Moyobamba-Iquitos Updated Report - 1.20.16 PDF

COFIDE
Moyobamba-Iquitos Transmission
Line
Final Technical Due Diligence
Report
Final | January 20, 2016
This report takes into account the particular

instructions and requirements of our client.
It is not intended for and should not be relied
upon by any third party and no responsibility
is undertaken to any third party.
Job number 240242-00
Arup Latin America, S.A.U.

Alcalá 54
28014
Madrid
Spain
www.arup.com
COFIDE Moyobamba-Iquitos Transmission Line
Final Technical Due Diligence Report
Contents
Page
Important Notice 4
Executive Summary 5
1 Introduction 19
1.1 Project Overview 19
1.2 Project Context 19
1.3 Project Description 19
1.4 Basis for the Report 21
1.5 Role of Arup 22
2 Project Participants Review 24

2.1 Project Participants 24
2.2 Technical Commentary on Project Participants 30
3 Concession Agreement Review 32

3.1 Concession Agreement Overview 32
3.2 Risk Allocation 36
3.3 Summary Technical Commentary on CA 37
3.4 Right of Way, Social, Environmental & Permits 39
3.5 Payment Mechanism 39
3.6 Reinforcements “Refuerzos” and Second Circuit 39
3.7 Penalties 41
3.8 Relief Events and Termination 41
4 EPC Agreement Review 43

4.1 EPC Agreement Overview 43
4.2 Summary Technical Commentary on EPC Agreement 50
4.3 Alignment with CA 51
4.4 Subcontractors 60
4.5 Payment Schedule 60
4.6 EPC Contractor Security Package 61
5 O&M Contract 65
6 Transmission Line Design Review 66

6.1 Overview 66
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6.2 Geotechnical Studies 68

6.3 Tower Foundations 70
6.4 Tower Structures 75
Substation Site Works 77
6.5 Electrical Design Review 77
6.6 Equipment Selection and Vendor Selection 89
6.7 Construction Plan/Methodology 90
7 Construction Cost 96
7.1 Total CapEx 96
7.2 EPC Price 96
7.3 Concessionaire Cost 102
8 Project Schedule 104

8.1 Overview 104
8.2 Benchmarking Study 105
8.3 Key Construction Schedule Risk Mitigation 106
8.4 Engineering Schedule Review 108
8.5 Procurement Schedule Review 109
8.6 Construction Schedule Review 109
8.7 Technical Commentary 111
9 Operations and Maintenance Review 113

9.1 Preliminary Operations Phase 113
9.2 Commercial Operations Phase 117
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Important Notice
This report was prepared by Arup Latin America S.A.U. (“Arup”) in its capacity as Independent
Technical Advisor to the lenders or bond investors pursuant to an Agreement dated December 18, 2014
with Isolux Corsán (“The Advisory Services Agreement”). The forward-looking projections, forecasts,
or statements are based upon interpretations or assessments of available information at the time of
writing. Actual events may differ from those assumed, and outcomes are subject to change. Findings
are time-sensitive and relevant only to current conditions at the time of writing. Factors influencing the
accuracy and completeness of the forward-looking statements may exist that are outside of the purview
or knowledge of those involved. Any recipient of this document (“Recipient”), by its acceptance or use
of this document, acknowledges the foregoing and agrees to release Arup from any liability, unless it
has executed Arup’s standard reliance letter in which case Recipient shall be subject to the limitations
of liability set forth in The Advisory Services Agreement.
In performing the services, Arup has received information from third parties and has relied upon the
reasonable assurances of third parties, but does not warrant or guarantee the accuracy of such
information. It is understood and agreed by the Recipient that advisory services contain reasonable
assumptions, estimates, and projections that may not be indicative of actual or future values or events,
and are therefore subject to substantial uncertainty. Future developments or events cannot be predicted
with certainty and may affect the estimates or projections provided, such that Arup does not specifically
guarantee or warrant any estimate, opinion, or projection. This report speaks only as of its date, and
Arup is under no obligation to update the report to address changes in facts or circumstances that
occur after such date that might materially affect the contents of the report or any of the conclusions
set forth therein. Arup will not in any circumstances be liable for (a) any loss of investment, loss of
contract, loss of production, loss of profits, loss of time, or loss of use, and/or (b) any consequential,
incidental, or indirect loss. Questions concerning the use of or reliance on this report should be directed
to Arup’s project director, Jorge Valenzuela, at:Jorge.Valenzuela@arup.com.

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Executive Summary
This report is primarily based on information available as of November 30, 2015.
Arup’s summary opinion is that, from a technical point of view, the Moyobamba-
Iquitos Transmission Line (the “Project”) appears to be feasible and the Project
should be able to comply with the terms of the Concession Agreement (“CA”).
However, we note that the final design is not yet complete, as final construction
drawings will be produced throughout the construction phase. Arup opines that this
is consistent with industry practices.
Project Overview
The Government of Peru (the “Owner”), acting through the Ministry of Energy and
Mines., has entered into a design, build, finance, operate and maintain (DBFOM)
agreement with Líneas de Transmisión Peruanas S.A.C. (the “Concessionaire”) for
the procurement of the Project. The Project is the result of the development process
led by the Agencia de Promoción de la Inversión Privada, or ProInversión. The
Concessionaire is a wholly owned subsidiary of Isolux Corsán (“Isolux.”) The
concession term is 30 years after construction completion.
The Concessionaire’s compensation will be realized through annual payments
according to local regulation Ley 28832 based on the investment values of the Project.
This payment structure minimizes appropriations-related risk.
The Project consists of the construction of a new transmission line and associated
substations covering 588km at 220kV and 7.8km at 60kV. The Project will connect
the currently isolated electrical grid of Iquitos, located in the Amazon rainforest, to
the national electrical grid of Peru (Sistema Eléctronico Interconectado Nacional, or
SEIN). The majority of the construction will take place in remote regions of the
Amazon basin and Andes Mountains.
The Owner provided a referential design for bidding purposed, however the design
of the final routing of the 588km line is the responsibility of the Concessionaire. The
Concessionaire’s design optimizes on the Owner’s design by following the route of
the previously studied Right of Way (“ROW”) for the proposed Ferrocarril
Interoceánico Norte railroad project that would connect the cities of Yurimaguas and
Iquitos.
Figure 1 illustrates the Concessionaire’s Design alignment in comparison to the
Owner’s Referential Design.

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Figure 1: Transmission Line Alignment
The key construction works include:

• A 1x220kV-60Hz power transmission line from the existing substation
Moyobamba Nueva (220/138/22.9kV) to the new substation, Iquitos Nueva
(220/60/13.8kV), via a 220kV new Intermediate Substation with a minimum
capacity of 150MVA. The line will be double circuit (only one circuit will be
procured and installed)1 with two lightning shield wires (including one of Optical
Ground Wire (“OPGW”));
• A 2x60kV power transmission line linking the new substation (Iquitos Nueva) to
the existing substation (Iquitos) with a minimum capacity of 150MVA. The line
will be double circuit 800MCM AAAC conductors with one shield wire (type
OPGW);
• Extension of two existing substations: Moyobamba Nueva 2
(220kV/138kV/22.9kV) and Iquitos (60kV);
• New 220/60/13.8kV substation (Iquitos Nueva) with capacity of
150/150/30MVA complete with shunt reactors and Static Var Compensators
(SVC);
• New 220kV Intermediate Substation completed with shunt and series
compensation.
1
Note that the power demand only necessitates the installation of one circuit. However, the towers
are designed to carry the load of two circuits and the permits and electrical designs are performed
considering two circuits so that it is possible to install an additional circuit in the future if it is
needed. The design complies with the CA.
2
Substation Moyobamba Nueva has not been built at the time of this report and is the responsibility
of another concessionaire.

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Project Participants Review Summary

• Isolux is a large, reputable, global company with a leading position in large
construction and concessions in the areas of energy, civil engineering,
environment and facilities. The company has sufficient depth of expertise and
breadth of relevant project experience necessary to successfully deliver the
Project.
• Isolux has sufficient experience managing power and high voltage transmission
line concessions. The firm’s transmission line projects total 5,959km in Brazil,
the USA and India. For these projects, Isolux has provided integrated
management services for these projects, including design, engineering,
construction and operations and maintenance (“O&M”). In Brazil, Isolux has
relevant experience building and operating transmission lines in the Amazon
rainforest.
• The engineering, procurement and construction (“EPC”) Contractor has a solid
foundation of construction and operation experience in Peru. The Concessionaire
intends to transfer knowledge from Isolux’s projects in the Brazilian Amazon
(and elsewhere) to Peru, which should help mitigate many of the risks associated
with building transmission lines in challenging terrain.
• The Concessionaire plans to subcontract O&M activities to PLENA, a Brazilian
company and subsidiary of Isolux that specializes in the field. PLENA has
sufficient experience as an operator of transmission assets.
• The EPC Contractor has provided a list of potential subcontractors that will be
used on the Project. Arup opines that the process for hiring subcontractors appears
reasonable; however, we have not received a written subcontractor engagement
plan.
• The Concessionaire has provided a list of potential suppliers that they are
considering for the transmission line, the substations and the replacements for the
substations. The list includes a number of internationally recognized firms, such
as Siemens, ABB and GE Energy. Arup has experience with a number of the
suppliers. All of those we have encountered are considered reasonable or better.
• The Concessionaire has confirmed that all products purchased are certified as in
compliance with the design standards specified in the CA. These design standards
are in line with best practices.
Concession Agreement Review Summary

• The CA states the Owner will provide the ROW for the Project and the
Concessionaire will assume the associated costs. The CA does not specify relief
events associated with schedule or cost overruns associated with ROW
acquisition. Therefore, it is assumed that cost and delay risks related to ROW are
held by the Concessionaire. The Lenders’ ROW Advisor reports that the majority
of the ROW has already been obtained.

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• The Concessionaire assumes the risk for compensations, restrictions, and

relocation costs associated with the Previa Consulta process of negotiating
compensation for affect indigenous populations according to Law 29785.
According to the Lenders’ Environmental Advisor the Project has been exempted
from the Previa Consulta process.
• The Concessionaire assumes the risk for acquiring the environmental licenses and
the associated costs to implement the management plan detailed in the licenses.
The CA does not specify relief events associated with schedule or cost overruns
associated with environmental licensing acquisition. Therefore, cost and delay
risks related to environmental licenses are assumed to be held by the
Concessionaire. The Lenders’ Environmental Advisor reports that the
Environmental Impact Assessment (“EIA”) has not yet been approved and that
the Concessionaire is in the final stages of resolving observations.
• Annual payment is guaranteed to the Concessionaire according to the base tariff
established by OSINERGMIN in 2006 in Article 1 of Law No. 28832 for a
Guaranteed Transmission System (Sistema Garantizado de Transmisión o
“SGT”). Therefore from a technical point of view, appropriations-related risk is
minimal.
• The Concessionaire has 52 months from CA Commencement to reach
Commencement of Commercial Operations. As described in Section 8, the CA
schedule includes reasonable timeframes for the defined deadlines.
• Per the CA, the Concessionaire is subject to penalties of up to US$30 million for
delays up to 150 days. As discussed in the next section, the risks listed above that
are retained by the Concessionaire (obtaining EIA approval, ROW acquisition,
obtaining Project and construction licenses, etc.) do have the potential to lead to
delay penalties that reach the cap amount. This opinion is based on the results of
the Conditions Precedent Delay Analysis conducted by Arup based on input from
the Lenders’ Environmental and ROW Advisors. See Section 4.3.7.2 for details.
• Change in law will trigger re-balance of the economic-financial equilibrium. The
Concessionaire’s exposure to cost increases stemming from change in law is
equal to 5% of the referential investment (approximately US$25 million) during
construction or 5% of the net income during operations. Therefore, this risk is
minimal.
• Arup opines that the penalty regime during operations, which is established by
Peruvian transmission laws, is not overly onerous. Penalties include excessive
transmission downtime of deficient power transmission which usually result from
equipment or infrastructure failure/damage. According to the legal advisor,
H&CIA, these fines can range from 1 to 1400 Peruvian Taxation Units
(US$1,162). Based on review of benchmark projects, the risk of termination based
on non-tax penalties levied by Owner or OSINGERGMIN in one calendar year
greater than 10% of Base Tariff in previous year is low.
• As stated in 9.2.2, the contingency in the Commercial Operations Phase Budget
for penalties is appropriate. In addition, the US$3 million performance bond

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provided by the Concessionaire during operations appears sufficient to cover a

major penalty event in a given year.
• The Concessionaire is to maintain a US$30 million performance bond during
construction. This security obligation has not been passed down to the EPC
Contractor in a back to back manner; the performance guarantee for the equivalent
amount provided by the EPC Contractor is in the form of a corporate guarantee,
which is a less liquid form of security.
• Termination clauses are in line with industry standards.
EPC Agreement Review Summary

• The commentary below is based on draft EPC Agreement dated October 30, 2015.
Arup understands that the Lenders are negotiating an addendum to the EPC. The
preliminary technical conclusions of this negotiation are outlined in Appendix E.
• The Scope of Works in the EPC Agreement is appropriate for the Project.
• It is unclear who bears cost and schedule risk related to site and/or geotechnical
conditions. The CA and the EPC Agreement do not specifically address this issue.
Arup recommends that this risk be passed to the EPC Contractor.
• The scope of the EPC Contractor includes the Trial Operations of the line;
however, the fee for this scope is not included in the lump-sum contract and will
be subject to negotiation with the Concessionaire; therefore this represents a risk
that the overall cost of the Project will increase; Arup recommends that the cost
of Trial Operations be added to the lump sum EPC Price.
• Most key obligations and risks related to engineering, procurement and
construction of the Concessionaire defined in the CA have been passed down to
the EPC Contractor via the EPC Agreement. Similarly, the delay penalty
provisions and penalty cap from the CA have been appropriately passed down to
the EPC Contractor for items controlled by the EPC Contractor.
• However, some obligations and risks related to Conditions Precedent for
construction (obtaining EIA approval, ROW acquisition, obtaining Project and
construction licenses, etc.; See Section 4.3.4 for details) have not been fully
passed from the Concessionaire to the EPC Contractor, resulting in the
Concessionaire holding risks that could impact cost and/or schedule. Best
practices suggest that all design and construction related activities, including all
environmental and permitting requirements, are passed down to the EPC
Contractor such that the CA and EPC Agreement are “back to back.” Consultation
with a legal advisor is recommended to determine inconsistencies between the
CA and the EPC Agreement.
• Related to the above, Arup opines that certain Conditions Precedent outlined in
the EPC Agreement section are at risk for delays. Therefore, it is possible for the
Concessionaire to incur delay penalties from the Owner in the CA without being
able to pass them through to the EPC Contractor. The delay scenario analysis
conducted by Arup estimates that the Concessionaire is subject to penalties of up

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to US$30 million for delays up to 150 days which is equal to the delay penalties
cap in the CA. Please refer to Section 4.3.7.2 for a detailed discussion.
• The technical criteria for achieving Provisional Acceptance and Final
Acceptance, as well as the commissioning and acceptance test procedures to
which the EPC Contractor must adhere are defined in the CA. These criteria and
procedures are standard for the industry.
• The EPC Contractor is responsible for Commissioning, the Power Line
Contractual Verification Tests (“Verification Tests”), and the Trial Operations
Period. The Concessionaire is responsible for producing the Operability Study
that must be presented to the Committee for Economical Operation of the
National Interconnected Power System (“COES”) for approval before connecting
the line to the SEIN. The Concessionaire is also responsible to pay for the
Inspector required to verify the Verification Tests and to pay for the service
performed by the EPC Contractor during the Trial Operations Period. In Arup’s
opinion, the responsibilities maintained by the Concessionaire represent risks of
cost overruns and schedule delay, and we recommend transferring these
responsibilities to the EPC Contractor.
• The EPC Contractor may subcontract the works, but maintains responsibility for
the works performed by subcontractors. This provision is in line with industry
standards.
• The EPC Agreement does not include clauses that required Concessionaire
approval of key subcontractors. Arup opines that industry best practices suggest
that any subcontractor performing at least 20% of the works should be approved
by the Concessionaire and be subject to the same principal clauses of EPC
Agreement that allow for the proper oversight and management directly by the
Concessionaire;
• The EPC security package should include sufficient liquid or semi-liquid
performance security, typically in the form of a performance bond, retainage,
letter of credit, reserve account or contingent equity. One method to measure the
adequacy of an EPC security package is to estimate the cost to replace the EPC
Contractor in the event of a default. Arup estimates the cost to replace the EPC
Contractor to be between US$78 and US$92 million (14-17% of the total EPC
Price). This estimate does not include financing costs and/or Lenders’ overhead
during the replacement period.
• The 25% limit of liability cap is consistent with other infrastructure projects in
the area; Arup opines that this cap seems appropriate from a technical point of
view.
• The EPC Agreement reviewed by Arup does not include inflation adjustments
during normal construction of the Project; and therefore, it was assumed that the
lump sum included inflation risk. The Concessionaire has indicated that this is an
error and that the remaining balance of work outstanding will be updated for
inflation throughout the construction phase. Arup recommends that this inflation
adjustment and its calculations is prescribed in the EPC Agreement.

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Design Review Summary

The Concessionaire developed detailed engineering to the Owner on December 24,
2015 and is awaiting verification of the design. Arup opines that the Owner’s
approval of the detailed engineering is sufficient to begin construction. Final
construction drawings will be produced throughout the construction phase. Arup
opines that this is consistent with industry practices.
Geotechnical
• In general, the geotechnical investigations performed or underway are reasonable;
explorations are appropriately being performed at the tower spotting locations to
determine expected soil conditions to be encountered during construction.
• Individual design documents generally reach an appropriate level of detail in their
design, although consistency with some newer reports, such as the recent
geotechnical ground investigation, needs further development. We expect
detailed designs and construction plans to fully account for these reports. It is
expected that final construction plans will be developed progressively throughout
the construction phase, which Arup opines is an acceptable approach for this
Project.
• Scour models have been developed for the towers in the vicinity of the main
rivers, however the calculations should be rerun using the new geotechnical
information. The Concessionaire has indicated that are currently refining the
scour analysis and it will be completed during construction.
• Rock formations are expected at some locations on the route, however the ground
investigation methods used (wash boring and geophysical investigations) do not
reliably prove the presence of fresh rock. The Concessionaire is developing two
types of designs for these locations, for both shallow rock and rock at depths of
up to 7m. Arup recommends that until fresh rock is proven at these locations (in
further studies conducted during detailed design), an alternative foundation type
such as micropiles or spread footings should be considered as a contingency plan.
In response to this recommendation, the Concessionaire has provided the
requested alternative foundation design (spread footings) which Arup opines is
reasonable.
• Arup recommends that further studies be carried out during detailed design to
validate the rock parameters used, or alternatively that the foundation designs
consider more conservative parameters.
Foundation Design
• In general the foundation designs appear reasonable and the design calculations
incorporate reasonably conservative assumptions.
• Detailed design should take into consideration the opinions and recommendations
from the previous section based on Arup’s review of existing geotechnical
studies.

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• The Concessionaire has divided the soil profiles along the route into homogenous
classifications. In Arup’s opinion, based on the geotechnical investigation
performed, the defined soil classes are appropriate inputs to be considered for
foundation designs.
• The Concessionaire’s design considers the use of helicoidal stakes. Arup notes
that this foundation solution will reduce the weight of materials and equipment
that are needed to build the foundation and thus represent a positive impact on the
logistical challenges of building in remote areas.
• Arup has verified, via spot checks, that foundation loads for tower types IQT60
and IQSE (representative cases) included in the structural design documents are
consistent with the appropriate load cases in the foundation reports.
• At the time of Arup’s review, there was a limited area of about 25km where no
geotechnical information was available, the type of foundation assumed is a
shallow foundation fixed with anchors into fresh rock which is considered to be
optimistic at this stage due to the lack of specific information in these areas.
Detailed design should consider outcomes of further analysis.
• Furthermore, the type of foundation referenced above (zapata anclada suelo
sierra) requires additional considerations that could invalidate the viability of this
solution, such as the response to lateral loads, the possibility of buckling of tie
bars under soil compression, etc. These issues could be addressed while
maintaining a similar foundation type if the slender tie bars were replaced with:
a) a more robust member, such as micropiles, capable of carrying both tension
and compression or b) with traditional spread footings that are excavated deeper
until fresh rock is found and use overburden soils to resist tensile reactions. The
Concessionaire has provided Arup with the requested contingency design that can
be implemented in the event fresh rock is not found, and Arup opines that the
requested design (spread footings) appears reasonable.
Tower Design
• Arup’s high level review suggests that there are no critical issues with the
structural design of the towers. In general, the Concessionaire’s structural
configuration of the towers is reasonably optimized to economize steel weight
and constructability while maintaining the required structural strength and design
safety factors. The documentation provided seems to be in line with the level of
detail indicated in the scope of Annex 8 of the CA.
• The level of detail for the tower drawings reviewed to date are appropriate
according to the requirements of the CA at this stage; however, they will need to
be developed at a later stage (during construction) in order to be at the appropriate
level to submit to the fabricator; the fabricator will act as final detailer and will
produce the shop drawings. This approach is in line with industry best practices.
The drawings will need to include a legend clarifying the steel sections to be
provided in each location. The Concessionaire has sent Arup a sample drawing
whose level of detail appears to be satisfactory.
• Prior to submitting tower designs to the fabricator, Arup recommends that the
design documentation include the following:

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- List of load combinations indicating the load factors considered in each of

them.
- Joint connectivity assumptions (pinned or fixed).
- Considerations on whether members are considered as tension and
compression elements or just as tension members.
• Portions of the documentation refer to material standards from the People’s
Republic of China, we recommend indicating the appropriate equivalent ASTM
standard.
• Although no required by the local code, the Concessionaire has completed
analytical justifications in an effort to make sure that seismic loads do not govern
the design of the transmission towers which Arup opines is a reasonable
conclusion.
Substation Site Works
• The documentation provided so far is general and only covers the general layout
of the substations. While this level of detail is appropriate for the current stage of
the Project’s development, and the design is compliant with the CA, it is expected
that new information on this matter will be developed during construction for
incorporation into the detailed. Arup notes that substation site works design is not
on the critical path and does not represent a significant portion of the overall EPC
Price.
Electrical Design
• In general, the electrical design complies with the requirements of the CA. Arup
has identified minor discrepancies as identified in this report; however, if the
recommended steps are taken the remaining modifications to the electrical design
are not expected to have major impacts on the Project.
• In general the electrical design criteria selected for the design of the 220kV and
60kV transmission lines conforms to the relevant local and relevant international
standards applicable to such designs and meet the overall intent of the CA.
• The scope of works for the substations conform to relevant international standards
relevant to such designs and meet the overall intent of the CA.
• Both primary and secondary protection signals are proposed to be transmitted
between the New Iquitos (60kV) and Existing Iquitos (60kV) Substations via
OPGW. Arup notes that this solution does not comply with the CA, as this method
does not provide the adequate network resilience. Therefore, we recommend that
the system include a secondary communication system that is independent of the
primary communication system, such as a Power Line Carrier (“PCL”)
communication system.
• In the Concessionaire’s design, communication between the Iquitos Substation
and the Control Centre in Lima is via a virtual private network (“VPN”) without
backup. In order to comply with the CA, a back-up system, a satellite
communication channel has been proposed by the Concessionaire to be

