Mozambique Regional Transmission Backbone Project CESUL Technical Economic

Mozambique Regional Transmission Backbone Project (“CESUL”): Technical & Economic Feasibility Study Presentation of Feasibility Study Report CESUL Launch Workshop Centro de Conferências Joaquim Chissano Maputo, 24 November 2011 1 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Presentation outline Feasibility study objective & goals Ø Feasibility study highlights Ø Power market assessment Ø Mozambique generation options considered Ø CESUL technical feasibility Ø Economic & financial feasibility Ø CESUL project timelines Ø Institutional and operational arrangements Ø Conclusions & Recommendations Ø 2 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Feasibility Study objective & goals Objective: • Provide technical and economic determination of least cost option for transfer of 3, 100 MW north-south in Klicka här för att ändra format på underrubrik i bakgrunden Mozambique CESUL Project Goals: • Contribute to Mozambique’s economic and social development through facilitating improved access to electricity by: – Interconnecting the Mozambique power systems north-south, i. e. creating a Backbone Transmission System – Supply electricity at affordable prices to load centres and consumers along the transmission system corridor • Facilitate realisation of Mozambique’s large power development potential, with particular focus on hydropower, for domestic and industrial use and bulk export of cost-competitive renewable energy to South Africa and Southern Africa © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Feasibility Study scope of work Review and update all information in previous studies and undertake: • Load forecasts (Mozambique / Southern Africa region) • Regional generation scenarios (for Mozambique Klicka här förexpansion att ändra format på underrubrik i bakgrunden candidate projects) • Power system studies – Minimum one (1) AC link north-south as a premise for acceptability of any alternative • • Determination of substation locations Line routes – HVAC and HVDC (incl. electrode locations) Preliminary engineering designs (lines & substations) and costing Project packaging and implementation programme Operational and control centre requirements, including organisation & training Economic and financial feasibility analysis Liaise with CESUL ESIA/RPF Consultant (separately appointed) The CESUL Feasibility Study builds on previous pre-feasibility study (2008) by Vattenfall Power Consultants and subsequent technical Optimisation Study (2009) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Feasibility Study deliverables The Technical and Economic Feasibility Study report consists of the following documents: för att. Report ändra format på underrubrik i bakgrunden • Volume. Klicka I-A: här. Main • Volume I-B: Appendices to Main Report • Volume II: Economic Impact Study (still being completed) • Volume III-A: Preliminary Design Report – HVAC and HVDC Transmission Lines • Volume III-B: Preliminary Design Report – HVAC and HVDC Substations © Vattenfall AB • Volume IV: Line Route Report – HVDC Line • Volume V: Line Route Report – HVAC Line Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Key challenges encountered • Challenges to successful realisation of CESUL and the associated large (hydropower) generation developments include: – – – Project size and remoteness / distances involved Klicka här för att ändra format på underrubrik i bakgrunden Technical requirements (to ensure high availability & reliability) Cost competitiveness compared to alternative regional options Amount of financing and commercial frameworks required Integrated nature of generation and transmission developments, requiring alignment of stakeholder interests and high degree of coordination • Other key considerations include: – Devising transmission solutions in support of initial generation developments while facilitating long-term expansion to tap Mozambique’s energy potential – Ensuring sustainability and tangible benefits to local (Mozambican) economy from recommended technical and economic solutions – Minimising environmental & social impacts through line route selection – Dynamic and iterative nature of planning, analysis, structuring and financing © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Findings and Conclusions • Feasibility Study confirms technical viability of combined HVAC and HVDC transmission backbone solution for 3, 100 MW (and more) power transfer capability • CESUL Phase 1 investment costs (excl. financing costs and IDC) are estimated at US$ 2, 119 Klicka million US$ 1, 800 for Stage 1) här(of förwhich att ändra format på million underrubrik i bakgrunden – Phase 1 financing requirement of ~US$2, 780 million incl. IDC & price contingency • Economic viability of combined hydropower and transmission backbone is robust • Financial viability and competitiveness of delivering electricity at Mozambique / South Africa border in southern Mozambique appears promising – Timely realisation of Mphanda Nkuwa project