JSC Caucasus Energy and Infrastructure (CEI) JSC Caucasus Energy and - - PowerPoint PPT Presentation

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The Company Presentation The Company Presentation

February 2009

JSC Caucasus Energy and Infrastructure (CEI) JSC Caucasus Energy and Infrastructure (CEI)

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CEI CEI – – Company Profile, Corporate ID Company Profile, Corporate ID

Highlights

 A joint stock company organized under the Georgian law in 2007  Obtained a Georgian Stock Exchange listing in January 2008  Launched a GDR program with BONY in March 2008  Completed a database of technical and economic parameters of potential greenfield HPP projects in Georgia  Obtained a license for the construction of 42MW Mtkvari HPP in Georgia  Successfully undertook the US$18.0 million worth REPO transaction in December 2008, raising CEI’s Net Asset Value (NAV) per share from an estimated 1.81 GEL to an estimated 2.50 GEL  As at January 2008, the share price stands at GEL 1.60, resulting in MCap of GEL 38.6 mln (about US$23.2 mln)

Ownership Structure

 CEI holds a mandate to invest in Georgian and regional companies engaged in: Production, transmission and distribution of electricity Production, transmission and distribution of gas Extraction, distribution and marketing of crude and oil products Management of water utilities Development of cargo warehousing and logistics Management of toll roads Waste management and recycling Development of carbon emission trade-related opportunities  CEI intends to concentrate on greenfield investments in small and medium-size HPPs and electricity transmission lines in Georgia

Strategy

Domicile Georgia IPO February 2008 Private Placement US$50 million GSE Ticker Code NRGY GDR Issue March 2008 GDR/Share Ratio 1 GDR equals 10 company shares Bloomberg Ticker Code 2728484Z LI Equity Investment Advisor Galt & Taggart Asset Management, LLC Registrar JSC Kavkasreestri Auditor Ernst & Young Georgia LLC Legal Counsel BGI Legal Base Currency Georgian Lari Outstanding Shares, mln 24.1 Free Float (%) 100 Mcap, US$ mln 23.2

Key Facts

Others 26.6% Kairos Eurasian Fund 16.5% Kairos Fund Ltd 32.9% Sakaropel 5.0% Consibilink Ltd 6.6% BNY (Nominees Limited) 12.4%

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Key Project Key Project

Mtkvari HPP

 Location: Akhaltsikhe District, Southern Georgia  River: Mtkvari  Head: 100.0 m  Water discharge: 55.0 m3/sec  Number and type of units: 2; Francis  Construction time: 4.5 years  Potential installed capacity: 42.0 MW  Annual power output: 240.0 GW/h  Estimated construction costs: US$ 65.0 mln  Estimated tariff range (kWh): US¢ 4.0 - 5.5  Estimated payback period: 7 years  Expected life-span of the plant: 50 years

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 In December 2008 CEI successfully conducted a REPO transaction, under which, CEI shareholders were granted the right to sell up to 60% of their stake holding in the company back to CEI at the (GEL equivalent) price of US$ 0.70 per share. As a result of this transaction the company bought back 25.7 million shares worth GEL 29.7 million (US$ 18.0 million). In the aftermath of the transaction the Net Asset Value (NAV) per share has increased from an estimated 1.81 GEL to an estimated 2.50 GEL  Georgian company GeoEngineering Ltd. has completed a topography of the surface map for Mtkvari HPP and started a geological survey of the hydro power plant area  Icelandic project development company Verkis and Ukrainian UkrHydroProject have conducted a comprehensive study of the Mtkvari HPP project. Findings have confirmed a possibility of increasing the power potential of Mtkvari HPP, from 28 MW to 42MW capacity  UkrHydroProject won an informal tender for providing a comprehensive design of the Mtkvari HPP project  Verkis was hired to conduct a feasibility study of the Mtkvari HPP project  CEI is engaged in active talks with the International Financial Institutions (IFIs) on their potential involvement in the Mtkvari HPP project through a combination of debt and equity financing

Corporate Developments Other Provisions Corporate Outlook

 Feasibility study on Mtkvari HPP is expected to be completed in May 2009  Technical description of the project will be finalized in June 2009  Environmental impact assessment report should be completed in May 2009  Construction of the Mtkvari hydro power plant will commence in June 2009  Talks with IFIs on funding the project are expected to be finalized in the fourth quarter of 2009  First IFI fund disbursement is expected in early 2010  Turkish and Georgian governments agreed to build a new 400-500 kV HV transmission grid between the countries, funded by the Georgian Government, EBRD and KSW  The newly appointed Prime Minister outlined that the construction

