Africa, a Major Challenge for ENGIE Africa, a Major Challenge for ENGIE

Africa, a major challenge for ENGIE Africa, a major challenge for ENGIE Africa’s population grew from 100 million in 1900 to 275 million in the 1950s-1960s, 640 million in 1990 and one billion in 2014. ENGIE is According to demographic projections, by 2050 there will be confident that between 2 and 3 billion Africans, rising to 4.2 billion in 2100. The prospects for economic growth are also promising. According to the in the next 40 African Development Bank, Africa’s GDP could rise from a baseline of USD 1700 billion in 2010 to more than USD 15 trillion in 2060. years, global Over the last 10 years, Africa’s economic prospects have improved growth will considerably, even though growth is still very much skewed towards South Africa, Nigeria and North Africa. Multiple key be driven by factors combine to ensure the long-term continuation of this trend: sustained, rapid growth of the working population with the Africa’s growth, emergence of a significant middle class, a sharp increase in foreign direct investment, vast and better exploited natural resources, which is in turn wide-scale urbanisation and improved governance and institutional capabilities. fuelled by strong However, this kind of economic growth is only possible if a major effort is made to increase power generation demographics. resources on a continent where 75% of the population has inadequate access to energy. 2 – Africa, a major challenge for ENGIE To address these challenges, ENGIE decided to create a Business Unit (BU) dedicated entirely to Africa. The creation of this BU demonstrates just how much importance ENGIE attaches to Africa and how determined it is in helping Africa meet its energy needs. For ENGIE this is a new frontier for growth and development, following the Group’s major international successes in South America, Asia and the Middle East. The new Africa BU is part of the Group’s general reorganisation in early 2016, involving the creation of 10 geographical BUs. The aim is to move even closer to customers and deliver solutions that are ideally suited to their needs, while being fully immersed in local ecosystems and giving the ‘territorial’ dimension priority over the ‘business’ dimension. In taking this approach, t h e Africa BU aims to ‘be African’. This means recruiting personnel locally, identifying risks, being capable of creating institutional networks and partnerships with local companies, forging sustainable relationships with investors and private and public financial institutions, and asserting our local roots while forging contacts with civil society and NGOs. Africa, a major challenge for ENGIE - 3 Africa is a richly diverse continent, where the Group’s strategy must be adapted to countries and regions which are all very different in terms of their natural resources as well as their political, economic and demographic situations. This means mobilising all of the Group’s businesses: • Centralised electricity generation with a systematic focus on renewable energies and gas. • Gas infrastructure, specifically transmission, regasification terminals and storage: - coordinated with exploration/production, the importation of liquefied natural gas and gas-fired power generation. • Energy support for local authorities, not just massive megalopolises connected to the grid, but also rural areas with the deployment of off-grid solutions or innovative micro-grid solutions. • The sale of gas, electricity and energy efficiency services to businesses. • The sale of gas and electricity to residential customers via new mobile phone billing options. 4 – Africa, a major challenge for ENGIE ENGIE aims to be one of Africa’s main energy leaders in the next ten years, with five major projects in Africa. To support this ambition, the Africa BU will have around one hundred people and will be active across the entire continent with four offices corresponding to vast regions where ENGIE is active: • Casablanca (Morocco) for North Africa, • Abidjan (Côte d’Ivoire) for West Africa and central Arica, • Nairobi (Kenya) for East Africa, • Johannesburg (South Africa) for the southern part of the continent. BU Africa ENGIE ENGINEERING Our offices Africa, a major challenge for ENGIE - 5 ENGIE in Africa In its efforts to develop successfully in Africa, ENGIE is focusing on South Africa and Morocco, specifically power generation with an installed capacity of 760 MW, of which 395 MW in wind and solar, but also energy services via the creation of its subsidiaries Cofely and Tractebel Engineering. Tractebel Engineering has offices in Algeria, Morocco, Nigeria and Tanzania, and is involved in some forty projects across the continent. In addition to these assets, the Group is involved in the exploration/production of gas fields in Algeria and advanced prospecting in Egypt. The Group is also present via its solidarity-oriented investment fund, ENGIE Rassembleurs d’Energies, which invests in projects that help people living under precarious conditions gain access to sustainable energy. The fund is active in Morocco, Burkina Faso, Kenya and Tanzania. 