23 - 24 April 2009

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China e Brasil: Potenciais Parceiros em Projetos de Energia Alternativa

Michael Meagher C.W.Downer & Co.

Background Chinese Infrastructure Development

Transportation Infrastructure

The Chinese Government is in the midst of a massive upgrade of its transportation infrastructure

Highways, waterways, and airports are being improved across the country All of these projects bring opportunities to construction equipment, engineering, and electronics and safety devices companies, especially for projects funded by the World Bank, Asian Development Bank and OECF
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Highways

In the past few years, China has been rapidly developing its highway system The government has added about 3,000 km of expressway a year to the existing network China has already built a 30,000 km network of highways, second only to the U.S. in total kilometers
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Bridges

One major project is a 29 km bridge across the mouth of the Pearl River in the south eastern province of Guangdong to link Hong Kong and Macau, and then on to Zhuhai Work on this US $730 million project is expected to start this year

Ports

China has sixteen major shipping ports with a capacity of over 50 million tons per year Combined Chinas total shipping capacity is in excess of 2,890 million tons By 2010, 35% of the worlds shipping is expected to originate from China

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45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

Sha ngha i She nzhe n Hong Kong Gua ngzhou Ningbo Qingda o Tia njin

2006 Throughput 2011 Throughput

Selected Chinese Ports Unit: 1,000 TEU

Port of Shanghai
The new Shanghai Port of Yangshan is an example of the type of investment the Chinese are making in port infrastructure The first two phases of the US $14.5 billion Yangshan deep-sea port are now open, with a 2020 target year for achieving the full capacity of the port (33 to 50 deep-sea berths) at 25 million TEUs per year The port is located about 32 km (20 miles) offshore and is connected to the mainland by a highway bridge

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Chinese Railway System

2006 2010 Five Year Plan: Six new railways for passenger transportation, including one between Beijing and Shanghai Five inter-city railways, including one between Beijing and Tianjin that has trains running at a top speed of 350 km/h Upgrading of five existing railways including one between Datong and Qinhuangdao

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Shanghai Metro

Shanghai Metro opened in 1995 By 2010 it will have 250 km of track By 2012 it will 500 km of track with 350 stations citywide

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Chinas Response to the Economic Crisis

At a time when major infrastructure projects are being put off around the world, China will spend an estimated US $586 billion over the next two years roughly 7 percent of its gross domestic product each year to construct new railways, subways and airports and to rebuild communities devastated by an earthquake in May 2008

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Chinas Response to the Economic Crisis

Rural infrastructure: Efforts will be made to speed up rural infrastructure construction Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure safe drinking water

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Chinas Response to the Economic Crisis Transport: Accelerating the growth of the transport network, including more passenger rail links and coal routes Trunk railways will be extended and more airports will be built in western areas Urban power grids will also be upgraded

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Additional Projects Announced 04 Dec 2008

China's Government announced it will spend an extra CNY 100 billion (US $14.5 billion) on key projects in the fourth quarter of 2008 About CNY 28 billion (US $4.06 billion) has been allocated to railways, roads and airport infrastructure, CNY 15 billion (US $2.18 billion) for railways, CNY 5 billion (US $2.18 billion) for highways, CNY 5 billion (US $2.18 billion) for rural roads, and CNY 3 billion (US $726 million) for the country's central and western airports

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Chinese City Example: Tianjin

(Tianjin is the port city nearest Beijing)

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Chinese Infrastructure Projects in Latin America

From 2004 China began to secure raw materials through investing in Chinese businesses that operated in Latin America Many Latin American business leaders thought they could look forward to a sharp increase in Chinese foreign direct investment Chinese did not invest in their companies, but sought to buy them instead There were some exceptions, such as Chile's Codelco copper mining company, which saw a significant investment from China
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Chinese Infrastructure Projects in Latin America

China offered to make a US $4.82 billion investment in Brazil's rail lines but the deal died because China wanted to bring in its own workers, while the Brazilian government wanted those jobs for Brazilians Brazil's saw its trade balance with China reverse, resulting in a deficit largely driven by cheap Chinese textiles flooding Brazilian markets Some business sectors accused the Chinese of "dumping" textiles on Brazil, selling them far below market prices
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Chinese Infrastructure Projects in Latin America

