Todos los derechos reservados para XM S.A E.S.P APEx Conference October 14 to October 17 Paris, France Central and South American Markets Luis Alejandro Camargo S. Wholesale Market Manager XM S.A. E.S.P.

2 Contents Markets characteristics Markets situation Conclusions

3 MER MÉXICO R: 35% R: 25% GHGH Capacity Generation D Demand Central American and Mexican Power Systems GD 49,8 32,4 GW Mexico G D 1,4 1,8 GW Guatemala GD 1,09 0,88 GW Salvador GD 1,6 1,13 GW Honduras Nicaragua GD 0,56 0,48 GW Costa Rica GD 2,1 1,4 GW Panama GD 1,3 1 GW R: 35% R: 24% R: 19% R: 28% R: 14% R: 32% R: 21% MER Mexico

4 South American Power Systems CAN – Andean Community - Chile MERCOSUR The Southern Common Market Venezuela G Capacity Generation D Demand Colombia Ecuador Peru Bolivia Chile Argentina Brazil Paraguay Uruguay GW BRAZIL CAN MERCOSUR

5 Markets characteristics Monopoly Open Access Competitive State Monopoly Single Buyer (Monopsony) Wholesale energy market Honduras Costa Rica Venezuela Paraguay

6 State Monopoly Single Buyer (Monopsony) Markets characteristics Wholesale energy market Honduras Costa Rica Venezuela Paraguay Under construction Monopoly

7 Wholesale Spot Prices ―Nicaragua ―Uruguay ―Guatemala ―El Salvador ―Panama ―Ecuador ―Peru ―Bolivia ―Argentina ―Colombia

8 Markets situation

9 Economic and electricity demand growth Electricity Demand Economic Growth (05-06) 4.5% 5.0% 5.6% 5.9% South America Central America

10 Markets situation New Reliability Charge scheme Organized Forward Energy Market Derivative Clearinghouse Secondary natural gas market Interconnection to Panama Power System Reliability Regulation under revision Policy of nationalization – power resources. Power taxing Country Institutions to be Transformed Regulation of Electricity for Imp and Exp High demand growth Development of the electrical infrastructure Electricity market redesign Peru Policy of subsidy fuels Electricity importation from Colombia: 12% Policy of self-supplying High investment in generation. Hydroelectric projects in construction Political unstability. Institutions expected to be Transformed. New constitution 300MW 500MW 100MW 336MW Ecuador Colombia Bolivia CAN Region Government announces for returning to CAN National Electricity Corporation Policy of nationalization of power resources and services Subsidy to the public services High dependency on liquid fuels. High prices Long rationing in Nicaragua Regional electricity market where trading is limited by transmission constrains Political influence on regional market Panama interested to be part of CAN  Framework Treaty (1995)  Transitory regulations of Operation and Trading (2002)  Regulator, ISO and PX Regional  MER Regulation (2005)  Application of the transitory regulation MER Region (SIEPAC) Venezuela 200MW

MW 6,300 MW 900 MW 70 MW 2,000 MW 600 MW High demand growth Competition in the long term supply: auctions for US122 billions Distribution companies must buy for the long term Balancing spot market Power Rationing 2007 High dependency on natural gas Political influence on the market High dependency of foreign oil and natural gas Policy of self-supplying Interest to become part of CAN Chile High participation of vertically integrated public company High dependency of oil State monopoly Bi national projects with Brazil and Argentina Modernization of the sector towards integration with Mercosur Brazil Uruguay Argentina Paraguay Markets situation

12 Conclusions Renewed political influence in Power Sector Self-supplying policies in most countries Low progress in markets development and regional agreements: CAN, MERCOSUR and SIEPAC Power sector nationalization in Venezuela, Bolivia, … High demand growth and fast reserve reductions in the region Subsidies to public services Weak market signals for new investments

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