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implemented between the New Iquitos Substation and the Control Center in Lima.
This proposed back-up system is appropriate for the Project.
• The 220kV transmission line has been designed to accommodate the maximum
power rating of 195MVA, but the transformer rating at the new Iquitos substation
as prescribed by the CA is 165MVA under ONAF (Oil natural Air forced) cooling
condition. This means that the maximum transfer capacity of the transmission line
design up to 195MVA cannot be achieved on a continuous basis due to the power
constraint in the transformer. Arup notes that the design specification of the
transformer defined in the CA is not optimal, and recommends considering the
implementation of a higher capacity transformer. However, Arup notes that, while
the transformer cannot operate at 195MVA on continuous basis, the system will
still operate during brief periods above the 165MVA capacity rating meeting the
IEC 60076-7 loading guide for short period (hours only); the system should not
exceed this capacity on a regular basis. Isolux has confirmed the design will
maintain the transformer rating of 165MVA despite this recommendation, which
is in compliance with the CA.
• The 60kV double circuit transmission line between the new and existing Iquitos
substation has been designed to carry 150MVA. Each circuit is designed to carry
a nominal capacity of 75MVA; therefore, if one circuit fails or is under
maintenance, the required power rating of 150MVA (normal) cannot be
maintained. This means that the transmission between Moyobamba and the
existing Iquitos substation cannot be guaranteed at 150MVA. To adhere to
international best practices, it is recommended to increase the single circuit
capacity between the new and the existing Iquitos substation to 150MVA and thus
achieve an N-1contingency in the line. In Arup’s opinion, the CA does not clearly
indicate whether each circuit may be designed as 75MVA, as is the case in the
Concessionaire’s design, or if each circuit is not be designed to 150MVA. Isolux
has confirmed its position that it will maintain the design for 75MVA, which the
Concessionaire believes is in compliance with the CA.
• The control and protection rooms within the substations are not provided with
gaseous type automatic fire protection system. Therefore there is a risk of fire
damage to the critical equipment within the substations. Although it is not
explicitly required by the CA, industry best practices are to provide gaseous type
fire protection system within the control and protection rooms. Isolux has
confirmed that the system will comply with the CA, but will not be a gaseous
system.
• The Concessionaire’s design does not consider temperature and humidity climate
control within, control, protection and 13.8kV switchgear rooms of respective
substations. According to industry best practices, climate control should be
implemented in these spaces to reduce the likelihood of failures and abnormal
operations especially in tropical climates. Therefore, it is recommended these
rooms to be temperature and humidity controlled.
Construction Plan

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• The Concessionaire’s transportation plan is generally well thought out and takes
into account the transportability by river according to estimated water depths by
month and land transportation of the various materials.
• Arup considers the elevation changes in the mountain regions to be significant. A
detailed construction plan should be developed for these regions especially in
consideration of cable pulling.
• In the floodplains national safety norms will have to be considered to ensure the
workers are protected in the presence of tropical vegetation and wildlife like
snakes and leeches.
Cost Review Summary

• Based on a comparison with other project benchmarks, and a comparison of the
with the bottom-up Arup EPC cost benchmark, the EPC Price of US$553.7
million appears reasonable to perform the works contained in the EPC
Agreement. To develop the EPC cost benchmark, Arup performed an independent
cost analysis, and the resulting base case scenario budget resulted in a
construction cost approximately 11 – 15% below the EPC Price. Arup opines that
these differences are within an acceptable range of accuracy.
• The EPC Price is lump-sum for the design and construction of the line adjusted
throughout construction for escalation. However, there are a number of
construction risks that are held by the Concessionaire (e.g. cost overruns resulting
from delay or construction risks associated with Conditions Precedent, such as
permitting and ROW). Therefore, the Concessionaire could be exposed to EPC
Price increases.
• Arup opines that the EPC Price should be lump sum and not include escalation
adjustments. However, if escalation indices are applied, they should follow the
guidelines provided by Peru’s “formula polinomica.”
• The EPC Contractor is also responsible for the Trial Operation of the Project for
at least 30 days until the Commercial Operations Start Date. The cost of these
services is not included in the lump-sum and will be negotiated with the
Concessionaire. Arup opines that the Trial Operations cost should be included in
the lump sum EPC Price.
Schedule Review Summary

• Arup’s analysis indicates that the construction and preliminary operation schedule
of 49 months is achievable. While Arup believes the schedule duration to
generally be reasonable, we have identified potential sources of delay risk, with
the primary risk being: geotechnical risk, ROW, permitting, timely construction
of the Cobra Transmission Line, procurement of equipment, weather and site
access.
• Based on feedback from the Lenders’ Environmental and ROW Advisors, and as
discussed in the EPC Agreement Review Summary, there is a risk that some of

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the Conditions Precedent for which the Concessionaire is responsible could face
delays, which would delay the overall Project Schedule. While Arup notes that
the proposed Project Schedule leaves a buffer of three months between the
planned EPC Operations Start Date (49 months) and the CA Operations Start Date
(52 months), as stated in Section 4.3.7.2, the Base Case Delay Scenario assumes
that the EIA approval will not be obtained until early March. This delay will
reduce the float to approximately one month. This remaining buffer will help
mitigate the risks identified in this section, but it is not substantial.
• Further, as stated in Section 4.3.7.2, if the EPC Contractor takes the full 34-month
construction period to which it is entitled, the EPC Operations Start Date will
occur after the CA Operations Start date, subjecting the Concessionaire to
penalties. Therefore, it is recommended that the construction period defined in
the EPC Agreement be reduced to 31 months and the Concessionaire generate an
Acceleration Plan should one be needed.
• According to the Concessionaire, the procurement lead time after delivery of the
fabrication drawings for structural steel in the towers is eight months and the lead
time for foundations is five months. Arup notes these lead times will put the
structural steel fabrication on the critical path of the construction schedule and
delays in fabrication drawings could result in a delayed start date for critical path
activities. Such a delay would thus require construction acceleration to recover
the time lost.
• The presented engineering schedule complies with the deadlines defined in the
EPC Agreement and the CA.
• In terms of the construction schedule, Arup notes that additional teams may be
needed for foundation construction in the Iquitos section to ensure that foundation
construction is completed on time. Alternatively, the cable hanging sequence can
be adjusted at a later date if necessary to accommodate delays in construction in
this section. In response to this issue being raised by Arup, the Concessionaire
has provided a contingency schedule showing the adjusted total float in this
section assuming multiple work fronts which appears reasonable. Other potential
delay risks include impacts of the geotechnical study results, ROW acquisition,
permitting (including EIA) and the on-time completion of the Cobra
Transmission Line.
• In terms of equipment procurement, the CA establishes that major substation
equipment must arrive on site by 42 months after the CA Commencement. In the
Concessionaire’s schedule the longest lead items could be ready as early as April
2017 which is 12 months prior to the CA deadline. Arup believes this is
reasonable.
O&M Review Summary

In regards to the Preliminary Operations Phase:
• Arup opines that the Preliminary Operations Plan is in line with the CA and
industry standards and complies with the process as defined by Peruvian
standards.

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• The Preliminary Operations Plan does not explicitly include the Operability Study
Phase. However, the Site Acceptance Tests cover the scope of the Operability
Studies. The Operability Study is the responsibility of the Concessionaire, and its
approval is required to register with the COES before beginning Trial Operations.
As stated in the EPC Agreement Review, Arup opines that the Operability Study
should be the responsibility of the EPC Contractor.
• The Preliminary Operations Plan does not clearly include the Verification Tests,
which are necessary according to the CA; however, these tests are included in the
scope and lump-sum fee of the EPC Agreement.
• The Preliminary Operations Plan nomenclature should mirror the names and
phases for the actual Preliminary Operations Phase outlined in the CA, e.g.
“Operability Study” rather than “Site Acceptance Tests”, so that it is easier to
determine compliance of the Preliminary Operations Plan with the CA. This
would help clarify whether or not the Verification Tests are included in the scope
of works.
• The Concessionaire should coordinate with OSINGERMIN and COES to reduce
the period between the completions of the Verification Tests and the start of the
Trail Operations Period. Regular written communication and meetings is
recommended.
• The estimated budget for the Preliminary Operations Phase is US$10,355,000.
Arup opines the budget appears adequate with a large contingency of about 57%
to cover unforeseen complications.
• Arup recommends that SEIN simulations that correspond to the Commissioning
Test Phase conditions are included as part of the scope of the Operability Study.
• Commissioning Tests should be linked to studies that simulate the SEIN actions
in a variety of circumstances to avoid unforeseeable situations.
• The Commission Test Phase and the Power Line Contractual Verification Tests
(“Verification Tests”) should be carried out as two successive testing stages.
In regards to the Commercial Operations Phase:
• The scope of work for O&M is in line with Peruvian norms and, as such, is
sufficient to comply with the CA. The Concessionaire will hire the O&M
operator, PLENA, to offer management advisory for a management fee of
US$598,000 (~12% of the annual O&M budget), and will directly contract the
remaining works.
• Arup opines that the Concessionaire’s scope of work adequately accounts for the
challenges presented by the Project’s geographical isolation and lack of access
roads.
• Arup recommends that the Concessionaire reconsider the staffing plan proposed
for the Project; an additional Operations person will likely be needed.
• The Concessionaire’s total annual O&M budget of US$5.011 million, including
the PLENA management fee, is also considered reasonable.

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• The direct costs plus PLENA’s management fee estimate of US$3.469 million
per year is within normal ranges for the type of service offered.
• Arup considers the contingency included in the annual budget for possible
penalties to be adequate, the performance bond of US$3 million performance
provided by the Concessionaire during operations is sufficient to cover a major
penalty event in a given year.
• It is recommended that a reserve account is maintained to cover potential major
penalty scenarios in a given year. In our opinion, it is reasonable that this reserve
could be the difference between the exceptional penalty amount (US$2.5 million
and the annual penalty budget (US$600,000).

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1 Introduction
1.1 Project Overview
The Government of Peru (the “Owner”), acting through the Ministry of Energy and
Mines., has entered into a design, build, finance, operate and maintain (DBFOM)
agreement with Líneas de Transmisión Peruanas S.A.C. (the “Concessionaire”) for
the procurement of the Moyobamba-Iquitos Transmission Line (the “Project”). The
Project is the result of the development process led by the Agencia de Promoción de
la Inversión Privada, or ProInversión. The Concessionaire is a wholly owned
subsidiary of Isolux Corsán (“Isolux.”) The concession term is 30 years after
construction completion.
The engineering, procurement and construction (“EPC”) Contractor will be Isolux
Ingenieria S.A. Sucursal Peru.
Isolux will self-perform the Operations and Maintenance (“O&M”) of the Project.
Isolux will directly subcontract the O&M works and will also hire PLENA, a
subsidiary of Isolux, as management advisors.
The Concessionaire’s compensation will be realized through annual payments
according to local regulation Ley 2883 based on the investment values of the Project.
1.2 Project Context

In 2011 ProInversion issued an Urgent Decrees (Decreto de Urgencia No. 001-2011
and 002-2011) regarding the necessity and urgency for private investment for a
number of concessions, including this Project.
The Project consists of a 220kV power transmission line and complementary facilities
from the City of Moyobamba to the City of Iquitos. The Project will connect the
currently isolated electrical grid of Iquitos, located in the Amazon rainforest, to the
national electrical grid of Peru (Sistema Eléctronico Interconectado Nacional, or
SEIN).
The Project will connect in Moyobamba to the Cajamarca-Cáclic-Moyobamba
transmission line, which is included under the same Decree and which is due to start
operation in May 2016.
1.3 Project Description

The Project includes the design and construction of a 588km 220kV transmission
line, a 7.8km 60kV transmission line, two new substations, and the expansion of two
existing substations. The 220kV line starts at the existing substation in Moyobamba
(“Moyobamba Nueva”, or “New Moyobamba), passes through a new substation,
(“Intermediario” or “Intermediate”), in Trompeteros and terminates at a new
substation in Iquitos (“Iquitos Nueva” or “New Iquitos”). The 60kV line is located in
Iquitos and connects between the Iquitos Nueva substation and the existing substation
(“Iquitos”).

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The Owner provided a referential design for bidding purposed, however the final
routing of the 588km line was the Concessionaire’s responsibility. The
Concessionaire’s design optimizes on the Owner’s design by following the route of
the previously studied Right of Way (“ROW”) for the proposed Ferrocarril
Interoceánico Norte railroad project that would connect the cities of Yurimaguas and
Iquitos.
Figure 2 illustrates the Concessionaire’s Design alignment in comparison to the
Owner’s Referential Design, while Table 1summarizes the main differences between
the Concessionaire’s Design and the Owner’s Referential Design.
Figure 2: Transmission Line Alignment
Table 1: Principle Differences between Owner’s Referential Design and Concessionaire’s

Design
Owner’s Referential Concessionaire’s Design
Design
Length of 220kV 631km 588km
Length of 60kV 5.2km 7.8km
Conductor Type ACAR AAAC
1.3.1 Key Construction Works

The key construction works include:
• A 1x220kV-60Hz power transmission line from the existing substation
Moyobamba Nueva (220/138/22.9kV) to the new substation Iquitos Nueva
(220/60/13.8kV), via an 220kV new Intermediate substation, with a minimum
capacity of 150MVA. The line will be double circuit, but only one circuit will be
procured and installed, with two lightning shield wires (including one of Optical
Ground Wire (“OPGW”)).

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• A 2x60kV power transmission line linking the new substation Iquitos Nueva to
the existing substation Iquitos, with a minimum capacity of 150MVA. The line
will be double circuit 800MCM AAAC conductors with one shield wire (type
OPGW).
• Extension of two existing substations: Moyobamba Nueva 3
(220kV/138kV/22.9kV) and Iquitos (60kV).
• New 220/60/13.8kV substation Iquitos Nueva with capacity of 150/150/30MVA
complete with shunt reactors and Static Var Compensators (SVC).
• New 220kV Intermediate Substation completed with shunt and series
compensation.
Refer to Section 6 for more information on the design.
1.4 Basis for the Report

Arup’s analyses and comments have been carried out based on a desktop review of:
• Concession Agreement (“CA”),
• EPC Agreement (October 30, 2015),
• Owner’s Referential Design,
• Concessionaire’s alignment and electrical, structural, geotechnical and hydraulic
design as of November, 2015.
• Concessionaire’s budget and schedule,
• Concessionaire’s operations and maintenance plan and budget,
• Concessionaire’s support documentation for the Concessionaire’s Design and
cost estimate,
• Meetings with the Concessionaire which took place on December 22-23, 2014,
March 11-12, 2015 and November 19, 2015.
All documents have been provided by the Concessionaire and its advisors and have
been delivered to Arup either in person, via electronic mail, or via an online project
data room. Arup did not verify the accuracy or veracity of the Project information.
The scope of this report does not include: 1) field analysis of existing asset condition
or 2) review of insurance provisions; and/or legal advice.
The purpose of this report is to inform potential debt investors regarding the
preliminary merits and risks associated with the Project. When possible, we will make
recommendations for the Project to better manage/mitigate identified risks.
3
Substation Moyobamba Nueva has not been built at the time of this report and is the responsibility
of another Concessionaire.

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1.5 Role of Arup

Arup has been appointed to act as the Lender’s Technical Advisor to support the
Lenders in the technical due diligence for the financing of a transmission line toll
road in the regions San Martin and Loreto.
The Lender’s Technical Advisor’s task is to assess the technical risks and risk
mitigation strategies associated with the Project from a lender’s perspective. Key
aspects of this work include:
Commercial Due Diligence
• Review of the adequacy of risk allocation and the obligations that are passed
through from the Concession Agreement to the EPC Agreements and O&M
Agreement (if available).
• Identify potential technical risks associated with the transaction, including design
risk, construction risk, and operating risk.
Design Review
• Perform a review and evaluation of the quality, completeness, and suitability of
the design options, criteria and methodology applied vis a vis the Concession
Agreement.
• Comment on the appropriateness of the design process considering the integration
of the construction and the operations and maintenance inputs into the design,
constructability, maintainability, satisfaction of operational requirements.
• Comment on design challenges and risks.
• Assess innovative proposals developed by the design team.
• Evaluate the safety and traffic management plan during construction and
operations.
Construction Cost & Schedule
• Evaluate the structure of the budget differentiating between direct and indirect
costs and associated contingencies given the project’s risks.
• Assess the adequacy of the unit prices by comparing them against market values.
• Comment on the proposed construction schedule, critical paths, and potential
risks (permits, relocations, weather, etc.).
• Assess the security package proposed by the EPC Contractors (performance
bonds, letters of credit, liquidated damages, etc.).
Operations and Maintenance (O&M) Review
• Evaluate the adequacy of the O&M budget based on the Concession Agreement
requirements, the existing and future asset conditions, and the specifics of the
Project location.

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• Assess the adequacy of the headcount proposed to operate the facility.

• Comment on the adequacy of the contingencies built in the O&M budget.
• Comment on interface issues between the EPC and the O&M during the
construction phase.

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2 Project Participants Review

Arup opines that the Concessionaire has the appropriate experience for this Project.
“Isolux Ingeniería Sucursal Perú” (“Isolux Peru” or the“EPC Contractor”) has
sufficient experience in Peru, and since the EPC Contractor has the same parent
company as the Concessionaire, it will be able to draw on the Concessionaire’s
transmission line experience. The parent company of the Concessionaire, Isolux, has
significant experience providing integrated delivery services, including design,
construction and operations, for transmission projects around the world.
2.1 Project Participants
2.1.1 Owner – Government of Peru

The granting authority, or Owner, is the Government of Peru (República del Perú),
acting through the Ministry of Energy and Mines (Ministerio de Energía y Minas).
2.1.2 Concessionaire – Lineas de Transmisión Peruanas

S.A.C.
The Concessionaire, is a wholly owned subsidiary of Isolux, which is based in Spain.
Isolux is a global company with a leading position in large construction and
concessions in the areas of energy, civil engineering, environment and facilities. The
company has more than 80 years of professional activity and currently operates in 43
countries on four continents. The company has a backlog of more than €49.19 Bn. At
present, 86% of the backlog stems from contracts outside of Spain. Isolux ranks 45th
overall in the ENR Top 250 International rankings, 10th in Power and 7th in Latin
America/Caribbean. The company has experienced revenue growth of over 10% per
annum from 2011 to 2013.
Isolux has experience managing highway, power and high voltage transmission line
concessions. The firm’s transmission line projects total 5,959km in Brazil, the USA
and India. For these projects, Isolux has provided integrated management services,
including design, engineering, construction and O&M. In Brazil, Isolux is currently
constructing and operating 3,842km of transmission lines divided into seven different
power concessions. These Brazilian concessions include:
• Amazon Project (LXTE and LMTE) is a concession to build, operate and
maintain six substations and 1,191km of transmission lines (500kV – 230kV) to
connect Manaus and Macapá (in the Amazonian jungle) with the Brazilian
Electricity System. The project has been fully operational since January 22nd,
2014. The $1,000 million project has a transmission capacity of 2,400MW.
• In 2013, a new 30 years concession transmission project was awarded (LITE).
The project consists in the construction and O&M of 563km transmission lines
(500kV), it will connect to existing transmission lines. The project will be
operative in 2016.

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• Isolux is also constructing new transmission lines in India and the United States
(U.S.). The India project involves the construction and O&M of 1,512km of
transmission lines (765kV-400kV) and five substations. The project was to
become operational by August 2015, but has been delayed by the local
government’s failure to acquire necessary ROW.
In the U.S., Isolux formed a joint venture with the Canadian Investment Fund and
Brookfield Asset Management to deliver seven new transmission lines to transport
power to the grid from wind farms located in the northeast and south of Texas. The
concession includes the construction and O&M of six substations and 605km of
345kV transmission lines. The project has been fully operational since January 29th,
2014.
Table 2 below summarizes Isolux’s portfolio of transmission line concession projects.
All of these projects were constructed and operated by companies affiliated with
Isolux.
Table 2: Isolux Corsán Transmission Line Experience
Country Client Type Extension Status
CPTE 500kV 181 km Operation
LXTE 500kV 508 km Operation
LMTE 500kV 683 km Operation
IENNE 500kV 720 km Operation
Brazil JTE 230kV 940 km Operation
LTTE 500kV 247 km Construction
LITE 500kV 563 km Construction.
Operation expected in
2016.
USA WETT (Wind 345kV 605 km Operation
Energy
Transmission
Texas)WETT
India SEUP 765kV-400kV 1.512 km Construction.
Operation expected
by August 2015.4
2.1.2.1 Concessionaire Organization

Figure 3 shows the Concessionaire’s organizational structure, including the names of
key individuals in the organization.
4
The Concessionaire informs that this project has been delayed 1 year due to right of way delays that
were the responsibility of the government.

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Figure 3: Concessionaire Organizational Chart

\\GLOBAL.ARUP.COM\AMERICAS\JOBS\S-F\240000\240242-00\4 INTERNAL PROJECT DATA\4-05 REPORTS & NARRATIVES\DD REPORT\MOYOBAMBA-IQUITOS DRAFT DD_15 CLEAN.DOCX
2.1.3 EPC Contractor – Isolux Ingeniería Sucursal Peru

The EPC Contractor’s construction experience in Peru includes:
• Construction of Chilina Bridge, a 563m span, 40m high bridge over the Chili
River in the city of Arequipa, completed on-time and on-budget.
• Construction and operation of the first large photovoltaic (“PV”) project in Latin
America, through Isolux Peru’s subsidiary, T-solar. The project consists of two
power plants in operation in Arequipa, with a combined capacity of 44MW and
an investment value of $165million.
•
Also, Isolux has indicated that the company plans to transfer relevant knowledge
gained from constructing transmission projects in other countries to Peru through the
appointment of key staff with relevant experience in past projects. Isolux will also
utilize its experienced labor force for the more specialized tasks of tower erection and
cable pulling.
2.1.4 Concessionaire as Operator

As stated above, Isolux has significant experience operating transmission projects
that the company has also designed and constructed. Isolux has provided Arup with
historical operational data for a selection of these projects that demonstrates that the
company has a satisfactory performance record as an operator.
2.1.5 Engineer
The Concessionaire has indicated that Getinsa will be the lead engineering firm for
the Project. Founded in 1984 in Spain, Getinsa has projects in over 20 countries. The
firm has experience taking linear infrastructure from feasibility studies through
design and construction to operation. The company’s experience in Peru includes
final design of 137km of roads in the La Libertad Region, and the feasibility study,
executive engineering and environmental impact studies for the Yurimaguas – Iquitos
railway (Ferrocarril Interoceánico). The railway follows the same route as the
Project.
Arup has been informed that the electrical engineer on the Project will be Tacta: a
Brazilian firm with experience advising on and designing transmission lines in Brazil
and across South America, including Peru. Tacta and Isolux previously collaborated
on several projects in Brazil including the Paracatu-Pirapora and Tucuruí-Vila do
Conde C3 transmission lines.
The Concessionaire has provided the following list of firms involved in the
engineering studies and designs completed to date, including Getinsa and Tacta.

