dados econ?micos financeiros - laudo de avalia?

0 2015 KPMG Corporate Finance Ltda., a Brazilian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in Brazil.

Eneva S.A. in Judicial Recovery Economic and Financial Valuation Report of

Eneva Participaes S.A. in Judicial Recovery and Parnaba Gs Natural S.A.

CORPORATE FINANCE

April 13, 2015

To the Board of Directors of Eneva S.A. in Judicial Recovery Rio de Janeiro - RJ April 13, 2015 Economic and financial valuation report of: Eneva Participaes S.A. in Judicial Recovery and Parnaba Gs Natural S.A. Dear Sirs, Under the terms of our proposal, dated April 9, 2015, for professional services and subsequent understandings, KPMG Corporate Finance Ltda. (KPMG) has performed the economic and financial valuation of Eneva Participaes S.A. in Judicial Recovery (Eneva Participaes JR) and Parnaba Gs Natural S.A. (PGN), at the base date of December 31st, 2014. It is imperative to point out that this version of the valuation report is a free translation from Portuguese to English; therefore, in case of discrepancies between the report in Portuguese sent on April 13, 2015 and the free translation report, the former shall prevail in all matters. Yours Sincerely, Augusto Sales Paulo Gulherme Coimbra Partner Partner

ABCD KPMG Corporate Finance Ltda. Av. Almirante Barroso, 52 4th 20031-000 - Rio de Janeiro, RJ - Brazil P.O. Box 2888 20001-970 - Rio de Janeiro, RJ Brazil

Phone 55 (21) 3515-9400 Fax 55 (21) 3515-9000 Internet www.kpmg.com.br

2015 KPMG Corporate Finance Ltda. is a Brazilian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss entity. All rights reserved.

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Important Notes

For the benefit of this report, Eneva S.A. in Judicial Recovery (Eneva JR or Client), Eneva Participaes S.A. in Judicial Recovery (Eneva Participaes JR) and Parnaba Gs Natural S.A. (PGN), altogether will be referred to as Companies.

On February 12th, 2015, Eneva and Eneva Participaes filed a Plan for Judicial Recovery (JRP), in accordance with Article 53 of the Brazilian Judicial Recovery Law. Within this context, Eneva JR seeks to initiate a capital increase. Such potential capital increase envisages a change in Eneva JRs shareholding structure, and, in case the JRP obtains full approval for execution, such mutations in shareholding structure are planned to be made through the following contributions: (i) cash; (ii) credit capitalization; (iii) and asset subscription.

Within such context, E.ON SE (E.ON), through its subsidiary DD BRAZIL Holdings S..R.L (the main shareholder of Eneva JR and of Eneva Participaes JR), is interested in subscribing assets in the intended transaction (item iii of the capital increase in the JRP). In effect, E.ON is willing to contribute its 50% stake in Eneva Participaes JR and 9.09% stake in PGN (Transaction).

This report has been elaborated by KPMG, as per Eneva JRs Board of Directors requisition, as a support for the Transaction. The report, according to the JRP, will be presented to Eneva JRs Creditor Committee. In case of approval, the report will be presented to the Extraordinary General Shareholders meeting.

This report may not be circulated, copied, published or, by any matters, utilized, nor may it be archived, partly or integrally, without KPMGs previous consent. As this report will be used in the analysis of a potential capital increase transaction (Transaction) involving Eneva JR, which is a Brazilian company listed with the So Paulo Stock Exchange (Bovespa), as well as subject to the reporting requirements of the Brazilian Stock Exchange Commission (CVM), the Client may give access to the report to CVM only to the extent required by law and shall remain fully responsible for any damage or injury resulting or arising from such access, which may be experienced by Eneva, KPMG, including representatives of KPMG, or any third party.

The economic and financial valuation of Eneva Participaes JR was based on (i) Discounted Cash Flows (DCF) for Parnaba III Gerao de Energia S.A., Parnaba IV Gerao de Energia S.A. and PGN, and on (ii) Adjusted Book Value methodology for the other companies presented on page 71, and performed by KPMG, on the base date of December 31st, 2014.

The Client and E.ON, through its designated professionals, provided information regarding the Companies and their respective markets, which has been used for this report. The Companies will be referred to in this report altogether as Information Providers.

The services rendered by KPMG were based on the following information provided by Eneva JR: BAL ENEVA PARTIC_DEZ_2014.xls, Bdados_dez 2014.xlsx, MPX EON

Consolidado MPX Dez-14 (EQ).xlsx, unaudited financial data related to Eneva Participaes JR and its subsidiaries as of 31/12/2014, based on cost approach;

20.1.7 ENEVAValuationComplete_v306_KPMG.xlsx, related to downstream business and Eneva Participaes JRs valuation;

Availability MTP v5_completo.xlsx, Despacho_v6.xlsx, related to the estimated dispatch projections of the thermal power plants involved in the downstream business;

Fixed O&M breakdown.xlsx, related to the fixed O&M costs of UTE Parnaba III e IV;

Hour dispatching Overhaul.xlsx, related to the overhauling costs of UTE Parnaba III and IV;

APLICE DE RISCOS OPERACIONAIS.msg, related to the insurance costs of UTE Parnaba III and IV;

mutuos_Dez14.pdf, related to the intercompany loans within Eneva Participaes JR; and

WK breakdown.xlsx, related to the working capital breakdown for UTE Parnaba III and IV.


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Important Notes

The services rendered by KPMG were based on the following information provided by E.ON: EON proposal dispatch 2015.03.18.xlsx capex and opex projection, related to

upstream business; Overview of E&P assumptions 2015.03.13.pdf summary of E.ONs view on PGN

production modeling; EON proposal dispatch 2015.03.18.xlsx Other pertinent information; 1. Untitled_23032015_112117.pdf Apresentao ANEEL, PGNs business

presentation; FS_Eneva_2014_eng.pdf, Enevas Historical financial statement data of

31/12/2014, which is unaudited; Final Report Pecm II_extract for KPMG.pdf, MPX_FS YE 2012_page 81.pdf, to

support the PPA renewal assumption for UTE Parnaba III and IV; and PGN profile EON vs BTG 20150318.pptx analysis comparing main assumptions

between EON and BTG regarding the information related to the Gas Reserves under the Parnaba Basin, Capex projection, Opex projection for PGN and BPMB

It is imperative to point out that this version of the valuation report is a free

translation from Portuguese to English; therefore, in case of discrepancies between the report in Portuguese sent on April 13, 2015 and the free translation report, the former shall prevail in all matters.

KPMG based its work on the information provided by the Information Providers and/or other representatives of such Information Providers. Therefore, the Client, including its Management, takes responsibility for all information provided to or discussed with KPMG.

Any changes in the information provided by the Client and E.ON to KPMG may impact the results of this report. KPMG assumes no responsibility for updating, reviewing or amending this report, as a result of the disclosure of any information subsequent to the date of the issuance of this report.

During the course of our work, we carried out analysis procedures whenever necessary. However, we emphasize that our work did not constitute an audit of the financial statements or of any other information provided by the Client or E.ON and should not be interpreted as such. Our work took into consideration the relevance of each item, therefore, less relevant assets and liabilities were not analyzed in detail.

KPMG has not verified independently the information provided by the Client, so, it cannot confirm the precision, accuracy and sufficiency of such information and, therefore, the Client assumes all responsibility for the information provided to KPMG.

