Equatorial Energia (Equatorial), Eletrobrás and others (management, etc.), respectively, own 65.1%, 33.7% and 1.2% interest in Cemar. Equatorial is a publicly-listed holding company whose main strategy is to expand its electric power distribution operations in the north, northeast and central-west regions of Brazil. Currently, Cemar is its only portfolio company. GP Investimentos and UBS Pactual Fund collectively, through a wholly owned limited liability company – Brasil Energia I, currently own over 30% economic interest in Equatorial. GP Investimentos is a leading private equity firm in Latin America and is publicly-listed on the Bovespa. Since its inception in 1993, GP Investimentos and its predecessors have raised more than $2.5 billion from Brazilian and international investors and have acquired 42 companies in 13 different sectors. UBS Pactual Fund is owned by UBS Pactual, the cornerstone of UBS operations in Brazil and throughout Latin America. UBS Pactual was formed with the acquisition of Banco Pactual by UBS AG in May 2006. UBS is a leading global wealth manager, investment banking and securities firm, and one of the largest global asset managers in the world. Eletrobrás is the Brazilian state-owned power utility with extensive ownership of generation and transmission assets.

The total project cost (2007-2009 Investment Plan) is estimated at approximately $307 million equivalent. The proposed project involves a subscription by IFC of cross-border, local currency-indexed notes (the Notes) o be issued by Cemar for an amount of up to $80-100 million equivalent. The Notes will be fully subscribed by IFC as a private placement for IFC’s own account.

80.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	80.0
Equity

* These investment figures are indicative

The project is located in the state of Maranhão in the northeast region of Brazil. Cemar is headquartered in São Luís, the capital city of Maranhão. Maranhão has a population of approximately 6.2 million and covers an area of 333,366 km2 area (3.9% of Brazilian territory). Approximately 40% of Maranhão residents live in rural areas.

According to the Brazilian Institute of Geography and Statistics (IBGE), Maranhão is one of the poorest states in Brazil with many of its residents still lacking access to electricity and other basic amenities. The project has high development impact, as it is expected to: - Support Maranhão’s economic growth: The project will modernize and expand the electricity distribution network and add sub-transmission and distribution capacity to effectively meet the rapid increase in electricity demand in Maranhão. - Increase electricity access to the poor: The project will increase electricity access in one of the poorest states in Brazil, especially given Cemar’s active participation in the Programa Luz Para Todos (Light for All Program or PLPT) which connects poor, rural households. Access to electricity will enable the poor residents of Maranhão to enjoy a better quality of life, increase work productivity and engage in new economic opportunities. - Improve the quality of service to end consumers: The Investment Plan will enable the company to make improvements in the reliability and quality of service which will enhance customer satisfaction and support economic growth by avoiding significant costs associated with disruptions in electricity supply. - Reduce energy losses: The project involves capital expenditures that will enable the company to reduce commercial and technical losses. This will allow the company to improve cash flow and redeploy capital to further improve operations and expand the distribution network. Reducing technical losses also contributes to energy efficiency and associated environmental benefits.

IFC will play an important role in the project by: - Supporting private sector electricity distribution companies which need significant financing to implement various projects to continue growing and improving their quality of service. - Providing longer-term, local currency financing to match the project and company’s needs. Such financings are not generally available from local banks and the Brazilian capital markets. - Catalyzing private sector financing through the demonstration of commitment to financing a sector that is otherwise perceived to have high regulatory risk and past financial difficulties. - Assisting in the implementation of environmental and social policies in line with international standards.

This is a Category B project because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. A mature, established, operating company, Cemar has a proven track record of effective management of environmental and social impacts from its projects in compliance with applicable regulations at the Brazilian federal and state levels. Cemar devotes adequate financial and human resources to its environmental and social management programs effectively mitigating potential impacts from on-going operations.