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Table 3: Contributing Engineering Firms

Works Firm
Substation Engineering
Substation basic engineering SISENER
Substation detailed engineering HMV
Alternatives study LISYS
Substation Geotechnical GETINSA
Transmission Line Engineering
Design and location of towers TACTA
Foundations alternatives study TAT
Foundations basic engineering ARENAS
Foundations detailed engineering ARENAS
Flooding study BMG GEOMATICA
LIDAR Topography HORIZONS
Transmission Line Geotechnical GETINSA
Geotechnical Study GETINSA
Redesign of towers, additional geotechnical and hydraulic
GETINSA
studies.
2.1.6 O&M Subcontractor

The Concessionaire plans to directly subcontract the O&M works and hire PLENA,
a Brazilian company and subsidiary of Isolux that specializes in the field, as a
management advisor. PLENA is currently responsible for the O&M of Isolux’s
transmission lines in Brazil. The availability of these transmission lines during
PLENA’s management is shown in Table 4.
Table 4: Annual Availability of Brazilian Transmission Lines Operated by PLENA

Concession 2007 2008 2009 2010 2011 2012 2013
CPTE 100.000% 99.872% 99.906% 99.979% 100.000% 99.999% 99.386%
LXTE 95.262%
LMTE 98.082%
IENNE 98.940% 99.980% 99.998%
JTE 99.917% 98.534% 99.998% 99.961% 99.902%
LTMC 99.997% 100.000%
Figure 4 below shows PLENA’s current concessions under operation.

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Figure 4: PLENA Current Concessions in Brazil
Arup opines that Isolux, via PLENA, has sufficient experience as an operator of
transmission assets.
2.1.7 Other Subcontractors

The Concessionaire reports that Isolux will self-perform about 30% of the
construction works. The EPC Contractor is considering subcontracting a number of
other firms to assist with the works (see Appendix B for a complete list), a portion of
which has construction experience in Peru. Based on interviews with the
Concessionaire, Arup opines that the process for hiring subcontractors appears
reasonable; however, we have not received a written subcontractor engagement plan,
nor have we received sufficient information to opine on their respective capabilities.
The Concessionaire has stated they will take the following strategic actions with
subcontractors:
• Hire subcontractors for works that are common to the geographic area (e.g.
foundation construction, and ground workers during tower erection) and self-
perform scopes that require project specific expertise (e.g. suspended tower
erection workers, cable pulling);
• Maintain the responsibility for the procurement of specialized equipment and
materials (e.g. substation equipment, tower materials, conductors, etc) within the
Isolux procurement team and subcontract procurement of locally available
materials to subcontractors (e.g. rebar, formwork, aggregate, cement);
• Hire multiple subcontractors for similar scopes to increase redundancy and limit
exposure to a single subcontractor failure; and

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• Hire subcontractors in incremental scopes to base successive contracts on past

performance.
2.1.8 Major Suppliers

The Concessionaire has provided a list of potential suppliers that they are considering
for the transmission line, the substations and the replacements for the substations. The
list includes a number of internationally recognized firms, such as Siemens, ABB and
GE Energy. Arup has experience with a number of the suppliers. All of those we have
encountered are considered reasonable or better. The complete list of suppliers can
be found in Appendix C.
The Concessionaire has confirmed that all products purchased are certified as in
compliance with the design standards specified in the CA. These design standards are
in line with best practices.
The Concessionaire is issuing Request for Qualifications (“RFQs”) for the key
components of the substations and transmission line. This process is in line with
industry standards.
A contract for the steel towers supply has been signed with Changshu Fengfan Power
Equipment Co. Ltd. (represented by Adea Power Consulting Pty Ltd). Adea is a firm
with extensive global experience in design, management and procurement of
transmission lines. As required by the CA, they are compliant with the ISO 9001
quality management system for production of hot dip galvanized angle and tubular
tower structure for transmission lines, telecommunication and microwave
transmission, and steel structural components.
2.2 Technical Commentary on Project Participants

Arup’s summary opinions and recommendations are as follows:
• Isolux is a large, reputable, global company with a leading position in large
construction and concessions in the areas of energy, civil engineering,
environment and facilities. The company has sufficient depth of expertise and
breadth of relevant project experience necessary to successfully deliver the
project.
• Isolux has sufficient experience managing power and high voltage transmission
line concessions. The firm’s transmission line projects total 5,959km in Brazil,
the USA and India. For these projects, Isolux has provided integrated
management services for these projects, including design, engineering,
construction and O&M. In Brazil Isolux has relevant experience building and
operating transmission lines in the Amazon rainforest.
• Isolux has also provided operational data for projects in the company’s portfolio.
This historical information suggests that Isolux has a successful record as an
operator of transmission assets.
• The EPC Contractor has a solid foundation of construction and operation
experience in Peru. The Concessionaire intends to transfer knowledge from

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Isolux’s projects in the Brazilian Amazon (and elsewhere) to Peru, which should
help mitigate many of the risks associated with building transmission lines in
challenging terrain.
• The EPC Contractor has provided a list of potential subcontractors that may be
used on the Project, a portion of which has construction experience in Peru. Based
on interviews with the Concessionaire, Arup opines that the process for hiring
subcontractors appears reasonable.
• The Concessionaire has provided a list of potential suppliers that they are
considering for the transmission line, the substations and the replacements for the
substations. The list includes a number of internationally recognized firms, such
as Siemens, ABB and GE Energy. Arup has experience with a number of the
suppliers. All of those we have encountered are considered reasonable or better.
• The Concessionaire has confirmed that all products purchased are certified as in
compliance with the design standards specified in the CA. These design standards
are in line with best practices.

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3 Concession Agreement Review

In general, the contractual clauses of the CA are conventional to what is normally
found in similar concession agreements. The CA demonstrates a reasonable
distribution of risks between the Owner and the Concessionaire.
3.1 Concession Agreement Overview

The CA between the Owner and the Concessionaire was executed on October 6,
2014. A summary of the key terms and provisions in the CA are listed in Table 5
below:
Table 5: CA Summary
Term CA Summary: Moyobamba – Iquitos Transmission Line CA
Section
Project Línea de Transmisión 220kV Moyobamba – Iquitos y
Subestaciones Asociadas
Owner Government of Peru (Republica del Peru)
Concessionaire Consorcio Isolux Transmisora Peruana
Owner’s Ministry of Energy and Mines (Ministerio de Energía y Minas)
Representative
Commencement October 6, 2014
Term Earlier of (a) 30 years from the Commercial Operations Start 3.1
Date (“Puesta en Operación Comercial”), or (b) any earlier 4.3
termination as provided in the CA. 13
Anexo 7
Commercial Operations Start Date to be achieved within 52
months of Commencement plus any extensions recognized by
the Owner per Clause 4.3.
Concession Design, Build, Finance, Operate and Maintain the transmission 3.1
Scope line and all necessary supporting infrastructure to comply with
the terms of the CA.
Concession Annual payment according to the base tariff established by 8.1

Payment OSINERGMIN in Article 1 of Law No. 28832 for a Guaranteed
Transmission System (Sistema Garantizado de Transmisión o
“SGT”). Payments to begin at Commercial Operations Start
Date.
Investment Concessionaire to invest US$499,175,573.19 8.1
Amount
Operation Cost Operations Costs US$12,694,569.29 8.1
Construction 220kV Transmission Line: Moyobamba New Substation to Anexo 1
Works – 220kV Intermediate Substation to Iquitos New Substation:
Line
• Approximately 430km
• Towers designed and built to carry 2 circuits

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Section
• 1 Circuit installed
• 1 or 2 conductors per phase
• Allowable conductors include: ACAR, AAAC, ACSR
• 2 Shield wires: 1 – 24 Fiber OPGW and 1 – Concessionaire’s

choice
• Steel lattice or steel post towers depending on land use

Construction 60kV Transmission Line: Iquitos Nueva Substation to Existing Anexo 1
Works – 60kV Iquitos Substation:
Line
• Approximately 5.2km
• 2 circuits
• 1 or 2 conductors per phase
• Allowable conductors include: ACAR, AAAC, ACSR
• Nominal capacity of 150MVA
• 1 Shield wire: 24 Fiber OPGW
• Steel lattice or steel post towers depending on land use

Construction Expansion of Moyobamba Nueva Substation Anexo 1
Works –
• Concessionaire to expand the future substation to include the
Substations
necessary infrastructure to transmit 220kv.
Intermediate Substation
• Concessionaire to build reactive compensation substation

220kv:220kv
Iquitos Nueva Substation
• Concessionaire to build 220:kv:60kv substation

Expansion of Existing Iquitos Substation
• Concessionaire to expand capacity of existing substation.

Financing Concessionaire responsible for financing 9.4
9.8
The CA contract does not permit Concessionaire to obtain Anexo 7
financial guarantees from the Owner.
Financial close to be reached within 24 months of

Commencement

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Section
Operations & The Concessionaire is responsible to operate and maintain the 3.1
Maintenance Project for 30 years plus at least 30 days of Trial Operations 3.3
5.4
The Commencement of Commercial Operations will begin once 5.5
the transmission line has successfully completed 30 days of Trial 5.6
Operations in accordance with the stipulations of the CA, the
engineering study and pre-Operability Study.
After Commencement of Commercial Operations, the

Concessionaire is responsible to deliver the services of the
Project and any damages resulting therein according to
applicable law.
Non-compliance The Concessionaire has 52 months from Commencement of the 11.1
Points and CA to achieve Commencement of Commercial Operations. 11.4
Penalties Failure to meet this deadline will result in penalties of: 11.5
• US$85,000 per calendar day for each of the first 30 days of Anexo 7
delay
• US$165,000 per calendar day for each of the 31 – 60 days of

delay
• US$250,000 per calendar day for each of the 61 – 150 days

of delay
The Concessionaire will incur a penalty of US$2,000,000 for each
instance of the following occurrences:
• The government authority deems that the Concessionaire has

committed an act to limit, restrict or distort the free energy
market
• A failure to comply with the results of dispute resolution

pertaining to Refuerzos
The Concessionaire is responsible to pay penalties related to
service non-compliance in accordance with the directive and
procedures of OSINERGMIN (Directvas y Procedimientos del
OSINERGMIN)
Right of Way The Concessionaire will request easements for the ROW from 4.1
the Owner. The Concessionaire is to assume all costs required to 4.2
obtain and maintain the easements.
The Concessionaire is responsible to obtain the land required for

the expansion and construction of the substations.
Permits The Owner will make its best effort to obtain permits, licenses, 4.1
authorizations, concessions, easements, land rights and similar in
the event that the local government authority present an undue
delay of the provision of these items despite the
Concessionaire’s completing all necessary steps required by
applicable law.

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Section
Insurance Concessionaire is to maintain the following insurance policies at 7.1
the start of construction and throughout the duration of the 7.3
Project:
• Civil Policy with a minimum limit of US$5,000,000 per

claim
• All Risk Policy equal to the Probably Maximum Loss (PML)

as determined by an independent advisor.
Concessionaire’s The Concessionaire to maintain: 12.1
Guarantees 12.2
• US$30 million performance bond during construction
12.3
• US$3 million performance bond during operations Anexo 4
Anexo 4-A
• Any guarantees established in Article 25 i) of the Electrical
Concessions Law (Ley de Concesiones Eléctricas)
Concessionaire’s Principal causes for a Concessionaire Default include: 13.2
Defaults
• Delay of 150 calendar days of any of the milestones defined
in Anexo 7
• Unjustified ceasing of operations of the Project or failure to

resolve sanctions imposed by OSINERGMIN
• Accumulation of non-tax penalties levied by the Owner or

OSINERGMIN in one calendar year greater than 10% of the
Base Tariff of the previous year.
• Concessionaire or Operator bankruptcy
• Failure to acquire or renew guarantees or insurance policies
Handback Concessionaire to return assets of the concession at the end of 13.12

Requirements the concession term at no cost to the Owner other than any
remaining balance due on refuerzos if any.
Change in Law The Owner and Concessionaire are entitled to mechanisms to 15.3
reestablish the economic – financial balance of the CA caused by
a change in applicable law that results in either:
• a 5% or greater variation in the cost of investment during

construction, or
• the net income during the course of 1 year varying by 5% or

more of the current Base Tariff

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Section
Relief Events The main relief events provided to the Concessionaire due to an 13.4
Owner’s Default include: 13.5
• A delay by over 6 months of the milestones established in

Anexo 7 of the CA caused by a governmental authority
• The extension of 18 months of the duration established in

Article 24 of Decreto Supremo No 001-2012-MC
• If the costs for the Consulta Previa established in Anexo 9

exceed 15% of the CA investment amount
• A major breach of contract or obligations by the Owner
• the Owner’s denial of granting authority of electric

transmission due to the results of the previa consulta
Either the Concessionaire or the Owner may terminate the

contract in the event of a force majeure event impeding the
Project for more than 12 continuous months.
Concessionaire’s During the time between Commencement and Commencement 10.2
Compensation of Commercial Operations, neither party will be held responsible 10.6
for Force for force majeure events. Under mutual accord between the
Majeure Owner and Concessionaire, an extension of the Project milestone
deadlines may be granted equal to the amount of time the critical
path of the Project was directly affected by the event.
During the operation of the Project, compensation for force

majeure events will be governed by OSINERGMIN and
applicable law.
Termination The Owner may terminate the CA at any time. In the event that 13.14
Rights that the Owner terminates the contract or if the Concessionaire
terminates the contract due to an Owner’s Default, the
Concessionaire is entitled to termination payment from the
Owner.
Termination payments will take into account the investment

amount and outstanding payments.
3.2 Risk Allocation

In general, the CA distributes the risks of the project between the Owner and the
Concessionaire according to the following:

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Table 6: Concession Agreement Risk Allocation

Risk Owner Concessionaire Comments
Design
Construction
Procurement
Financing
O&M
Permitting Owner to make reasonable efforts to assist in the
Project permitting
Revenue Modality of contract is SGT (Guaranteed
Transmission System) revenues funded by user
payments per Peruvian Law 28832 according to a
formula based on predefined investment and
projected O&M costs.
Environmental Concessionaire to acquire environmental license
Social Concessionaire may resolve the contract if cost
overruns arising due to the Previa Consulta
exceed 15% of referential budget
Right of Way Owner to provide ROW and Concessionaire to
assume costs
Force Majeure Neither the Client nor the Contractor shall be
responsible for the failure to comply with one or
more of their obligations when such failure is
attributable to a force majeure event.
Change in Law Economic financial equilibrium of the contract to
be reestablished in the event a change in law
affects costs or net operating income by more than
5%
3.3 Summary Technical Commentary on CA

Arup’s summary opinions of the technical aspects of the CA are as follows:
• In general, the contractual clauses of the CA are conventional to what is normally
found in similar concession agreements, with a reasonable distribution of risks
between the Owner and the Concessionaire.
conditions. The CA does not specifically address this issue; Arup recommends
that this risk be passed to the EPC Contractor;
• The CA states the Owner will provide the ROW for the Project and the
Concessionaire will assume the associated costs. The CA does not specify relief
events associated with schedule or cost overruns associated with ROW
acquisition. Therefore, cost and delay risks related to ROW are assumed to be
held by the Concessionaire. The Lenders’ ROW Advisor reports that the majority
of the ROW has already been obtained.
• The Concessionaire assumes the risk for compensations, restrictions, and
relocation costs associated with the Previa Consulta process of negotiating

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compensation for affect indigenous populations according to Law 29785. The

Lenders’ Environmental Advisor has informed Arup that the Project has been
exempted from the Previa Consulta process.
• The Concessionaire assumes the risk for acquiring the environmental licenses and
the associated costs to implement the management plan detailed in the licenses.
The CA does not specify relief events associated with schedule or cost overruns
associated with environmental licensing acquisition. Therefore, cost and delay
risks related to environmental licenses are assumed to be held by the
Concessionaire. The Lenders’ Environmental Advisor reports that the EIA has
not yet been approved and that the Concessionaire is in the final stages of
resolving observations.
• Annual payment is guaranteed to the Concessionaire according to the base tariff
established by OSINERGMIN in 2006 in Article 1 of Law No. 28832 for a
Guaranteed Transmission System (Sistema Garantizado de Transmisión o
“SGT”). Therefore, appropriations-related risk is minimal.
• The Concessionaire has 52 months from the commencement of the CA to reach
Commencement of Commercial Operations. As described in Section 8, the CA
schedule includes reasonable timeframes for the defined deadlines.
• Per the CA, the Concessionaire is subject to penalties of up to US$30 million for
delays up to 150 days. As discussed in the next section, the risks listed above that
are retained by the Concessionaire (obtaining EIA approval, ROW acquisition,
obtaining Project and construction licenses, etc.) do have the potential to lead to
delay penalties that reach the cap amount based on the results of the delay analysis
conducted by Arup based on input from the Lenders’ Environmental and ROW
Advisors. See Section 4.3.7.2 for details.
• Change in law will trigger re-balance of the economic-financial equilibrium. The
Concessionaire’s exposure to cost increases stemming from change in law is
equal to 5% of the referential investment (approximately US$25 million) during
construction or 5% of the net income during operations. Therefore, this risk is
minimal.
• Arup opines that the penalty regime during operations, which are established by
Peruvian transmission laws, is not overly onerous. Penalties include excessive
transmission downtime of deficient power transmission which usually result from
equipment or infrastructure failure/damage. According to the legal advisor,
H&CIA, these fines can range from 1 to 1400 Peruvian Taxation Units
(US$1,162). Based on review of benchmark projects, the risk of termination based
on non-tax penalties levied by Owner or OSINGERGMIN in one calendar year
greater than 10% of Base Tariff in previous year is low.
• As stated in 9.2.2, the contingency in the Commercial Operations Phase Budget
for penalties is appropriate. In addition, the US$3 million performance provided
by the Concessionaire during operations appears sufficient to cover a major
• The Concessionaire is to maintain a US$30 million performance bond during
construction. This security obligation has not been passed down to the EPC

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Contractor in a back to back manner; the performance guarantee for the equivalent
amount provided by the EPC Contractor is in the form of a corporate guarantee,
which is a less liquid form of security.
• Termination clauses are in line with industry standards.
3.4 Right of Way, Social, Environmental & Permits

Please refer to the Lenders’ Environmental and ROW Advisors reports for more
detailed more detailed commentary on ROW, social and environmental elements of
the Project.
For a discussion on permits related to construction, see Section 8.3.
The permit required to begin Trial Operations is the acceptance of the Operability
Study and registration with the COES. See Section 4.3.3 and Section 9.1 for more
details.
The permit required for Commercial Operations is Certificate of Integration of the
Transmission Installations in the SEIN.
3.5 Payment Mechanism

The modality of contract is a SGT System (“Sistema Garantizado de Transmisión”
or “Guaranteed Transmission System”) as defined by Peruvian Law 28832 enacted
in July 2006. Revenues are funded by user according to the legislation based on the
referential investment and O&M amounts specified in the Contract and using a
discount rate of 12%. Thus the appropriations-related risk is minimal from a technical
point of view.
The revenues of the Concessionaire may be affected by the imposition of fines during
operation per OSINGERMIN regulations. See Section 9 for a review of the O&M
budget. Arup opines that, based on a review of benchmark projects, the
Concessionaire’s approximate budget is sufficient to cover likely penalties. Thus,
Arup opines that the penalty regime is not overly onerous. In addition, according to
the Legal Advisor to the Project, the payment mechanism is clear and not subject to
conflicting interpretations between Owner and Concessionaire.
3.6 Reinforcements “Refuerzos” and Second Circuit

Reinforcements
The CA includes the concept of Reinforcements or “Refuerzos” which are defined by
the Peruvian Law 28832. A Reinforcement is defined as an improvement in the
capacity, performance or quality of an existing transmission asset or the permission
of access to the network. In order for a Reinforcement to be imposed on a
transmission asset it must be included in the Peruvian Transmission Plan (“Plan de
Transmisión”) and be below a threshold value set by the law (according to the
Concessionaire the current maximum cost of a reinforcement is US$30 million). The
Concessionaire will not have the right refute the installation of the Reinforcement;

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however the Concessionaire will have the first right of refusal to implement the
proposed Reinforcement. The Reinforcement will be paid upon an established price
that will be paid to the Concessionaire via an increase in the Base Tariff according to
an established discount rate. If the Concessionaire declines its rights of first refusal,
the installation will be bid out to interested parties and the Concessionaire is obligated
to comply with the process.
According to the Concessionaire there are no Reinforcements currently planned and
Arup is not able to determine what kind of Reinforcements would be needed at this
time. The most likely Reinforcements that may be required could be equipment
installations in the either the Intermediate Substation or New Iquitos Substation.
According to the Concessionaire, the industry norm in Peru is that concessionaires
typically self-perform reinforcements. In the event that the Concessionaire elects to
install a Reinforcement, the Concessionaire will be responsible for financing the
incremental cost. Arup opines that all Reinforcements would need to meet the
performance specifications in the CA. Further, Arup suggests that language be
included in the CA that significant Reinforcements require lenders’ consent.
Second Circuit
During construction, the Concessionaire is only required to install one circuit in the
220kV transmission line; however, the CA establishes that the Concessionaire must
design the 220kV transmission line to carry two circuits and to acquire the necessary
right of way and permits to install 2 circuits. The CA states that the second circuit
shall be installed once it is included in the updated Peruvian Transmission Plan, and
that the causes to include the second circuit could include:
• The forecasted energy demand in Iquitos will require additional transmission
capacity; or
• Works begin on the Mazán hydroelectric project or other generation source in the
area of influence of the Project.
The installation of the second circuit will rely on the cooperation of the
Concessionaire through the contract procurement process.
Arup has not reviewed any information related to the installation of the second circuit.
Arup notes in general that at the time of installation of the second circuit, careful
planning of the installation will be necessary to address health and safety risks. In
addition, Arup opines that sections of cable that will need to be pulled by helicopter
may require planned service outages of the first circuit. In areas where cables can be
pulled by land, power outages may not be required.
Arup estimates that the total cost to procure and install the second circuit is ~US$60
– 70 million which is above the threshold of the maximum price for Reinforcements;
and therefore, it appears likely that the contract to construct, operate and maintain the
second circuit will be bid publicly.