In September 2008, in response to the boycott staged against its price hike by Chinese steelmakers, Brazilian iron ore miner Vale refused to provide ore to China Jia XiangRong, vice-chairman of Jiangsu Shagang Group, China's largest private steel enterprise, also spoke of the ships stranded in Brazil: We are angry with Vales behavior and our bottom line is no way for even a penny increase."
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Chinese Infrastructure Projects in Latin America In February 2009 Petrobras announced it had signed two Memorandums of Understanding with Chinese institutions and an export oil contract with UNIPEC Asia Co. Ltd. -- a subsidiary of China Petrochemical Corporation, or SINOPEC to export around 100 thousand barrels of oil per day The Memorandum between China Development Bank Corporation, SINOPEC and Petrobras presents has the followings details :
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Chinese Infrastructure Projects in Latin America

* Credit supply to Petrobras, including the option to off-set the debt with the export of oil, as per Chinese institution option and in a volume to be defined in the future * Increase the oil export of Petrobras to China * Partnerships between Petrobras and Chinese companies to develop projects in several oil industry segments * Supply of service, material and equipment by Chinese companies to Petrobras * Promoting contacts between Chinese and Brazilian companies for the purpose of creating joint ventures
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Chinese Infrastructure Projects in Latin America The amount of the deal is estimated as US $10 Billion in loans for Petrobras which is in exchange for future oil exports The loans will be used by Petrobras to continue its investment programs to develop a huge oil field in the pre-salt basin

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Chinese Infrastructure Projects in Latin America

In January 2009, Draga Brazil, a consortium headed up by Chinese dredging firm Shanghai Dredging Company, bid for a share of the Reais1.46bn ($729.8m) dredging contracts being offered throughout by the Brazilian government Draga Brasil has already won the Reais17.5m award to carry out Emergency Dredging for the port of Itajai Many people believe Draga Brasil is well placed to win further contracts in Brazil
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Chinese Infrastructure Projects in Latin America

Draga Brasil has already confirmed to SAO that it will be bidding for Tender $78.3m, number two, which is for Brazils Santos port Draga Brasil announced that it will not be bidding for Rio Grande (tender number three worth $91.5m), in the south of Brazil A Draga Brasil spokeswoman added that the consortium will put in bid offers for a good percentage of the other six contracts coming up this year
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Chinese Infrastructure Projects in Latin America

In 2004, Chinese leader Hu Jintao traveled to Latin America, promising US$100 billion in trade by 2010 on the heels of the APEC summit in Chile His promise was reached in 2007, with trade between China and Latin America passing some US$102 billion Bilateral trade between China and Brazil reached around US$23.37 billion
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Alternative Energy in China China rapidly has moved along the path of renewable energy development About 16 percent of China's electricity came from renewable sources in 2006, led by the world's largest number of hydroelectric generators

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Alternative Energy in China In 2007, China had the world's largest total investment in renewable energy sources (excluding large scale hydropower plants) with expenditures of US $10.8 billion, up 91 percent over the year before and the largest installed renewable capacity at 152 GW In 2007, China invested US $12 billion, almost level with world leader Germany as a percentage of GDP

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Alternative Energy in China For wind power, Chinese policymakers have set an ambitious goal of putting in place 30,000 MW of wind power by 2020 Biomass energy from agricultural waste, straw and waste from cities alone may exceed 500 million metric tons of coal equivalents

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Alternative Energy in China In the near-term China plans to develop 120 GW of renewable energy by the year 2020; this would account for 12% of Chinas total installed energy producing capacity. China's growth target for renewable energy production will require an investment of approximately 800 billion Yuan (~ US $115 billion) by 2020 China has set a renewable energy target of 5% of primary energy by 2010 and 10% of primary energy by 2020
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Alternative Energy in China

In the long term, China has set an objective of having 30% or more of its total energy requirements satisfied by renewable sources by 2050

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Wind Energy China is the fourth largest producer of wind power, after the United States, Germany, and Spain China has identified wind power as a key growth component of the country's economy It is anticipated that China will have 25-30 GW of windpower capacity or even more by 2010

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Wind Energy In 2006, China had 1.3 GW of installed wind capacity In 2007, China added 3.4 GW of wind power In 2008, 5.5 GW of wind power was added China projects to add 10 GW of capacity per year by 2010

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Wind Energy

There are currently more than 40 wind turbine generator manufacturers in China, including 4 foreign invested enterprises, 7 joint-venture companies and over 20 domestic manufacturers