The preparation of this report was based on our reliance, with the express approval of the Client, on the accuracy, content, veracity, completeness, sufficiency and integrity of the data provided to or discussed with KPMG. Thus, KPMG has not inspected any asset, or prepared or obtained an independent valuation of the Clients assets, liabilities, or its solvency. Therefore, the Client, including its Management, takes responsibility for all information provided to or discussed with KPMG.

All estimates and projections herein presented have been provided by the Information Providers; when necessary, such estimates and projections have been adjusted by KPMG, according to its own judgment on their reasonability, and are assumed to be underpinned by the Information Providers managements best evaluation of the Companies and respective markets best perspectives.

Except when otherwise stated, in footnotes or specific references, all data, historic or market information, estimates, projections and assumptions, included, considered, used or presented in this report were provided by the Client to KPMG.

The information herein presented, related to the Companies financial and accounting conditions, and related to the Companies respective markets, is based on the available data as at December 31, 2014. Any changes in the information provided by the Information Providers may impact the results of this report. KPMG assumes no responsibility for updating, reviewing or amending this report, as a result of the disclosure of any information subsequent to December 31, 2014, or any other subsequent event

The shareholder structure and participation percentages of related/controlled companies presented in this report have been provided to KPMG by the Information Providers, and have not been subject to KPMGs independent verification.


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Important Notes

We emphasize that the determination of the economic value of possible contingencies, and other adjustments to the financial statements (if applicable) were not part of the scope of this report. Thus, with respect to such items, our work was based on information and analysis made available by the Client and/or their auditors, lawyers and/or other advisors.

This report has been elaborated according to the economic and market conditions, among others, available as at the elaboration time period. The conclusions herein presented, therefore, are subject to exogenous variations of which KPMG does not have any control.

The sum of the individual values herein presented may diverge from the sums presented in this report, due to rounding issues.

Although the work on which this report is based was performed independently by KPMG under technical supervision, the analyses of the different factors that characterize the valuation report is subjective in nature. Therefore, when performed by other professionals, such analyses may express points of view different from those presented by KPMG.

Our valuation was made on the basis of events which can be reasonably expected, and therefore does not take into account extraordinary and unforeseeable events (new industry regulations, changes in tax laws, natural catastrophes, major social and political events, nationalization etc.), which may cause adverse effects on the Companies.

This report is not to be used as a sole basis for the evaluation of the Companies, for the report does not contain all necessary information for such use. Therefore, this report is not to be interpreted as a proposal, solicitation, suggestion, nor recommendation by KPMG for the Transaction. Any decision taken by the Companies shareholders shall be assumed integrally by the same shareholders. KPMG will not take any responsibility as to the Companies shareholders decisions.

We emphasize that a valuation establishes a theoretical estimate within an interaction involving a buyer and a seller, where both are intended to close a deal, with the necessary access to all relevant information, and assuming that neither parties have the immediate necessity to buy or sell. An effective negotiation does not necessarily reflect such conditions, and may include

other elements; consequently, the estimated value need not be used in the effective transaction.

This report does not envisage the satisfaction of any personal nor specific interests. Thus, results from other evaluations, elaborated by third parties, may diverge from our results. Notwithstanding, such divergence should not be regarded as an inherent deficiency of the realized work.

The Companies shareholders have to perform their own analyses regarding the Transaction, through the consultation of their own financial, tax and legal advisors, in order to define their own opinion as to the Transaction. This report is to be read and interpreted with full consciousness of our already mentioned restrictions. In addition, the reader must be aware of the restrictions and characteristics of inherent to the Information Providers.

This report is to be solely used within the Transaction context, as herein described. We cannot guarantee that this report may be used in other contexts. Furthermore, we emphasize that KPMG will not perform additional services, and will not adapt this report for other objectives.

The scope of our engagement did not include the detection of fraud in the Companies operations, processes, records or documents.

Valuations, in general, present significant degrees of subjectivity. Thus, there are no guarantees that any assumptions, estimates, projections, results, or the preliminary results presented in the work document will be effectively noted and/or verified, in their entirety, or partially. Hence, KPMG is not responsible, and cannot be held responsible for any differences between the valuation results, and the results noted a posteriori.

The services performed herein may have been based on legal and administrative rules. In this regard, we note that our legislation is complex and often the same provision can be interpreted in multiple ways. KPMG always seeks to be up-to-date on the various interpretative tendencies, in order to permit a broad assessment of the alternatives and risks involved. Even so, there may be some interpretations of the law that differ from ours. Under these circumstances, neither KPMG, nor any other firm, can provide total assurance that the Company will not be questioned by third parties or government authorities.


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Contents

Glossary

I. Executive Summary

II. Information about the appraiser

III. Information about the companies

IV. Market information overview

V. Valuation Methodology

VI. Assumptions

IX. Valuation

Appendix I Curricula vitae

Appendix II Balance Sheet

Appendix III Book Value

Appendix IV Discount Rates

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Contents

ACL Energy Free Market ACR Energy Regulated Market ANEEL Brazilian Electricity Regulator ANP Brazilian Petroleum National Agency BACEN or BCB Central Bank of Brazil BCM Billion Cubic Meters BMI Business Monitor International BM&F Commodities and Futures Stock Exchange BOVESPA Brazilian Stock Exchange CAGR Compounded Annual Growth Rate CAPM Capital Asset Pricing Model CCEAL Energy Trading Contracts in the Free Market CCEAR Energy Sales in the regulated market CCEE Energy Commercialization Chamber of Commerce COFINS Contribution for Social Security Financing (Federal Tax Over Revenues) CoGS Cost of Goods Sold CRP Country Risk Premium CVM Securities and Exchange Commission CVU Unitary Variable Cost

D&A Depreciation and Amortization DCF Discounted Cash Flow EBIT Earning Before Interest and Tax EBITDA Earnings Before Interest, Tax, Depreciation and Amortization EBT Earning Before Tax EIA Energy Information Administration EIU Economist Intelligence Unit EMBI Emerging Market Bond Index EPE Brazilian Energy Research Entity ERP Equity Risk Premium


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Contents

E&P Exploration & Production

GDP Gross Domestic Product

GVB Gavio Branco Gasfield GVR Gavio Real Gasfield GW Giga Watt IBGE Brazilian institute of Geography and Statistics IFRS International Financial Reporting Standards INEA Enviroment State Institute IPCA Brazilian Consumer Price Index IRPJ Brazilian Corporate Income Tax ITS Quarterly Financial Statement JRP Judicial Recovery Plan KPMG KPMG Corporate Finance Ltda. LNG Liquified Natural Gas MBA Masters in Business Administration MMBtu One Million British Thermal Unit MW Mega Watt MWh Mega Watt Hour M&A Mergers & Aquisitions NOPAT Net Operating Profit After Tax NPV Net Present Value ONS Brazilian Interconnected Grid Operator Opex Operational Expenses O&M Operation & Maintenance PE Private Equity PIS Brazilian Social Integration Program PLD Energy Spot Price PPA Power Purchase Agreement PPP Public-Private Partnership


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Contents

RGR Eletrobras R&D Fund R$ Brazilian Real R&D Research and Development RF Risk Free SE Shareholders Equity SELIC Brazilian Interest Rate SG&A Sales, General and Administrative Expenses SPE Special Purpose Vehicle SUDENE Superintendency for the Development of the Brazilian Northeastern Region TPP or UTE Thermal Power Plant TCF Trillion Cubic Feet WACC Weighted Average Cost of Capital WC Working Capital

BNDESPAR Brazilian National Bank of Social and Economic Development Investment Vehicle

BPMB BPMB Parnaba S.A.