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3.7 Penalties
The CA specifies penalties per day of delay in reaching commercial operations
applied according to the following schedule:
• US$85,000 per day for the first 30 days of delay
• US$165,000 per day for the subsequent 30 days of delay
• US$250,000 per day for the subsequent 90 days of delay
In addition, the CA establishes a single penalty of US$2,000,000 per each of the
following occurrences:
• A governmental authority declares that the Concessionaire has improperly taken
advantage of its role in the energy transmission market
• Failure to comply or partial, delayed or defective completion of mandated
improvements (“Refuerzos”) to be made to the Project
• Additionally, if the if the Project experiences line outages or deficient
performance standards according the regulations provided by OSINGERMIN, the
corresponding penalties will be applied.
The delay penalty provisions and penalty cap has appropriately been passed down
to the EPC Contractor for the items controlled by the EPC Contractor.
3.8 Relief Events and Termination

Termination clauses are in line with industry standards. The principal causes for the
Owner to declare the Concessionaire in default include:
• Delay of 150 calendar days of any of the milestones defined in Anexo 7
• Unjustified ceasing of operations of the Project or failure to resolve sanctions
imposed by OSINERGMIN
• Accumulation of non-tax penalties levied by the Owner or OSINERGMIN in one
calendar year greater than 10% of the Base Tariff of the previous year.
• Concessionaire or Operator bankruptcy
• Failure to acquire or renew guarantees or insurance policies.
The main relief events provided to the Concessionaire due to an Owner’s Default
include:
• A delay by over six months of the milestones established in Anexo 7 of the CA
caused by a governmental authority
• The extension of 18 months of the duration established in Article 24 of Decreto
Supremo No 001-2012-MC

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• If the costs for the Consulta Previa established in Anexo 9 exceed 15% of the CA
investment amount
• A major breach of contract or obligations by the Owner
• The Owner’s denial of granting authority of electric transmission due to the
results of the previa consulta
Either the Concessionaire or the Owner may terminate the contract in the event of a
Force Majeure event impeding the Project for more than 12 continuous months. In
the event of the termination of the CA, the concession will be auctioned off
according to the value of the investment made in the Project and based on whether
the line is operational when termination occurs. The first auction price shall not be
inferior to the value of the concession assets. If a second auction is required, a
reduction of up to 25% of the value of the concession assets may be considered.

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4 EPC Agreement Review

The EPC Agreement between the Concessionaire and the EPC Contractor was
executed on December 22, 2014. Arup understands that an addendum to the EPC
Agreement is currently being negotiated with the Lenders. A summary of the
preliminary agreements for the EPC Agreement addendum can be found in Appendix
E. The EPC Agreement transfers the principal design and construction risks of the
Project to the EPC Contractor while the Concessionaire maintains risks associated
with environmental licensing, permitting and ROW acquisition as well as other risks
as detailed in this section.
4.1 EPC Agreement Overview

The key terms are summarized in below:
Table 7: EPC Agreement Summary
Term EPC Agreement Summary: Transmission Line Moyobamba Section
– Iquitos
Project Linea de Transmision 220kV Moyobamba – Iquitos y
Title Contrato Llave en Mano entre Lineas de Trasmision Peruanas
SAC y Isolux Ingenieria Sucursal Peru para el Suministro de
Bienes, Construccion, Instalacion, Puesta en Operacion de la
Linea de Transmision 220kV Moyobamba – Iquitos I
Concessionaire Líneas de Transmisión Peruanas S.A.C.
Contractor Isolux Ingenieria S.A. Sucursal Peru
Date 22 December 2014 – Addendum to be executed
Scope of Works Design, procure, build, install, commission, and trial operate the 3.1
588km of 220kV transmission line, 7.8km of 60kV transmission Anexo A
line and associated substations.
Price US$553,659,521.54 plus VAT plus cost of Trial Operations 13.1
Period to be negotiated with the Concessionaire.
Construction EPC Contractor to deliver the definitive engineering (proyecto de 5.1.1(i)
Term ingenieria a nivel 43ransmissi) 10 months and 10 working days 5.1.3(i)
after the CA Commencement. 5.3
EPC Contractor to deliver the definitive engineering Project
Schedule (cronograma de actividades) in conformance with
Anexo 7 of the CA 10 months and 10 working days after the CA
Commencement.
EPC Construction Term is 34 months plus 1 month of Trial
Operations (Periodo de Operacion Experimental)
Advance EPC Contractor to receive a down payment of US$16 million. 7.6
Payment 8.1.1
EPC Contractor to receive a mobilization payment as a condition 8.1.2
precedent to the commencement of the EPC Construction Term. 8.1.3
Mobilization payment will be equal to:

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– Iquitos
• 50% of the budgeted amount for mobilization, accesses, land

clearing (44ransmi. US$36.1m)
• 20% of the budgeted amount for the transmission line civil

works (US$46.7m)
• 20% of the budgeted amount for the substation civil works

(US$3.2m)
Totaling approximately US$86 million or 15.5% of the EPC Price.
Contractor to provide guarantees equal to the amount of the

mobilization payment to be amortized according to physical
progress.
The down payment and mobilization payment will be amortized
over the construction term according physical progress
Contractor’s Payments to be made according to monthly construction progress 13.5
Payments reports based on earned value of the Project 13.6
Payment for specified equipment and materials to be made
according to the following schedule:
• 15% upon the issuance of the purchase order
• 75% At arrival to port for international goods or upon

completion of fabrication for domestic goods
• 10% upon arrival on site

Contractor’s 7.6
• Contractor to provide Performance Guarantee equal to US$30
Performance
million in the form of a corporate guarantee that is to remain
Security/ in effect until the Provisional Reception of the Works.
Guarantees
• Contractor to provide a replacement and quality guarantee
equal to US$5 million in the form of a corporate guarantee to
remain effect for one year after the Provisional Reception of
Works.
• In addition to the previously mentioned guarantees, the EPC

Contractor must also deliver:
• A standby letter of credit equal to 4.6% of the EPC
Contract to be held against fines, penalties and damages.
• A standby letter of credit equal to 5.4% of the EPC
Contract to be held the successful completion of the EPC
Contract.
Bonuses and EPC Contractor to pay a penalty equal to the greater of 0.01% of 12.1
Delay Penalties the EPC Price (US$55,365.95) or the penalty amount for delay 12.3
established in the CA.
The EPC Contractor delay penalties are capped at US$30m
If the EPC Contractor finishes the construction works early a
bonus payment may be negotiated between the Concessionaire
and the Client.

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– Iquitos
Contractual EPC Contractor to be responsible to all fines and penalties that 12.4
Penalties may arise due to the construction of the Project.
Contractor’s EPC Contractor’s limit of liability equal to 25% of EPC 12.4
Liability Cap Agreement price (US$138.4 million)
Right of Way Concessionaire responsible to obtain right of way, necessary 8.2
easements, and access paths for the Project. Anexo G
The Concessionaire must provide the land necessary to build the
substations and 50% of the easements required to build the
Project as conditions precedent to begin the construction phase.
Of the 50% of the easements, at least half must be a continuous
section. The remaining 50% of easements to be delivered
according to Anexo G
Design EPC Contractor to develop design in accordance with EPC 5.1.1
Contract, appendices of the CA, applicable law, and engineering
best practices.
Permits Concessionaire to acquire and assume the cost to acquire and 5.3.1
maintain the following licenses: 9.3
- Environmental Certification
- Certificate of on-existence of archaeological remains (CIRA)
- Archaeological remediation
- Construction licenses
- Negotiations with indigenous communities
- Right of way acquisition
- The necessary permits for the Experimental Operation
EPC Contractor to acquire and assume the cost to acquire and
maintain the following licenses:
- Waste management
- Provisional works licenses
- Water permits
- Borrow pits and material disposal areas
Cost Overruns EPC Contractor shall not be entitled to apply for or claim 6.1.4
payment exceeding the lump sum price except for in the 9.3
following situations: 13.1
• If the final length of the line is increased due as a result of the

EIA
• Any cost increases due to exceptional measures as a result of

the EIA
• Changes solicited by the Concessionaire
• Work stoppages not caused by the EPC Contractor including

work stoppages caused by the Concessionaire’s supervisor
• Extension of construction term for reasons not caused by the

EPC Contractor including delays by the Concessionaire to
achieve permits to electrify the line

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– Iquitos
• The direct and indirect cost associated with Force Majeure

events
• Change in equipment selected by the EPC Contractor
• Delay of more than 7 days for the signing of the Provisional

Reception Act or Definitive Reception Act for reasons not
caused by the EPC Contractor
• Costs incurred by the EPC Contractor during the Trial

Operation Period.
• Price adjustments in the time leading up until the

commencement of the construction term due to the following
indices:
-WPSSOP 3500
- IPC N
• A change in Law.
Schedule Relief EPC Contractor may request an extension to the construction 10.6
term due to the following events:
• Changes requested by the Concessionaire
• Default on obligations by the Concessionaire
• Works suspensions not cause by the Contractor
• A delay in performing obligations by the Concessionaire,

Supervisor or third parties
• Force Majeure events
• Suspensions caused by inspections or supervision
• Delay in licensing
• Delay in right of way acquisition
• Delay in payments to the EPC Contractor

Schedule The Concessionaire may request the EPC Contractor accelerate 10.4
Acceleration the construction progress. If the EPC Contractor is less than 60
days delayed or delayed due to no fault by the EPC Contractor,
the Concessionaire assumes the incremental cost. If the delay is
more than 60 days and due to the fault of the EPC Contractor, the
EPC Contractor assumes the incremental cost.
Subcontractors EPC Contractor may subcontract works to subcontractors but 3.1
maintains responsibility for the works performed.
Geological No specific mention; it is unclear who owns cost and schedule
Risks risk related to geotechnical impacts.
Environmental Concessionaire to acquire Environmental Impact Study and bear 5.3.1
Risk risk of cost overruns related to its findings. 7.4
The EPC Contractor shall take all reasonable steps to protect the

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– Iquitos
environment in compliance with the requirements of applicable 8.2
law. 13.1
Archeological Concessionaire to acquire Certificate of Non-Existence of 5.3.1

Remains Archaeological Remains. 8.2
Concessionaire responsible for the resolution of unexpected
archaeological findings
Change in Law Concessionaire to recognize impact on the EPC Contractor due to 13.1
change in law equal to the direct cost, indirect costs, and a profit.
Taking Over EPC Contractor responsible to commission the works and obtain 9.1
Requirements Owner acceptance of completed works in accordance with CA. 9.2
Once commissioning is approved by the Owner, the EPC 9.3
Contractor will operate the Project during the Trial Operations Anexo E
Period (Periodo de Operacion Experimental) for a fee not Anexo H
included in the lump-sum and subject to negotiation with the
Concessionaire.
EPC The Concessionaire may terminate the contract in any of the 15.2
Contractor’s following events:
Default
• Bankruptcy or failure of the EPC Contractor to perform their
responsibilities
• A delay of 150 days after 52 months from the CA

commencement
• Payment default from the EPC Contractor
• The EPC Contractor meets or exceeds its liability cap
• Any serious default of the EPC Contractor of the

requirements of the EPC Agreement
A force majeure event lasting longer than 12 months.
In the event that the Concessionaire terminates for any of the
reasons listed above other than a force majeure event, the EPC
Contractor shall pay the Concessionaire an amount equal to 5% of
the unexecuted works.
Concessionaire’ The EPC Contractor may terminate the contract in any of the 15.3
s Default following events:
• Bankruptcy or failure of the Concessionaire to perform their

responsibilities
• A delay of 60 days in payment after receipt of an invoice
• Any serious default of the Concessionaire of the requirements

of the EPC Agreement
• A force majeure event lasting longer than 12 months.

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– Iquitos
• A delay of over 365 days of the construction phase

commencement (Fecha de Inicio de Construccion de la Linea
Electrica) since the completion of the engineering
• A force majeure event lasting longer than 12 months.
In the event that the EPC Contractor terminates for any of the
reasons listed above other than a force majeure event, the
Concessionaire shall pay the EPC Contractor all sums due
plus an amount equal to 5% of the unexecuted works.
Relief Events Neither the Concessionaire nor the EPC Contractor will be held 14.1
responsible for non-compliance with their obligations of the EPC
Agreement when such non-compliances are a direct result of a
force majeure event.
The EPC Contract contains the appendices or “Anexos” A – H. The appendices are
summarized below:
Appendix A: Scope of the project, site description and technical specifications
of the Transmission Line.
In Anexo A the scope and general characteristics of the line are stated. This Appendix
restates certain language from the CA, but also defines criteria in addition to the CA.
For example, Appendix A states the line lengths for each subsection of the
transmission line and indicates the coordinates of each line vertex as well as the
expected ground conditions at that vertex. Arup notes that by defining the vertices of
the line and specific lengths, this could entitle the EPC Contractor to a claim if a
vertex is changed during construction. We recommend that the technical scope and
parameters in this appendix be back-to-back with the requirements of the CA, and
that the EPC Contractor only have the rights to produce a claim due to the causes
specified in the body of the EPC Agreement.
The appendix specifies technical criteria for equipment and civil works and includes
at the end a disclaimer that the final configuration, dimensions and characteristics of
the reactive compensation equipment will be defined by the EPC Contractor and
subject to the approval of the Pre-Operability Study by the Committee for Economical
Operation of the National Interconnected Power System (“COES”). Arup notes that
the Pre-Operability Study is not required to be approved by COES, but rather the
Operability Study. Arup suggests that this final disclaimer be changed to read that the
final configuration, dimensions and characteristics of all technical specifications of
the Project are subject to the EPC Contractor’s final design and subject to the approval
of the Owner and compliance with the CA.
Appendix B: Construction budget for EPC Contractor works and EPC
Contractor’s Offer
This section includes an illegible excerpt from a financial model that shows capital
expenditure (“CapEx”) investment over time and a high – level construction budget.
It is unclear to Arup how which values will be used and how to calculate escalation,

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cost overruns, and physical progress of the Project (earned value). Arup notes that
both budgets are based on an outdated design and that the number of towers has
changed. Arup opines that it is important to have a clear understanding of how the
Project costs will be measured and tracked and recommends that an updated detailed
budget be agreed upon by the parties to be used during construction.
In addition, this section includes the list of replacement parts and equipment to be
purchased by the EPC Contractor. Arup notes that these parts and equipment should
be checked against the final design produced by the EPC Contractor to update the
requirements. Arup opines that changes in costs of the updated budget or replacement
parts and equipment should be considered under the EPC Agreement as design risk
passed to the EPC Contractor.
Appendix C: Construction Schedule
Appendix C shows a construction schedule. See Section 8 for commentary on the
Project Schedule.
Appendix D: Terms for the Supervision of the Project
Appendix D has been left blank stating it is pending the specifications of the
supervision contract and the specifications of Osingermin.
Appendix E: Appendices 1, 2, 5 and 8 of the CA
Appendix E includes the CA appendices for project specifications, verification
procedures, telecommunications and design requirements for the Project. Arup opines
that these appendices are relevant to the EPC Agreement to fulfill back to back
provisions; however, in Arup’s opinion the entire CA should be referenced in the
EPC Agreement as a binding document and not just the appendices attached to the
EPC Agreement.
Appendix F: Guarantees
Appendix F outline the conditions of the guarantees of the project. Arup notes that
his section is subject to the revised guarantee provisions in the EPC Addendum under
negotiation and recommends this appendix be review by legal counsel.
Appendix G: Right of Way Schedule
Appendix G is listed as pending the delivery of the ROW schedule to Osingermin.
Arup understands that this schedule has been delivered to Osingermin.
Appendix H: Verification tests schedule and protocols
Appendix H is pending input from the definitive schedule, supervision contract and
requirements of Osingermin.

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4.2 Summary Technical Commentary on EPC

Agreement
Arup’s general summary opinions of the technical aspects of the EPC Agreement
are as follows:
• The commentary below is based on the executed EPC Agreement. Arup
understands that the Lenders are negotiating an addendum to the EPC. The
preliminary technical conclusions of this negotiation is outlined in Appendix E;
• The Scope of Works is appropriate for the Project;
conditions. The CA and the EPC Agreement do not specifically address this issue;
Arup recommends that this risk be passed to the EPC Contractor;
• The scope of the EPC Contractor includes the Trial Operations of the line;
however, the fee for this scope is not included in the lump-sum contract and will
be subject to negotiation with the Concessionaire; therefore this represents a risk
that the overall cost of the Project will increase; Arup recommends that the cost
of Trial Operations be added to the lump sum EPC Price;
• Most key obligations and risks related to engineering, procurement and
construction of the Concessionaire defined in the CA have been passed down to
the EPC Contractor via the EPC Agreement. Similarly, the delay penalty
provisions and penalty cap from the CA have been appropriately passed down to
the EPC Contractor for items controlled by the EPC Contractor;
• However, some obligations and risks related to Conditions Precedent for
construction (obtaining EIA approval, ROW acquisition, obtaining Project and
construction licenses, etc.; See Section 4.3.4 for details) have not been fully
passed from the Concessionaire to the EPC Contractor, resulting in the
Concessionaire holding risks that could impact cost and/or schedule. Best
practices suggest that all design and construction related activities, including all
environmental and permitting requirements, are passed down to the EPC
Contractor such that the CA and EPC Agreement are “back to back.” Consultation
with a legal advisor is recommended to determine inconsistencies between the
CA and the EPC Agreement;
• Related to the above, Arup opines that certain Conditions Precedent outlined in
the EPC Agreement section are at risk for delays. Therefore, it is possible for the
Concessionaire to incur delay penalties from the Owner in the CA without being
able to pass them through to the EPC Contractor. The delay scenario analysis
conducted by Arup estimates that the Concessionaire is subject to penalties of up
to US$30 million for delays up to 150 days which is equal to the delay penalties
cap in the CA. Please refer to Section 4.3.7.2 for a detailed discussion;
• The technical criteria for achieving Provisional Acceptance and Final
Acceptance, as well as the commissioning and acceptance test procedures to
which the EPC Contractor must adhere are defined in the CA. These criteria and
procedures are standard for the industry;

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• The EPC Contractor is responsible for Commissioning, the Power Line

Contractual Verification Tests (“Verification Tests”), and the Trial Operations
Period. The Concessionaire is responsible for producing the Operability Study
that must be presented to the COES for approval before connecting the line to the
SEIN. The Concessionaire is also responsible to pay for the Inspector required to
verify the Verification Tests and to pay for the service performed by the EPC
Contractor during the Trial Operations Period. In Arup’s opinion, the
responsibilities maintained by the Concessionaire represent risks of cost overruns
and schedule delay, and we recommend transferring these responsibilities to the
EPC Contractor;
• The EPC Contractor may subcontract the works, but maintains responsibility for
the works performed by subcontractors. Arup opines that the process for hiring
subcontractors appears reasonable;
• The EPC Agreement does not include clauses that required Concessionaire
approval of key subcontractors. Arup opines that industry best practices suggest
that any subcontractor performing at least 20% of the works should be approved
by the Concessionaire and be subject to the same principal clauses of EPC
Agreement that allow for the proper oversight and management directly by the
Concessionaire;
• The EPC security package should include sufficient liquid or semi-liquid
performance security, typically in the form of a performance bond, retainage,
letter of credit, reserve account or contingent equity. One method to measure the
adequacy of an EPC security package is to estimate the cost to replace the EPC
Contractor in the event of a default. Arup estimates the cost to replace the EPC
Contractor to be between US$78 and US$92 million (14-17% of the total EPC
Price). This estimate does not include financing costs and/or Lenders’ overhead
during the replacement period;
• The EPC Contractor is required to deliver an O&M Manual to the Concessionaire,
but the EPC Agreement does not specify the timing of the delivery of the manual.
Typically a received and approved manual is a Condition Precedent to the
completion of the construction phase with sufficient lead time to ensure timely
registration with the COES; and
adjustment and its calculations is prescribed in the EPC agreement.
4.3 Alignment with CA

The EPC Agreement provides provisions that enable the CA terms to govern those of
the EPC Agreement. However, this section describes the key areas where the
provisions of the EPC Agreement do not mirror those of the CA, or areas where the
owner of the risk is unclear, which could result in some of the EPC risks (that

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potentially impact cost and schedule) being held by the Concessionaire. Consultation
with a legal advisor is recommended to determine inconsistencies between the CA
and the EPC Agreement.
4.3.1 Site Risk

It is unclear who bears cost and schedule risk related to site and/or geotechnical
conditions. The CA and the EPC Agreement do not specifically address this issue.
Arup recommends that the EPC Contractor maintain geotechnical and site risks.
4.3.2 Trial Operations

Arup notes that the scope of the EPC Contractor includes the Trial Operation of the
line. However, the fee for this scope is not included in the lump-sum contract and will
be subject to negotiation with the Concessionaire; therefore this represents a risk that
the overall cost of the Project will increase. The budget for the Trial Operations Period
costs are reviewed in Section 7.3. Arup recommends that the cost of Trial Operations
be included in the lump-sum contract.
4.3.3 COES Registration

The Concessionaire maintains the risk associated with producing the Pre-Operability
and Operability Study. The Pre-Operability study is a Condition Precedent to
beginning construction. The Operability Study is to be submitted to the COES for
acceptance and registration as a member of COES. The Operability Study is a
technical study that will rely on the design and operations procedure developed by
the EPC Contractor, and therefore, Arup believes this is a risk that form a technical
point of view the EPC Contractor is better positioned to manage. The registration
with the COES is a Condition Precedent for beginning the Trial Operations Period,
and therefore, represents a delay risk maintained by the Concessionaire.
4.3.4 CA and EPC Agreement Inconsistencies

The EPC Agreement states that environmental licensing, construction permits and
ROW acquisition (see Table 8) are the responsibility of the Concessionaire. These
are also Conditions Precedent for beginning the Trial Operations Period. Cost
overruns and schedule impacts incurred due to the delay or the results of these
processes are the responsibility of the Concessionaire. Best practices suggest that all
design and construction related activities, including all environmental and
permitting requirements, are passed down to the EPC Contractor such that the CA
and EPC Agreement are “back to back” with regards to these activities as permitted
by local law and regulations.