is key to commence CESUL development – Realising Cahora Bassa North Bank will allow complete CESUL Phase 1 development – Cost of debt financing to be tested with market participants • HVAC solution will ensure interconnection of Mozambique’s national transmission grid, with increased access to electricity along line route • HVDC portion of transmission backbone is scalable – for initial CESUL Phase 1 solution and beyond • Due to magnitude of project costs, a staged Phase 1 realisation should be considered • CESUL development needs to continue without delay from early 2012 to align with planned timeframe for commissioning of hydropower project(s) • © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Recommended CESUL Phase 1 solution • CESUL Phase 1 includes combined HVAC & HVDC solution • HVAC solution includes: • • 1, 340 km 400 k. V AC line for 900 MW continuous power transfer. Klicka at 400 här k. V, för butattwith 550 format k. V design of equipment ändra på underrubrik i bakgrunden 50% series compensation of AC line • HVDC solution (Phase 1) includes: • 1, 275 km ± 500 k. V DC bipolar transmission line and converter stations with 2, 650 MW capacity • 90 km transmission lines to Cataxa and Maputo electrodes • Implementation of HVDC solution is proposed staged: • • Stage 1: ± 500 k. V DC line with 1, 325 MW converter capacity Stage 2: Additional 1, 325 MW converter capacity • Project is proposed packaged and tendered as a limited number of contracts (indicatively 7) • Timeframe to implement Phase 1 / Stage 1 is 59 months: • • © Vattenfall AB Design, tendering and contracting period: 17 months Construction period: 42 months Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 8

CESUL Feasibility Study – Power Market Assessment 9 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Mozambique demand forecast - recent electricity demand growth trajectory (excluding Mozal) Klicka här för att ändra format på underrubrik i bakgrunden © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Mozambique demand forecast (cont. I) • Forecast period is 2010 – 2030: – Energy supplied (before losses) (in GWh) and Peak demand (MW) – Natural growth + Large consumer demand – Medium forecast case (+ high på and low forecast) Klicka här = förbase att ändra format underrubrik i bakgrunden • General electricity demand drivers: – Annual GDP growth: • 2010 - 2015: 6. 5% - 7. 9% (IMF estimates) • 2016 - 2030: initially 7. 0%, tapering off to 4. 0% • GDP elasticity: 1. 2, tapering off to 1. 1 (except large loads) – Electricity tariffs – current tariffs do not cover costs: • 7% real increase assumed over next 5 years • Assumptions applied will contribute to dampen future demand growth • Large user loads: – Defined as > 5 MW initial loads, identified based on information from Ed. M, Ministry, developers and consultant estimates – Cost-reflective tariffs assumed, with consequences for energy intensive projects that rely on low tariffs (e. g. Mozal expansion) – Uncertainty with respect to loads and timing dealt with by estimating probability and applying loads to medium forecast, high forecast and low forecast respectively © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Mozambique demand forecast (cont. II) – Base Case national demand forecast (GWh) Klicka här för att ändra format på underrubrik i bakgrunden © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Mozambique demand forecast (cont. III) Peak Demand – Base Case, High and Low forecasts (MW) Base Case forecast – natural growth and large loads (MW) Klicka här för att ändra format på underrubrik i bakgrunden 13 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Southern African power demand Importance of South Africa’s IRP 2010 • South Africa approved an IRP 2010 in April 2011, being a 20 -year indicative generation expansion plan Klicka här för att ändra format på underrubrik i bakgrunden • Strong focus on clean, renewable energy • Plan assumes 2, 600 MW of hydropower import, mainly from Mozambique, to commence in 2022 (earlier if possible) • Preference is for base load / mid-merit energy (not peaking) • IRP 2010 includes long-term indicative electricity price forecast • Forecast average cost of new (base-load) generation is >10. 0 USc/k. Wh • Represents benchmark for Mozambique • Southern Africa needs additional hydropower at South Africa border generation capacity – quickly! • Current reserve margins are insufficient • Actual price will however be subject to 14 • South Africa is by far the dominant market commercial negotiations SAPP power demand supply: © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Mozambique Generation Options and Regional Generation Expansion Scenarios 15 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Generation Option Assessment – Mozambique candidate generation projects • Potential generation projects were reviewed, focused on hydropower, coal, gas-fired projects • Gas-fired plant with a total capacity of up to 600 MW Klicka här för att ändra format på underrubrik i bakgrunden are assumed built in Southern Mozambique, as well as 100 MW of local generation injected into Tete part of system • Based on regional market assessment, hydropower projects are considered priority: • Mphanda Nkuwa (“MPNK”) • 1, 500 MW base-load / mid-merit plant • 8, 600 GWh of annual energy (850 MW firm power) • Feasibility study complete / Concession Agreement exists • Cahora Bassa North Bank (“CBNB”) • 1, 245 MW estimated mid-merit/peaking capacity • 2, 983 GWh of gross annual energy (but only 854 GWh increase in overall Cahora Bassa annual energy) • Studies ongoing / data & information to be firmed up © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 16