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Solar Energy

China has become a world leader in the manufacture of solar photovoltaic technology, with its six biggest solar companies having a combined value of over US $15 billion Around 820 megawatts of solar PV were produced in China in 2007, second only to Japan
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Solar Energy
In China there now are six factories producing at least 2 MW/year each of monocrystalline, poly-crystalline and non-crystalline Photovoltaic cells, including: Wuxi Suntech Solar Energy Co., Ltd., which produces approximately 50 MW/year of solar cells and photovoltaic modules and is the worlds third largest supplier of solar cells Yunnan Semi-conductor Parts Plant, which manufactures approximately 2 MW/year of monocrystalline cells
LDK Solar Co
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Solar Energy
Baoding Yingli Solar Energy Modules Plant, which manufactures approximately 6 MW/year of polycrystalline cells and modules Shanghai Jiaoda Guofei Solar Energy Battery Factory, which produces approximately 1 MW/year of modules Shanghai PV Science and Technology Co., Ltd., which produces approximately 5 MW/year of modules

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Hydropower In 2005, the following hydroelectric power projects were approved by the National Development and Reform Commission and began construction: The Jinsha River Xiluo Crossing (12.6 GW) The Yellow River Laxiwa (4.2 GW) The Yalong River Mianpi (First Phase) (3.6 GW)

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Hydropower In 2006, 10 GW of installed hydropower capacity went into operation in China The National Development and Reform Commission also approved 13 additional hydropower projects in 2006, which cumulatively will have 19.5 GW of power generating capacity

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Hydropower New hydropower projects that were approved and began construction in 2006 include: The Jinsha River Xiangjia Dam (6 GW) The Yalong River Mianpi (Second Phase) (4.8 GW) The Lancang River Jinghong (1.75 GW) The Beipan River Guangzhao (1 GW)
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Biomass and Biofuel China emerged as the worlds third largest producer of ethanol bio-fuels (after the U.S. and Brazil) as of the end of the 10th Five Year Plan Period in 2005 At present ethanol accounts for 20% of total automotive fuel consumption in China

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Biomass and Biofuel In the 11th Five Year Plan period (2006 through 2010) China plans to develop 6 million tpy of fuel ethanol capacity Chinas fuel ethanol capacity is expected to grow to 15 million tpy by 2020 Despite this level of production, experts say that there will be no threat to food security, though there will be an increasing number of farmers who will be "farming oil" if the price of crude oil continues to increase
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Biomass and Biofuel Work has begun on the 250 million Yuan Kaiyou Green Energy Biomass (Rice Husks) Power Generating project located in the Suqian City Economic Development Zone in Jiangsu Province The Kaiyou Green Energy Biomass Power project will generate 144 million kwh/year and use 200,000 tpy of crop waste as input

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Infrastructure Opportunities Involving Chinese Companies

There are many Chinese companies who manufacture the following equipment related to infrastructure: Construction Equipment Telecommunications and other electronic equipment Steel and concrete China is a world leader in the manufacture of alternative energy equipment, including solar panels and windpower turbines
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Infrastructure Opportunities Involving Chinese Companies

Some Chinese construction companies are seeking partners worldwide Some Chinese companies make excellent joint venture partners Some Chinese companies are looking to make overseas acquisitions, particularly in areas such as mining, telecommunications and manufacturing
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How to do Joint Ventures and Conduct M&A with Chinese Companies

Chinese / Brazilian relationships have great promise, but many have failed due to misunderstandings and bad strategies There are thousands of Chinese consultants who claim to have the relationships necessary to help you do business They are not professionals and will do much more harm than good

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SECTION IV C.W. Downer & Co.

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C.W. Downer & Co. Specializes in Cross-Border M&A and Fundraising

40 client-side professionals across seven integrated offices

Dublin Boston Paris Shanghai Frankfurt Beijing

Sydney

Mid-Market Focus

Integrated Firm

Over 30 Years Experience

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C.W. Downer & Co. Since 2004

47 cross-border transactions involving US, UK, Benelux, French, German, Spanish, Australian, Norwegian, Finnish and Irish companies

56 transactions with strategics, 17 transactions with private equity groups

73 completed transactions

38 sell-side transactions, 35 buy-side transactions

Aerospace, Automotive, Food Ingredients, Material Handling & Logistics, Retail & Consumer Products, Pharma, and Industrials

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SECTION V C.W. Downers Previous Clients

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Trusted Advisor to Leading Corporations and Private Equity Firms

Strategic Clients:

Private Equity Clients:

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