BTG Banco BTG Pactual S.A. Cambuhy Cambuhy Investimentos Eneva JR Eneva S.A. in Judicial Recovery

Eneva Participaes JR Eneva Participaes S.A. - in Judicial Recovery E.ON E.ON S.E. PGN Parnaba Gs Natural S.A.

OGX An Oil & Gas Company from the EBX Group


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VI. Assumptions

IX. Valuation





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Introduction

Eneva JR is a publicly-listed company and Eneva Participaes JR is a joint venture owned by Eneva JR (50%) and E.ON (50%).

On February 12th, 2015, Eneva and Eneva Participaes filed a Plan for Judicial Recovery (JRP), in accordance with Article 53 of the Brazilian Judicial Recovery Law. Within this context, Eneva JR seeks to initiate a capital increase transaction. Such transaction envisages a change in Eneva JRs shareholder structure, and, should the JRP obtain full approval for execution, such mutations in shareholder structure are planned to be made through the following contributions: (i) cash; (ii) credits capitalization; (iii) and assets subscription.

Within such context, E.ON, as main shareholder of Eneva JR and Eneva Participaes JR, is interested in subscribing assets in the intended transaction (item iii of the capital increase in the JRP). In effect, E.ON is willing to contribute with its 50% stake in Eneva Participaes (downstream) and a 9.09% stake PGN (upstream).

Given the above mentioned context and background, the objective of our work, in accordance with the Clients request was to perform a valuation of PGN and Eneva Participaes, in order to underpin the possible asset subscription.

Basis of information The main basis of information used from Eneva RJ is listed below:

BAL ENEVA PARTIC_DEZ_2014.xls, Bdados_dez 2014.xlsx, MPX EON Consolidado MPX Dez-14 (EQ).xlsx, unaudited financial data related to Eneva Participaes JR and its subsidiaries as of 31/12/2014, based on cost approach;

20.1.7 ENEVAValuationComplete_v306_KPMG.xlsx, related to downstream business and Eneva Participaes JRs valuation;

Availability MTP v5_completo.xlsx, Despacho_v6.xlsx, related to the estimated dispatch projections of the thermal power plants involved in the downstream business;

Fixed O&M breakdown.xlsx, related to the fixed O&M costs of UTE Parnaba III e IV;

Hour dispatching Overhaul.xlsx, related to the overhauling costs of UTE Parnaba III and IV;

APLICE DE RISCOS OPERACIONAIS.msg, related to the insurance costs of UTE Parnaba III and IV;

mutuos_Dez14.pdf, related to the intercompany loans within Eneva Participaes JR; and

WK breakdown.xlsx, related to the working capital breakdown for UTE Parnaba III and IV.

The main basis of information used from E.ON is listed below: EON proposal dispatch 2015.03.18.xlsx capex and opex projection,

related to upstream business; Overview of E&P assumptions 2015.03.13.pdf summary of E.ONs view

on PGN production modeling; EON proposal dispatch 2015.03.18.xlsx Other pertinent information; 1. Untitled_23032015_112117.pdf Apresentao ANEEL, PGNs

business presentation; FS_Eneva_2014_eng.pdf, Enevas Historical financial statement data of

31/12/2014, which is unaudited; Final Report Pecm II_extract for KPMG.pdf, MPX_FS YE 2012_page

81.pdf, to support the PPA renewal assumption for UTE Parnaba III and IV; and

PGN profile EON vs BTG 20150318.pptx analysis comparing main assumptions between EON and BTG regarding the information related to the Gas Reserves under the Parnaba Basin, Capex projection, Opex projection for PGN and BPMB.

The valuation was based substantially on information and assumptions provided by the Clients Management and E.ON, which were discussed with and analyzed by KPMG.

It is imperative to point out that this version of the valuation report is a free translation from Portuguese to English; therefore, in case of discrepancies between the report in Portuguese sent on April 13, 2015 and the free translation report, the former shall prevail in all matters.


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I. Executive Summary (cont.)

Subsequent events

Our work was based on the equity position and information obtained prior to the date of issuance of this report.

We emphasize that any relevant facts that may have occurred between December, 2014 and the date of issuance of this report, and that were not brought to KPMGs knowledge could affect the analysis of the Company.

It is important to point out that KPMG will not update this report after the date of issuance.


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Summary of Results

Based on the scope of our report, and subject to the assumptions, restrictions, and limitations described herein, we have estimated the fair value of Eneva Participaes JR and PGN as at December 31, 2014, as presented below.

Eneva Participaes S.A. in Judicial Recovery

E.ONs stake (50.0%) (R$MM)

158.63 166.18 151.07

- +

PGN

* Range considered in accordance with CVM instruction n 436.

Equity Value per share

(R$) 1.13

1.19 1.25

PGNs valuation, as at December 31, 2014, ranges from R$ 985.0 million to R$ 1,083.2 million. The valuation of E.ONs stake in PGN (9,09%) ranges from R$ 89.5 million to R$ 98.5 million.

The valuation methodology applied, in order to determined the value of PGN, was the discounted cash flow method (presented on pages 58 to 60) .

Eneva Participaes in Judicial Recovery valuation, as at December 31, 2014, ranges from R$ 302.1 million to R$ 332.4 million. The valuation of E.ONs stake in Eneva Participaes in JR (50,0%) ranges from R$ 151.1 million to R$ 166.2 million.

The valuation methodology applied for the operational subsidiaries was the discounted cash flow approach (presented on pages 51 to 57). As for the non-operational and pre-operational subsidiaries, the applied methodology has been the cost approach, which considers the book value of shareholders equity (presented on page 71).

Equity Value 100%

(R$ MM) 302.15 317.26 332.36

E.ONs stake (9.09%) (R$MM)

94.00 98.46 89.53

- +

Equity Value per share

(R$) 1.46

1.53 1.60

Equity Value 100%

(R$ MM) 984.96 1,034.08 1,083.20


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Contents

Glossary






VI. Assumptions

IX. Valuation





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The KPMG Network KPMG Corporate Finance Ltda. is part of a global network of independent

firms that provide Audit, Tax and Advisory services. KPMG International provides no services. However, its member firms perform Audit, Tax and Advisory practices (through the Audit departments, Tax and Advisory, respectively). Together, KPMG International's member firms have more than 155 thousand employees across the world, and is present in 155 countries.

KPMG brand was created in 1987 from the merge of Peat Marwick International (PMI) and Klynveld Main Goerdeler (KMG).

KPMG Internationals member firms in Brazil, through its various autonomous offices, account for 156 partners and more than 3,282 employees in 22 cities: So Paulo (headquarters), Belo Horizonte, Belm, Braslia , Campinas, Curitiba, Cuiab, Florianpolis, Fortaleza, Goinia, Joinville, Londrina, Manaus, Osasco, Porto Alegre, Recife, Ribeiro Preto, Rio de Janeiro, Salvador, So Carlos, So Jos dos Campos and Uberlndia.

The Corporate Finance segment of KPMG International member firms sum up to approximately 2,100 professionals, in more than 100 offices across 82 countries.

KPMG Corporate Finance Ltda., a Brazilian company incorporated in the 1990s, leads and manages negotiations within corporate transactions, including mergers and acquisitions, dispositions, structured finance, project finance, debt advisory, privatization and economic and financial appraisals services.

Internal process of approval of the report The economic and financial valuation of the Companies was performed by

a team of qualified consultants, monitored and reviewed by the engagement partner. In addition, the team was also composed of a partner-reviewer, a senior manager and a manager.

The approval of the report occurred only after it was reviewed by the engagement partner and the partner-reviewer.