Generation Scenarios and associated Transmission Solutions No. Scenario: 0 Reference 1 2 CESUL capacity CESUL transmission alternative Not applicable (new 400 k. V line Songo-Matambo. Inchope + reinforcement in south required) Klicka här för att ändra format på underrubrik i bakgrunden Single circuit 400 k. V line (4 x Tern) with 550 k. V CBNB 1, 245 MW equipment rating, 70% series compensation 0 MW Double circuit 400 k. V line (4 x Tern) with 550 k. V equipment rating, 50% series compensation MPNK 1, 500 MW MPNK + CBNB Single circuit 400 k. V line (4 x Tern) with 550 k. V 2, 745 MW equipment rating, 50% series compensation, plus Bi-pole DC line (4 x Martin), 2, 650 MW capacity 4 Add. Hydro Energy Same as Scenario 3 (2 nd bi-pole may be required 3, 536 MW if all generation projects implemented early) 5 Extended Hydro 4, 486 MW Scenario 3 plus 2 nd bi-pole (5, 300 MW capacity) 6 Large Hydro & Coal 7, 545 MW 3 Scenario 3 plus 2 nd bi-pole to Maputo and 3 rd bipole terminated in South Africa Candidate generation projects and associated transmission alternatives were studied through scenarios, with grid injection of 600 MW gas-fired generation in south and 100 MW generation in Tete common to all scenarios © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Regional generation expansion modelling • Southern Africa needs ~1, 500 MW of additional (base-load) capacity per annum • Future generation and transmission developments in Mozambique will depend on competitiveness of Mozambique projects compared to alternative regional projects Klicka här förfor att Mozambique ändra format på underrubrik bakgrunden projects were • Cost characteristics and regionali generation developed analysed – January 2011 used as reference year for prices and cost estimates – Investment, (fixed and variable) O&M costs, and fuel costs considered – Analysis covered thermal (coal and gas-fired) and renewable generation projects (including hydropower, wind and solar) – Cost data were sourced from EPRI, Nexant and Consultant’s own data bases – Particular focus on generation expansion as envisaged by South Africa’s IRP 2010 • Generation expansion simulations were undertaken to demonstrate economic viability of large-scale power export from Mozambique – Total generation costs, including energy not served (“ENS”) and spinning reserve costs, as well as generation related transmission costs (including losses) considered – Mozambique options substituted for ‘generic’ options in IRP 2010 – Overall NVP of total generation costs in regional generation simulations was calculated, using feasibility study Generation Scenarios 1 to 6 as previously presented © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Generation expansion scenario results Klicka här för att ändra format på underrubrik i bakgrunden Some observations: • All generation scenarios with inclusion of Mozambique hydropower projects appear merited • Despite significant transmission costs, both MPNK and CBNB are economically viable projects • While Scenario 4 shows the highest potential saving, this scenario may trigger additional investments in transmission infrastructure at an early stage • On balance, therefore, Scenario 3 (MPNK and CBNB) appears to be most robust, with scope for future expansion by additional hydropower resource developments © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Technical Feasibility Assessment 20 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Planning methodology & criteria • Transmission – Planning assumptions document prepared and discussed with Eskom (ref. “Memorandum of Transmission Planning Assumptions”) • Complies general withformat Southpå Africa’s Grid Code Klicka härinför att ändra underrubrik i bakgrunden – Deterministic N-1 planning criteria, but with agreement that up to 2, 000 MW of generation can be tripped in Tete area for an outage of a line on CESUL transmission backbone (effectively a “N-½ criteria”) • Will normally not affect customers in South Africa due to size of South Africa system – Series compensation facilities and Static VAr Compensators (SVC) along AC backbone planned with redundancy – All transmission alternatives considered include at least one 400 k. V AC line from Tete area to Maputo, to provide supply to areas in between – Recognised that wheeling capacity through Zimbabwe may be limited • Generation characteristics recognised – Production profiles – Forced