Allianz Global Corporate Specialty Re Brasil AGCS ALLIANZ

Allianz Global Corporate & Specialty Re Brasil AGCS ALLIANZ CLIMA

70% OF BUSINESSES ARE EXPOSED TO WEATHER RISKS TOO MUCH OR TOO LITTLE, TOO COLD OR TOO HOT, TOO HIGH OR TOO LOW File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 2

BENEFITS OF WEATHER RISK MANAGEMENT SOLUTIONS • Weather Hedging Increases Firm Value • Protect against poor weather conditions • Better cash flow stability allows more accurate budget management • Improved returns help equity valuations • Revenue security allows forecast reliability • Improved financing and creditworthiness lowers cost of capital • Extreme downside protection ensures liquidity File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 3

CREATING A WEATHER RISK SOLUTION Step 1: Identify Weather Risks Step 2: Quantify Weather Risks Step 3: Structure a Tailored Solution File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 4

CASE STUDY #1 THE WORLD BANK HAS COMPLETED A $450 MILLION WEATHER AND OIL PRICE INSURANCE TRANSACTION FOR A URUGUAYAN STATE-OWNED HYDRO-ELECTRIC POWER COMPANY. BY ARTEMIS ON DECEMBER 20, 2013 Overview of Weather Problem Client Benefit, Value Added § South American power generation is 75 -90% based on alternative energy, mostly hydro § Protects cost of power generation § Uruguayan power company operates 3 hydro plants § Worldbank intermediation Administración Nacional de Usinas y Transmisiones Eléctricas (UTE) § The country experienced a lack of rain reducing power generation and even negatively impacting national GDP § Positive impact on Uruguayan GDP § Deal-of-the-Year by Environmental Finance § Club deal ensures sufficient risk capacity § Alternative to hydro generation is thermal plants which depend on fuel prices Structure Application, Lessons Learned § 18 -month lack of rain cover § Alternative energy (wind, hydro, solar) § Second trigger oil price § Double trigger deal with rain and oil price § USD 450 m risk capacity § Worldbank enables large derivative execution § 39 weather stations measuring rain § Execution capabilities globally § Oil price determines amount of payout § Data collection via specifically installed stations with help of Speedwell Weather Systems § ENSO (El Nino) effect § Derivative execution File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 5

CASE STUDY #2 - ALTERNATIVE ENERGY MICROSOFT BENEFITS FROM ALLIANZ & NEPHILA WIND FARM REVENUE SWAP BY ARTEMIS ON NOVEMBER 15, 2016 ALLIANZ RISK TRANSFER & NEPHILA IN SECOND WIND FARM REVENUE SWAP BY ARTEMIS ON JULY 25, 2016 NEPHILA CLIMATE & ALLIANZ COMPLETE FIRST SOLAR FARM PROXY REVENUE SWAP BY ARTEMIS ON MAY 24, 2018 Overview of Weather Problem Client Benefit, Value Added § On- and off-shore wind farm operators and capital providers depend on steady wind § Volatility protection due to low wind and wind intermittency § Too much or too little wind impair energy production § Revenue security § Improved creditworthiness and financing conditions § Same holds true for hydro and solar § Capital providers (e. g. banks) often require resource (wind, rain, irradiance) risk protection to provide loans § During construction phase, excess wind is problematic Structure Application § Wind covers can be structured to meet client / stakeholder needs: § Wind, solar, and hydro cover § Put option helps to protect against lack of wind, e. g. at P 90 § Excess wind protection during construction phase § Collar structure reduces volatility risk and lowers premium requirement for the client because strong wind years help to pay for weak wind years § Important Deals: § Multi-year (5 years or more) possible to match financing terms § Protection: 10 -year Proxy Revenue Swap. Microsoft Corp - Project: 178 MW Bloom Wind Farm, which is due to be constructed near Dodge City, Kansas, to provide energy power to its datacenters. Apex Clean Energy - Project: Old Settler Wind (151. 2 MW wind farm located in Floyd County, Texas). File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 Elliott Green Power – Project: 98 MW Susan River Solar farm and 78 MW Childers Solar farm, in Australia 6

CASE STUDY #3 CONSTRUCTION OF A OFFSHORE WIND PLANT IN NORTH SEA Overview of Weather Problem Client Benefit, Value Added § Construction of offshore wind farm in the North Sea § Protects against cost overruns § Project begins Apr 15 th and is supposed to end Sep 1 st § Opposite risk than low wind risk of wind farms in operation § Boat use costs EUR 300, 000 per day; delays are costly § Fast payout § 21 consecutive workable hours are necessary to complete erection of 70 monopods § An hour is workable if wave height is less than 1 Meter 99. 8% of the time and wind speed less than 15 m/s Structure Application § Payout of daily boat costs for each day of delay after Sep 1 st to eliminate cost § Offshore wind farm construction overrun risk due to bad weather § Other construction covers include frost day product where construction § Workable hour definition is tailored companies protect against cold weather detrimental to outside work § Payout structure can be adjusted to fit cost structure § Short-term forecast data may be used for settlement since that is operationally used to make construction decisions File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 § Certain countries have labor laws prohibiting work in extreme weather conditions (e. g. Netherlands) 7

ALLIANZ GLOBAL CORPORATE & SPECIALTY RE BRASIL For further information, please contact: Angelo Colombo, CEO of AGCS South America Angelo. colombo@allianz. com +55 (11) 3527 -0200 Patricia Marzullo, Head of Engineering - AGCS South America Patricia. marzullo@allianz. com +55 (11) 3527 -0296 Follow AGCS Sign up for ‘e. Update’, our regular newsletter on www. agcs. allianz. com File name | Department | Author Copyright © 2017 Allianz Global Corporate & Specialty SE (All rights reserved) 22 -Nov-20 8