Identification and qualification of the involved professionals

Augusto Sales, Paulo Guilherme Coimbra (project leader), Cludio Ramos, Rben Palminha and Fabiano Delgado coordinated and participated in the development of the assessment presented in this report. For more information, please refer to Appendix I.

Appraiser declarations KPMG Corporate Finance declares, in March 15th, 2015, that:

It does not entitle any shares of PGN, Eneva JR or Eneva Participaes JR, nor do its partners, directors, officers, directors, controllers or persons related to them;

There are no commercial and credit relations that could impact the Report;

There is no conflict of interest that impairs the necessary independence required for the performance of this work..


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II. Information about the appraiser (cont.)

Presented below are some of KPMGs experiences in the energy & natural resources:sector:

KPMG Corporate Finance

2014

Acted as financial advisor for LNG tariff review

Petra Energia and Parnaba Gs Natural


Valuation advisory related to the acquisition of several wind power projects from Sowitec

Enel

2014


2014

Valuation related to a 20% stake acquisition of Jirau HPP (3,750

MW)

Mitsui & Co


2014

Valuation related to the acquisition of Unisa

TAESA (Cemig Group)


2013

Valuation related to the acquisition of Desenvix

SN Power


2013

Valuation of Brasympe for company restructuring purposes

Brasympe


2013

Valuation related to the acquisition of CELPA

(distribution)

Equatorial Energia

KPMG Structured Finance S.A.

2014

Sell-side financial advisor in Vicels sale to Soenergy

Vicel


2014


2013

Valuation related to the acquisition of Elektro

Iberdrola


2013

Valuation related to the acquisition of TBE Group

(transmission)

TAESA (Cemig Group)


2014

Valuation related to the acquisition of 5 electricity transmission companies

State Grid

KPMG Structured Finance S.A.

2013

Valuation related to the acquisition of Grupo Guascor

Dresser Rend



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IX. Valuation





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A Brief History of Eneva JR and Eneva Participaes JR

III. Information about the companies Eneva Participaes Judicial Recovery

2007 2008 2010 2012 2013 2014 2015

Eneva and E.ON form strategic partnership to invest in the energy markets of Brazil and Chile.

Eneva enters the Market with the energy sale from UTE Itaqui and Energia Pecm on the A-5 auction promoted by ANEEL, with supply contract for 15 years.

Lauching of the fundamental stone marks the inicial phase of construction and mounting of one of the leading projects of Eneva's portfolio.

Eneva and OGX start the drilling of 1-0GX-16MA well, located in the PN-T-68 bloc in the Parnaba Basin, State of Maranho, and identify hydrocarbons.

Announcement of increased shareholding agreement between E.ON and Eneva. From that moment, E.ON holds 37.9% of the company's capital, and Eike Batista 23.9%. Parnaba I reaches total installed capacity in commercial operation, with 676 MW.

The Parnaba Natural Gas capital increase is completed. The control shall be exercised by Cambuhy, Eneva and E.ON. Eneva announces capital increase of up to R$ 1.5 billion and debt restructuring in their holding.

Eneva and Eneva Participaes, on February 12th, 2015, filed a Plan for Judicial Recovery (JRP), in accordance with Article 53 of the Brazilian Judicial Recovery Law. Within this context, Eneva seeks to initiate a capital increase (among other things) after the complete judicial approval.

Eneva initiates its judicial recovery process on December 9th, 2014. The judicial recovery process is a consequence, among other factors, of (i) not renewing the agreement to suspend the amortization and payment of interest of financial transactions contracted by Eneva and certain subsidiaries with its financial creditors, expired on November 21st, 2014; and (ii) not having reached an agreement with the financial institutions involved in the implementation of Enevas stabilization plan aimed at strengthening the capital structure and measures for the re-profiling of Enevas financial debt.

Operational Information

Eneva JR has a portfolio of gas fueled power plants, and has an array of possible greenfield coal and wind power projects.

Eneva JR has long term PPAs, which are indexed by inflation rates.

Integrated assets of gas exploration and production meet the demands of the plants owned by Eneva JR.

Source: Eneva JR

* Income statement - Eneva Participaes JR *R$ MM 31/12/2014Net revenues 499.14

Cost of goods sold (553.21)Gross profit (54.07)

SG&A (10.31)EBIT (64.38)

Financial expenses (19.28)EBT (83.66)

Deferred tax 21.24Lucro lquido/prejuzo (62.42)

* non-auditedNet income/losses (146.07)Net income/losses (62.42)


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ENEVA Comerc. de

Energia Ltda..

III. Information about the companies (cont.) Eneva Participaes Judicial Recovery

Source: Eneva JR

100%

Seival Participaes

S.A.

Seival Gerao de

Energia Ltda.

Au II Gerao de Energia S.A.

UTE Porto do Au

Energia S.A.

ENEVA Solar Empreendimen-

tos Ltda.

Tau Gerao De Energia

Ltda.

ENEVA Comerc. de

Combustveis Ltda.

Sul Gerao de Energia Ltda..

Au III Gerao de Energia

Ltda.

50% 50% 50% 50% 50% 100%

Parnaba Participaes

S.A. SPEs Ventos*

* Central Elica Algaroba Ltda. Central Elica Asa Branca Ltda. Central Elica Boa Vista I Ltda. Central Elica Boa Vista II Ltda. Central Elica Boa Vista III Ltda. Central Elica Bonsucesso Ltda. Central Elica Bonsucesso II Ltda. Central Elica Milagres Ltda. Central Elica Morada Nova Ltda. Central Elica Ouro Negro Ltda. Central Elica Pau Branco Ltda. Central Elica Pau DArco Central Elica Pedra Branca Ltda. Central Elica Pedra Rosada Ltda. Central Elica Pedra Vermelha I Ltda. Central Elica Pedra Vermelha II Ltda. Central Elica Santa Benvinda I Ltda. Central Elica Santa Benvinda II Ltda. Central Elica Santa Luzia Ltda. Central Elica Santo Expedito Ltda. Central Elica So Francisco Ltda. Central Elica Ubaeira I Ltda. Central Elica Ubaeira II Ltda.

Parnaba Gerao e Comerc. de Energia S.A.

Parnaba IV Gerao de Energia S.A.

70%

70%

Parnaba III Gerao de Energia S.A.

70%

ENEVA PARTICIPAES

S.A.

MPX Chile Holding

Ltda.

50% 100% 100% 100% 100%

100% 1

2

3

4 6 7

5

8 9 10 11 12 13 15 16

14


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Parnaba Participaes S.A.


Parnaba III & IV

Originally denominated as UTE MC2 Nova Vencia, UTE Parnaba III was owned by the Bertin Group. The project took off after the 2008 A-5 energy auction, with a 15 year concession agreement due in 2027, and was supposed to be constructed in the Esprito Santo state, Brazil.

In 2011, ANEEL authorized the transfer of ownership and contractual modifications including location change - that led to the creation of UTE Parnaba III.

Parnaba IV obtained an authorization in 2013 to operate and sell its energy within the ACL, and its concession agreement is due in 2028.

Source: Eneva JR

Parnaba Gerao e Comercializadora de Energia

Parnaba Gerao e Comercializadora de Energia is an energy trading company, whose provider of electricity is Parnaba IV. In effect, the CCEAL agreement between the TPP and the trading company stipulates that the latter agrees to acquire 5% of the formers gross energy.

Parnaba Comercializadora is a break-even company, therefore does not generate material profits nor losses.

