Pre-Payment the “Aqualectra Experience” by Steven Martina President & CEO Aqualectra Metering, Billing, CRM/CIS Americas Sao Paulo, Brazil, 12, 13, 14 August 2003

Curaçao, Netherlands Antilles 182 square miles, population , Avg. Temp 27 0 C

Legal structure of the corporationProduction StIP/EGC Holder of 100% Common stock Mirant Holder of 100% Preferred stock 100% Common Stock 100% Common Stock 100% Common Stock 49% Common StockDistribution Multi Utility CUCHoldingsB.O.O

Aqualectra Key Figures year end 2002 Total Assets208 USD Million Shareholders Equity292 USD Million Revenue USD Million Net result USD Million Capacity Electricity235 MW nameplate Capacity Water M 3 / Day nameplate Peak Load Electricity120 MW Daily average Usage M 3 / Day Electricity connections Water connections Personnel737

THE AQUALECTRA EXPERIENCE

Challenges to overcome Increasing untimely payment by customers Increasing non payment by customers Increasing theft As a Consequence Collection process becomes more complex Increasing provision bad debts

Pre-Payment as a solution Main objectives A solution for purchasing of electricity and water in portions according the customers budget Rationalize the process of dis-/ reconnects Minimize credit lines and outstanding arrears Improve public image of Aqualectra Improve overall efficiency of the the collection process

Pre-Payment as a solution The Economic Rationale – The Model basics Supports conversion of conventional to pre-paid water, electricity separately or jointly Implicit assumptions that the products are converted jointly. Unmatched conversion has less benefit on e.g. meter reading and bill distribution Time span of 10 years, coincides with the life cycle of the meter

Pre-Payment as a solution The Economic Rationale – The benefits Earlier collection of revenue Reduction of bad debts write off Collection of old debt through pre-payment surcharge Gain in efficiency of personnel Reduction in dis / re-connect procedures and cycle time Reduction of cost in printing and distributing invoices Reduction of cost in meter reading A profit tax reduction due to increased depreciation and investment allowance of 8% as allowed by Antillean tax laws

Pre-Payment as a solution The Economic Rationale – Expenses Required investment in meters, central equipment and payment points Possible reduction of volume purchased by a more conscious client No collection of surety, Pay back of surety to converted clients Commissions payable to payment points Operational costs of the prepayment system

Payment is received before products are used rather than afterwards The time to process readings and produce and distribute an invoice The time the bill remains outstanding at a customer Pre-Payment as a solution The Economic Rationale – Main assumptions “ Cash collected earlier”

Pre-Payment as a solution The Economic Rationale – Main assumptions “ Aggressiveness in converting problem accounts” The policy is to convert problem accounts into prepaid accounts. This has a significant impact on financial attractiveness of prepaid. An “aggressiveness index” varying from 0% to 100% has been included in the model. The significance of the index is as follows: –if the index is set to 0%, problem accounts are converted to prepaid at the same rate as other accounts. –if the index is set to 100%, problem accounts are aggressively converted to prepaid. Problem accounts are converted to prepaid before any normal accounts. The aggressiveness index has been set to 75%

Pre-Payment as a solution The Economic Rationale – Main assumptions “ Aggressiveness in converting problem accounts”

Pre-Payment as a solution The Economic Rationale – The Base case The following pages illustrate the variable settings and the results of the financial model for a base case, which consists of the most likely assumed values The proportion of the achieved investments, benefits and expenses in the base case is displayed graphically over the first 5 years, which in the base case is the period in which the conversions from traditional to prepaid occur Note: meter investments include installation but are net of recovered installation charges and saved traditional meter replacements

Pre-Payment as a solution The Economic Rationale – The Base case

Pre-Payment as a solution Conclusions and recommendations The base scenario provides a positive picture of the project, with a return on investment (IRR) of 24% In the base scenario, with a yearly investment in prepaid meters (incl. installation), more than half of this expenditure is recovered immediately through the earlier collection of revenues The financial viability is sensitive, however, to a number of the input variables, some of which the utility does not have under its control (reduction in usage) The major benefits in financial terms are the effects of fewer accounts receivable write-offs, early collection, and the tax break caused by depreciation and the investment allowance The investment in meters is by far the largest component of investment, overshadowing investment in central equipment and payment points

Pre-Payment as a solution Conclusions and recommendations continued We believe that prepaid has clear financial benefits when performed for problem accounts (because conversion to prepaid reduces account receivable write-offs and money-losing cutoff procedures) and in the case of new installations, where most or all of the investment can be recovered from the client. We believe the model shows that the benefits of conversion of a normal account (a well-paying customer) does not outweigh the investment, however: In the case that a normal account is charged for the conversion to prepaid the ROI will not be negatively impact

Pre-Payment as a solution Conclusions and recommendations continued The “aggressiveness index” is a major factor in the financial viability of the project. It is recommended to pursue at least a moderately aggressive policy of converting problem accounts to prepaid. The sensitivity analysis shows only marginal to negative viability if lower aggressiveness indices are used. The above must be tempered by the realization that Prepaid should probably not be marketed as a solution for problem accounts only. Doing so might create a stigmatization of the concept, endangering the overall project.

Some Images Electricity Distribution – Pre-Paid Meters

Concluding Remarks Stakeholder perspective Stakeholder Satisfaction Stakeholder Contribution Investors Customers & Intermediaries Employees Regulators & Communities Suppliers

Concluding Remarks The Aqualectra Experience DIVERSIFICATION / INNOVATION  PARADIGM Pre-payment concept fully accepted ( pre-paid electricity meters installed/ Water in pilot phase ) Increasing demand (instead of technology push) Economic rationale Contributed to a positive image of “Aqualectra Corporate Citizenship”

Pre-Payment the “Aqualectra Experience” by Steven Martina President & CEO Aqualectra Metering, Billing, CRM/CIS Americas Sao Paulo, Brazil, 12, 13, 14 August 2003 THANK YOU FOR YOUR ATTENTION