6 – Africa, a major challenge for ENGIE ENGIE in South Africa South Africa – with a population of 52 million and an estimated GDP of USD 350 billion accounting for more than 25% of GDP in sub-Saharan Africa – is the second largest economy in Africa after Nigeria. In terms of energy, the country is the biggest electricity market in Africa, with an installed electrical capacity of more than 45 GW, but it still struggles with under-production. Some 25% of the population does not have access to electricity and the grid suffers from under-capacity, exposing the country and industrial companies to frequent load-shedding risks. In its COP21 contribution, South Africa reasserts the commitment it made in Copenhagen to reduce CO2 emissions by 34% by 2020 and 42% by 2025 compared to a ‘business as usual’ scenario. To reach these targets, the country is establishing a carbon tax, implementing precise regulatory limits for each sector of the economy and modifying its energy mix, specifically by developing all renewable energies and replacing coal-fired power plants. In other words, South Africa is aiming to increase its energy production while modifying its energy mix. To achieve these objectives, the South African government decided to call on independent power producers for 30% of its production, with the rest provided by incumbent operator Eskom. The government also launched a 20-year plan aiming for a 42% increase (17 GW) in new capacity based on renewable energies: solar, wind, nuclear, hydro and biomass. ENGIE is ideally placed to address this challenge: it has had a presence in South Africa since 1994 – specifically in energy services – and is the country’s leading independent power producer. The Group aims to support the government in defining a balanced energy mix based on renewable energies and gas. Africa, a major challenge for ENGIE - 7 West Coast One wind farm West Coast One is a 94 MW wind farm 130 km north of Cape Town. It has 47 2-MW wind turbines. West Coast One is part of the government’s programme to develop renewable energies by independent power producers (the ‘world-class renewable energy IPP procurement programme’). The programme aims to develop 8 GW of wind power over 20 years. Construction of the wind farm began in mid-2013 and it commissioned in June 2015 for 20 years. This will result in 5.6 million tonnes of CO2 saved during2 that period. The project was led by Aurora, a joint venture created by ENGIE (43%) in partnership with Investec Bank (34.5%) and Kagiso Tiso Holdings (20%). In accordance with the rules currently applicable in South Africa, 2.5% of the investment is donated to local development projects (Local Community Trust). 8 – Africa, a major challenge for ENGIE Kathu solar park ENGIE is also developing a solar park in Kathu (Northern Cape province), 600 km southwest of Pretoria, the country’s administrative capital. This 100 MW concentrated solar power (CSP) plant uses parabolic trough technology and will be equipped with a molten salt storage system that provides 4.5 hours of battery life, thus helping to offset the intermittent nature of solar energy. Led by ENGIE (49%), the consortium comprises a group of South African investors, including SIOC Community Development Trust, Investec Bank, Lereko Metier and Public Investment Corporation. The consortium was given ‘preferred bidder’ status in January 2015. This project is also part of the government programme for renewable energy independent power producers (REIPPP). The candidates selected as preferred bidders will be invited to engage in negotiations with a view to concluding a 20-year power purchase agreement (PPA) with Eskom, the public power production and distribution company in South Africa. The Kathu works phase is scheduled to start in early 2016. Africa, a major challenge for ENGIE - 9 Solairedirect in South Africa Tractebel Engineering in South Africa Solairedirect, a wholly owned Tractebel Engineering is active in South Africa in subsidiary of ENGIE specialising in solar engineering and consultancy, specifically for energy, has been present in South Upington (100 MW, Northern Cape) and Kathu, Africa since 2009. Solairedirect is and for the West Coast One wind farm and the currently in charge of two projects in Koeberg nuclear plant. Aurora and Vredendal (Western Cape province) with a total installed capacity of 21 MW. These two solar parks are part of advanced regional projects involving local authorities and stakeholders. Dedisa and Avon peakers ENGIE is also developing two thermal power plant projects in South Africa: the Dedisa and Avon peakers (with a total capacity of 1,000 MW). Dedisa and Avon are new open-cycle gas turbine plants (335 MW and 670 MW) located respectively in Cape province and in KwaZulu-Natal near Durban. They are scheduled to come online in 2016. A 15-year operation and maintenance contract was signed with Eskom (the incumbent operator).

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