FROM EQUITY TO DEBT: AN OWNERS MANUAL

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FROM EQUITY TO DEBTAN OWNERS MANUAL

• MAKING THE MARKET WORK
• Gulf Coast Power Association
• April 3, 2002

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From Equity to Debt An Owners Manual

• Tractebel North America, with its roots in
  development of Qualified Facilities Power
  Projects, is pursuing a growth plan to become an
  integrated energy provider.
• Much like a home-owner that chooses to remodel,
  Tractebel North America is adding onto its
  business model.
• Tractebel North America looked into its financial
  tool box to engineer a complementary financing
  solution.
• Tractebel has a new financial owners manual to
  complement our remodeled business.

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From Equity to Debt An Owners Manual

• Tractebel North Americas expansion has created
  burgeoning credit and cash needs.
• Tractebel North America has been challenged to
  minimize the credit impact on Tractebel SA while
  minimizing financing and credit costs.
• To achieve these objectives, Tractebel North
  America funds growth with equity, low cost debt
  from parent and parent guarantees during
  development and construction phase.

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From Equity to Debt An Owners Manual

• What Are We Trying To Build?
• What Do We Have Now?
• How Much Will it Cost?
• How Long Do We Have to Complete to Project?
• What Financial Tools Can Assist in the Remodeling?

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From Equity to Debt An Owners Manual

• What Are We Trying To Build?
• Integrated Energy Merchant With Multiple
  Positions Along Value Chain.
• Ownership or Control of Physical Power Generation
  
• Ownership or Control of Physical Mid-Stream Gas
• Short and Long Term Placement of Physical
  Positions in Wholesale Market
• Tailored Industrial Energy Solutions

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From Equity to Debt An Owners Manual

• What Commercial Tools Do We Need To Achieve This?
• Proprietary Trading
• Origination and Structuring
• Acquire Control of Generation
• Place Commodity in Market
• Site and Construct New Generation
• Operate Generation Efficiently
• Low Cost Gas Power Plants
• Small Tailored Energy Services Industrial
  Solutions

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From Equity to Debt An Owners Manual

• What Will our Financial Profile be After the
  Remodeling?
• Tractebel North Americas expanded commercial
  presence will achieve investment grade profile.
• Diversified cash flow base that will withstand
  inherent regional volatility.
• Tractebel North Americas credit profile will be
  less dependent on Tractebel SA.

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From Equity to Debt An Owners Manual

• What Do We Have Now?
• In North America, smaller presence along value
  chain
• Portfolio of traditional QF Facilities with
  stable cash flow and earnings. Individual
  project finance loans.
• Construction of merchant gas fired plants.
• Active trading and origination group.
• LNG regassification facility.
• North America benefits from Tractebel SAs strong
  credit profile and integrated global business.

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From Equity to Debt An Owners Manual

• How Much Will It Cost?
• Multi-billion dollar capital cost for green-field
  gas fired facilities.
• Credit Support in the form of guarantees for
  trading and origination operations
• Liquidity lines to backstop trading and hedging
  positions.

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From Equity to Debt An Owners Manual

• How Long Do We Have to Complete to Project?
• Greenfield development construction schedule of
  three to four years
• Once critical mass is achieved, Tractebel North
  America will have diversified physical assets
  that we either own or control.

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From Equity to Debt An Owners Manual

• What Financial Tools do we use in the Remodeling?
• Financial tools must be short term and flexible,
  anchored with Tractebel SA support during intense
  investment cycle.
• Tractebel SA credit commitment can fall-off once
  investment cycle complete.

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From Equity to Debt An Owners Manual

• What Financial Tools do we use in the Remodeling?
• Tractebel North America doesnt use one size
  fits all with regard to credit and financing.
• Tractebel North America segments credit/funding
  activity, then structures a tailored credit
  facility.
• Financing structure allow Tractebel SAs support
  to fall away when Tractebel North America
  becomes credit-worthy as a stand-alone.

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From Equity to Debt An Owners Manual

• What Financial Tools do we use in the Remodeling?
• Currently, credit profile tethered to Tractebel
  SA due to small scale of current operations.
• Tractebel SA Guarantee Envelope
• Tractebel SA Debt (or guaranteed Debt)
• Tractebel SA Equity Infusion
• Project Finance non-recourse debt which is credit
  enhanced with the related party tolling
  agreement.
• Related party tolling agreements guaranteed by
  Tractebel SA.

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From Equity to Debt An Owners Manual

• What Financial Tools do we use in the Remodeling?
• Goals
• Increase Velocity of Existing Credit Facilities.
• Recycle Credit Lines.
• Layer types of credit facilities to maximize
  appeal to different lending sectors.

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From Equity to Debt An Owners Manual
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From Equity to Debt An Owners Manual
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From Equity to Debt An Owners Manual
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From Equity to Debt An Owners Manual

• What Are the Benefits?
• Segmentation of Lender Group
• Maximizes Low Cost Funding
• Tractebel SA Relationship Banks Fund Corporate
  Debt
• Tractebel SA Provides Parent Company Guarantees
  to Counterparties.

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From Equity to Debt An Owners Manual

• What Are the Benefits?
• Segmentation of Lender Group
• Suez credit facilities, Tractebel North Americas
  Shareholder, also tapped for short-term funding.
• Banks interested in invitations to bid on North
  America ancillary services.

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From Equity to Debt An Owners Manual

• What Are the Benefits?
• Segmentation of Lender Group
• Project Finance banks fund construction
• Institutional Investors tapped in future based on
  Tractebel North America Credit
• Vendor financing available for some small
  installations

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From Equity to Debt An Owners Manual

• What Are the Benefits?
• Financial tools minimize funding costs while
  limiting impact on credit capacity of parent to
  growth cycle.
• Credit support required only until business is
  mature and cash flow is sustainable.

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From Equity to Debt An Owners Manual

• What Are the Benefits?
• No cute accounting tricks
• International Accounting Standards (IAS) focus on
  risk shifting to substantiate off-balance sheet
  structures.
• Exotic structures would have never worked for
  European shareholders.