and Scheduled outages – Minimum 15% reserve requirement for South Africa, with maximum 19% import share (of peak load) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Transmission system studies undertaken • Load flow, voltage stability and losses • Simulation of normal ‘steady state’ operation Klicka här för att ändra format på underrubrik i bakgrunden • Contingency analyses • Transient and dynamic stability • Fault levels • Sub-synchronous resonance studies • Switching studies • Optimisation of conductor configuration • Optimisation of reactive power compensation facilities: – Line and bus shunt reactors – AC line series compensation – Static VAr Compensation (SVC) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Transmission system studies (cont. ) • Key assumptions: – Generation at Benga and Moatize developed basically to cover own demand, with 100 MW surplus generation sold Klicka här för att ändra format på underrubrik i bakgrunden to Ed. M – HVDC Songo - Apollo transfer capacity of 1, 920 MW – SAPP grid support during contingencies – Wheeling via Zimbabwe attempted kept at low level as full capacity of interconnection Songo - Bindura may not be available in future • Under normal operations, wheeling may possibly be avoided once CESUL HVDC line is in service – Comparison of alternatives based on unit cost estimates • Detailed cost estimates based on supplier quotations developed for recommended CESUL scheme – CESUL O&M costs estimated at 2. 0% p. a. – Marginal cost of losses priced at 6. 0 USc/k. Wh (for equivalent capacity and energy cost) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Transmission solutions considered • HVDC • 500 k. V and 600 k. V bi-pole schemes - bi-pole lines • 800 k. V mono-pole Phase 1 ändra format på underrubrik i bakgrunden Klicka här för att • 2 nd 800 k. V mono-pole in Phase 2, forming bi-pole with DC in Phase 1 • HVAC • 400 k. V operation (but heavier equipment design) • Quadruple line configuration to limit reactance • Compact line / expanded bundle design considered for high transfer levels • Series compensation up to 70% to achieve transient stability • Line and bus shunts to handle energization / load rejection • SVCs for voltage & stability control measures • Intermediate substations required for voltage control combined with supply to local area © Vattenfall AB Both HVAC and HVDC technology solutions were examined in the Feasibility Study, under a number of design considerations Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 24

Transmission studies – considerations • Characteristics of existing transmission system • Defining. Klicka a base case (without CESUL här för att ändra format på underrubrik i bakgrunden backbone) • Specific technical challenges (line lengths, fault levels, compensation, energization) • Substation locations (AC + DC) • Interaction with HVDC system Songo – Apollo (RSA) • Integration with neighbouring SAPP countries and wheeling over SAPP networks • System expansion in Southern Mozambique • Interfacing with Motraco system • New Master Power Controller (MPC) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Line routings (HVDC and HVAC) Key considerations: General • Utilize existing and planned "energy" corridors (transmission lines, roads, Klicka här för attrailways) ändra format på underrubrik i bakgrunden • Minimise social and environmental impact • Access and maintenance conditions • Utilise reliable low cost design • Least cost HVAC Line Routing • Support for development of Mozambique • Interconnection of EDM grid • Selection of substations considering reactive compensation requirements HVDC Line Routing • Bulk power transfer (aligned to generation scenarios) • Minimise social and environmental impact • Utilise reliable low cost design © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 26

Conclusions from transmission studies For AC line(s), the following is noted: • Distance from Tete to Maputo (~1, 340 km along chosen route) presents technical challenges: Klicka här för att ändra format på underrubrik i bakgrunden Voltage control (for energisation and normal and contingency operation) – – Transient and dynamic stability – (Note: 53 km of 400 k. V line Songo – Cataxa will be required, not currently defined as part of CESUL Phase 1) • Low reactance is required, implying: – Four bundle conductor configuration – Compact line design with expanded bundle would be required for high transfers (>1, 400 MW) • Low reactance leads to high capacitance, causing: – Higher switching surges – Increased insulation level – Higher investment costs © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Conclusions from transmission studies (cont. I) • AC line requires extensive reactive power control for energisation and voltage regulation during normal and contingency operation: för be att ändra på underrubrik i bakgrunden – Long. Klicka line - här must split informat sections – Intermediate substations at Inchope, Vilanculos and Chibuto are required and will feed into local grids – Line shunt reactors