Luanda , September 10th, 2014

1. EDEL Experience on managing Prepayment System in Luanda • Engª Clara Sanches EDEL - Member of the Board • Dr. Jorge Costa Reis noLimits - Partner Luanda, September 10th, 2014

2. Prepayment in EDEL Case study – Mártires de Kifangondo Lessons learned Vision towards the future Key success factors Some Recommendations AGENDA

3. INTRODUCTION EDEL motivation to implement prepayment take into consideration the benefits for the client (electricity consumer) and for the sustainability of the company. • “Pay what you consume” (no more estimated consumption) • Greater control on electricity consumption • Possibility to pay previous debt on each prepaid charge • No more Debt and surtaxes for disconnections and reconnections • Debt recovery and revenue increase • Fraud reduction (split metering and more fraud detection methods) • Better supply quality and decrease of grid overload • Decrease of billing complaints Client EDEL

4. LUANDA PREPAYMENT OVERVIEW EDEL began the prepayment installation through a pilot project in 2003 and in 2011 start to roll out through Luanda. Today there are over 83.000 clients buying electricity through the prepayment system. LUANDA DISTRICTS 7% 8 26% 1 1 7 1% 93% 9 6 2 2 0% 4 5 15% 3 3 21% 3 4 4 5 5 0% 1 6 6 0% 10 23% 2 7 7 8 8 9 9 10 10

5. CASE STUDY – MÁRTIRES DE KIFANGONDO THE PROJECT LUANDA Location: Mártires de Kifangondo, Maianga District Prepaid meter installation: began in 2011 Prepaid clients: 3.916 (until 31/08/2014) Project participants : Management & Operation Installation • Management • Commercial operation • Technical Support EDEL Supplier • Contractor • Installer • Guaranty support Consultant Inspector • Management support • Technical advisory • Work inspection and approval SAMPLE OF PREPAID CLIENTS FOR ANALYSIS Type of Client ...that have Debt • CLIENTS SAMPLE (low voltage) BT (Domestic) 1.169 (93%) 276 (24%) 1.260 BTE (Comm. & Ind.) 91 (7%) 20 (22%) • Assumptions for selecting sample of clients: • Clients with a prepaid meter installed until December 2012 • Clients with a 2011 year Billing over 1.000 Kwanzas

6. CASE STUDY – FINANTIAL ANALYSIS Postpaid 2011 Billing and Collection Prepaid 2013 Sales and Debt recovery Analysis by comparing the same subset of clients with Average yearly values per client in Kwanzas per BT CLIENTS (Domestic) per BTE CLIENTS (Comm. & Ind.) BILLING 29.181 70.310 2011 POST PAID COLLECTION 25.552 (88%) 67.559(96%) +17% - 9% DEBT 3.629(12%) 2.750(4%) PREPAID SALES 34.104 64.052 On average, Domestic Clients spent more 17% on prepayment than with the previous post paid. On average, Commerce and Industry Clients spent less 9% with prepayment than with the previous post paid. 2013 PREPAID ELECTRICITY 31.548 (93%) 60.322(94%) DEBT RECOVERY 2.556(7%) 3.729(6%) 34% % OF CLIENTS WHO SPENT MORE ON PREPAID 54% decrease increase decrease increase RATIO ELECTRICITY SALES ON PREPAID / BILLING ON POST PAID % OF CLIENTS % OF CLIENTS RATIO RATIO

7. LESSONS LEARNED Based on the case study, it is possible to identify a series of challenges that were overcome with the prepayment, contributing to a financial sustainability of the company. Debt recovery at a rate of 35% of each prepaid sale Debt increase continuously P O Estimated consumption unrealistic (only 30% of the subset clients had a conventional meter) BT Clients (Domestic) spent more with prepayment (30% of the subset clients increase more than 50% on electricity) O P Prepaid management system can detect remotely possible fraud (2% of BT clients and 5% of BTE Clients spent less than 10% of the average prepaid sales of the subset) Difficulty on fraud detection P O

8. VISION TOWARDS THE FUTURE Reaching more than 90% of Luanda Clients with prepayment meters • Increase the installation of prepayment meters; Expedite procurement (turn-key tenders). Expand Prepayment selling channels reaching closer to the client Implement more prepayment point of sale; Develop new technologies to ease electricity purchase. Improve client’s trust on electricity supply • Faster response of complaints; Less outages.