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Table 8: Permit Risk Allocation

License and Permits Concessionaire EPC
Contractor
Environmental Impact Study X
Environmental Certification from the Ministry of Energy
and Mines X
Certification of the Non-Existence of Archaeological
Remains (CIRA) X
Archaeological remediation (if necessary) X
Construction licenses with local Authorities X
Outreach and negotiation with indigenous communities
(Consulta Previa) X
Right of way and easements X
Waste management X
Licenses and permits for provisional works X
Water rights X
Borrow pits and landfills X
4.3.5 EPC Price Adjustments

The CA states that the financial – economic equilibrium of the contract between the
Owner and the Concessionaire can be adjusted exclusively in the event that a
change in applicable laws have a cumulative impact on costs and revenues above
5% of the investment amount. The EPC Agreement provides relief mechanisms for
cost overruns or schedule delays for impacts that are beyond the control of the EPC
Contractor. In general the Concessionaire retains the following risks related to cost
overruns:
• Any cost increases due to exceptional measures as a result of the Environmental
Impact Assessment (“EIA”) including an increase in the line length;
• Changes solicited by the Concessionaire;
• Work stoppages or delays not caused by the EPC Contractor including work
stoppages caused by the permitting, ROW acquisition or the Concessionaire’s
supervisor;
• The direct and indirect cost associated with Force Majeure events;
• Costs incurred by the EPC Contractor during the Trial Operation Period;
• Price adjustments in the time leading up until the commencement of the
construction term due to inflation indices or during suspension of works;
• A change in the applicable laws.
Due to the fact that the EPC Agreement and CA are not fully back-to-back, it appears
that that the Concessionaire would bear the associated cost overruns in these
instances. The Concessionaire explicitly maintains the risk of environmental
licensing, permitting and right of way acquisition. Furthermore Arup notes, that in
the EPC Agreement, the Concessionaire appears to assume the risk for cost overruns

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associated with work stoppages not caused by the EPC Contractor, Force Majeure
events, inflation and change in law.
4.3.6 EPC Schedule Relief

The EPC Agreement provides relief mechanisms for schedule delays for impacts that
are beyond the control of the EPC Contractor. In general the Concessionaire retains
the following risks related to schedule delays;
• Any schedule delay due to changes requested by the Concessionaire including
impacts resulting from the EIA;
• Defaults by the Concessionaire;
• Work stoppages or delays required by the Concessionaire, but not caused by the
EPC Contractor;
• Delays by the Concessionaire or technical supervisor;
• Force Majeure events or impact from third parties;
• Stoppages for inspection or supervision;
• Delays in licenses, permits, or any other administrative requirement;
• Delay in right of way acquisition;
• Payment delays from the Concessionaire.
Due to the fact that the EPC Agreement and CA are not fully back-to-back, it appears
that that the Concessionaire would bear the associated schedule risk in these
instances. In Addition, Arup notes that to finish the construction phase and begin the
Trial Operations Period, the Concessionaire maintains the risk for acquiring the
necessary permits to begin the testing of the line.
4.3.7 EPC Schedule Review

See Section 8 for a full write up on technical risks related to the construction schedule.
This section compares the durations allotted in the EPC Schedule to the CA Schedule,
and looks at the conditions precedent to begin construction. This section also
comments on the Accelerated Schedule clause in the EPC Agreement.
4.3.7.1 Contractual Schedule Analysis

In general and in a base case scenario, the EPC Agreement aligns with the
deadlines/milestones in the CA. Arup notes that the construction terms of each
document are defined based on different criteria which may lead to the contracts
becoming inconsistent. Table 9 provides a summary of the key contractual deadlines
per both agreements.

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Table 9: CA and EPC Agreement Deadline Comparison.

Milestone CA EPC Agreement
Commencement October 6, 2014 December 22, 2014
Engineering Deadline CA Commencement+ 12 CA Commencement + 10

months months + 10 work days
Schedule Deadline CA Commencement+ 12 CA Commencement + 10
months months + 10 work days
EIA Deadline CA Commencement + 22 Responsibility of
months Concessionaire
Construction Phase Start N/A Conditions Precedent:
Date - Engineering Complete
- EIA approved
- CIRA approved
- Reception of 50% ROW
- Access to site
Construction Deadline N/A Construction Phase Start
Date+ 34 months
Trial Operations Start Date N/A End of Construction Phase and
once Concessionaire registers
with COES
Operations Start Date CA Commencement + 52 Trial Operations Start Date +
Deadline (Also Provisional months 30 days of successful
Reception of Works) operation
Definitive Reception of N/A Provisional Reception of
Works Works + 12 months
The graphic below illustrates the key milestones for the CA and EPC Agreement
schedules and reveals that there is a risk that delays in the EIA approval could prevent
the Project’s EPC Operations date from complying with the CA Operations Start
Date. As per the CA, the Concessionaire is entitled to a 22-month period between CA
Commencement (Commercial Close) and EIA Approval. As per the EPC Agreement,
the EPC Contractor is entitled to a construction term of 34 months plus one month of
trial operation from the date of EIA approval.
Figure 5 shows if the EIA approval takes the entire 22 month period allowed in the
CA, and the construction period extends for 34 months after the EIA Deadline, then
the Late EPC Operations Start Date will take place after the CA Operations Start Date
(the period between CA EIA Deadline and CA Operations Start Date is 30 months).
Our understanding is that the Concessionaire would be responsible for construction
delay penalties that would result from this hypothetical scenario. As described in
Section 8, the construction schedule appears adequate and delay risks can be
mitigated

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Figure 5: CA and EPC Agreement Schedule Milestones
CA
OPERATIONS
CA START DATE
COMMENCEMENT CA
ENGINEERING CA EIA
DEADLINE DEADLINE
EARLY EPC
EPC
OPERATIONS
ENGINEERING
START DATE
DEADLINE LATE EPC
OPERATIONS
EPC
START DATE
ENGINEERING
FINAL
DEADLINE
Early EPC Operations Start Date is calculated applying the EPC construction duration of 34 months
plus 30 days of Trial Operations, assuming the EIA is obtained in 12 months as planned in the EPC
Schedule.
Late EPC Operations Start Date is calculated applying the EPC construction duration of 34 months
plus 30 days of Trial Operations from the CA EIA Deadline established in the CA. The EIA is the
responsibility of the Concessionaire and is a condition precedent for the EPC Contractors 34 month
construction duration to begin.
4.3.7.2 Conditions Precedent Delay Analysis

As described in the previous section, there is a risk that the Project is delayed beyond
the CA Commercial Operations Start Date due to risks maintained by the
Concessionaire. In these cases, the EPC Contractor will not be subject to penalties or
default under the provisions of the EPC Agreement; and therefore, the
Concessionaire will be liable to pay delay penalties to the Owner that cannot be
passed down to the EPC Contractor. To estimate the risk of these delays, Arup has
analyzed the Conditions Precedent to both the construction phase and the Trial
Operations Period as defined in the CA and the EPC Agreement. This review is based
on feedback from the Lenders’ Environmental and ROW Advisors.
Conditions Precedent to Begin Construction
According to the Lenders’ Environmental and ROW Advisors and Isolux, the
following conditions have already been met:
• Concessionaire to present Pre-Operability Study to COES
• Concessionaire to acquire all archaeological certificates
• Concessionaire to resolve accords with indigenous communities
• Concessionaire to acquire 50% of the lands associated with the transmission line
construction

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• Concessionaire to name its representative

The following Conditions Precedent are still outstanding and represent risk to the
delay of the Project.
CA 4.5: Owner to verify Definitive Engineering
The Concessionaire, via the EPC Contractor, is responsible to deliver the definitive
engineering to the Owner. The EPC Contractor delivered the engineering to the
Owner on 24 December and the Owner has 15 working days to approve, resulting in
an assumed January 19, 2016 approval. In a downside scenario, the Owner may object
and request modifications before beginning construction.
EPC 10.3 Approval of EIA
The Concessionaire is at risk to obtain EIA approval. According to the Lenders’
Environmental Advisor, the EIA has been delivered to the Owner and the
Concessionaire has responded to the first set of observations. The range for potential
acceptance dates given by the Lenders Environmental Advisor is from February 1,
2016 to May 15, 2016.
EPC 10.3 Project and Construction Licenses Granted
The Concessionaire is at risk to obtain the required Project and construction licenses.
According to the Concessionaire project and construction licenses are only needed
for non-federal lands in the urban areas that correspond to the substation construction.
The transmission line is to be constructed on federal land and, therefore, does not
require this license. The licenses for the substations take approximately 25 days to
acquire after receiving the approved EIA. The Concessionaire notes that the
construction will begin on the transmission line once the EIA is approved. Arup
recommends modifying the EPC Agreement so that project and construction licenses
are not a condition precedent to begin the construction phase so that work can
commence on the transmission line immediately after EIA approval.
EPC 10.3 Deliver the ROW Necessary to Build the Substations.
The Concessionaire is at risk to acquire 100% of the land necessary to build the
substations as a Condition Precedent to begin construction. According to the Lenders’
Right of Way Advisor, there may be problems acquiring land necessary for the
Intermediate Substation and that the expected date to achieve 100% of ROW could
range from February 28, 2016 to January 6, 2018. Since the substation construction
is not on the critical path, Arup recommends removing this Condition Precedent for
commencement of the construction phase.
EPC 10.3 EPC Contractor to Receive Mobilization Payment
The Concessionaire is required to deliver to the EPC Contractor the mobilization
payment as a Condition Precedent to begin construction. The mobilization is
dependent on the achievement of the other Conditions Precedent.
EPC 10.3 Concessionaire to Approve Engineering and Issue Notice to Proceed.

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The Concessionaire must approve the engineering and then issue a Notice to Proceed
(“NTP”) to officially begin the construction phase. It is not expected that the
Concessionaire will withhold either condition upon the successful completion of the
other conditions precedent outlined above.
Conditions Precedent to Commercial Operation Phase
The EPC Contractor is responsible to perform the Verification Tests and to prepare,
submit, and obtain approval for the final Verification Test Report. The approval of
the final Verification Test Report will mark the end of the 34 month contractual
construction study. Before beginning the Trial Operations Period, the Concessionaire
is responsible to register as a member with the COES. This registration involves the
production and approval of the Operability Study. While it is possible for the EPC
Contractor and Concessionaire to perform their respective obligations in parallel,
Arup highlights that becoming a member of the COES is a prior requirement to
connect the line to the SEIN and represents a risk of delay to starting the Trial
Operations Period if the Operability Study and subsequent approvals are delayed. To
account for this risk in our analysis, Arup assumes that there will be a one month
additional delay between the ending of the 34 month construction period and the
beginning of the one month Trial Operations Period.
Delay Scenario Results
The analysis below shows the amount of penalties to which Arup estimates that the
Concessionaire may be subject (and will not be reimbursed by the EPC Contractor)
under a variety of scenarios. Furthermore, the analysis compares the Commercial
Operations Start Date to the CA Long Stop Date for the scenarios considered.5 The
scenarios considered in this analysis are outlined below:
Base Case
For the Base Case analysis we assume the EPC Contractor uses the entire 34 month
construction period. We note that it is possible to accelerate construction as outlined
in Section 8. In addition the Base Case assumes:
• Owner to verify Definitive Engineering: January 19, 2016 approval;
• Approval of EIA: February 1, 2016;
• Project and Construction Licenses granted: 25 days after EIA approval;
• Obtain ROW: February 28, 2016;
• Additional one month of delay (between construction and Trial Operations
Period) related to the Concessionaire’s risk registering with the COES;
• Construction Start Date assumed to take place immediately after last Condition
Precedent (February 28, 2016)
5
Arup notes that the “cushion” between the Commercial Operations Start Date and the Long Stop
Date is the time frame comparable to the 10 months considered by the Lenders in their liquidated
damages calculation. See Appendix E for more commentary on the EPC Security Package Proposal
provided by Santander (the Liquidated Damages sub cap).

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Pessimistic Scenarios
The following pessimistic scenarios represent the downside scenarios provided by the
Lenders’ Environmental and ROW Advisors. Construction Start is assumed to begin
after achieving the delayed Condition Precedent. Scenarios include:
• Approval of EIA: May 15, 2016;
• Obtain ROW: January 6, 2018;
The results of the analysis show that based on the current state of the outstanding
Conditions Precedent and the assumption that construction is not accelerated, the
Base Case scenario would result in approximately 24 days of delay in the
Commercial Operations Start Date representing approximately US$2 million in
delay penalties for the Concessionaire. Selected pessimistic scenarios show that this
value could reach US$17 million for a significant EIA delay, US$12 million for a
delay in the mobilization payment or a default in the most pessimistic scenario
presented by the Lenders’ Right of Way Consultant for the land acquisition for the
Intermediate Substation.
Arup notes that these values only consider the delay penalty costs and do not consider
other costs, notably the escalation that will be due to the EPC Contractor for a delay
in the commencement of the works.
Table 10: Conditions Precedent Delay Analysis
ROW Substation
Scenario Base Case EIA Delay Delay
Construction Start 2-Mar-16 15-May-16 6-Jan-18
Construction End 2-Jan-19 15-Mar-19 6-Nov-20
COES Registration delay 2-Feb-19 15-Apr-19 6-Dec-20
Commercial Operations Start Date 2-Mar-19 15-May-19 6-Jan-21
CA Commercial Operations Start Date 6-Feb-19 6-Feb-19 6-Feb-19
Commercial Operations Start Date Buffer/(Delay) in days (24) (98) (700)
Delay penalties (US$ million) $2.04 $17.0 $30
CA Long Stop Date 6-Jul-19 6-Jul-19 6-Jul-19
Long Stop Date Buffer/(Delay) in days 126 52 (550)
Long Stop Cushion (months) 5 2 N/A
See Section 8.1 for a discussion on the impacts of these delay scenarios on the
overall Project Schedule.
4.3.7.3 Accelerated Schedule Clause

The EPC Agreement allows the Concessionaire to obligate the EPC Contractor to
accelerate construction progress at their own cost if the construction works become
delayed 60 or more days due to causes attributable to the EPC Contractor. Arup notes
that this EPC Agreement clause is not common. While this mechanism could be a
way to mitigate the schedule risk held by the Concessionaire, it is not clear how

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acceleration of works will be measured or enforced other than that the plan for
accelerating the works must be agreed upon between the parties.
The Concessionaire may request that the EPC Contractor accelerate the schedule if
the delay is less than 60 days. In this case, the Concessionaire will agree to reimburse
the EPC Contractor to the associated incremental costs.
Arup opines that it is possible to accelerate the schedule and measure the associated
incremental; however, international best practices suggest that the combination of
early works bonuses and penalties should be sufficient to properly incentivize the
EPC Contractor to minimize delays. The EPC Agreement includes delay penalties
states that a construction works early bonus payment may be negotiated between the
Concessionaire and the EPC Contractor.
4.4 Subcontractors
The EPC Agreement allows the EPC Contractor to subcontract the works, but the
EPC Contractor maintains responsibility for the works performed by subcontractors.
See Appendix Appendix B for a list of potential subcontractors, a portion of which
have experience in Peru.
However, the EPC Agreement does not include clauses that require Concessionaire
approval of key subcontractors. Arup opines that industry best practices suggest that
any subcontractor performing at least 20% of the works should be approved by the
Concessionaire and be subject to the same principal clauses of EPC Agreement that
allow for the proper oversight and management directly by the Concessionaire.
4.5 Payment Schedule

This section addresses the Project payment schedule and opinions related to three
types of advanced payments: 1) design 2) mobilization and 3) procurement. Arup’s
summary commentary on these topics is as follows:
• The EPC Agreement includes a high-level payment schedule of the EPC Scope
of Works. A more detailed program of construction works should be developed
once more detailed engineering is available that will facilitate an accurate
measurement of earned value during the construction phase. The earned value
schedule should align with the Project Schedule, which is discussed in Section 8.
The methodology for determining earned value should be agreed upon by the
Concessionaire and EPC Contractor prior to Financial Close.
• Up-front payments typically consist of payments to manufacturers,
design/engineering conducted prior to Financial Close and working capital for the
EPC Contractor. The working capital is determined by evaluating the EPC
Contractor's cash flow model, to which Arup does not have access. Advance
payments can range from 10% - 40% of the EPC price. The EPC Agreement
specifies two advance payments. At commencement a down payment of US$16
million is disbursed at the EPC Commencement to fund the design/engineering
phase. The second advance payment is the mobilization payment defined as equal

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to approximately 15.5% of the EPC Price (. US$86 million). Thus, the total
amount is within the typical range.
• The payment application and supporting materials (including cash flow model
referenced above), is typically reviewed by the independent engineer (“IE”) and
the amount of payment is agreed to by the Concessionaire and EPC Contractor
prior to first disbursement. All advance payments are recommended to be backed
100% by a liquid security that can be amortized at the same rate as the advance
payment.
• The EPC Agreement specifies milestone payments for the procurement of
specified materials and equipment to be installed in the Project. The EPC
Contractor is entitled to milestone payments equal to 15% upon issuing the
purchase order, 75% upon the procurement item arriving at the port of origin for
imported goods or upon completion of fabrication for domestic items and 10%
upon the delivery of the procurement item to the job site. Arup opines that the
payment schedule appears reasonable and notes that the 15% upfront payments
should be backed by a liquid security. Note that this security could be provided
by the manufacturer.
adjustment and its calculations is prescribed in the EPC agreement.
4.6 EPC Contractor Security Package

The EPC Agreement specifies the following:
• A limit of liability for the EPC Contractor equal to 25% of the EPC Price
(US$138,414,880);
• A performance guarantee equal to US$30 million (5.4% of the EPC Price) in the
form of a corporate guarantee;
• A letter of credit equal to 4.6% of the EPC Price (US$25,468,338) to back
penalties and damages;
• A letter of credit or standby policy equal to 5.4% of the EPC Price
(US$29,897,614) as a performance guarantee;
• A warranty guarantee of US$5 million (0.9% of the EPC Price)] in the form of a
corporate guarantee that is effective for one year following the Operations Start
Date and may be extended if the Guarantee Period is extended;
• With regards to the two advanced payments described in Section 4.5, the EPC
Agreement states that this payment must be covered by a guarantee of equal value
but does not specify the form of the guarantee.

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4.6.1 EPC Summary Conclusions

Arup’s commentary on the EPC Contractor security package is as follows:
• The security package should include sufficient liquid or semi-liquid performance
security, typically in the form of a performance bond, retainage, letter of credit,
reserve account or contingent equity. One method to measure the adequacy of the
security package is to size it based on the estimated cost to replace the EPC
Contractor in the event of an EPC Contractor default. As shown below, the
estimated technical costs incurred to replace the EPC Contractor is between
US$78 and US$92 million (14-17% of the total EPC Price). Note that the
performance bond is considered less liquid, or more difficult to access, relative to
the on-demand liquid security because more time and resources (legal fees,
negotiations) are required to convert the bond to cash. Note that Arup’s opinion
regarding liquid security does not include non-technical costs, such as financing
or other Concessionaire costs that typically comprise total liquidated damages.
• The 25% limit of liability cap is consistent with other infrastructure projects in
the area; Arup opines that this cap seems appropriate from a technical point of
view.
• The warranty guarantee, which is a portion of the total EPC Contractor
replacement scenario described below, should be sufficient to cover the EPC
Contractor’s warranty obligation during the early years after construction. This
guarantee is typically 3-5% of the EPC Price for one to five years after completion
of the construction works depending on the local legal and regulatory conditions.
The current warranty security is 0.9% with a duration of one year in the form of
a corporate guarantee; therefore, the warranty package, in our opinion, is not
sufficient.
• As stated in the previous section, all advance payments are recommended to be
backed 100% by a liquid security that can be amortized at the same rate as the
advance payment;
• Best practice suggests that this security package should be delivered prior to
construction commencement.
4.6.2 EPC Contractor Default Analysis

Arup performed an analysis comparing the provisions outlined above with the risks
associated with an EPC Contractor default. The risks are allocated throughout the life
of the Project corresponding to 0, 25, 50, 75, and 100 percent completion. The
following risks were considered in the event of an EPC Contractor default:
• Advance payments: We assume that any advance payments other than the down
payment will be covered 100% by liquid securities.
• Latent defects in construction: The completed works up until the event of the EPC
Contractor default will likely be subject to latent defects or other causes for
rework that would have normally been performed by the EPC Contractor. The

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risk is assumed to be equal to 10% of the progress completed but not received at
time of default.
• Premium to find a new contractor: The risk and associated premium the Project
would have to pay in order to hire a replacement contractor will depend on local
market conditions at the time of default and availability of firms with adequate
capacity. It is expected that the need for immediate replacement and the
mobilization and overhead costs associated with the replacement will add to the
contract price. Our analysis considers a 20% premium applied to the cost of
remaining work during the Project.
• Delay risk: The process to remove the existing EPC Contractor and hire a new
one can impact the schedule. We assume that it will take five months to hire a
new contractor and an additional one month to mobilize due to the isolation of
the Project. Damages are based on the penalties issued by the Owner according
the CA. We have assumed that the time lost due to contractor replacement will be
recoverable when the Project is less than 25% percent complete.
Table 11 provides a summary of the quantified risks versus the security package in
place.
Table 11: Security Package Analysis for EPC Contractor Default Scenario (US$ million)
Percent Complete 0% 25% 50% 75% 100%
1. Payment Application 0.0 138.4 276.8 415.2 553.7
2. Work completed and received 0.0 51.4 193.3 377.3 553.7
3. Work completed but not received 0.0 87.0 83.6 38.0 0.0
4. Work to be completed 553.7 415.2 276.8 138.4 0.0
Risk
Latent defects in construction (a) 0.0 8.7 8.4 3.8 0.0
Premium for new contractor (b) 0.0 83.0 55.4 27.7 0.0
Delay Penalties I n/a n/a 15.0 22.5 30.0
Total risk 0.0 91.7 78.7 54.0 30.0
Risk as a % of EPC Price 17% 14% 10% 5%
Suggested Security Package 0.0 91.7 78.7 54.0 30.0
Notes:
(a) 10% of Work Completed but Not Received (assume 10% of EPC Agreement value)
(b) 20% of Work to be Completed
(c) Assume 0 – 5 months impact to schedule depending on when default occurs
4.6.3 EPC Contractor Replacement Market

In the event of an EPC Contractor default, Arup opines that there are several national
and international EPC contractors that are capable of completing the Project. During
the bid phase Abengoa Peru also presented an offer. In addition, international and
national firms such as Odebrecht, Mota Engil, Graña y Montero have experience
building in the Amazon basin and transmission line developers ISA (Colombia) and
Cobra (Spain) have experience developing lines in Peru.