required at either end of each line section in combination with switched bus shunt reactors – Large SVCs required at intermediate substations, with two units at each of Inchope and Vilanculos to maintain operability during outages of SVCs • New substation proposed at Moamba to act as feeding point for Maputo area (and suitable connection point for gas-fired plant and potential future 3 rd 400 k. V line to South Africa) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Conclusions from transmission studies (cont. II) For DC line(s) the following is noted: • 500 k. V HVDC bi-pole solution with bipole DC line estimated to present least. Klicka för att ändra format på underrubrik i bakgrunden cost solution forhär CESUL DC link – 600 k. V HVDC bi-pole and 800 k. V monopole also evaluated, but considered to imply slightly higher overall costs • Bi-pole solution will provide higher overall availability (than mono-pole), although loss of 500 k. V bi-pole will require tripping of generation as for a 800 k. V mono-pole solution • 500 k. V bi-pole solution will also limit environmental impacts through reduced width of right-of-way, lower line towers (about 3. 5 m lower) and less time of operation with electrodes © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Phase 1 – combined HVAC / HVDC solution Klicka här för att ändra format på underrubrik i bakgrunden • • © Vattenfall AB HVAC operated at 400 k. V (equipment designed for 550 k. V) – 900 MW transfer capacity HVDC operated at ± 500 k. V – 2, 650 MW transfer capacity, implemented in two stages , each with 1, 325 MW converter capacity Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 30

Staged implementation of HVDC for CESUL Phase 1 Klicka här för att ändra format på underrubrik i bakgrunden Stage 1: 1, 325 MW © Vattenfall AB Stage 2: 1, 325 MW Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 31

CESUL connections to Mozambique power system Connection to ‘regional’ power systems Connection to load centres and Klicka här för att ändra format på underrubrik i bakgrunden consumers along CESUL HVAC transmission line route Transmission Voltage levels © Vattenfall AB lines Transformer capacity Matambo 400/220 k. V - 2 x 250 MVA Inchope 400/220 k. V in-out 1 x 400 MVA Vilanculos 400/110 k. V External project (not CESUL) 1 x 125 MVA Chibuto 400/110 k. V 110/33 k. V External project (not CESUL) 1 x 125 MVA 1 x 40 MVA Moamba 400/275 k. V 275/110 k. V 110/33 k. V External project (not CESUL) 1 x 500 MVA 1 x 125 MVA 1 x 63 MVA Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”) 32

CESUL Project cost estimates • General approach – Unit costs used for comparison, drawn from Consultant’s databases and external cost statistics (e. g. CIGRE) – Supplier quotations used for actual Project icosting and economic/financial Klicka här för att ändra format på underrubrik bakgrunden analysis, based on EPC delivery, "CIF to port“ • Project costing includes Engineering & Owner’s Costs and Contingencies (added to suppliers’ EPC cost quotations): – Engineering & Owners Cost: 10% of EPC quotations • Considered conservative – Physical Contingencies: 10% of EPC quotations – Price Contingencies: not included in Project cost estimates • 10% price contingency on EPC quotations recommended included when finalising Project financing requirements • Relocation / compensation payments: – Included in Project costs with value equal to 2% of estimated transmission line cost (HVAC and HVDC) – CESUL RPF Report recommendations will be used in Final Report, with latest indication is 3% of transmission line costs © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Phase 1 HVAC costing HVAC - Cost Components Foreign Local underrubrik USD (‘ 000) i bakgrunden USD (‘ 000) 400 k. V Klicka här för att ändra format på Total USD (‘ 000) HVAC Transmission Line 339 641 81% 79 672 19% 419 313 HVAC Substations 336 736 92% 29 281 8% 366 017 0 0% 8 386 100% 8 386 Engineering & Owner's Cost (10%) 47 120 60% 31 413 40% 78 533 Physical Contingencies (10%) 62 826 80% 15 707 20% 78 533 786 323 83% 164 459 17% 950 782 Compensation (2% of line) Total HVAC Phase 1 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Phase 1 HVDC costing HVDC - Cost Components Stage 1, ± 500 k. V 1325 MW Foreign Local Total USD (‘ 000) 308 258 81% 72 308 Klicka här för att ändra format på underrubrik i bakgrunden HVDC Stations 294 685 92% 25 625 19% 380 566 8% 320 310 7 611 100% 7 611 HVDC Transmission Line 0 0% Engineering & Owner's Cost (10%) 42 053 60% 28 035 40% 70 088 Physical Contingencies (10%) 56 070 80% 14 018 20% 70 088 83% 147 597 17% 848 663 Compensation (2% of line) Total HVDC: Stage 1 of Phase 1 HVDC - Cost Components Foreign Local Total Stage 2, Additional 1325 MW USD (‘ 000) 244 720 92% 21 280 8% 266 000 Engineering & Owner's Cost (10%) 15 960 60% 10 640 40% 26 600 Physical Contingencies (10%) 23 940 90% 2 660 10% 26 600 284 620 89% 34 580 11% 319 200 HVDC Stations Total HVDC: Stage 2 of Phase 1 © Vattenfall AB 701 066 Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Phase 1 – total