1 2 3

100 %

5 % 95 %

Kinross Mining

CCEAL Agreements

Parnaba Comercializadora

Parnaba IVs generated energy

Overview of Parnaba III & Parnaba IV

Operational highlights Parnaba III Parnaba IV

Concession agreement CCEAR N 7179/08

N/A ( 1 )

Full installed capacity (MW) 176 56

Physical guarantee (MW) 101.8 52

Net physical guarantee (MW) 98 49 Concession/authorization expiry 2027 2028 (1)

(1) - Parnaba IV is a "Free Market" power plant, which operates under an authorization agreement. It obtained a license/authorization to operate and sell energy in bilateral agreements.


20

Company Description Equity Value at 100% (R$ MM)

Seival Participaes S.A. Holding company, which detains the control of Seival Participaes Gerao Ltda. 39.49

Seival Gerao de Energia Ltda.

Located in Candiota, Rio Grande do Sul, the company envisages a possible development of a coal-fueled thermal power plant (600MW installed capacity). The project, for the time being does not have any PPA, nor concession agreement or source of financing.

-

Au II Gerao de Energia S.A.

Located in the northeastern region of the Rio de Janeiro state, the company was set up in order to install a gas fueled power plant in the Au Complex. However, the project is currently in standby.

4.67

UTE Porto do Au Energia S.A.

Located in the northeastern region of the Rio de Janeiro state, the company was set up in order to install a coal fueled power plant in the Au Complex. However, the project is currently in standby.

44.00

MPX Chile Holding Ltda. Holding company which controlled the Companies business in Chile that were sold in December, 2014. 0.22

Sul Gerao de Energia Ltda.

Located in Candiota, Rio Grande do Sul, the company envisages a possible development of a coal-fueled thermal power plant (727MW installed capacity). The project does not presently have any PPA, nor concession agreement.

13.15

ENEVA Comercializadora de Combustveis Ltda. It is a non-operational fuel trading company. (0.04)

ENEVA Solar Empreendimentos Ltda.

Is a holding company, which detains control of Tau Gerao de Energia Ltda. 8.42

Overview of the non-operational and pre-operational companies

It is worth noting that even though some of the below mentioned companies have ambitious projects, their book value is, for the time being, not material.


Source: Eneva JR

4

5

6

7

8

10

11

12

Company Description Equity Value at 100% (R$ MM)

Au III Gerao de Energia S.A. Special Purpose Vehicle that was incorporated in order to detain information and technology softwares. 2.52

Tau Gerao de Energia Ltda. Located in Tau, Cear, the company operates a 1MW solar powerplant. -

ENEVA Comercializadora de Energia S.A.

It is an electricity trading company, located in Rio de Janeiro. Its level of activity is not relevant. 19.54

SPE Ventos

Agglutinates 23 special purpose vehicles, which detain preliminar licenses for the development of wind power plants. None of them, however, have PPAs, nor concession agreements.

1.47

13

14

15

16


21

PGN owns a 70% stake in the Consortium that holds the concessions of 7 blocks in the Parnaba Basin (21,000 km).

Current production from GVR field: c. 5.6 million m3/day.

The Consortium estimates reserves of more than 1 TCF (around 32.3 BCM only considering 7 fields nearby GVR and GVB infrastructure hub). When considering a longer projection period, the recuperable gas may reach over 70 BCM, though currently, no certified third party study has been developed.

The company plans to commercially launch 4 fields during 2015. Third party geological studies were hired and results are expected for the 2nd half of 2015.

The blocks operated by Parnaba Gs Natural (former OGX Maranho) were acquired by the PE fund Cambuhy Investimentos and E.ON.

III. Information about the companies (cont.) PGN

Consortiums information

The upstream consortium in the Parnaba Basin (Consortium) currently operates 3 gas fields and 7 exploration blocks with a total approximate area of 21 thousand square kilometers in the Maranho State.

Below is presented a simplified diagram of the Consortiums current operation.

Source: E.ON

Consortium

BPMB PGN

BTG Patcual E.ON Cambuhy Investimentos Eneva JR

9%

70% 30%

100% 18%

73%

Integrated project concept Gas to wire

Long term contracts with thermal plants (UTEs) controlled by Eneva JR and Eneva Participaes JR;

TPPs have long term PPA contracts (15-20 years);

Close to 1GW total capacity already in operation;

UTE I (675MW), UTE III (178 MW) and UTE IV (56MW) are already in operation. UTE II (517 MW) will be concluded in 2018; however, the PPA will start only in 2016 because of the waiver granted by ANEEL.


22

III. Information about the companies (cont.) PGN

In 2015, the company will conduct an onshore drilling campaign in Brazil. Discovered wells and new production wells will be drilled, which could allow PGN to increase production capacity by 70%, by July, 2016, to 8.4 million cubic meters per day.

Source: PGNs annual report 2014

Income Statement

R$ MM 31/12/2013 31/12/2014Sales net revenue 323.71 581.98Costs (118.84) (274.49)Gross profit 204.88 307.49Operational expenses

Exploration expenses (76.06) (43.77)SG&A (25.57) (30.88)Other operational revenues/expenses (0.56) (8.35)

Operational expenses (102.19) (83.01)EBIT 102.69 224.48Financial results

Financial revenues 24.83 55.73Financial expenses (73.11) (92.15)Exchange rate net variation (33.65) (9.99)

Financial result (81.93) (46.41)EBT 20.76 178.07Income tax and social contribution (7.65) (23.97)Deferred taxes (0.48) (32.36)Net profit 12.64 121.74


23

Contents

Glossary






VI. Assumptions

IX. Valuation





5

9

13

16

23

27

32

49

63

67

70

72


24

Projected

2,50 2,50 2,50 2,55

3,664,21

3,10

4,134,50 4,70

4,79

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

IV. Information about the Market Brazilian Macroeconomic trends

Macroeconomic trends

GDP expanded meagerly in 2014 and more recent data suggest that prospects have worsened.

In 2014, consumers suffered with the government's failed attempt to curb inflation and foster GDP growth. In March 2013 annual interest rate was 7.25%, the lowest in Brazil's history. From then on, there have been nine consecutive hikes, and annual interest rate has reached 12.75%.

According to the Brazilian Central Bank, the forecasted GDP variation for 2015 and 2016 are 0.5% and 1.8% respectively.

Projected

Exchange Rate (USD/BRL) annual variation (%)

Source: BCB (31/12/2014)

1,76 1,67 1,94

2,14 2,36

2,71 2,76 2,79 2,86 2,96

3,06

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Henry Hub (USD$/MMBtu)

Source: Bloomberg (31/12/2014)

5,91

6,50

5,84 5,80

6,38 6,56

5,70 5,50 5,50 5,50 5,50

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

IPCA annual variation(%)

Source: BCB (31/12/2014)

Projected


25

IV. Information about the Market Brazilian Energy sector overview: Electricity

77% of the electricity in Brazil comes from hydraulic plants, which are responsible for 76.9% of energy installed capacity. Behind hydro plants, thermal energy is responsible for 12.8% of the installed capacity.

Given the importance of hydraulic resources to the Brazilian electricity sector, the level of reservoirs are of great relevance to the optimization of energy generation, as they represent a form of energy storage.

The illustration below depicts the sources of Brazilian electricity

Producers: responsible for the energy generation that is negotiated in the

ACR, ACL market or spot market.

Transmission: responsible for the operation of transmission grids, which are available for all producers, as long as the grids are interconnected and as long as the producers pay transmission fees.

