PANAMA

POWER PURCHASE AGREEMENTS On September 5, 2014, the Republic of Panama issued an emergency request for proposals for 200 MW of thermally-generated power. IEP put together a plan to rehabilitate an existing facility. Project Summary - Panama Power Purchase Agreements On September 5, 2014, the Republic of Panama issued an emergency request for proposals for 200 MW of thermally-generated power through the state-owned transmission company, Empresa de Transmision Electrica, S.A. (ETESA). IEP placed a successful bid and was officially notified that its wholly-owned subsidiary Erryl Capital, Inc., a Panamanian corporation had been awarded a series of Power Purchase Agreements (PPAs) to supply 80 MW. IEP had put together a plan to rehabilitate an existing facility and employ two GE LM-6000 aero-derivative turbine generators running on #2 fuel oil. Concurrent with execution of the PPAs, Erryl Capital posted performance bonds with the three distribution companies worth approximately $19.6M. The three PPAs, (each of which has identical contract terms) were allocated amongst the distribution companies in the following percentages: EDEMET 52%; ENSA 40%; EDECHI 8%. The PPAs provided payments for both electric energy and capacity each of which are in effect for a five (5) year term. Capacity pricing is initially $58.00/MWh, and increases by 2% annually. The initial energy price is $148 MWh, 90% of which is adjusted by changes in the #2 fuel oil index relative to its August 2014 level of $2.77/gallon. In Panama, IPPs are responsible for its replacement power during both scheduled and forced outages. This risk is mitigated by Panama’s robust and liquid wholesale electricity market. During the development of the project, due to the reliability and growth of the Panamanian market, a number of investors approached IEP to purchase the PPAs. While IEP’s original intent was to build, own and operate the project, IEP did sell the PPAs on favorable terms such that a portion of the sales are to remain in the region for investment purposes.

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