Regional Leadership Forum Advancing Sustainable Hydropower in Latin America and the Caribbean

1. ENABLING ENVIRONMENT FOR
INVESTMENT AND INNOVATIVE
FINANCING
Regional Leadership Forum – Advancing
Sustainable Hydropower in Latin America and
the Caribbean
Rio de Janeiro 12/11/12

2. Itaú BBA – Our purpose
Our overriding purpose is to contribute decisively to the success of our
clients, developing their business in order to achieve sustainable
leadership, playing a significant role in the growth of the countries
where we operate, and in the advancement of the people who are
directly or indirectly served by the projects we support.
(…)We use our international structure to find solutions wherever they
may be, while relying on our creativity to precisely perceive the
needs of each client.
(…)A great deal of certainty is dangerous. Certainties are comfortable
and lead to accommodation. We understand that even when we
believe deeply in something we should still question it. The strength
of our reputation springs from our capacity to do things better and
differently, and from our restlessness and daring attitude.”
Source: http://www.itau.com.br/itaubba-en/about-itau-bba/who-we-are/our-purpose/, downloaded 12Nov2012
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3. Itaú Unibanco: Global Presence
Itaú Unibanco has a strong presence in South America …
Itaú BBA U.K. Securities Ltd.
Banco Itaú BBA Intl S.A. (London)
Banco Itaú BBA Intl Frankfurt Rep. Office Itaú Asia Securities Ltd.
Tokyo Branch
Itaú Unibanco Tokyo
Banco Itaú BBA Intl Paris Rep. Office
Itaú BBA USA Securities Inc.
Branch
Banco Itaú Europa Luxembourg S.A.
Itaú BBA NY Rep. Office
Banco Itaú Suisse S.A. Switzerland
Banco Itaú Europa Intl (Miami) Itaú Unibanco NY Branch
Banco Itaú BBA Intl S.A. (Lisbon)
Itaú BBA Securities Inc Miami
Banco Itaú BBA Intl Madrid Rep. Office Itaú Middle East Itaú BBA Shanghai Rep. Office
Itaú Unibanco S.A. Nassau Branch
Itaú Unibanco S.A. Cayman Branch Ltd. (Dubai) Itaú Ásia Securities Ltd. (Hong Kong)
Itaú BBA Nassau Branch
Itaú Unibanco Holding S.A. Cayman Branch
Banco Itaú BBA Colombia Bahamas Ltd.
Itaú Bank & Trust
BIE Cayman Ltd.
Banco Itaú BBA S.A. Peru Rep. Office
Itaú Unibanco S.A. . (Brazil)
Banco Itaú Paraguay S.A.
Banco Itaú BBA S.A. (Brazil)
Banco Itaú Uruguay S.A.
Banco Itaú Chile
Banco Itaú Argentina S.A.
... and global distribution capabilities.

4. “We want to be a part of our clients' success, which is why we have
established a presence in the world's major financial centers. ”
Source: http://holtz.org/Library/Social%20Science/Geography%20and%20Economic%20Development%20by
%20Gallup,%20Sachs/GDP%20Density%20Map.gif , downloaded 12Nov2012
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5. “We want to be a part of our clients' success, which is why we have
established a presence in the world's major financial centers. ”
Source:http://www.cojoweb.com/earthlights_dmsp_big.jpg , downloaded 12Nov2012
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6. Keys to Successful, Sustainable Business
cStrategies:
• Developed through a transparent partnership process
involving stakeholders of different sectors and segments
of society
• Reflects national conditions and preferences, natural
resources base, and institutional framework
• Recognizes short-term trade-offs
• Focus on long-term goals
• Allows for intermediate adjustments, if necessary
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7. General Concern:
“Project financings are based on the notion that risks in the transaction are
identified upfront, allocated to transaction parties and mitigated where
economical. The upfront risk allocation, high leverage, and use of special
purpose limited recourse financing vehicles sometimes invite comparisons
to structured finance transactions. A key distinction between the two areas
of the capital markets is the operational risk of project financings, which
requires an assessment of technical risks especially around new
construction works, and the fact that project cash flows are dependent on
operating performance - which may vary markedly. ”
Source: Moody’s “Generic Project Finance Methodology”, 20Dec2010,
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_127446, downloaded 12Nov2012
“Defaults primarily due to market risk include defaults caused by adverse
variances in price and volume assumptions eg lower than expected output
commodity prices; higher than expected input commodityprices; or lower
than projected traffic volumes/demand/usage/patronage. ”
Source: Moody’s “Default and Recovery Rates for Project Finance Bank Loans, 1983–2010”, 31Jan2012,
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_139381, downloaded 12Nov2012
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8. Regional Issues:
• Exposure to market volatility
• Counterparty risk
• Institutional Development, Market Mechanisms and
Regulatory risk
• Baseline E & S Assessment and Unexpected issues
• Incomplete Cost-Benefit Analysis (social costs,
environmental services etc)
• Climate Change:
“Warming will have many severe impacts, often mediated through water:
Melting glaciers will initially increase flood risk and then strongly reduce
water supplies, eventually threatening one-sixth of the world’s population,
predominantly in the Indian sub-continent, parts of China, and the Andes in
South America.”
Source:Stern Review: The Economics of Climate Change, Summary of conclusions, page vi.
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9. Contingency Planning x Proper Upfront Risk Allocation
Source: Aneel, Standard Concession Contract, 4 th Subclause, 5th Clause
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10. Thank you!