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5 O&M Contract
As discussed in Section 9.2, the Concessionaire plans to directly subcontract O&M
works and hire PLENA, a Brazilian company and subsidiary of Isolux that specializes
in the field, as a management advisor. As stated in Section 2.1.6, PLENA has
sufficient experience as an operator of transmission assets.
In the unlikely situation of a O&M Subcontractor replacement scenario, Arup
would expect additional costs to be incurred by the Concessionaire. These costs
would include both one-time costs and long-term increased costs. One-time costs
would mainly result from procuring a new O&M Subcontractor and include legal,
procurement and O&M mobilization expenses. These one-time costs would be
minimal in relation to the annual Project O&M budget, as the transmission sector in
Peru has a robust history of privatization of operations. In Arup’s opinion, suitable
replacement operators are available in the local market in the event of an O&M
Contractor default.

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6 Transmission Line Design Review

6.1 Overview
Arup has reviewed a draft of the Definitive Design (Diseño Definitivo) provided by
the Concessionaire. From a technical point of view, the design proposed by the
Concessionaire appears to be feasible.
The Concessionaire has noted that the Definitive Design is labeled as such to mirror
the terminology in the CA. However, the current design is still being revised and is
subject to change as engineering is finalized. It is expected that detailed design will
continue after construction commences; Arup opines that this approach is reasonable
for this Project and is in line with industry standards. The table below indicates the
level of the designs reviewed by Arup.
Table 12: Design Progress
Transmission Line Status
Topography & Alignment 100% complete
Tower Spotting 100% complete
Geotechnical investigation 96% complete (at time of our review
25km were pending)
Hydrologic/Hydraulic investigation 95% complete (Pending enhanced
scour studies at river crossings)
Tower Structure Design 80%, (missing fabrication detail)
Tower Foundation Design 80% (missing tower specific detail)
Electrical Design 60% (missing design update based on
System Studies tests)
Substations Status
Topography 10%-20% (limited data available at
Geotechnical investigation this time. Substations are not on the
Architecture critical path)
Structural Design
Grounding Design Not yet produced
Protection 70-75% complete
Substation Automation System 30% (missing most functional design
specifications)
Telecommunication/Telecontrol/Teleprot (missing most functional design
ection specifications)
Arup notes that before construction begins on any individual element, final
construction drawings must be produced; however, it is reasonable for the
Concessionaire to begin works in regions with fully developed studies while final
designs are still being produced for future works. In addition to completing the design
progress shown in the previous table, below is a list of outstanding items that Arup
has highlighted in the following sections if this report.

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Table 13: Select Outstanding Items

Outstanding Item Comment
Steel fabrication drawings Complete and send fabrication drawings for tower and
foundation steel to prevent construction delays
Foundation liquefaction Concessionaire to ensure that liquefaction is considered in
design final construction designs
Foundation scour at river Concessionaire to perform local scour studies considering
crossings available site geotechnical information
O&M Manual Concessionaire to confirm delivery date for O&M
Manuel. Arup recommends earliest date possible to
prevent delays in Operability Study and registration with
the COES
Back-up communication Concessionaire to acquire confirmation from Owner that
60kV line duplicate OPGW is compliant with CA or if not change
design to PCL
Back-up communication to Concessionaire include satellite back-up system
Control Center connection the Iquitos Substation to the Control Center in
Lima in final design
Rerun system study Concessionaire to verify line design with reactive power
study compensation study at 195MVA
Power specification for Concessionaire to acquire confirmation from Owner that
60kV line their interpretation two 75MVA circuits is correct instead
of two 150MVA circuits
Equipment specs Concessionaire to confirm seismic criteria are included in
substation and transmission line equipment specifications
Grounding design Concessionaire to develop grounding design
Electrical room systems Concessionaire to comment whether they will adhere to
Arup's opinion to incorporate gaseous fire control system
Cable pulling plan Concessionaire to submit detailed cable pulling
methodology and management plan before beginning the
pulling phase of construction
O&M Manual Concessionaire to confirm delivery date for O&M
Manuel. Arup recommends earliest date possible to
prevent delays in Operability Study and registration with
the COES
6.1.1 Methodology
This section of the report provides a high-level review of the Definitive Design
provided up to November 6th, 2015 and reflects supplemental discussions held
between Arup and the Concessionaire. The scope of this review covers the following
areas:
• Review of the geotechnical studies
• Review of the tower foundation design
• Review of the tower structure design

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• Review of the substation site works

• Review of the electrical works for the transmission line and substation
• Equipment and vendor Selection
• Construction methodology
6.2 Geotechnical Studies
6.2.1 Overview
Arup considers the level of detail of the documents received to be reasonable. Arup
has some recommendations for further studies and analysis of the geotechnical
conditions in floodplains and on rock that will allow for more reliable foundation
design during the detailed design phase which will take place during construction.
These recommendations for limited locations are noted below.
At the time of this report, geotechnical investigations are continuing in approximately
25km of the route that are difficult to access. These studies will be ongoing through
Financial Close and during construction. This approach is in line with industry
standards. The risk of differing site conditions will be reduced once these studies are
completed. Note that as per Section 3, it is unclear whether these risks are held by the
Owner or the Concessionaire. The CA and the EPC Agreement do not specifically
address this issue. Arup believes this risk should belong to the EPC Contractor.
6.2.2 Description of Studies

Most towers have boreholes at the expected tower spotting locations. However, some
areas with difficult access are still pending ground investigations.
In general, the laboratory tests carried out are mainly aimed at determining index,
strength and chemical properties. Shelby undisturbed soil samples have been obtained
and SPT (standard penetration testing) has been carried out to provide an indication
of soil properties.
6.2.3 Technical Commentary

• The Concessionaire developed detailed engineering to the Owner on December
24, 2015 and is awaiting verification of the design. Arup opines that the Owner’s
approval of the detailed engineering is sufficient to begin construction. Final
construction drawings will be produced throughout the construction phase. Arup
opines that this is consistent with industry practices.
• In general, the geotechnical investigations performed or underway are reasonable;
explorations are appropriately being performed at the tower spotting locations to
determine expected soil conditions to be encountered during construction.

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• Individual design documents generally reach an appropriate level of detail in their

design, although consistency with some newer reports, such as the recent
geotechnical ground investigation, needs further development.
•
• Areas surrounding rivers (Rio Mayo, Rio Paranapura) are identified as potential
flood areas. Typical soils in these areas are defined as saturated and organic soft
soil up to 5.0m below ground level. However, there is no estimation/analysis of
the geotechnical parameters for these types of soils. Due to the low bearing
capacity for these types of soils and the shallow groundwater level in these areas,
specific soil parameters for soft soil should be considered. The Concessionaire
has stated that they will provide these analyses as part of detailed design.
• A preliminary liquefaction assessment has been included; however, Arup opines
that further analysis should be developed to account for each soil variation; for
example liquefaction potential may exist in sandy soils when they are loose and
saturated, and not just in the cases of clean sands as suggested in the report.
Although historically liquefaction has not been associated with many lattice tower
foundation failures, it should be formally addressed in the Project’s final design.
• Scour models have been developed for the towers in the vicinity of the main
rivers, however the calculations should be rerun using the new geotechnical
information. The Concessionaire has indicated that are currently refining the
scour analysis and it will be completed during construction.
• The Concessionaire states that in areas identified as susceptible to scour, an
alternative foundation type consisting of driven piles will be implemented to
mitigate against scour and erosion that can undermine these foundations. Arup
believes this solution to be reasonable.
• Rock formations are expected at some locations on the route, however the ground
investigation methods used (wash boring and geophysical investigations) do not
reliably prove the presence of fresh rock. The Concessionaire is developing two
types of designs for these locations, for both shallow rock and rock at depths of
up to 7m. Arup recommends that until fresh rock is proven at these locations (in
further studies conducted during final design), an alternative foundation type such
as micropiles or spread footings should be considered as a contingency plan. As
requested, the Concessionaire has provided Arup with a contingency foundation
design (spread footings) that Arup opines is reasonable.
• Rock parameters (RMR=65) used in the calculation of the allowable rock-bearing
pressure are based on a theoretical value which is significantly greater than those
registered in two geo-mechanical stations carried out on the rock surface for the
ground investigation which report an RMR<20. Although in most cases these
values for sandstones improve with depth, the current design requires a rock
quality which the existing ground investigation has not proven. Arup recommends
that further studies be carried out during construction to validate the rock
parameters used, or alternatively that the foundation designs consider more
conservative parameters.

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6.3 Tower Foundations
6.3.1 Overview
The Concessionaire has developed a variety of foundation designs, allowing for
adaptability as the geotechnical studies are finalized. Arup has reviewed the plans and
design specifications and calculation reports for the proposed tower foundation
designs. The information received is at various levels of detail and the final detailed
design will be developed in parallel with construction. In general, Arup considers the
proposed solutions to be reasonable, subject to the recommendations for elements to
be incorporated into the detailed design highlighted in the previous section. Arup
notes that the main foundation uncertainty concerns the designs for foundations with
anchors into fresh rock, since the geotechnical studies of these locations have not yet
been completed.
6.3.2 Description of Design

The Concessionaire has developed five types of foundations as a function of both the
structure type and soil type, as illustrated below. Calculations and drawings generally
reach a significant level of detail, although there is a need for further development of
some areas in order to confirm coordination between different reports.
Figure 6: Foundation types breakdown by tower type and soil type

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Figure 7: Rock anchored foundation (“Zapata anclada en roca”)
Figure 8: Soil anchored foundation (“Zapta anclada en suelo sierra”)

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Figure 9: Pile foundation (“Pila recta con base”)

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Figure 10: Helicoidal piles (“Pilotes helicoidales”)

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Figure 11: Tubular Metallic Piles (“Tubular metálico hincado”)

• In general the foundation designs appear reasonable and the design calculations
incorporate reasonably conservative assumptions;
• In general the foundation design appears consistent with a 30-50 year design life.
It is our understanding that Peruvian code requires a 25-year design life;
• Detailed design should take into consideration the opinions and recommendations
from the previous section based on Arup’s review of existing geotechnical
studies;
• The incorporation of some alternative foundation types that do not rely on finding
a fresh rock surface should be considered simply a contingency at this stage;
• The Concessionaire has divided the soil profiles along the route into homogenous
classifications. In Arup’s opinion, based on the geotechnical investigation
performed the defined soil classes are appropriate inputs to be considered for
foundation designs;

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• Arup has verified, via spot checks, that foundation loads for tower types IQT60
and IQSE (representative cases) included in the structural design documents are
consistent with the appropriate load cases in the foundation reports;
• The Concessionaire’s design considers the use of helicoidal stakes. Arup notes
that this foundation solution will reduce the weight of materials and equipment
that are needed to build the foundation and thus represent a positive impact on the
logistical challenges of building in remote areas;
• At the time of Arup’s review, there was a limited area of about 25km where no
geotechnical information was available, the type of foundation assumed is a
shallow foundation fixed with anchors into fresh rock which is considered to be
optimistic at this stage due to the lack of specific information in these areas.
Detailed design should consider outcomes of further analysis;
• Furthermore, the type of foundation referenced above (zapata anclada suelo
sierra) requires additional considerations that could invalidate the viability of this
solution, such as the response to lateral loads, the possibility of buckling of tie
bars under soil compression, etc. These issues could be addressed while
maintaining a similar foundation type if the slender tie bars were replaced with:
a) a more robust member, such as micropiles, capable of carrying both tension
and compression or b) with traditional spread footings that are excavated deeper
until fresh rock is found and use overburden soils to resist tensile reactions. AS
requested, the Concessionaire has provided Arup with a contingency design that
can be implemented in the event fresh rock is not found. This design (spread
footings) appears reasonable;
• The short-term capacity calculation for piles (driven piles and piles with base
enlargements) in cohesive soils has not been considered in the Memorias de
Cálculo. Given the large factors of safety which are being used in these reports,
this omission does not seem to have an implication on the minimum size of the
piles required. Arup verified this specifically for Torre IQA30 suelo II-I Mo/Yu.
In any case, in order to assure that all critical cases are covered, the
Concessionaire should consider short-term verification for piles supported on
cohesive soils in the detailed design;
• Drawings “LTP-LTMI-ID-EM-PL-30” (5.1.7 Detalle de cruces de ríos) show
micropiles used as foundation support. Although this foundation type may be
appropriate, there is no information in relation to the design of this type of
foundation. We would expect information for this foundation to be included in
the detailed design produced during construction.
6.4 Tower Structures
6.4.1 Overview
Arup has reviewed the plans and design specifications and calculation reports for the
proposed tower structures. The information received is at various levels of detail and
the final detailed design will be developed in parallel with construction. Arup’s high
level review suggests that there are no critical issues with the structural design of the

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towers. The Project includes very tall and slender towers supporting long spans of
cables. The design calculations appear reasonable to justify the design.
6.4.2 Description of Design

The Concessionaire has developed 7 types of structures to be used in the Project.
Figure 12: Structure Profiles
The tower design contain the appropriate level of detail for the current phase of the
Project. Member cross section and connection details require further development
during the detailed design phase (which will continue through Financial Close and
during construction).

• Arup’s high level review suggests that there are no critical issues with the
structural design of the towers. In general, the Concessionaire’s structural
configuration of the towers is reasonably optimized to economize steel weight
and constructability while maintaining the required structural strength and design
safety factors. The documentation provided seems to be in line with the level of
detail indicated in the scope of Annex 8 of the CA.
• The level of detail for the tower drawings reviewed to date are appropriate
according to the requirements of the CA at this stage; however, they will need to
be developed at a later stage (during construction) in order to be at the appropriate
level to submit to the fabricator; the fabricator will act as final detailer and will
produce the shop drawings. This approach is in line with industry best practices.
The drawings will need to include a legend clarifying the steel sections to be
provided in each location. The Concessionaire has sent Arup a sample drawing
whose level of detail appears to be satisfactory.
• Prior to submitting tower designs to the fabricator, Arup recommends that the
design documentation include the following:
- List of load combinations indicating the load factors considered in each of
them.

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- Joint connectivity assumptions (pinned or fixed).

- Considerations on whether members are considered as tension and
compression elements or just as tension members.
• Portions of the documentation refer to material standards from the People’s
Republic of China, we recommend indicating the appropriate equivalent ASTM
standard.
• Although no required by the local code, analytical justifications have been carried
out by the Concessionaire to assure that seismic loads do not govern the design
of the transmission towers. This approach appears appropriate.
Substation Site Works

The documentation provided so far is general and only covers the general layout of
the substations. While this level of detail is appropriate for the current stage of the
Project’s development, and the design is compliant with the CA, it is expected that
new information on this matter will be developed for incorporation into the detailed
design during construction]. Arup notes that substation site works design is not on
the critical path and does represent a significant portion of the overall engineering,
procurement and construction (“EPC”) Cost.
6.5 Electrical Design Review
6.5.1 Overview
Arup performed a high level review of the line, substation and system electrical
design proposals submitted by the Concessionaire. The review compared and checked
the Concessionaire’s design against the requirements stipulated in the CA and general
industry standards and best practices. Arup reviewed a design in progress, and the
final design may be subject to change post-Financial Close, which is considered to be
in line with industry best practices. In general Arup finds that the electrical design is
reasonable and on tract for compliance with the conditions of the CA.
Description of Design
The Moyobamba to Iquitos Transmission line is a key infrastructure project in Peru
interconnecting National Grid (SEIN) of Peru to isolated power system in Iquitos
region.
Due to the significant length involved, both sections of the line are provided with
series capacitor compensation to improve the power transfer capability. In addition,
shunt reactors will be required to control the reactive power of the series capacitors
so that the transmission line can operate under minimum load condition. To be able
to control the voltage in a dynamic and continuous manner, the line will be provided
with static var compensation and synchronous compensation.

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Figure 13: General Arrangement of the Proposed Transmission Line
In general, the electrical design consists of the following main components:

• Transmission Line (“TL”): The TL consist of line conductors to transmit the
power at different voltages. The selection of the conductor type is based on the
desired power to be transited between the two points. The conductors are
supported by the transmission towers along the line route. Selection of the towers
are based on the terrain of the transmission line and its alignment and the
environmental conditions.
• Substations: A substation is the central point at the start or end of a TL segment
and contains the switchgear and control gear that are necessary to operate the
transmission line continuously and reliably.
• Reactive compensation: Reactive power compensation for the line is required to
mitigate the over voltage at the end of the line during the line energization and
no-load/load conditions and thereby maintain the voltage within the required
limits. Over voltages are common in long transmission lines due to the line
capacitance.
• Series Compensation: In long transmission lines, line reactance is significantly
high and as such the power transfer capability is limited. Series compensation is
required to reduce the inductive reactance of the line and thereby increase the
power transfer capability. The series compensation will require an additional
substation (Intermediate substation) in between the two end of the transmission
line.
• Static Var Compensation (“SVC”): During the varying load conditions, the
substation busbar voltages (for example 220kV) can fluctuate and such
fluctuation can exceed the stipulated limits. Therefore, to control the busbar
voltages within the desired limits in a dynamic and continuous manner, a SVC
system is provided. The system consists of automatically ransmissiled reactors
and capacitors.
• Synchronous compensator (“SC”): In long transmission lines, the line
capacitances generate excessive capacitive line charging current which can lead
to a rise of voltage in the system. In such a scenario, the synchronous compensator
absorbs the excess reactive power. In addition to absorbing or releasing reactive
power, the SC also serves to improve the power factor. SCs consist of a
synchronous motor whose shaft is not connected to anything and is allowed to
spin freely.

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• Power network protection: The power network protection system safeguards

the specific equipment such as the transmission line, transformers, reactors,
capacitors, outdoor busbars etc, from possible network faults such as line-to-line
or line-to-ground short circuits. The protection relays deployed in such schemes
react to clear the fault and protect the equipment from damage.
• Telecommunication System: The telecommunication system provides
communication between substations and the remote control station in order to
provide both voice and the data communication (The Project’s remote control
station will be located in Lima, Peru). The protection and control signals are
transmitted via the communication system. A typical communication systems
includes optical fiber (via OPGW), power line carrier (PLC), satellite
communication and dedicated public telephone network if available.
• Substation Automation System (SAS): The SAS provides the basis for control
and monitoring functions of the substation switchgear and other equipment. The
control functions are performed either locally from the central point within the
substation or remotely from the remote control center. The system monitors the
operational status of the designated equipment such as circuit breakers, the
condition of the auxiliary systems such DC batteries, and any system faults. The
SAS report allows the operating staff to take apocopate action.
6.5.2 Line Design

This section reviews the selection of key transmission line equipment.
Selection of Line Conductors
The Concessionaire has performed industry standard studies to select the appropriate
conductor type for both 220kV and 60kV transmission lines. The study has included
two sections of 220kV line and a section of 60kV line and considers the following
factors:
• Current carrying capacity
• Line loss
• Corona effect
Based on this criteria, the Concessionaire has selected conductor type 2xAAAC
800MCM per phase. The design calculations carried out to the relevant international
standards confirms that the type of line conductors selected is an appropriate selection
for the Project and meet all of the requirements stipulated within the CA.
Selection of Optical Fiber Ground Wire (OPGW) and Guard Wire (GW)
The selection of the Optical Fiber Ground Wire (“OPGW”) and Guard Wire (“GW”)
is based on the short circuit study projected for the year 2035. The maximum values
considered are 4.5kA at Moyobamba substation, 2.4kA at Intermediate Substation
and 3.2kA at Iquitos substation. Fault duration of 500ms has considered thermal
withstand requirements. The Concessionaire has used in-house developed software
called "CUREO" to simulate the distribution of short circuit currents between the

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ground wires and the ground when a short circuit happens along the line. Arup notes
that this software is not an industry standard. Therefore, Arup recommends reviewing
the validation and accreditation process implemented for this software.
Based on the analysis the final temperature rise on OPGW and GW is within the limits
of their thermal capability. Thus, the selection of these components is reasonable and
meets the requirements of the CA.
Selection of Insulators
The Concessionaire has selected glass insulated with a creepage distance of
20mm/kV corresponding to the pollution level II IEC 60815. The CA specifies a
creepage distance of 25mm/kV subject to verification by the Concessionaire. The
environmental pollution level selected for the assessment is deemed reasonable, and
therefore, the creepage distance selected by the Concessionaire is adequate for the
design.
Arup notes that the Concessionaire’s design considers 20 insulators per string
selected for 220kV which is one less than the 21 insulators required by the CA. The
Concessionaire has confirmed they have modified the design to conform to the CA.
This approach is appropriate.
6.5.3 Substation Design

This section reviews the Project’s substation designs.
Extension of To-be Built Moyobamba 220kV Substation
The Moyobamba 220kV substation will be built by a third party. That to-be-built
substation must then be extended by the Concessionaire to accommodate a new line
bay to transmit power to the Project. The substation will be built to a 220kV double
busbar configuration with a line transfer switch. The proposed design submitted by
Concessionaire consists of;
• Extending the 220kV double busbar to accommodate new 220kV line bays
with transfer switch.
• One (01) cell line 220 kV to the S.E. Intermediate.
• One (01) cell line reactor for the 220 kV line to the SE Intermediate.
• A 220 kV 20MVAr line reactor for the line to the SE Intermediate with
required protection an controls
• Provision for a future extension for one (01) 220 kV cell to the SE
Intermediate.
In general, the above provisions conform to the CA requirements. One exception is
that while the CA specifies 40MVAr reactor but based on the system studies, it has
found that the 20MVAr is adequate. The reactive compensation study carried out by
the Concessionaire to reach this determination seem to be in line with the industry
standard practice for similar designs.

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In addition to the above, the Concessionaire is required to assess the capacity of the
existing auxiliary systems such as low voltage alternating current (LVAC) and low
voltage direct current (LVDC) supplies and provide additional capacity as required.
Similarly any other works deemed necessary to be carried out for the required
extension shall form part of the Concessionaire provisions. At the time of Arup’s
review, the Concessionaire’s design did not include a detailed description of the
extension plan. It is expected that the Concessionaire will assess this capacity during
detailed design.
New Intermediate Substation 220kV
The new Intermediate Substation will be required to accommodate the series
compensation to the long transmission line. The substation shall be double busbar
configuration and completed with;
• One (01) cell coupling bar at 220 kV.
• Two (02) cell line in 220 kV lines to the existing Moyobamba substation (SE
Belaunde Terry) and New Iquitos substation.
• Two (02) capacitive series compensation systems in 220 kV lines to the
Moyobamba and New Iquitos to compensate 60% of the inductive reactance
of the lines.
• One (01) cell line reactor for 220 kV line to Moyobamba.
• A line reactor in 220 kV 60MVAr for the line to the Moyobamba
• Space for four (04) Future 220 kV cells.
The above provisions conform to the CA requirements. However, the CA specifies a
50MVAr reactor but based on the system studies, it has found that the 60MVAr is
required. The reactive compensation study carried out by the Concessionaire to reach
this determination seem to be in line with the industry standard practice for similar
designs.
New Iquitos substation 220/60kV
The proposed 220kV TL will terminate at the city of Iquitos at a new 220/60kV
substation which will link the exiting 60kV substation via a double circuit 60kV
transmission line. The substation will be a double busbar configuration on both
220kV and 60kV sides. The new Iquitos substation will be complete with;
220kV side:
• One (01) cell coupling bar at 220 kV.
• One (01) cell line for the 220 kV line to the Intermediate substation.
• One (01) cell line reactor for 220 kV line towards the Intermediate substation.
• A line reactor in 40MVAr for the line to the Intermediate substation.
• One (01) cell reactive compensation at 220 kV.