• f the power transmission grid is among the top priorities of the

new cabinet

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Benefits of the Benefits of the Mtkvari Mtkvari HPP Location HPP Location

Mtkvari HPP

 Direct electricity supply to the energy deficient eastern Georgia through the existent power network  Alternative access to the Western Georgian transmission grid, once the Southern connection is built  Electricity export to Turkey, through a new transmission grid, expected to be completed in 2011- 2012  Electricity export to Russia and Azerbaijan, through the existent transmission network

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CEI CEI – – Consolidated Financial Statements (IFRS) Consolidated Financial Statements (IFRS)

Income Statement (GEL) YTD 2008 YTD 2007 % Change (Unaudited) (Audited) Operating revenue

• N/A

Investment income 6,570,197

• N/A

Other non-operating revenue 8,110,519

• 65,969

N/A Total revenue 14,680,716

• 65,969

N/A Salaries and other benefits

• 375,601
• 4,831

7,674.10 General and administrative expenses

• 590,137
• 89,347

560.5 Depreciation and amortisation charges

• 13,315
• N/A

Finance cost

• 89,366
• N/A

Total expenses

• 1,068,419
• 94,178

1,034.50 Profit/(loss) before income tax 13,612,297

• 160,148

N/A Income tax (expense)/benefit

• 2,068,968

24,022 N/A Profit/(loss) for the period 11,543,329

• 136,126

N/A Balance Sheet (GEL) 31-Dec-08 31-Dec-07 % Change (Unaudited) (Audited) Property, plant and equipment 12,116,844

• N/A

Intangible assets 1,949

• N/A

Investment in subsidiary 202,739

• N/A

Deferred income tax assets

• 24,022

N/A Total non-current assets 12,321,533 24,022 51,192.7 Assets held for sale 888,600

• N/A

Trade and other receivables 18,653,780

• N/A

Available-for-sale financial assets 2,522,358

• N/A

Bank deposits 8,213,562

• N/A

Cash and cash equivalents 47,346,995 1,590,229 3,554.6 Total current assets 77,625,295 1,590,229 4,781.4 Total assets 89,946,828 1,614,251 5,472.0 Share capital 12,500,000 308,000 3,958.4 Share premium 43,968,760 1,495,000 2,841.1 Treasury shares

• 6,464,612
• 58,000

11,045.9 Other reserve 397,271

• N/A

Retained earnings/(accumulated deficit) 11,407,204

• 136,126

N/A Total equity 61,808,623 1,608,874 3,741.7 Non-current liabilities Deferred tax liability 3,101

• N/A

Total non-current liabilities 3,101

• N/A

Trade and other payables 143,127 5,377 2,562.0 Income tax payable 1,597,350

• N/A

Borrowings 26,394,626

• N/A

Total current liabilities 28,135,104 5,377 523,171.5 Total equity and liabilities 89,946,828 1,614,251 5,472.0

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CEI CEI -

• Management

Management



• Mr. Irakli Bezhuashvili (CFO)

Irakli Bezhuashvili joined CEI in the capacity of Chief Financial Officer in April 2008. Prior to joining CEI, Mr. Bezhuashvili served as a Senior Consultant at PricewaterhouseCoopers as well as an Audit Manager at UBC International Ltd. He has also occupied the post

• f Director at Georgian Branch of Eilamed Raj BV. Irakli

Bezhuashvili

• btained

his Bachelor’s degree in Municipal Engineering and Economy from Technical University of Georgia. Mr. Bezhuashvili is an accredited member of the Association of Certified Chartered Accountants (ACCA).



• Mr. Archil Mamatelashvili (CEO)

Archil Mamatelashvili joined the Company in the capacity of Chief Executive Officer in October 2007. Prior to joining CEI, Mr. Mamatelashvili served as the Country Manager for Energo Pro S.A. in Istanbul, Turkey (April 2007 – October 2007) and as the Deputy Minister of Energy of Georgia (March 2005 – April 2007). Mr. Mamatelashvili holds an Undergraduate degree in Economics from Tbilisi State university, and a joint international MBA degree from Weatherhead School of Management of Case Western Reserve University/IMC.