investment costs Summary CESUL Phase 1: 400 k. V 900 MW HVAC Transmission and ± 500 k. V 2, 650 MW HVDC Transmission Klicka här för att ändra format på underrubrik i bakgrunden USD (’ 000) Total HVAC Phase 1 950 782 Total HVDC Stage 1 of Phase 1 848 663 Total HVAC + HVDC Stage 1 of Phase 1 Total HVDC Stage 2 of Phase 1 Total CESUL Phase 1 1 799 445 319 200 2 118 645 (excl. IDC, Financing costs/fees and Price Contingencies) Interest During Construction (IDC) & Financing Costs / Fees (est. ) 450 000 Price Contingency (10% of Project Costs excl. IDC & fees) 211 865 Total Phase 1 Funding Requirement 2 780 510 36 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Economic & Financial Feasibility 37 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Economic feasibility – objective & approach • Objective of economic analysis: – Establish least-cost Project option (for each generation scenario) – Ensure that benefits of least-cost Project option exceeds Project costs Klicka här för Project att ändrarepresents format på underrubrik i bakgrunden – Demonstrate that efficient use of scarce economic resources • Approach: – Project benefits and costs are compared to a situation without the Project – Analysis is based on discounted cash flow (“DCF”) modelling – Required Internal Rate of Return (“IRR”) of 10% in real terms (equal to assumed economic opportunity cost of capital) – Calculation of Economic IRR (“EIRR”), Net Present Value (“NPV)” and Economic Unit Energy Cost (“EUEC”) of electricity generated and transported – Analysis focused primarily on assessment of Generation Scenarios 1, 2 and 3: • Scenario 1: CBNB only (1, 245 MW) • Scenario 2: MPNK only (1, 500 MW) • Scenario 3: MPNK + CBNB (1, 500 MW + 1, 245 MW), with CBNB implemented 2 years after MPNK • Scenario 3: MPNK only + Stage 1 of CESUL Phase 1 only © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Economic feasibility – assumptions • Main assumptions: – 45 years Project life – All power from MPNK and CBNB assumed contractually transmitted over CESUL Klicka här för att ändra format på underrubrik i bakgrunden infrastructure – Transmission losses assumed as 4. 5% in recommended alternative – Electricity valued at 10. 5 USc/k. Wh at SA border • Equal to estimated alternative cost of base-load supply (assuming Combined Cycle Gas-Fired plant using imported LNG) – Operating costs of CESUL infrastructure: 2. 0% p. a. of investment – Energy transmitted from: • MPNK: 8, 548 GWh/year • CBNB: 2, 983 GWh/year – Total net increase of production at Cahora Bassa complex is 854 GWh/year, including a decrease at CBSB of 2, 129 GWh/year – Loss of generation at CBSB takes place at night, and such lost generation is priced at 2. 6 USc/k. Wh (assumed as variable cost of coal-fired plant) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Economic feasibility - results Total Economic Value Scenario 3 (Generation + CESUL) Scenario 1 Scenario 2 Phase 1 in USD million Klicka här för att ändra format på underrubrik i bakgrunden Total Economic NPV 132 1 565 1 962 (at 10% economic discount rate) CESUL Project Economic Feasibility Results 1 416 Scenario 3 Phase 1 Stage 1 only Scenario 1 Scenario 2 Scenario 3 Phase 1 12. 5 % 12. 7 % 12. 6 % NPV (USD mill) @ 10% 184 268 402 332 Break even tariff (USc/k. Wh) 4. 60 2. 35 2. 56 2. 89 Project IRR Note: IRR and NPV calculations are based on financial transmission tariff © Vattenfall AB Scenario 3 Phase 1 Stage 1 only Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Economic feasibility – results (cont. ) • MPNK + CESUL are economic viable and robust solution • With MPNK only, cost ‘penalty’ Construction cost + 20% 7. 30 7. 41 7. 73 of developing CESUL with Klicka här för att ändra format på underrubrik i bakgrunden Construction cost + 10% 6. 94 7. 06 7. 38 combined HVAC and HVDC Base case has marginal impact only 6. 58 6. 71 7. 03 (unit cost at SA border) • Staged CESUL Phase 1 Construction cost - 10% 6. 22 6. 35 6. 68 development is viable solution Sensitivities – Economic Unit costs (USc/k. Wh) – MPNK Construction cost - 20% Scenario 2 Scenario 3 Phase 1 Stage 1 only 5. 86 6. 00 6. 33 • CBNB + CESUL represent an economic viable solution based on HVAC transmission solution • CBNB economics improve substantially when developed with MPNK and ‘complete’ CESUL solution (HVAC + HVDC) • CBNB economics appear robust in combination with MPNK, based on recommended CESUL Phase 1 © Vattenfall AB Sensitivities – Economic Unit costs (USc/k. Wh) – CBNB Construction cost + 40% Construction cost + 30% Construction cost + 20% Construction cost + 10% Base case (unit cost at SA border) Construction cost - 10% Construction cost - 20% Scenario 1 Scenario 3 Phase 1 10. 37 10. 13 9. 89 9. 65 8. 01 7. 78 7. 54 7. 31 9. 41 7. 07 9. 17 8. 93 6. 84 6. 