9. EDEL Experience on managing Prepayment System in Luanda • Engª Clara Sanches EDEL - Member of the Board • Dr. Jorge Costa Reis noLimits - Partner Luanda, Setember 10th, 2014

10. PILLARS OF SUCCESS There are several critical success factors in a massive installation process as well as in the ongoing operational business. Perform a previousVIABILITY ANALYSIS Define an INTEGRATED PREPAYMENT SOLUTION Find the right MODEL FOR WORKS CONTRACTS Execute PROCESS REENGINEERING Define the COMERCIAL STRATEGY Develop a COMMUNICATION PLAN

11. VIABILITY ANALYSIS • Prior to any implementation,it is important to understand the impacts of prepayment on the business so it can be defined and planned a strategy to maximize the benefits. The Viability study calculated the investments necessary and operational costs for the prepaid infrastructure and estimated the worth benefits that represent real savings or revenues for the company. Accumulated COSTS NPV (10 Years) CAPEX • Equipment installation (meters, boxes, etc.) • Work on the grid for prepayment adequacy • Inspection and Consultancy • Commercial system and channels Payback 47% 100% Yearly Millions USD 8% 45% OPEX NET PROFIT over 10 years (1) • Maintenance costs • Communication and other costs Year BENEFITS Peak Funding • Electricity sales increase • Debt recovery Nota: (1) Values at current prices

12. INTEGRATED PREPAYMENT SOLUTION • The definition of an integrated prepayment solution is crucial for the correct functioning of the infrastructure. • It is important to consider: • interoperable solution (supported in standards) • scalable (allowing evolution) • competitive (balance between price paid and the expected return) • high tech (take into account emerging technologies) • Appropriate to reality (can merge into the social and technical environment) Information Systems Prepaid Management System Other Systems Sales Channels Mobile Telecommunications Network Data Network Point of Sale + Prepaid "Scratch" MPOS Online 3rd Party Website ATM Consumption zone Remote Metering Meter Meter Meter Purchase credit recharge PLC RF Comm. wire Consumption area Display Display Display User interface Client

13. MODEL FOR WORKS CONTRACTS • It is important to establish the right model balancing: • Project management complexity • Rink transfer (to the supplier) • Local suppliers capacity Supplier’s responsibilities Compliances – EDEL Requirements Equipment Supply • Prepaid meters requirements • Meter Boxes requirements • Cables requirements • Underground grid installation • Aerial grid installation • Buildings installation Equipment Installation • Planning and preparing installation • Project communication to the client previous to meter installation Installation management Project Support • Troubleshooting, equipment repair • Equipment and installation warranty • Comprehensiveness of training • Documentation format Training

14. PROCESS REENGINEERING The prepaid will introduce a different paradigm in the company, therefore is crucial to develop a process reengineering initiative in an early stage COMMERCIAL CYCLE POST PAID CONTRACTING METER READING BILLING COLLECTION INSPECTION METER INSTALLATION TECHNICAL SUPPORT Substitution Adaptation Adaptation PREPAID ENERGY SELLING CONTRACTING METER INSTALLATION TECHNICAL SUPPORT INSPECTION EDEL’S APPROACH FOR PROCESS REENGINEERING PHASE I Post Paid Processes assessment PHASE II Impact analysis on business operations PHASE III Processes design and adaptations PHASE IV Training and change management Process reengineering was conducted through 4 phases

15. COMMERCIAL MODEL COMMERCIAL NETWORK – PREPAID CHALLENGES • The different nature of the prepayment brings new challenges for the commercial network. It is therefore important to complement the existing sale channels with new ones, taking in consideration: • Availability • Proximity • Universality • To support the deployment of new sale channels for prepayment, it was defined a specific commercial model for each type of channel (players and business model) EDEL Client POST PAID PREPAID Agent Third Party Agent Third Party Extended Hours for Customer Service Appropriate sales channels for different segments of customers Customer proximity EXAMPLE OF COMMERCIAL MODELS 1 2 3 4

16. COMMUNICATION STRATEGY It is important to define a strategy to communicate the prepayment to the clients, so that the changes can be effective and complaints can be reduced. • EDEL developed a communication strategy aiming to: • Counteract resistance to prepaid • Educate about the new operating model • Breaking myths of pre-paid (more expensive, less reliable, etc.) • Discourage fraud COMMUNICATION OBJECTIVES COMMUNICATION CONTENTS • NEW SPECIFIC “BRAND” • BROCHURES • SPECIFIC WEBSITE • SOUND VEHICLE • MEDIA COMMERCIALS • RADIO PROGRAMS

17. RECOMMENDATIONS Toward the success of Prepayment... Start with a viability study to evaluate the business impact, and to know the real costs of the project (CAPEX & OPEX) Define an integrated prepayment solution (interoperable, scalable, etc.. but cost effective) Establish a model for works contracts that reduces the risk to the company and the management complexity Support the prepayment deployment with a process reengineering Complement existing sale channels with new ones to assure availability, proximity and universality. Invest in a communication strategy targeting the prepayment customers P P P P P P

18. Thankyou • Engª Clara Sanches EDEL – MemberoftheBoardclarasanches@hotmail.com • Dr. Jorge Costa Reis noLimits - Partnerjorge.costareis@nolimitsbt.com Luanda, September 10th, 2014