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Appendix Appendix -

• Georgian Electricity Sector

Georgian Electricity Sector

ESCO

Note: P - Privately Held; S - State Owned; GSE – JSC Georgian State Electrosystem

(22%) GNEWRC Enguri (+Vardnili) (40%) (40%) (12%) Other HPPs Thermal Thermal Technical Operator GSE Ministry of Energy of Georgia Policy Maker S P P S % in Generation Telasi EnergoPro Other Distributors Direct Customers Export P % in Consumption (27%) (16%) (27%) (8%) Import (3%) (5%) P P P

Georgian Electricity Market Highlights Electricity Balance, Georgia Highlights

 The Georgian Electricity sector is mostly privately owned and partially liberalized  Only Transmission, Dispatch, the largest hydro power plant (HPP), located in the conflict zone and a thermal power plant (TPP) are owned by the state  Wholesale generation tariffs are fully liberalized and any generation company is permitted to sell electricity to any wholesale customer at a directly negotiated tariff  Retail tariffs are regulated by Georgian National Electricity and Water Regulatory Commission  However, small HPPs (less than 13 MW capacity) can sell electricity at unregulated tariffs to any wholesale or retail customer  HPPs account for roughly 78% of the country’s electricity supply, whilst TPPs generate 17% and imports contribute another 5%  The electricity generation at the HPPs has increased, mainly due to better operating conditions and upgrades across the sector  The share of TPPs and imports in Georgia’s energy sector is set for a steady decline

Source: The Ministry of Energy of Georgia, CEI Estimates Supply, TWH 2005 2006 2007 2008E 2009F 2010F 2011F HPP 5.9 5.4 6.7 6.8 7.5 7.6 7.6 Thermal 1.0 2.2 1.5 1.4 1.5 1.6 1.7 Total Production 6.9 7.6 8.2 8.2 9.0 9.3 9.5 Imports 1.4 0.8 0.4 0.7 0.8 0.7 0.8 Total Supply 8.3 8.4 8.6 8.9 9.8 10.0 10.3 Demand, TWH 2005 2006 2007 2008E 2009F 2010F 2011F Domestic consumption 7.9 8.2 8.0 8.3 9.1 9.3 9.5 Export 0.4 0.2 0.6 0.6 0.8 0.7 0.7 Total Demand 8.3 8.4 8.6 8.9 9.8 10.0 10.3

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Appendix Appendix -

• Georgian Electricity Market

Georgian Electricity Market

Electricity Market Highlights

Source: The Ministry of Energy of Georgia

Installed hydro power generation capacity is approximately 26% of the total potential hydro capacity available in the country Georgia uses hydro power to fully meet local demand and export electricity in summer Thermal power is needed to balance consumption in winter Aggregate peak capacity is circa 1,650 MW

Source: The Ministry of Energy of Georgia

Domestic Consumption

Two main electricity consumption groups in Georgia Three regional distribution companies, cumulative ly accounting for roughly 69% of the country’s total electricity consumption About 30 large industrial enterprises, accounting for 23% of the country’s total electricity demand, allowed to directly purchase electricity from suppliers The share of exports in the energy consumption grew from 1% in 2004 to 7% in 2007

TWh % TWh % TWh % Telasi RAO UES (Russia) 1.9 33% 2 34% 2.1 35% Energo Pro Energo Pro (Czech Republic) 2.5 42% 2.5 43% 2.6 43% Kakheti Under Privatisation 0.2 3% 0.2 4% 0.2 3% Abkhazia Energy Company State owned 1.3 22% 1.2 20% 1.2 19% Total, Distribution Companies 5.8 100% 5.9 100% 5.9 100% 2005 Distributors Owner 2007 2006 GWh % GWh % GWh % Ltd Georgian Manganese (incl. Chiaturmanganum) 802 40% 741 37% 721 38% JSC Georgian Railway 320 16% 324 16% 292 15% Ltd Tbilisi Water 294 15% 319 16% 302 16% JSC Energy Invest (incl. Nitrogen Plant) 259 13% 261 13% 244 13% JSC Rustavtsementi (incl. Cespicement) 165 8% 117 6% 110 6% Ltd Tbilisi Metro 63 3% 64 3% 64 3% Ltd Madneuli 60 3% 58 3% 52 3% Other Direct Consumers 109 5% 105 5% 120 6% Total, Direct Customers 2,012 100% 1,989 100% 1,905 100% 2006 2005 Company 2007