60 Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Financial viability – objective & approach • Objective of financial analysis: – Takes the view of prospective investors in CESUL – Establishes whether can be expected to achieve a Klicka här för att ändrainvestors format på underrubrik i bakgrunden satisfactory equity return • Approach: – Project financial income and costs are compared to situation without the Project – Analysis is based on discounted cash flow (“DCF”) modelling – Required USD based equity IRR of 16% after tax in nominal terms for CESUL, 17% for generation investments – Calculation of Project and Equity IRR, NPV and Financial Unit Energy Cost (“FUEC”) of electricity generated and transported – Same Generation scenarios as in Economic Analysis, i. e. Scenarios 1 to 3, including alternative with Scenario 3 Stage 1 only © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Financial viability – assumptions • Main assumptions: – 30 years concession period – Electricity selling at 10. 5 USc/k. Wh at SA border Klicka här för attprice ändraset format på underrubrik i bakgrunden • Based on estimated alternative cost of base-load supply (assuming Combined Cycle Gas-Fired plant using imported LNG) • 10% of MPNK (and CBNB) energy sold with 40% discount to Ed. M (as per term of Concession for MPNK) – 70/30% debt/equity ratio assumed – 8. 0% - 8. 5% interest rate on USD loans (including margin) • Debt financing assumptions to be tested and confirmed by CESUL Financial Adviser – VAT and excise duty exemptions assumed for Generation and CESUL – No income tax incentives assumed for CESUL – Tax regime for Generation projects assumed as per MPNK Concession © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Financial viability - results MUSD NPV Scenario 1 Scenario 2 Scenario 3 Phase 1 Klicka här för att ändra format på underrubrik i bakgrunden Total Financial NPV -39 293 389 Total Government take 897 826 Scenario 1 Scenario 2 Scenario 3 Phase 1 Stage 1 only Project IRR 13. 0% 13. 1% 13. 0% Equity IRR 16. 0% 5. 78 2. 95 3. 26 3. 64 Break-even transmission tariff (USc/k. Wh) © Vattenfall AB 200 793 CESUL Project Financial Results 216 Scenario 3 Phase 1 Stage 1 only Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Financial viability – results (cont. ) • MPNK + CESUL is a Sensitivities Scenario 3 financially viable and robust Scenario 2 Financial Unit costs Phase 1 solution (USc/k. Wh) – MPNK Stage 1 only Construction cost + 20% 9. 74 9. 94 10. 31 • Cost ‘penalty’ of CESUL Klicka här för att ändra format på underrubrik i bakgrunden Construction cost + 10% 9. 25 9. 45 9. 82 with combined HVAC and Base case 8. 75 8. 96 9. 33 HVDC solution has (Unit cost at SA border) marginal impact only Construction cost - 10% 8. 25 8. 47 8. 85 • Staged CESUL Phase 1 Construction cost - 20% 7. 75 7. 98 8. 36 development is viable • CBNB financial viability uncertain based on CESUL HVAC solution • CBNB viability improves when developed with MPNK and ‘complete’ CESUL solution with HVAC + HVDC • CBNB financial viability appears robust in combination with MPNK, based on recommended CESUL Phase 1 solution © Vattenfall AB Sensitivities Financial Unit costs (USc/k. Wh) – CBNB Construction cost + 40% Construction cost + 30% Construction cost + 20% Construction cost + 10% Base case (Unit cost at SA border) Construction cost - 10% Construction cost - 20% Scenario 1 Scenario 3 12. 34 12. 05 11. 76 11. 47 9. 46 9. 17 8. 89 8. 60 11. 18 8. 32 10. 89 10. 60 8. 03 7. 75 Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Project Timelines 46 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Implementing CESUL – key steps • Key Project development activities – – – Appoint Consultant for Design, Specifications & Tender documents - Feb 2012 Commencement of Procurement process - Mar 2012 Klicka här för att ändra format på underrubrik i bakgrunden Approved tender evaluation - Mid Apr 2013 Approved contracts - Jun 2013 Financial Close of Project – Jul 2013 • Construction of Project Facilities – – Commencement of OHTL Construction Contracts – Mid Jul 2013 Commencement of Converter Stations Construction Contract – Mid Jul 2013 Commencement of Substation Construction Contracts – Nov 2013 Taking-Over of Project Facilities – Jan 2017 • Assumed timeline for associated IPP projects – Financial close MPNK – Mid-2013 – Commissioning of MPNK – 2 nd half of 2017 – Commissioning CBNB ~ earliest mid-2017 (but could be later) © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Phase 1 – Indicative Project Programme Klicka här för att ändra format på underrubrik i bakgrunden © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Institutional & Operational Aspects 49 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Envisaged organisation of CESUL • CESUL Project size, technical nature and complexity, as well as the very large financing requirements, are all factors indicating that CESUL should be established as a Special Purpose Vehicle (“SPV”) härand för att ändra format på underrubrik bakgrunden – SPVKlicka model recommended structure willi be developed by CESUL Financial & Legal Advisors – EDM is expected to be lead Sponsor – Additional equity participation may be sought from credible international investors with relevant skills, experience and financial strength • Organisation structure, staffing and