGHLIGHTS EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY Emerging Energy Latin America Fund II is a USD 150 million expansion capital fund focused on multi-sector investment in renewable energy. The Fund offers institutional investors an opportunity to invest in:  One of the world’s fastest growing regions  Renewable energy sector facing unprecedented demand from the industrial, transportation, and consumer segments  Renewable infrastructure sector with its urgent need of expansion  Seasoned fund management team with proven track record and three offices in the region Focused on Renewable Energy and Energy Efficiency infrastructure

4 EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY INVESTMENT SECTORS Renewable EnergyEnergy Services  Small Scale Hydro (up to 30 MW)  Wind  Solar  Energy Services Companies  Industrial Co-Generation  Renewable Energy Distribution  Renewable Energy Logistical Infrastructure PRIMARY COUNTRY/REGIONAL FOCUSINVESTMENT TYPE  Brazil  Colombia  Mexico  Peru  Chile  Central America  Infrastructure-orientation  Asset-centric  Expansion and growth INVESTMENT STRATEGY AND SECTOR FOCUS

5 EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY INVESTMENT STRATEGY AND SECTOR FOCUS  Strategies: - Portfolio Companies with - Scalable and proven business and technology models - Stable cash flow and resistance to macroeconomic fluctuations - Long term off take contracts with anchor end-users - Partnership with local management teams with proven development expertise and operational track records - Clustering companies into attractive portfolio acquisition targets - Lead investor role with extensive control over and influence on the operational management of portfolio companies  Portfolio Breakdown by Sector - Renewable Energy Infrastructure 80% - Energy Services Companies 20%  Portfolio Diversification - Geography: <40% of the fund’s assets will be invested in one single country - Assets: <15% of the fund’s assets in a single investment

6 INVESTMENT STRATEGY AND SECTOR FOCUS - TYPE OF ASSETS EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY Fund II will principally invest in three types of assets:  "Late stage" investments, with no early stage development risk, with construction risk, subject to completion of one or more of the following:  Resource identification and measurement  Basic engineering and design, construction budget reviewed and approved by third party  Site control and access to transmission  Key environmental permits and approvals, and execution contracts  Anchor revenue contracts  Project financing "highly likely" or in place  Operating or brownfield assets:  Assets with established operating profiles with potential for expansion ("low cost or free growth option")  Early stage assets:  Strong pre-feasibility analysis  Attractive resource, favorable regulation, and strong economic outlook  Key contracts or permits still need to be obtained

7 INVESTMENT STRATEGY AND SECTOR FOCUS - AGGREGATION EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY  EEE believes that there is an outstanding opportunity to aggregate smaller renewable energy projects, which benefit from portfolio efficiencies in financing, implementation and operation  Improvements in technology and economics, combined with the existence of strong resource base (hydro, solar, wind) have made smaller projects economic and attractive  The smaller projects, individually with enterprise value between $5-50 mm, is an overlooked and capital-constrained niche in the market  EEE will pursue a country-specific or a regional approach in the implementation of its roll-up strategy

8 INVESTMENT STRATEGY AND SECTOR FOCUS - AGGREGATION EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY  Country-specific portfolios - key issues  Lack of asset and geographic diversification  Country risk concentration  Resource risk diversity  Asset financing - single asset vs. portfolio - lender appetite may vary  Sector and electricity price outlook  Regulatory and institutional issues  Exit prospects  Regional portfolios - key issues  Portfolio diversification based on country, regulatory regime, hydrology variation, asset-type, asset- stage  Geographic composition of the portfolio - initial focus will be on countries with well-mitigated country and regulatory profiles favorable to small hydro, as well as investment grade sovereign ratings  Regional approach to financing is new but lender feedback is encouraging  Target focus - Peru, Mexico, Brazil, Chile, Central America, Colombia

9 PIPELINE OVERVIEW EMERGING ENERGY LATIN AMERICA FUND II CONFIDENTIAL – FOR PROFESSIONAL INVESTORS ONLY The team is actively working on the pipeline for Fund II:  Focus on renewable energy infrastructure.  The current Fund II active pipeline, as of October 2012, consists of:  Over 35 deals representing over US$2.7 billion of investment potential.  Over US$2.2 billion of the pipeline represents wind, solar, and small hydro renewable energy infrastructure.

10 CleanTech Fund (CTF): US$25 MM (2004) Early Stage VC Fund: Portfolio by Technology & Country (US$ MM)

11 Investment in clean energy had shown positive growth to 2011… But in 2012 showed a decline of 11% (source Bloomberg)

12 “Greening” investment report of G20 Green Growth Action Alliance Source: The Green Investment Report, the ways and means to unlock private finance for green growth, World Economic Forum, 2013

13 More “Green” investment required: US$700 billion per year (estimated) Source: The Green Investment Report, the ways and means to unlock private finance for green growth, World Economic Forum, 2013

14 US$700 billion green target: Possible public-private finance scenario Source: The Green Investment Report, the ways and means to unlock private finance for green growth, World Economic Forum, 2013

15 Data for 2011 suggest investment of circa US$370 billion…circa 50% of the goal …$75 billion from development finance institutions, and $ billion private flows Only $2 billion from PE funds

16 Leveraging private sector flows: some recent trends Source: The Green Investment Report, the ways and means to unlock private finance for green growth, World Economic Forum, 2013

17 Private Equity Funds: Early stage, Growth Capital, & Infrastructure Venture Capital funds:  Early stage, institutional capital  Companies are often still “concept”  “Pre” revenue or still incipient revenues  Usually several VC firms collaborate  Exit or sale to larger PE funds, strategic or Initial Public Offerings (IPOs) Private equity funds  Growth capital, usually expansion of current revenues by accelerating growth (“accelerated organic growth”)  Capital to acquire similar companies, competitors (“buy and build”)  Pre-IPO capital  “Greenfield” projects, require debt Infrastructure Funds  Project based special purpose companies  Usually “brownfield”  Significant debt requirements

18 Some conclusions: Transition to low carbon economy Key ingredients:  Stable fundamental economies  Strong regulatory support – key domestic policy is required Stable and long term vs infrequent or volatile Long term carbon regime preferable USA carbon markets are surprisingly showing life Financing requirements  Both debt and equity capital  Equity is critical for: Early stage risk capital (VC) Growth capital (PE) Project based equity (PE)  Capital Markets IPOs but also very important for private markets to function properly “Supply” of institutional capital via pension funds and other, i.e. institutional capital, needs to be increased in “greening” the economy generally

19 Some conclusions (Cont.): 2012 was a difficult year  Private sector flows slowed down despite capital markets positive performance “Cleantech” investing: over the last decade, early stage investments in a variety of cleantech sectors has proven challenging, investors have not seen the expected returns like other “new” or “tech” sectors  all major solar companies publicly listed have seen dramatic drops in share prices recently Renewable Energy Infrastructure: Less risky, will continue expanding  Wind energy matured quickly  Lower equity returns, lower capital costs, very competitive (circa US$41-42/MWh most recently in Mexico and Brazil)!  Most dramatic advances in Solar PV capex costs  Expected large investments in Latin America solar (‘grid parity” in Chile)  Auctions and policy frameworks are continuing to show results Natural gas: USA shale gas “revolution” will have long term effects throughout clean energy value chain  Positive impact on industrial energy efficiency in many Latin markets (especially cogeneration and transportation sectors) “Digital energy revolution” – 1 st billion smart phones by 2012 most important growth sub-segment is in “smart-grids” or “data” driven” investing (posted significant growth in 2012, circa 70%), includes commercial and residential buildings efficiency Distributed or decentralized generation will continue to grow (residential PV esp.)