Hydraulic77%

Natural gas8%

Biomass7%

Nuclear2%

Others6%

Electricity generation

matrix

Distributors: responsible for energy distribution services to distributor consumers, with determined tariffs fixed by ANEEL. Such agents are strictly regulated, and all energy distribution conditions and requirements are under high scrutiny by regulators.

Traders: these agents are allowed to acquire energy through bilateral contracts in the ACL environment, which will then be sold to free consumers, or to distribution companies in tendering process.

Consumers:

a) Free: consumers that fit the necessary legislative requirements and that have the right to choose the energy producer through free bilateral negotiations. (i.e. an industrial player with energy demand above 3 MWh).

b) Distributor consumers: consumers who are not allowed to choose their energy source and are strictly obligated to acquire energy from their local energy distribution company (i.e. residential consumers).

c) Energy importers: agents who possess specific permissions to import energy from a foreign country, in order to supply electricity within the domestic market.

d) Energy exporters: agents who possess specific permission to export electricity to neighboring countries.

Sources of energy

Main agents within the electricity sector

Main agents within the electricity sector

Source: EPE


26

IV. Information about the Market Brazilian Energy sector overview: Oil and Gas

In the next years, oil production in Brazil was expected to grow, thanks to the massive deposit of offshore oil, underneath a thick layer of salt, discovered in 2007. Petrobras, a Brazilian major oil company, projected that oil output may hit 5 million barrels per day by 2020. However, according to the Energy Information Administration (EIA), this production projection is not precise due to an array of factors, such as significant engineering and financing challenges for example, such as the recent reduction of the brent oil price in late 2014 that can reduce the estimate to 4 million barrels per day by 2020 at best (or less, depending on Petrobrasbusiness plan).

Gas production, similarly, is expected to grow vigorously in the next years, reaching 35.9 billion cubic meters by 2023. Production is expected to come mainly from the offshore Campos and Santos basins.

Brazilian proven oil reserves, as reported by EIA, are 13.15 billion barrels, while gas reserves are estimated at 396 billion cubic meters. Additionally, due to new discoveries, oil reserves are projected to reach 19.2 billion barrels and gas reserves to reach 461 billion cubic meters by 2023.

Production Reserves

Projected

Projected

Projected

Source: EIA, BMI 0369

1215

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023Mill

ion

cubi

c m

eter

s pe

r day

Dry Natural Gas Production

0

1

2

3

4

5

6

7

8

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mill

ion

barre

ls p

er d

ay

Proven Oil Reserves

Projected

020406080

100120140160180

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mill

ion

cubi

c m

eter

s pe

r day

Natural Gas Proven Reserves0,00,51,01,52,02,53,03,54,04,5

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

MM

Bar

rels

per

day

Crude oil and Other liquids production4.54.03.53.02.52.01.51.00.50.0


27

Contents

Glossary






VI. Assumptions

IX. Valuation





5

9

13

16

23

27

32

49

63

67

70

72


28

Free Cash Flow to Firm

The Free Cash Flow to the Firm aims to evaluate the company as a whole, that includes, beyond the stockholding, the participation of others holders of rights in the company (holders of bonds, shareholders, etc). The Free Cash Flow to the Firm can be represented by the following formula:

Free Cash Flow to the Firm

Net Profit

Working Capital

Investments (Capex)

=

+

-

Depreciation and Amortization +/-

Discounted Cash Flow

This methodology estimates the economic value (or the market value) of a company by calculating the present value of projected cash flows, i.e. the income and expenses (including investments needed for maintaining and expanding the companys activities) that are predictable from the perspective of perpetuity of the entity. These projections should take into consideration the business plan established by the companys management, the prospects of the sector in which the company operates and macroeconomic aspects.

The Discounted Cash Flow Methodology can be used to value any type of company provided it has a business plan that is consistent and feasible. This methodology is recommended for companies that have reasonable prospects for significant expansion of their activities and whose business plan may be considered appropriate for achieving this growth, since the methodology is based on future cash flows.

This methodology reflects the value of the intangible assets, such as brand name, client portfolio, product portfolio, among others, as all these assets have an effect on the companys capacity to generate results.

This is the commonly used methodology in estimating the market value of companies that are considered going concerns, except when the resulting value is less than the liquidating value of the company (adjusted net worth).

V. Valuation Methodology DCF


29

Discounted Cash Flows Method (DCF)

Historical Balance Sheet

Free Cash Flow To Firm

Assumptions

Historical Income Statement

Projections by Business Units

Projected Income Statement

Projected Capex, R&D, Working Capital

Discounted Free Cash Flow

Projected Balance Sheet

Discount Rate

The cost approach estimates the value of an asset based on its current cost. This approach reflects the idea that the fair value of an asset should not exceed the cost to obtain a replacement with comparable features and functionality. Within this context, book values, with the applicable adjustments, are a consistent manner to estimate the current cost of replacement of an asset.

Book value approach

Current Balance Sheet

Shareholders equity

Book value

Adjustments

V. Valuation Methodology DCF and Book value


30

V. Valuation Methodology Discount rate

D = Total debt E = Total equity t = Tax rate Kd = Cost of debt Ke = Cost of equity

Rf = Average risk-free return = Beta - specific risk coefficient E[Rm] = Average long-term return obtained on the stock market E[Rm] - Rf = Market premium CRP = Country risk Rs = Size premium = Alpha factor Ia = Long-term inflation in the United States Ibr = Long-term inflation in Brazil

E/(D+E)*Ke+(D/(D+E)*Kd = WACC Weighted Average Cost of Capital

D/(D+E)

Kd * (1-t)

E/(D+E)

Ke

=

*

+

*

WACC (Weighted Average Cost of Capital) CAPM (Capital Asset Pricing Model)

Establishing the discount rate is a fundamental stage of the economic valuation. This single factor reflects aspects of a subjective nature, varying from one investor to another, such as opportunity cost and individual perception of investment risk.

The cost of capital for the Companies was calculated using the WACC methodology. WACC takes into consideration various financing components, including debt, cost of equity and hybrid bonds used by companies to finance its cash needs. It is calculated according to the following formula:

The cost of equity for the Companies was calculated using the CAPM methodology. Using the CAPM methodology, the cost of equity is calculated according to the following formula:

+

Rf (1+Ia) x (1+Ibr)

Rs

+

+

[(1+Rf)/(1+Ia)*(1+Ibr)-1] +(*Rm)+CRP+Rs+ = Ke Cost of Equity

=

* (E[Rm] - Rf)

CRP

+


31

V. Valuation Methodology Discount rate (cont.)

To calculate the industry average Beta we have considered for the downstream, an unlevered Beta of 0.57 and for the upstream, an unlevered beta of 0.98. To calculate the average Betas of the sectors we considered the comparable companies.

Country risk premium (CRP) The build up of the cost of equity to this point has been based on

the United States equity and bond markets. As such a CRP is considered a necessary component in the cost of equity to incorporate additional risk associated with investing in the country, which is typically not reflected in the cash flows.

We have assumed a CRP of 2.18% for Brazil in our calculation, this is based on the historical 2 year average (between January 1st, 2013 and December 31st, 2014) of the EMBI+. (Source: JP Morgan).

Size premium The size premium (Rs) represents the additional return required

by investors to incur a higher level of risk to be investing in companies with different levels of size.

To account for PGN and Enevas size, we have added 1.98% to the cost of equity, this is the risk associated with Low Capitalization companies, through studies done by Duff & Phelps (2014).

Alpha factor The alpha factor () represents the additional risk associated with

a more uncertain cash flows (only applied to Parnaba III and Parnaba IV, as referred on page 73).