training programme for CESUL SPV should be clarified early to mitigate against operational risks • CESUL SPV will be granted long-term Concession under Mozambique law – Terms and conditions of the Concession need to be confirmed, including a Transmission / Wheeling charge methodology supportive of limited recourse project financing structures (part of mandate of Financial & Legal Adviser) – Relationships to EDM (as National Power Transmission Grid Manager), HCB, Motraco and other stakeholders must be clarified and formalised to ensure timely implementation of CESUL © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Skills and training requirements Management of CESUL Transmission Company • Maintenance Management System Training Staff of new Dispatch Centres Klicka här för att ändra format på underrubrik i bakgrunden • Operator training • Maintenance engineers and technicians: hardware, software and communication equipment training HVDC and SVC Staff • • Project engineers, operation managers, control and protection specialists Engineers responsible for HVDC and SVC control and protection Technicians maintaining HVDC and SVC equipment Operators for HVDC link, remote and local control Maintenance staff of CESUL Transmission Company • Maintenance engineers and technicians: fault tracing and preventive maintenance of HVAC substations, as well as live-line maintenance Key staff should be in place and be trained during Project construction phase Complementary external maintenance support by suppliers is recommended © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Control centre requirements New Control Centres • Generation and load growth in North/Central area • System expansion, load growth and interface with SAPP in South area Klicka här för att ändra format på underrubrik i bakgrunden • Hence, two (2) new National Control Centres are proposed Location • New NCC in (or near) Maputo SS • New SNCC in (or near) Matambo SS • Each CC equally equipped to be able to act as full back-up for the other • Existing Maputo RCC gradually transformed to Distribution CC for Maputo area Manning • Operation, each centre continuously manned with: − One chief operator and two assistant operators • Maintenance, each centre manned with: − One chief and two assistant SCADA maintenance engineers (in SNCC two assistant only) plus two telecom technicians © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Conclusions & Recommendations 53 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL Feasibility Study – Conclusions 1. CESUL is found to be technically and economically viable 2. Recommended Phase 1 design is a combined HVAC (400 k. V) and HVDC (500 k. V bi-pole) solution with high reliability, at a total cost of US$2, 119 m (funding requirement of ~US$2, 780 m), providing a transmission capacity >3, 000 MW Klicka här för att ändra format på underrubrik i bakgrunden 3. HVAC solution will ensure interconnection of central and southern parts of national grid, allowing for economic & social development along line route 4. Phase 1 solution is considered economically and financially robust, based on largescale export of hydropower to South Africa, with significant revenue to Go. M 5. Phase 1 facilitates implementation of MPNK and CBNB, with both projects found to be economically and financially viable in combination with CESUL solution 6. HVDC portion of CESUL Phase 1 can be implemented in two stages, allowing for staggered realisation of MPNK and CBNB if required (with MPNK assumed to be the first major hydropower development) 7. Phase 1 implementation is expected to take 59 months (of which 42 months construction time) 8. Financing requirements for CESUL Phase 1 are significant, with need for close coordination of generation and transmission developments to manage commercial and timing risks 9. CESUL can be expanded by adding 2 nd bi-pole with capacity of 2, 650 MW © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

CESUL – Recommendations and Next Steps i. Based on a targeted commercial operations date for MPNK by 2017, CESUL project preparation work has to commence early 2012 by progressing design, procurement and contracting arrangements Klicka här för att ändra format på underrubrik i bakgrunden ii. In parallel, recommended legal, financial and commercial structures and arrangements need to be finalised iii. Financial close of CESUL should be targeted for mid-2013 (to align with generation project timeframes) iv. Early confirmation of CESUL equity sponsors (in addition to EDM) will be key to successful development v. Timely and coordinated engagement with South Africa (Government and Eskom) will also be essential vi. Consideration may be given to creation of a Mozambique Joint Coordination Committee for CESUL and associated hydropower projects © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)

Obrigado / Thank you for your attention! com energia construimos futuro……… 56 © Vattenfall AB Technical & Economic Feasibility Study for Mozambique Regional Transmission Backbone Project (“CESUL”)