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• A (01) reactive compensation system SVC in 220 kV 60MVAr capacitive and

inductive 50MVAr.
• One (01) cell to a bank of 220 kV single-phase power transformers 220 kV /
60 kV / 13.8 kV.
• One (01) single-phase transformer bank power, more reserve unit, 220 kV /
60 kV / 13.8 kV, with a total phase Power: 150/150/54 MVA (ONAN) and
165/165/60 MVA (ONAF).
• Space for six (06) Future 220 kV cells
• Space for a (01) second transformer bank.
Note: The reactive compensation study carried out by the Concessionaire
recommends the nominal power of the operating total variable compensation in new
Iquitos is be + 85 / -75 MVAr. The Concessionaire’s final design shall incorporate
the updated recommendation.
Note: 54MVA and 60MVA on the tertiary winding on the power transformer is
different that the specification in the CA. Additionally, two cells have been provided
for the 220kV line reactors where the CA requires only one. The inconsistency is
likely a documentation error; however, the Concessionaire should seek confirmation.
60 kV side:
• One (01) cell coupling bar 60 kV.
• One (01) cell on the 60 kV to bank single-phase transformers
• Two (02) cell line for 60 kV lines to the existing Iquitos substation.
• Space for four (04) future of cells on 60 kV lines and
• Space for a (01) Future cell transformation for a second 60 kV transformer
bank
• Two (02) synchronous condensers ±25MVAr
In general the New Iquitos substation design conforms to the CA requirements with
the exception of the needed design modifications noted above.
Existing Iquitos Substation
The existing Iquitos 60kV substation is required to be extended to accommodate the
incoming 60kV line from the new Iquitos substation. The scope of work include;
• Extension of 60 kV busbars.
• Two (02) cell line for line from the New Iquitos.
In addition to the above, the Concessionaire is required to assess the capacity of the
existing auxiliary systems such as LVAC and LVDC supplies and provide additional
capacity as required. Similarly any other works deemed necessary to be carried out
for the required extension shall form part of the Concessionaire provisions.

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6.5.4 Support Systems

Grounding design
The CA states that the Concessionaire shall assess the impact on the existing ground
system at the Moyobamba 220kV and Iquitos 60kV existing substation as a result of
the fault contribution from the respective ends of the transmission line. Any
modification to the existing grounding design shall be part of the scope works. The
Concessionaire shall develop specific voltage curves across the substations (touch
voltage, step voltage, ground voltage rise) to prove that the earthing system is
effective under the maximum single phase to ground fault scenario and it does not
give rise to dangerous voltages across the site. Arup recommends that Industry
standards softwares such as “CDEGS” shall be used to design the substation earthing
system. Arup expects the Concessionaire to comply with this recommendation for the
final design.
Protection
The design proposed by the Concessionaire complies with the specifications
stipulated in the CA. Basic requirements of current transformers (CT’s) and voltage
transformers (VT’s) such as Accuracy Class, Rated Burden, Number of cores (for
CT’s) have been included in the Concessionaire’s proposal. However, minor
deviations are highlighted below which do not present significant risks to the Project.
Transmission Line Protection
The following requirements have been requested for protection functions of the
transmission lines in the Concession Contract.
Primary protection - Current Differential Protection
Secondary Protection - Distance Protection
Back up Protection - Overcurrent / Earth Fault (OC/EF)
The Concessionaire has proposed the Primary and Secondary Protection in such a
way that two numerical protection relays are provided and both ‘Line Differential
Protection’ & ‘Distance Protection’ functions are integrated within each relay (i.e.
Primary Protection Relay & Secondary Protection Relay). Standard overcurrent /
earth fault protections are provided as back up protection with a protection relay
which is integral to the Bay Control Unit.
Furthermore, additional functions are also integrated within these relays. The
proposed protection for transmission lines is reasonable and in line with the
specifications of the CA.
Transformer/ Reactor Protection
Required protection functions for transformers and reactors in the Concession
Contract are as follows.
Primary Protection: Current Differential Protection
Secondary Protection: Overcurrent / Earth Fault

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The Concessionaire has proposed the ‘Current Differential Protection’ in the Primary
protection relay which also has overcurrent / earth fault protection integral to it. Three
dedicated relays for overcurrent /earth fault protection have been provided on each
side of the transformer (primary & secondary and tertiary sides). Furthermore, other
protection functions such as ‘winding/ temperature’, ‘pressure relief’ have been
provided as required. The design is reasonable and in line with the specifications of
the CA.
Primary and secondary protection for Thryristor Controlled Reactors (“TCR”) at
Intermediate and Iquitos substations has been provided as required in the CA. The
scheme includes phase overcurrent, current differential and thermal overload
protection, as required. The design is reasonable and in line with the specifications of
the CA.
The Concessionaire’s design does not include protection schemes for the Static VAR
Compensator (SVC) at Iquitos New substation or Fixed Series Compensators (FSC)
at Intermediate substation. However, it is highlighted that the manufacturers of the
SVC and the FCS are required to provide protection for the SVC as required, and the
Concessionaire shall ensure such sub-systems conform to the CA.
The proposed protection schemes by the Concessionaire are reasonable and in line
with the specifications of the CA.
Busbar Protection at Substations (220kV & 60kV)
The CA does not contain a specific clause on busbar protection for substations;
however, the Concessionaire’s proposal for a typical ‘Current Differential Busbar
Protection’ and integrated ‘circuit breaker failure protection’ scheme with numerical
relays at each substation is considered suitable for this purpose. Therefore, Arup
opines that the busbar protection for substations is appropriate.
Substation Automation System (SAS)
The proposed levels of operation and control are as follows:
Level 0 – local control

Level 1 – remote control via Bay Control Unit / Protection Relays
Level 2 – remote control from human machine interface (HMI) within substation
control room
Level 3 – remote control from two control centers
(Main control center – LIMA, back-up control center – New Iquitos SS)
The SAS has been proposed in accordance with the IEC 61850 as per the
requirements in the CA. At each substation, all the protection relays, are connected
to a switch. The Supervisory Control and Data Acquisition (SCADA) servers acquire
information from the protection relays using the IEC 61850.
The protocol used for SCADA communication between substations, and between the
Control Center in Lima and New Iquitos substation is IEC60870-5-104.

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The Inter-Control Centre Communication Protocol (ICCP) is used for communication

between the Concessionaire’s control center and the operational control center COES
SINAC.
The SAS proposal is appropriate for the Project and meets the requirements in the
CA.
Telecommunication / Tele-control / Tele-protection System
The CA specifies that the Project must incorporate three tiers of communication
systems between substations including a primary OPGW (optical fiber ground wire),
secondary PLC (Power Line Carrier/ Carrier Wave) and a back-up system such as
satellite, are required between substations.
The Concessionaire’s design adequately considers the primary and secondary
communication system for the 220kV line, but does not yet specify a ‘back up’ system
(satellite or other means). The Concessionaire has stated that a back-up system is
being studied. Arup notes that a ‘back up’ system must be implemented to comply
with the CA.
Both primary and secondary protection signals are proposed to be transmitted
primary communication system, such as a Power Line Carrier (PCL)
Communication between the Iquitos Substation and the Control Centre in Lima is via
a Virtual Private network (VPN). As a back-up system, a satellite communication
channel has been proposed between the New Iquitos Substation and the Control
Center in Lima. This proposed back-up system is appropriate for the Project.
6.5.5 System Studies

Electromagnetic Transient Study
A detailed electromagnetic transient studies have been carried out and some
recommendations are made to address the possible system issues. Arup notes that the
results of this study were finalized after the initial design was completed. As such,
there are discrepancies between the results of this study and the design reviewed by
Arup. The Concessionaire shall use the recommendations given in this study and the
electrical characteristics proposed for the equipment in the final design of the
transmission line and the substations.
Some of the key recommendations include;
• The 220kV line segment Moyobamba - Intermediate can be powered from the
220kV busbar at Moyobamba through a circuit breaker provided with pre-
insertion resistor (PIR) and the two reactors connected to the line at the both ends,
thus transient voltages during the energization will result less than 2.0 p.u.

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• If the line is energized through a circuit breaker without reactors and PIR, the
transient over voltage results in 2.54 p.u. in the middle of the line for the case of
phase-to-ground and 2.41 p.u. phase-to-phase. These values are higher than the
capacity of 220kV transmission lines normally rated at 2.3pu. This means that
that transmission line should be energized with the reactors connected with PIR.
• Recommendations have been given to avoid the resonance during the single and
three phase reclosing of the transmission line by having neutral earthing reactors
at each terminal of Moyobamba, Intermediate and new Iquitos substations.
• Evidence of ferroresonance has been detected during the energization of the
transformer at new Iquitos substation. To avoid ferroresonance during the
transformer energization, the series capacitors at the Intermediate substation have
to be placed in the by-pass mode. In addition, to reduce the inrush current and
limit the over voltage to value below 2pu during energization, the transformer
circuit breakers shall be equipped with a pre-insertion resistor ransmissionser. It
has also proposed to ensure that the transformer ac saturation reactance shall not
be less than 50%.
Arup cannot confirm the accuracy and the validity of the study results. However, the
study approach is appropriate for a project of this nature.
Reactive Compensation Study
The study has performed to identify the level of reactive compensation required at
the each of the substations, Moyobamba, Intermediate and new Iquitos to control the
voltage for the transmission line during various operating conditions including line
energization and no-load condition. Following the study, fixed shunt compensators
and variable compensations have been identified.
Based on the reactive compensation study, minor modifications have been made to
the compensation specified in the CA. The changes and recommendations include:
• The shunt compensators are: 20MVAr in Moyobamba (compared with 40MVAr
specified on the Concession Contract), 60MVAr in Intermediate (compared with
50MVAr specified on the Concession Contract) and 40MVAr in new Iquitos
substation.
• The shunt reactor at the Intermediate substation is to be inline and fixed, while
the reactors at Moyobamba and new Iquitos are to be inline and maneuverable
(switched on or off).
• It is recommended that the nominal power of the operating total variable
compensation operational in new Iquitos is + 85 / -75 MVAr. These compensation
value is higher than the values specified in the Concession Contact (+50/-
50MVAr) but it is believed that these higher values are necessary to meet the
conditions required under the CA.
Arup cannot confirm the accuracy and the validity of the study results. However, the
study approach is appropriate for the project of this nature.

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Insulation Coordination Study

Insulation coordination has been carried out in accordance with the standards to
determine the insulation levels of equipment within the substations, Moyobamba,
Intermediate, and Iquitos (both new and existing). Based on the study the isolation
level for different voltages have been determined for switchgear. In addition, the
minimum safe clearance between the live parts and the ground has been verified. The
study has been carried out in accordance with the International Standard; however,
Arup cannot confirm the accuracy and the validity of the study results.
6.5.6 Electrical Design Technical Commentary

In summary, the following observations were made on the Concessionaire proposals
submitted.
• In general the electrical design criteria selected for the design of the 220kV and
60kV transmission lines conforms to the relevant local and relevant international
standards applicable to such designs and meet the overall intent of the CA.
• The scope of works for the substations conform to relevant international standards
relevant to such designs and meet the overall intent of the CA.
• The selected conductor type, OPGW, GW and insulators are appropriate and meet
all of the requirements stipulated within the CA.
• Reactive compensation proposed at the existing Moyobamba, new Intermediate
and the new Iquitos substation meet the CA agreement and to achieve the required
performance of the overall new transmission system.
• The transmission line design proposed by the Concessionaire meets the protection
requirements (for transmission line, transformers and busbar) set forth by the CA.
• The proposal for SAS is comprehensive and adequate for the new transmission
scheme. System proposed conform to the latest technologies as identified within
the CA.
• Both primary and secondary protection signals are proposed to be transmitted
primary communication system, such as a Power Line Carrier (PCL)
• In the Concessionaire’s design, communication between the Iquitos Substation
and the Control Centre in Lima is via a VPN without backup. In order to comply
with the CA, a back-up system, a satellite communication channel has been
proposed by the Concessionaire to be implemented between the New Iquitos
Substation and the Control Center in Lima. This proposed back-up system is
technically appropriate for the Project.

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• Detailed system studies (electromagnetic transient, reactive power compensation

and insulation coordination) have been performed to (1) identify the operational
& performance issues of the new transmission line and (b) propose corrective
actions to remedy the operational & performance issues identified and (c) define
the electrical parameters. Arup are of the opinion that the system studies
undertaken are appropriate and adequate to meet the requirements stipulated
within the CA. However, Arup recommends additional scope to the power
compensation study as outlined below.
Notwithstanding the above, some of the issues have been identified both on the CA
and the design proposals submitted by the Concessionaire. The key issues identified
on the Concessionaire’s proposal include:
• The 220kV transmission line has been designed to accommodate the maximum
power rating of 195MVA, but the transformer rating at the new Iquitos substation
as prescribed by the CA is 165MVA under ONAF (Oil natural Air forced) cooling
condition. This means that the maximum transfer capacity of the transmission line
design up to 195MVA cannot be achieved on a continuous basis due to the power
constraint in the transformer. Arup notes that the design specification of the
transformer defined in the CA is not optimal, and recommends considering the
implementation of a higher capacity transformer. However, Arup notes that, while
the transformer cannot operate at 195MVA on continuous basis, the system will
still operate during brief periods above the 165MVA capacity rating meeting the
IEC 60076-7 loading guide for short period (hours only); the system should not
exceed this capacity on a regular basis.
• The 60kV double circuit transmission line between the new and existing Iquitos
substation has been designed to carry 150MVA. Each circuit is designed to carry
a nominal capacity of 75MVA; therefore, if one circuit fails or is under
maintenance, the required power rating of 150MVA (normal) cannot be
maintained. This means that the transmission between Moyobamba and the
existing Iquitos substation cannot be guaranteed at 150MVA. To adhere to
international best practices, it is recommended to increase the single circuit
capacity between the new and the existing Iquitos substation to 150MVA and thus
achieve an N-1contingency in the line. In Arup’s opinion, the CA does not clearly
indicate whether each circuit may be designed as 75MVA, as is the case in the
Concessionaire’s design, or if each circuit is not be designed to 150MVA.
• The control and protection rooms within the substations are not provided with
gaseous type automatic fire protection system. Therefore there is a risk of fire
damage to the critical equipment within the substations. Although it is not
explicitly required by the CA, industry best practices are to provide gaseous type
fire protection system within the control and protection rooms.
• Electromagnetic transient studies have recommended that the shunt reactor at the
Moyobamba substation to ground via a neutral earthing reactor to avoid resonance
in the single phase and three phase reclosing. In addition, this study has
recommended the incorporation of a pre-insertion resistor at the Moyobamba
terminal to limit transient voltage. These recommendations have not been

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implemented in the present scheme; however, the Concessionaire confirmed

during a teleconference that those recommendations will be implemented.
• In order to accurately identify the soil resistivity for the substation grounding
system, the Concessionaire shall develop specific voltage curves across the
substations (touch voltage, step voltage, ground voltage rise) to prove that the
earthing system is effective under the maximum single phase to ground fault
scenario and it does not give rise to dangerous voltages across the site. Arup
recommends using Industry standard software such as “CDEGS” to design the
substation earthing system.
• The Concessionaire’s design does not consider temperature and humidity climate
control within, control, protection and 13.8kV switchgear rooms of respective
substations. According to industry best practices, climate control should be
implemented in these spaces to reduce the likelihood of failures and abnormal
operations especially in tropical climates. Therefore, it is recommended these
rooms to be temperature and humidity controlled.
• Reactive power compensation study has not considered the transmission line
design capacity of 195MVA in their simulation (only considered 165MVA). It is
important to carry out the study based on the power design capacity to ensure that
there are no issues during the transmission of 195MVA.
6.6 Equipment Selection and Vendor Selection

See Section 2.1.8 for details on the list of suppliers. The complete list of suppliers
can be found in Appendix C.
The Concessionaire is issuing Request for Qualifications (“RFQs”) for the key
components of the substations and transmission line. This process is in line with
industry standards. The following table summarizes the selection and procurement
process for Project equipment.

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Table 14: Summary of Equipment Selection Process

Substation Items Status as of Nov 6 2015
Sistema SVC RFQ WILL BE FINISHED ON 15-11-15
Compensacion Serie REQUESTING QUOTATIONS FROM HQ MADRID
Compensadores Sincronos REQUESTING QUOTATIONS FROM HQ MADRID
Transformador de Potencia REQUESTING QUOTATIONS FROM HQ MADRID
Reactor de Potencia y Reactor de Neutro RFQ WILL BE FINISHED ON 15-11-15
Estructuras Metálicas RFQ WILL BE FINISHED ON 15-11-15
Interruptor de Potencia RFQ WILL BE FINISHED ON 15-11-15
Seccionadores y Cuchilla de Puesta a tierra rápida REQUESTING QUOTATIONS FROM HQ MADRID
Transformador de Corriente REQUESTING QUOTATIONS FROM HQ MADRID
Transformador de Tension REQUESTING QUOTATIONS FROM HQ MADRID
Pararrayos 220 kV, 60 kV y Pararrayos para Reactor
REQUESTING QUOTATIONS FROM HQ MADRID
de Neutro
Aisladores Soporte 200 kV REQUESTING QUOTATIONS FROM HQ MADRID
Trampa de Onda REQUESTING QUOTATIONS FROM HQ MADRID
Transformador de tensión con devanado de potencia RFQ WILL BE FINISHED ON 15-11-15
Sistema de Protección, Control y Medición REQUESTING QUOTATIONS FROM HQ MADRID
Sistema de Telecomunicaciones REQUESTING QUOTATIONS FROM HQ MADRID
220kV Transmission Line Items Status as of Nov 6 2015
COMPARISON CLOSED PENDING FINANCIAL
Towers
CLOSURE TO CONCLUDE PURCHASE
COMPARISON CLOSED PENDING FINANCIAL
Conductor
CLOSURE TO CONCLUDE PURCHASE
Insulator RFQ WILL BE FINISHED BY DEC 15
Hardware and Fittings RFQ WILL BE FINISHED BY DEC 15
6.7 Construction Plan/Methodology
6.7.1 Overview
Arup generally considers the proposed construction methodology to be reasonable.
The Concessionaire has demonstrated that they have analyzed the risks of building
in the diverse terrains of the project and is developing their construction plan
accordingly.
6.7.2 Description of Construction Methodology

Work on the project will be conducted from two main fronts situated in Iquitos and
Yurimaguas. An additional two main camps will be located in Trompeteros and
Moyobamba, as shown in Figure 14. The majority of the works will be based from
17 secondary camps located along the route of the line strategically placed

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considering accessibility and area of influence. Transportation of people and

materials will use roadways, rivers and helicopters where appropriate. The
Concessionaire will clear a 25m wide path for the location of the transmission line.
At the peak of construction, the Concessionaire envisions approximately 1,800
workers onsite.

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Figure 14: Location of work fronts, access rivers and work camps
Figure 15: Sample 12m wide forest clearance (Project will use 25m wide swathe)

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6.7.3 Mountainous Terrain Construction

The first 90km of the line starting from Moyobamba is classified as high rainforest
with a topography consisting of steep hilly topography ranging from 539 meters
above sea level to 2200 meters above sea level. Construction methods in this area will
be determined by the available modes of access to the line. Access roads will be built
in some locations, but construction of foundations and towers and pulling conductors
(winching) in some locations are challenging as there is no direct access. Therefore,
helicopter access will be required.
The Concessionaire estimates that approximately 79 towers from Towers 20 – 99 will
require helicopter access corresponding to a route length of approximately 50km.
Heliports are planned to be located near Moyobamba on the eastern end and Santa
Martha at the opposite extreme providing a serviceable radius of 25km from each
heliport. A staging area for materials and pre-fabrication yard for tower assembly will
be located near each heliport to facilitate logistics.
Currently the Concessionaire is considering the use of three helicopters. The heaviest
helicopter will be an air crane capable of heavy picks to transport equipment and
preassembled tower sections with a capacity of approximately 5,000kg depending on
the altitude of travel. A medium sized crane capable of picking 600 – 1,400kg will be
used to transport materials and workers and hang the guide wire for cable winching.
Finally the Concessionaire plans to hire a light helicopter for emergency services.
Helicopter operations must be coordinated during the dry season; therefore, the
climate limits the access to this 50km section to between approximately mid-April
and November.
Figure 16: Examples of air picks transporting pre-fabricated tower sections and winching
equipment
6.7.4 Amazon Basin Construction

Following the high rainforest, the remainder of the alignment crosses through the
Amazon basin, predominantly following the proposed Interoceánico Norte railroad
route. This area is characterized by flat alluvial terraces between 93 meters and 160
meters above sea level.
In the section from Yurimaguas to the Maranon River, and from the Tigre River to
Iquitos, standard construction methods can be used. During the dry season traditional
equipment includes wide caterpillar tracks on tractors, excavators and mini
excavators. During the rainy season the trails will become muddy and will need to be

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reinforced with a layer of tree trunks or equipment and supplies may be transported
by barge on provisional canals.
Figure 17: Examples of provisional logistical routes
Construction methods between the Maranon River and the Tigre River are primarily
governed by the floodplains and soil conditions. Amphibious excavation equipment
will be required and construction will be performed from barges. The machinery for
placement of helicoidal and tubular piles will need to be stabilized using tree trunks
in shallow water, or attached to stabilizing legs in water deeper than 1.6m.
6.7.5 Transport Logistics

The Concessionaire has studied the viable logistical corridors to access the work
front. The main access routes to the site include:
• Land transport from Lima to Moyobamba and Yurimaguas
• Land transport from Lima to Pucalpa and rive transport to Iquitos
• River transport via the Amazon River in Brazil to Iquitos
The secondary camps will have access via roads in the mountainous region and via
rivers in the Amazon basin.
6.7.6 Human Resources

At the peak of foundations construction, the work force incorporated during the
construction is predicted to include ten teams in the jungle, each team sized to
complete one foundation every five days. There will be four teams in the mountains
capable of completing one foundation in under seven days.