Risk free rate The risk-free rate is derived with reference to the 2 year average bond yield

on the United States 30 year treasury bond (T-Bond) rate between January 1st, 2013 and December 31st, 2014 or approximately 3.4%. (Source: Bloomberg, historical data)

Equity risk premium (ERP) To estimate the long term stock market risk premium (E[Rm] Rf), we relied

upon the average return above the Treasury Bond rate provided by investing in the U.S. stock market, which was 4.6% (source: Aswath Damodaran website).

Beta Beta is a statistical measure of how closely the value of a stock correlates

with the overall stock market. Beta is a measure of non diversifiable risk and is reflective of the variability of a particular share relative to the market. The average beta of a company is therefore calculated as the average correlation of the daily return of the share relative to the market.

To calculate a meaningful beta for an unlisted entity, the beta of a listed company with comparable business and operational risk is unlevered to remove the effects of the capital structure (i.e. remove the financial risk). The unlevered Beta is then relevered using the capital structure of the company or asset being valued to reintroduce the effects of their own financial risk.


32

Contents

Glossary






VI. Assumptions

IX. Valuation





5

9

13

16

23

27

32

49

63

67

70

72


33

Assumptions Introduction

Overview of Parnaba Complex

Overview of the Parnaba Complex

The Parnaba Complex is an energy park that, given the proximity between the gas fields (upstream) and TPPs (downstream), is founded on an integrated model.

Downstream

The Parnaba Thermal Electric Complex is formed by four TPPs (Parnaba I, Parnaba II, Parnaba III and Parnaba IV) that are expected to reach a full installed capacity of 1.425MW. It is located in the state of Maranho, Brazil.

Upstream

According to Enevas management, the upstream segment is expected to deliver 32.3 BCM of gas throughout current projection assumptions.

Currently, the Parnaba Complex operates 3 gas fields and 7 exploration blocks with a total approximate area of 21 thousand square kilometers.

Overview of Downstream

Parnaba Complex - Downstream composition

TPP Installed capacity (MW)Parnaba I 675

Parnaba II 517

Parnaba III 178

Parnaba IV 56

Total 1426

Source: Eneva JRs website

MA


34

Integration Downstream and Upstream

In order to fulfill electricity generation obligations, the TPPs must have a trustworthy source of fuel.

The initial source of gas, which is contractually guaranteed until 2027 for Parnaba III, and 2028 for Parnaba IV, will be provided by the Consortium.

The proximity between the gas fields, gas treatment units, and thermal power plants integrate the Downstream and Upstream businesses, as presented bellow:

Extention of Downstreams projection period

Albeit the fact that the gas supply agreements for Parnaba III and IV are bound to expire in 2027 and 2028 respectively, Eneva JRs management strongly supports the assumption that the TPPs will be able to extend the concession period until 2042 and 2043 respectively.

Assumptions Introduction (cont.)

The rationale behind such assumption, according to Eneva JRs management, is that the TPPs are not restricted to the Consortiums gas supply. In fact, should the Consortium not be able to deliver further gas, the TPPs may contract other gas suppliers.

In addition, Eneva JRs management assumption is based on markets perspectives, and on the Managements perception of latest MMEs (Brazilian Ministry of Mines and Energy) reports; therefore, the Management understands that the same approach used in other appraisal reports for similar projects would be valid for Parnaba III and IV.

For valuation purposes, it was considered an Alpha factor on the discount rate applied to the cash flows after the PPA/Concession renewal.

Source: Eneva JR


35

1.9 0.4

23.9

6.18.4

32.3

70.0

0

10

20

30

40

50

60

70

80

BC

M

Proven and estimated reserves

Morada Nova

Tianguar

Esperantinpolis

Baslios

Havana

Axixa

Angical

GVRGVB

SE BJIsabel

ChicoteAlencar

RaimundoSossgoVitria

Assumptions Introduction (cont.)

The present proven reserves add up to 8.4 BCM. It consists on current wells from the gas fields GVR, GVB and GVA. The gas fields, however, can encompass additional wells.

The consortium has already conducted extensive research on other wells located in GVR, GVB, SE Bom Jesus, Fazenda Isabel, Fazenda Chicote, Fazenda Alencar, Fazenda So Raimundo, Fazenda Sossgo and Fazenda Santa Vitria.

The company plans to launch 4 fields (Fazenda Santa Isabel, SE Bom Jesus, Santa Vitria and Chicote) as commercial during 2015. Third party geological studies were hired and results are expected for the 2nd half of 2015.

These estimates point towards an additional 23.9 BCM, totalling 32.3 BCM of natural gas reserves.

As it was mentioned before, PGN operates in 7 blocks, which also present other gas fields with a potential upside to be considered. The Clients Management has made studies on these gas fields: albeit they are in more distant blocks, they represent a potential additional reserve of nearly 37.7 BCM.

Since the current third parties studies related to the certification of internal research are at preliminary stages, the production considered in this report comes from the first contracts cycle reserves, which is 32.3 BCM.

37.7

Source: E.ON


36

Assumptions Eneva Participaes Judicial Recovery: Parnaba III

Revenues Fixed revenues (CCEAR Contract): Revenues from the energy generation capacity availability, as agreed in the CCEAR contracts signed in the 2008 A-5

Auction. The volumes were estimated based on the 98 Average MW capacity, as per the CCEAR contract, and the total number of hours of each year. The price was projected based on the agreed prices in the A-5 Auction, and have been annually adjusted by the Brazilian Inflation-index IPCA.

It is important to point out that current CCEAR contracts are bound to expire in 2027, and that from 2028 onwards the applied assumption assumes a PPA renewal under the same conditions as the one currently in place, with the rationale presented in page 34. In order to contemplate the risk associated to such renovation, an alpha factor was included in the discount rate from 2027 onwards, as in page 73).

Variable revenues (CCEAR CVU): O&M reimbursements were calculated based on the expected net energy dispatch, provided by Eneva JRs management, and the O&M agreed payment per dispatched megawatt-hour, which is specified in the CCEAR contract.

Please find below the revenue projection that has been used for Parnaba III

1,322 1,323

802

454504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504 504

0

100

200

300

400

500

600

700

800

900

0

200

400

600

800

1.000

1.200

1.400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

R$M

MGW

/h

Volume and revenue projection

CCEAR Revenues CCEAR CVU Net energy dispatch

CCEAR Renewal

Source: Eneva JR


37


Deductions

Deduction taxes: Deductions on gross revenues comprise PIS and Cofins at rates of 1.65% and 7.60% respectively. Given that the TPP uses production factors in order to deliver energy, the TPP has the right to claim PIS and Cofins credits.

Fixed costs

O&M fixed costs: Calculated according to current contract assumptions, and have been annually adjusted by Brazilian inflation-index IPCA.

ANEEL fees: Contractually agreed, within the CCEAR agreement, and is a fixed fee on the total installed capacity of the TPP, and was annually adjusted by Brazilian inflation-index IPCA.

TUST: Contractually agreed, within the CCEAR agreement, and is a fixed tariff on the total installed capacity of the TPP, net of transmission losses, and was annually adjusted by Brazilian inflation-index IPCA.

CCEE contribution: Fixed contribution on the total installed capacity of the TPP. It was annually adjusted by Brazilian inflation-index IPCA.

RGR over fixed revenues: As per regulation requirements, Parnaba III contributes 1.0% of its fixed revenues, net of deductions, to Eletrobras R&D fund, RGR.