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Appendix Appendix -

• Final Consumer and Transmission

Final Consumer and Transmission Electricity Tariffs Electricity Tariffs

 Transmission tariffs are set by the regulator GNEWRC on an annual basis  No charge for the generation capacity - transmission tariff reflects only the volume of electricity transfer  All newly built HPPs are fully deregulated as far as generation tariffs are concerned, whilst tariffs for the existing HPPs are capped  The total transmission charge is based on the pre-paying principle, whereby the cost of transmission is the same regardless the distance within the country  The electricity transmission tariffs are set as follows:

 1.80

GEL/MWh – Kavkasioni 500 kV line

• perator’s

(Sakrusenergo) tariff

 5.35 GEL/MWh – tariff for transmitting electricity on 220-35 kV

lines

 11.09 GEL/MWh – tariff for transmitting electricity on 10-6 kV lines  1.50 GEL/MWh – dispatch tariff collected by JSC Georgian State

Electrosystem

 The aggregate transmission tariffs are 8.65 GEL/MWh for the

usage of 220-35 kV lines, 14.39 GEL/MWh, for the usage of 10-6 kv lines

 The costs related to transmission losses are reflected in the final

consumer tariffs Weighted Average Final Consumer Tariffs (less of VAT), GEL/MWh

Electricity Transmission Tariffs Electricity Tariffs

 GNEWRC has established different tariff levels for customers who use less than 100 kWh, those who use more than 100 kWh but less than 300 kWh, and those who use over 300 kWh per month

Source: The Ministry of Energy of Georgia 2003 2004 2005 2006 2007 2008 2009E Tbilisi 114.2 114.2 114.2 135.6 135.6 135.6 135.6 The rest of Georgia 70.8 70.8 70.8 116.9 116.9 116.9 116.9

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Appendix Appendix -

• Power Transmission Network

Power Transmission Network

11

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Appendix Appendix -

• Primary World Energy Consumption

Primary World Energy Consumption Indicators, 2007 Indicators, 2007

 Georgia’s energy consumption per unit of GDP is one of the lowest in the CEE region at 0.73 TOE/US$ in 2007, which limits the downside potential in case of further energy efficiency improvements  In 2007, Georgia’s annual electricity consumption per capita reached 1,800 kWhs, compared to 8,000 kWhs in Germany, 8,500 kWhs in Japan, 13,500 kWhs in the US and 24,300 kWhs in Norway, which illustrates a huge upside potential for the electricity usage in the country as economy develops

5,000 10,000 15,000 20,000 25,000 30,000 35,000 I c e l a n d N

• r

w a y C a n a d a U S A O E C D J a p a n F r a n c e G e r m a n y C z e c h R e p u b l i c U K R u s s i a E s t

• n

i a G r e e c e S l

• v

a k i a F

• r

m e r U S S R B u l g a r i a U k r a i n e W

• r

l d A z e r b a i j a n T a j i k i s t a n T u r k e y C h i n a A r m e n i a G e

• r

g i a TPES/pop (toe/ 000,capita)

• Elct. Cons./pop (kWh/capita)

Source: International Energy Agency, Key Energy Indicators 2008

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Contacts & Important Notice Contacts & Important Notice

Bidzina Bejuashvili, CEO of Galt & Taggart Asset Management Bidzina Bejuashvili, CEO of Galt & Taggart Asset Management bbejuashvili@gtam.ge, +995 95 22 79 97 Archil Mamatelashvili, CEO of Caucasus Energy & Infrastructure Archil Mamatelashvili, CEO of Caucasus Energy & Infrastructure amamatelashvili@cei.ge, +995 99 15 95 73

Confidential & Proprietary

This document is intended solely for the use on a confidential basis by those persons to whom it has been transmitted by Caucasus Energy & Infrastructure or its affiliates. Intended recipients, by their acceptance and retention of this document, agree to preserve the confidentiality of its contents. This document is proprietary to Caucasus Energy & Infrastructure and may not be disclosed to any third party, reproduced, in whole or in part, or used for any purpose other than that for which it has been submitted without prior consent of Caucasus Energy & Infrastructure. This document is not and should not be construed as, an offer to sell or solicitation for an offer to buy any securities. The information and opinions contained in this document have been compiled or arrived by Caucasus Energy & Infrastructure from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. All opinions and estimates contained in this document constitute Caucasus Energy & Infrastructure’s judgment as of the date hereof based on the prevailing conditions and are subject to change without notice. The information contained in this document is published for the assistance of the intended recipient, but is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient. Caucasus Energy & Infrastructure accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or its contents.

For further information please visit the company website at www.cei.ge

• r contact: