1. Innovation Energie Développement IFRERA-Intermediate progress Meeting Activity in Indonesia SULAWESI PROJECT PRESENTATION LYON, JULY 20th 2005

2. Innovation Energie Développement General context of the project Demand : 35 GWh, peak load 9MW 77% is Residential consumption, the main driver for growth. Current supply : exclusively diesel engines (12MW), with increasingly high operating costs. The project considers the interconnection of 4 currently independent systems in order to:  improve supply stability  provide 24h supply  ease energy placement  higher public relations profile (IPO) Three run-of-the-river, mini-hydro sites have been identified in the South-East Sulawesi Island of Indonesia. Sambilambo : 3.1 MW Mikuasi 1.8 MW Rate Limbong 1.3 MW 6.2 MW

3. Innovation Energie Développement Feasibility study achievements Project sizing optimized (max. energy placement over project lifetime).  Full energy placement occurs in 2012 with 43 GWh supplied. The national authority (DJLPE) and the local authority (mayor of Mikuasi) are supportive of the project because of development opportunities. The potential developer is Indonesia Power (IP), and is now negotiating a PPA with the national utility PLN, based on the IFRERA F/S. Total investment package :  US$10m  30% equity injection  50% USD and 50% Rupiah investment

4. Innovation Energie Développement Financial Analysis and Results A financial analysis was conducted based on the criteria, assumptions and method wished by IP. The objective of this study : to identify the PPA tariff price that enables IP’s profitability target (IRR = WACC + 5%) At US$53/MWh : price is lower than end- customer prices and competitive with diesel engines.

5. Innovation Energie Développement Sensitivity study (1/2)

6. Innovation Energie Développement Sensitivity study (2/2) Worst case scenario : 100% Rupiah investment, leading to US$ 82/MWh (uncompetitive price) 100% USD investment leads to PPA price = US$45/MWh, but the project is very much exposed to exchange rate risks. Conclusion : to improve competitiveness it is preferable to invest in US$ as much as possible, WHILE mitigating the exchange rate risk with PLN in PPA arrangements (by agreeing on a PPA price in US$ for example).

7. Innovation Energie Développement Open questions for debate How could the IFRERA team help the project to reach achievement stage ? What could be drawn from this experience for economic and financial training sessions in Asia ? Other questions … Sensitivity analysis: compare the evolution of the oil price and the impact on diesel generation price.