Fixed-lease payment: The TPP has an agreement with the Consortium to pay a fixed-lease, which is contractually determined by the parties.

Overhauling: Projected according to the TPPs contract with its service provider, which was calculated according to the amount of energy dispatch throughout the projection.

Insurance: Parnaba III is entirely insured on its fixed and variable revenues. The insurance premium payment was annually adjusted by Brazilian inflation-index IPCA.

47 57 54 57

122

62 66 69 73 7786 86 90 96

101

156

112 119 125132 139

154 155 164173 182

306

203

0

50

100

150

200

250

300

350

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

R$

MM

Fixed costs breakdown

Free market expense O&M ANEEL fee TUST CCEE contribution RGR - over fixed revenue Fuel costs - fixed payments Overhauling InsuranceSource: Eneva JR


38


Variable costs Variable O&M costs: Projected according to the expected gross energy dispatch. A unit O&M cost (R$/MWh) annually adjusted by Brazilian inflation-index

IPCA was then applied on the dispatched energy.

RGR over variable revenues: As per regulation requirements, Parnaba III contributes 1.0% of its variable revenues, net of deductions, to Eletrobras R&D fund, RGR.

Fuel purchase: Variable fuel purchase has been projected according to expected gross energy dispatch. Fuel price is contractually determined by Parnaba III and the gas producers, and was annually adjusted by Brazilian inflation-index IPCA.

Variable-lease agreement: Calculated as the difference between: (i) total revenues and; (ii) fixed TPPs revenues; (iii) variable TPPs costs; and (iv) taxes, regulatory fees and insurance.

Total costs Please find below the cost projection that has been used for Parnaba III:

226 241

153

90 106112 118 125

131 139 146154 163 172

181 191202 213

225 237250 264

278 294310 327

345364

4754

50

53

118

59 6266 69

73 8281 86

91 96

151107 112

119125

132146 147

155164

173

296

192

273295

204

143

224

171 180190 201

212 228236 249

263 277

342308 325

343362

382410 425

449474

500

641

556

-

100,0

200,0

300,0

400,0

500,0

600,0

700,0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

R$

MM

Total costs projection

Variable costs Fixed costsSource: Eneva JR


39


Depreciation Total fiscal depreciation of property, plant & equipment is done in 10 years (at a 10% p.y. rate).

Total accounting depreciation of property, plant & equipment is done in 25 years (at a 4% p.y. rate).

Capex Major capital expenditures were done during the construction period (2011-2015). Throughout the projection period, with exceptions to 2015, maintenance Capex

is included within the O&M costs (Overhauling).

Income taxes The TPP is taxed within the real regime, with income taxes and social contribution rates at 25% and 9% respectively. It is worth mentioning, however, that

Parnaba III owns the following fiscal benefits:

Lucro da Explorao Exploration Profit, granted by SUDENE, from 2014 to 2023; and Accelerated depreciation which allows the TPP to depreciate its items with a 10% annual depreciation rate.

Working capital The projection considers an average of 45 days for account receivables on revenues and 50 days for accounts payable on costs and expenses.

Source: Eneva JR


40

Assumptions Eneva Participaes Judicial Recovery: Parnaba IV

Revenues ACL revenues: Calculated based on the expected net energy dispatch, estimated by Eneva JRs management, and the agreed payment per dispatched

megawatt-hour, which is specified in the PPA agreement with Kinross Mining and Parnaba Comercializadora S.A..

It is worth mentioning that, albeit the current ACL expires in 2019, the projection assumes that such contract will be renovated until 2028.

Please find below the revenue projection that has been used for Parnaba IV.

Source: Eneva JR

430 430

380

306

221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221 221

0

50

100

150

200

250

300

350

-

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

450,0

500,0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042

R$M

MGW

/h

Volume and revenue projection

CCEAL Revenues Other revenues Net energy dispatch

PPA Renewal

2043


41


Deductions Deduction taxes: Deductions on gross revenues comprise PIS and Cofins at rates of 1.65% and 7.60% respectively. Given that the TPP uses production factors

in order to deliver energy, the TPP has the right to claim PIS and Cofins credits.

Fixed costs O&M fixed costs: Calculated according to current contract assumptions, and have been annually adjusted by Brazilian inflation-index IPCA.

ANEEL fees: Contractually agreed; it is a fixed fee on the total installed capacity of the TPP, and was annually adjusted by Brazilian inflation-index IPCA.

TUST: Contractually agreed; it is a fixed tariff on the total installed capacity of the TPP, net of transmission losses, and was annually adjusted by Brazilian inflation-index IPCA.

CCEE contribution: Fixed contribution on the total installed capacity of the TPP. It was annually adjusted by Brazilian inflation-index IPCA.

Overhauling: Projected according to the TPPs contract with its service provider, which was calculated according to the amount of energy dispatch throughout the projection.

Insurance: Parnaba IV is entirely insured on its revenues. The insurance premium payment was annually adjusted by Brazilian inflation-index IPCA.

Source: Eneva JR

17 1715 14 14 15

16 1718 19

20 2122 23

25 2627 29

30 3234

3638

4042

4447

4952

0

10

20

30

40

50

60

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043

R$

MM

Fixed costs breakdown

O&M ANEEL fee TUST CCEE contribution RGR - over fixed revenue Overhauling Insurance


42


Variable costs Variable O&M costs: Projected according to the expected gross energy dispatch. A unit O&M cost (R$/MWh) annually adjusted by Brazilian inflation-index

IPCA was then applied on the dispatched energy.

RGR over variable revenues: As per regulation requirements, Parnaba IV contributes 1.0% of its variable revenues, net of deductions, to Eletrobras R&D fund, RGR.

Fuel purchase: Variable fuel purchase has been projected according to expected gross energy dispatch. Fuel price is contractually determined by Parnaba IV and the gas producers, and was annually adjusted by Brazilian inflation-index IPCA.

Total costs

Please find below the cost projection that has been used for Parnaba III:

Source: Eneva JR

30 32 33 3435 37 39

42 44 4649 51

54 5760 64

67 7175 79

83 8892

98103

109115

121128

17 17 15 14 1415 16

17 1819 20

21 2223 25

2627

2930

3234

3638

4042

4447 44

47

47 49 48 48 5053 55

59 6265 69

73 7781 85

90 95100

105111

117123

130137

145153

161 165174

0

20

40

60

80

100

120

140

160

180

200

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043

R$

MM

Total costs projection

Variable costs Fixed costs


43


Depreciation Total fiscal depreciation of property, plant & equipment is done in 10 years (at a 10% p.y. rate).

Total accounting depreciation of property, plant & equipment is done in 25 years (at a 4% p.y. rate).

Capex Major capital expenditures were done during the construction period (2011-2014). Throughout the projection period, maintenance Capex is included within the

O&M costs (overhauling).

Income taxes The TPP is taxed within the real regime, with income taxes and social contribution rates at 25% and 9% respectively. It is worth mentioning, however, that

Parnaba IV owns the following fiscal benefits:

Lucro da Explorao Exploration Profit, granted by SUDENE, from 2014 to 2023; and Accelerated depreciation which allows the TPP to depreciate its items with a 10% annual depreciation rate.

Working capital The projection considers an average of 45 days for account receivables on revenues and 50 days for accounts payable on costs and expenses.

Source: Eneva JR


44

Assumptions PGN

Revenues The results presented below represent 70% of the total revenues that the Consortium generates.

Gas contracts revenues: Based on the gas demand from the 4 TPPs, these revenues match the fuel purchase costs of the downstream b

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