• The Concessionaire’s transportation plan is well thought out and takes into
account the transportability by river according to estimated water depths by
month and land transportation of the various materials.

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• Helicopters pose additional health and safety issues. The construction

methodology should be carefully studied to ensure that the EPC Contractor has
adequate measures in place to address the construction risks. Health and safety
issues can be mitigated in part by contracting a reputable helicopter transport
subcontractor.
• Arup considers the elevation changes in the mountain regions to be significant. A
detailed construction plan should be developed for these regions especially in
consideration of cable pulling.
• In the floodplains national safety norms will have to be considered to ensure the
workers are protected in the presence of tropical vegetation and wildlife like
snakes and leeches.

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7 Construction Cost
The EPC Price included in the EPC Agreement is reasonable for this stage of the
Project’s design development. This opinion is based on: 1) comparison of EPC Price
versus relevant benchmarks and 2) comparison with Arup’s bottom-up EPC cost
benchmark.
7.1 Total CapEx

According to the Concessionaire the total CapEx for the project is US$821.9 million
including taxes and value-add taxes (IGV). The largest component of this cost is the
EPC Price which accounts for 67% of the total CapEx. The table below shows a
summary of the Total Project CapEx provided by the Concessionaire. A more
complete breakdown of the Total CapEx can be found in Appendix D. Arup notes
that this CapEx does not include escalation of the EPC Agreement which will be
calculated throughout construction. Arup opines that the EPC Price should be lump
sum and not include escalation adjustments. However, if escalation indices are
applied, they should follow the guidelines provided by Peru’s “formula polinomica.”
Table 15: Breakdown of Project CapEx
Item US$ %
Concessionaire Costs 28,665,580 3%
Bid Costs 3,005,001 0.4%
Environmental Licensing and Social Outreach 5,884,553 0.7%
Right of way 5,054,573 0.6%
Administration 3,581,617 0.4%
Supervision 3,366,582 0.4%
Insurance, Guarantees, Legal, Others 7,773,253 0.9%
Commissioning and Operations Startup 6,475,286 1%
Transaction Advisors and Fees 18,405,194 2%
Financial Costs 107,361,250 13%
EPC Price 553,659,518 67.4%
EPC Cost for Trial Operations6 3,686,400 0.4%
Taxes and IGV 103,677,264 13%
Total 821,930,492 100%
7.2 EPC Price

Arup reviewed the EPC Price included in the EPC Agreement. Arup opines that the
EPC Price is reasonable for this stage of Project’s development. The development of
additional engineering, the environmental licensing process and inflation adjustments
may result in changes in the EPC Price.
6
EPC Cost for Trial Operations is equal to the quote received by the EPC Contractor to charge as a
lump sum price to include in the EPC Agreement as part of the EPC Addendum under review. Arup
opines that the Trial Operations cost should be included in the lump sum EPC Price.

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The EPC Price for the Project is US$553.7 million. A breakdown of the main
construction items is shown in Table 16. As shown in the graphic, the procurement
and construction of the 220kV and 60kV transmission lines account for 82% of the
EPC Price.
Table 16: Breakdown of EPC Price (000s)
Item US$ % Total Cost Breakdown
Transmission Line $500,804,199 90%
Design $42,804,506 8%
Engineering $15,158,370 3%
Geotechnical $11,805,791 2%
Project
$15,840,346 3%
Management
Procurement $62,891,703 11%
Structures $31,768,431 6% Design 8%
Conductor Cable $16,802,653 3% Substations
Shield Wires $7,396,472 1% 10%
Procurement
Fiber Optic Cable $6,264,640 1% TL 11%
Insulators $592,859 0%
Fittings $66,649 0%
Construction $395,107,990 71%
Mobilization, Access Construction TL
Roads and Land $143,717,025 26% 71%
Clearing
Civil Works $204,827,172 37%
Erection $28,350,197 5%
Cable Winching and
$16,444,309 3%
Testing
Final Revision,
Testing and $1,769,288 0%
Servicing
Substations $52,855,323 10%
Total $553,659,522 100%
Arup performed two analyses in order to determine the adequacy of the EPC Price:
1) a comparison of the Project’s EPC Price with benchmark costs for similar projects
and 2) a bottom up analysis using Arup’s database of unit prices and quantities
derived from the Project design. This analysis focuses on the most important cost
items that comprise the EPC Price (69% of EPC Price): mobilization costs,
procurement of structural steel for towers and construction of foundations.
7.2.1 Benchmark Analysis

Arup evaluated the adequacy of the EPC Price against benchmarks for similar
projects. The Project’s total EPC Price of US$941,600 per km is within the cost range
of other transmission projects recently developed in the Amazon basin. Table 17

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shows how the Project compares to similar projects in the region. Note that the scopes
of work for these projects include substations and transmission line costs.
Table 17: Total Cost per km of similar projects recently in the Amazon.
Voltage No. No. of New Length Cost per
Project
(kV) Circuits Substations (km) Km*
Moyobamba Iquitos 220 1 2 588 $941,600
Oriximina-Itacoatiara-Cariri (Manaus) 500 2 2 586 $1,133,00
Jurupari-Oriximina, 500 2 3 713 $390,000
Tucurui-Xingu, Xingu-Jurupari, 500 2 2 527 $905,000
*Costs adjusted for inflation and exchange rates
Arup separated out the transmission line from the substation costs for a more accurate
benchmark comparison. Figure 18 shows that the EPC Price per km is greater for the
Project than comparable projects in the Brazilian Amazon. One possible explanation
for the higher costs is the overall remoteness and inaccessibility of the Project. Similar
projects in Brazil are located along the Amazon River, at the interface between the
jungle and farmland, and therefore, are more easily accessible using existing roads.
Temporary access, provisional camps, and construction using helicopters and barges
contribute to the Project’s high construction cost per kilometer.
Figure 18: Cost per km in relation to total project length for similar projects in the Amazon
rainforest (Transmission line construction costs only)
In summary, Arup opines that the EPC Price is reasonable compared with
applicable benchmarks.

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7.2.2 Bottom-Up Cost Analysis

Arup performed a more detailed, bottom-up analysis to assess the appropriateness of
the EPC Price. This analysis consisted of building an independent budget for the
largest drivers of the cost – preliminary works, foundation construction and the
procurement of tower steel. Arup built this budget by:
1) Subtracting 25% of EPC Price for assumed overhead, profit and contingency to
estimate EPC direct costs;
2) Building up a shadow estimate for the key cost drivers: transmission line
foundation construction and tower procurement and installation. Quantities were
determined from the Concessionaire’s engineering and Arup applied independent unit
costs (labor wages, material costs, equipment costs, production rates and general cost
benchmarks from Arup’s benchmark database adjusted to conditions of working in
the Amazon);
3) Adding the remaining direct costs provided by the EPC Contractor to the cost total
from #2 to determine the Arup benchmark EPC cost.
As a result of this analysis, the Arup benchmark is estimated to be US$471.2 million
for the Arup Base Case scenario (see scenario description later in this section), which
is 15% lower than the EPC Price. The Arup Pessimistic Scenario is estimated to be
US$495.0 million, which is 11% below the EPC Price. Arup opines that these
differences are within an acceptable range of accuracy. Therefore, the EPC Price is
considered reasonable.
7.2.2.1 Building Foundations Construction Cost

The biggest driver for the EPC Price is foundations, which is largely driven by the
foundation type. As shown below in Table 18, foundation costs account for 52% of
the transmission line construction cost which corresponds to 37% of the total EPC
Price. Therefore, Arup’s detailed cost analysis focuses on foundations and, more
specifically, foundation type.
Table 18: Construction cost breakdown for 220kV and 60kV transmission lines
Total Construction Cost
Item US$ million %
Breakdown
Preliminary
$ 143,717,025 36% Electrical
Works Metallic Inst.
7% Inst. 5%
Foundations $ 204,827,172 52% Preliminary
36%
Metallic
$ 27,450,692 7%
Installations
Electrical
$ 19,113,101 5%
installation
Total $ 395,107,990 100% Foundations 52%

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The Project includes seven different types of soil and, depending on the type of
transmission tower and soil type, four different types of foundations. See Section
6.3.2 for more detail.
Arup conducted a foundation analysis to determine 1) The total number of foundation
types per soil type and 2) the unit prices for each foundation type including materials
(concrete, reinforcement steel, anchorages, structural steel), production rates, labor
and equipment.
The following table summarizes the total number of foundations per foundation type.
Arup notes that the cost of each foundation type will vary based on the type of tower
installed.
Table 19: Distribution of Foundation Types
Foundation Type Quantity %

Rock foundation - anchored 74 9%
Concrete pile with enlarged base 112 14%
Helicoidal Pile 615 76%
Steel driven pile 11 1%
Total 812 100%
In determining the cost of each foundation per soil type, rock foundations and shallow
foundations (concrete pile with enlarged base, located mostly on dry soil) are the least
expensive because they require the least amount of material, excavations and
equipment on site. Foundations requiring helicoidal piles or steel driven piles are
generally located in worse quality soils, floodplains, and underwater, and are more
expensive. In Arup’s Base Case analysis, foundation costs range from approximately
US$9,000 to US$580,000. The following chart shows the distribution of foundation
costs for the Project.
Figure 19: Distribution of foundation costs in Arup base case analysis
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7.2.2.2 Building Costs for Tower Procurement and Installation

In addition the foundations, Arup performed a detailed analysis of the procurement
of the steel for the transmission towers (or metallic structures), which largely drive
the total Project procurement costs. These costs represent 51% of the total
procurement costs, as illustrated in the following table:
Table 20: Procurement Cost Breakdown
Total Procurement Cost
Item US $ million % Breakdown
Metallic Conductors
$ 31,768,430 51% Others
Structure 27% 1%
Insulators $ 7,396,472 12%
Shield wires $ 6,264,640 10%
Conductors $ 16,802,653 27% Shield

Wires
10%
Others $ 659,507 1% Metallic
Structure,
51%
Total $ 62,891,702 100% Insulators…
There are seven different types of transmission towers, and within those types, there
are various unit prices that reflect the tower heights and location. Arup therefore
generated unit prices from a benchmark database for each tower type and height
combination. Note that the Concessionaire obtained different quotes for the supply of
steel for the transmission towers, so those prices were incorporated in Arup’s analysis
to compare both processes in a more accurate and realistic manner.
7.2.2.3 Developing EPC Cost Range Based on Different

Foundation Assumptions
In order to develop a range of costs for foundations, Arup developed two scenarios:
a Base Case and a Pessimistic Case. The Pessimistic Case assumes there is an added
premium to account for difficulties in equipment and labor access to the sites. In
addition, the Pessimistic Case considers a steel price based on pessimistic market
conditions. The Base Case, however, takes on a less conservative premium to account
for site inaccessibility and the supply of steel is based on the quotes received by the
Concessionaire. The Base Case reduces the EPC cost, while the Pessimistic Case adds
to the EPC cost.
7.2.2.4 Compiling EPC Cost

In order to compile the Arup EPC cost benchmark, Arup took the direct cost
assumptions for foundations and tower procurement (for optimistic and pessimistic
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scenarios) and added back the other direct costs (30% of total direct costs) provided
by the EPC Contractor. Arup then added back the 25% assumed for overhead and
profit to obtain the total Arup EPC cost benchmark range. Under the Pessimistic Case,
the total Arup EPC cost benchmark is US$495.0 million; under the Base Case
scenario, the total Arup EPC cost benchmark is US$471.2 million. Compared to the
EPC Price, the difference between the two benchmarks is US$58.7 million (11%) and
US$82.5 million (15%) respectively.
Table 21: Arup Cost Analysis Results
Scenario US $ million % Variance
EPC Price 553.7 0%
Arup Base Case 471.2 14.9%
Arup Pessimistic Scenario 495.0 10.6%
Arup opines that this difference range is within an acceptable range of accuracy. This
percentage is in line with industry standards for these types of projects and for the
level of details in the design achieved. Therefore, the EPC Price is considered
reasonable.
7.2.3 Summary Technical Commentary on EPC Price

Arup has the following observations regarding the EPC Price:
• Based on a comparison with other project benchmarks, and a comparison of the
with the bottom-up Arup EPC cost benchmark, the EPC Price of US$553.7
million is reasonable,
• The EPC price is lump-sum for the design and construction of the line. However,
as indicated in Section 3, there are a number of construction risks that are held by
the Concessionaire. Therefore, the Concessionaire could be exposed to EPC cost
increases. See section below on Concessionaire Costs for the budget related some
of these risks/costs.
• The EPC Contractor is also responsible for the trial operation of the Project for at
least 30 days until the Commercial Operations Start Date. The cost of these
services is not included in the lump-sum and will be negotiated with the
Concessionaire.
7.3 Concessionaire Cost

The Concessionaire’s Cost beyond the EPC Price include financial, transaction,
administration and technical costs. The technical costs reviewed in this report account
for less than 1% of total Project CapEx (US$6.7 million) and include initial CapEx
and Preliminary Operations Budget (Operative Study, Commissioning Tests,
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Verification Tests and Trial Operations Period costs7). See Section 9 for a description
of these items and Table 25 for the costs of the individual line items.The
Concessionaire’s contingency of $5.9 million should be sufficient to absorb most
overruns.
Arup notes that the Concessionaire’s technical cost may also include cost overruns
for the EPC Price associated risks that have not been passed down to the EPC
Contractor. For example, in a downside scenario, the environmental licensing process
may cause a change in the length of the transmission line which would not be covered
by the lump-sum provisions in the EPC Agreement. According to the unit kilometer
prices established in the EPC Agreement, if the 220kV line length were to be
increased to the original reference design length of 631km, then the additional cost to
the Concessionaire would be approximately US$40 million.
Additionally, delays by the Concessionaire in achieving the Conditions Precedent can
result in additional penalties that will not be covered by the EPC Contractor. As
shown in Section 4.3.7.2 the Base Case additional fines related to a delay in the
Conditions Precedent is estimated to be US$2 million dollars with each day of
additional delay adding to the amount of potential delay cost up to in a worst case
scenario the US$30 million. Furthermore the delays in the start of construction will
entitle the EPC Contractor to increased escalation adjustments to the lump-sum EPC
Agreement.
Finally, Concessionaire costs include the O&M annual costs during Commercial
Operations. These are discussed in Section 9.2.2.
7
EPC Cost for Trial Operations (in Table 15) is equal to the quote received by the EPC Contractor to
charge as a lump sum price to include in the EPC Agreement as part of the EPC Addendum under
review. Arup opines that the Trial Operations cost should be included in the lump sum EPC Price.
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8 Project Schedule
Arup has received and reviewed the EPC Schedule (“Project Schedule”) containing
the Concessionaire’s Design engineering, procurement and construction schedules.
Arup believes these schedules to generally be reasonable; however this section does
identify potential sources of delay.
8.1 Overview
The EPC Schedule has a total duration of 49 months. The durations, start and end
dates of the key portions of the EPC Schedule are shown in Figure 20 and Table 22
below. According to our review, the EPC Schedule appears reasonable.
Figure 20: EPC Schedule Summary
Table 22: EPC Schedule Summary

Milestone Start Date End Date Duration
(months)
Total Project 6 Oct 2014 11 Nov 2018 49
Contract Signed 6 Oct 2014 6 Oct 2014 -
Permitting 15 Oct 2014 11 Jan 2016 15
Approval of EIA 11 Jan 2016 11 Jan 2016 -
First property acquisitions 11 Jan 2016 11 Jan 2016 -
Engineering 6 Oct 2014 11 Jan 2016 15
Procurement 16 Nov 2015 8 May 2017 18
Transport Transmission Lines 15 Feb 16 8 May 2017 15
Construction 20 Jan 2016 2 Sep 2018 31
Clearing Works, Access Roads & Site Infra. 20 Jan 2016 5 Jun 2017 17
Tower Foundations Construction 12 Apr 2016 14 Oct 2017 18
Tower Installation 7 Jul 2016 5 May 2018 25
Cable Installation 22 Mar 2017 2 Sep 2018 17
Substation Construction 21 May 2016 2 Sep 2018 28
Experimental Operations 4 Sep 2018 11 Nov 2018 2
However, while Arup notes that the proposed Project Schedule leaves a buffer of
three months between the planned EPC Operations Start Date (49 months) and the
CA Operations Start Date (52 months), as stated in Section 4.3.7.2, the Base Case
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Delay Scenario assumes that construction will not begin until early March. This delay
will reduce the float to approximately one month. This remaining buffer will help
mitigate the risks identified in this section, but it is not substantial.
Further, as stated in Section 4.3.7.2, if the EPC Contractor takes the full 34-month
construction period to which it is entitled, the Concessionaire will be subject to
penalties. Therefore, it is therefore recommended that the construction period defined
in the EPC Agreement be reduced to 31 months and the Concessionaire generate an
Acceleration Plan should one be needed.
In terms of the overview of other key schedule risks, we note that construction in
remote areas of the Amazon basin presents significant challenges to the Project, such
as lack of adequate modes of transportation for logistics support and potential
productivity losses due to rainstorms, especially during the months of December to
April. Other EPC-related Project Schedule risks include:
• Geotechnical risk (foundation design).
• Procurement of equipment (long lead times required for some items).
• Weather.
• Access to the site for construction crews.
• Difficult terrain (general construction risk in the Amazon and mountains).
Arup opines that the EPC Schedule generally accounts for and adequately manages
the risks. These mitigation measures are described in detail in Section 8.3.
8.2 Benchmarking Study

Arup compared the EPC Schedule to the proposed and actual schedules of similar
projects in the Amazon region of Brazil. We note that the schedule duration primarily
depends on the number of fronts used during construction; however, a review of
proposed and actual schedules for similar projects through similar terrain provides a
good starting point for analysis.
The duration of the CA Schedule is reasonable in relation to other similar projects
through similar terrain. As stated above and in Section 4.3.7.2, the Base Case Delay
Scenario assumes that due to delays in the Conditions Precedent, including an EIA
approval, the Project Schedule will be approximately 51 months. This is in line with
the other projects listed in Table 23 and Figure 21 below.
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Table 23: Proposed and Actual Schedule Comparison

Project Country Length CA Planned Actual Final
(km) Schedule Schedule
(months) (months)
Oriximina-Itacoatiara-Cariri 51
Brazil 586 36
(Manaus) 500kV
Jurupari-Oriximina 500kV Brazil 713 36 51
Tucurui-Xingu, Xingu-Jurupari, 54
Brazil 527 36
500kV line,
Moyobamba-Iquitos 220kV Peru 588 52 -
Figure 21: Proposed and Actual Schedule Comparison
Moyobamba-Iquitos EPC
Moyobamba-Iquitos CA
Tucurui-Xingu, Xingu-Jurupari
Jurupari-Oriximina, Jurupari-Laranjal-Macapa
Oriximina-Itacoatiara-Cariri
0 10 20 30 40 50 60
Months
CA Schedule Environmental Delay Additional Delay
In addition to environmental delays, the projects to which the EPC Schedule is

compared above experienced delays of one to seven months due to issues concerning
suppliers, licensing and the difficulties of tower implementation in densely populated
areas. The Concessionaire is mitigating these risks for the Project as follows:
• The Concessionaire has developed a procurement schedule that reduces the risk
of supplier delays, as discussed in the following section.
• Due to the remote location of this Project, delays due to problems with densely
populated areas are less likely to be a concern.
The following section summarizes the key construction risks and the extent to
which the Concessionaire is mitigating these risks through Project planning
activities.
8.3 Key Construction Schedule Risk Mitigation

The key schedule risks are listed below along with the mitigation measures that are
being implemented by the Concessionaire and/or the EPC Contractor, in addition to
recommendations for further mitigations. As stated above, the approximately one-
month buffer between the Project Schedule and the CA schedule should help mitigate
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delay risks. Arup also notes that construction can generally be accelerated, if need be,
by adding work fronts and making plans to start subsequent works early in the event
that the float preceding them is not fully used.
• Geotechnical risk: As stated in Section 4.3.1, the CA and EPC Agreement are
not clear regarding who bears cost and schedule risk related to site and/or
geotechnical conditions. A complete geotechnical study for the Project is
underway, but will not be complete until the detailed engineering phase (during
construction). While this is in line with industry standards, the results of this study
could impact Project costs and schedule. Arup also notes that the portion of the
Project that has been subject to the least amount of geotechnical investigation,
and consequently represents the greatest risk of foundation redesign, is the
Moyobamba section through the mountains. Arup notes that this section is not on
the critical path of the Project and, therefore, has some ability to cope with delays.
However, sections such as Moyobamba that need to be accessed by helicopter
have a limited window of available dates due to the annual climate cycle.
Therefore, it is important that these sections are ready to be begin works during
the dry season, which begins in June. Arup recommends that future studies take
this into account.
• Right of Way: This risk is held by the Concessionaire. Lenders’ ROW Advisor
reports that the majority of the ROW has already been obtained; however, they
also report that potentially serious delays may occur for the right of way
acquisition of the land necessary for the Intermediate Substation. Arup notes that
the possibility of working on different sections of the Project simultaneously
allows for works to begin before the ROW has been finalized; however, a
condition precedent for the EPC Contractor to begin works is receiving 100% of
the land required for the substations. Arup recommends consulting with the
Lenders’ ROW Consultant for this risk.
• Permitting: As stated in Section 4.1, the Concessionaire is at risk for obtaining
the majority of required permits, including the EIA and ROW. The Lenders’
Environmental Advisor reports that the EIA has not yet been approved and that
the Concessionaire is in the final stages of resolving observations. We recommend
consultation with the Lenders’ Environmental Advisor for further assessment of
the risk related to environmental and social permits According to the
Concessionaire project and construction licenses are only needed for non-federal
lands in the urban areas that correspond to the substation construction. The
transmission line is to be constructed on federal land and, therefore, does not
require this license. The other key permit required by the government prior to the
initial disbursement is the Certificate of conformity of the Pre-Operability Study
for the Project issued by COES). See Section 4.3.3 for more details.
• Cobra Transmission Line: The construction of this transmission line needs to
be completed before the Project can be operational, and the New Moyobamba
substation needs to be completed in time for Isolux to perform construction works
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there. As of September 2015 the works were reported by Osingermin to be 36%

complete.8
• Procurement of equipment: This risk has been passed from the Concessionaire
to the EPC Contractor. The EPC Contractor is planning to receive first deliveries
of the necessary equipment 16 months before the CA required date, which Arup
considers to be a sufficient buffer. In the EPC Contractor’s schedule the longest
lead items could be ready as early as April 2017 which is 12 months prior to the
CA deadline. Arup believes this is reasonable.
• Weather: This risk has been passed from the Concessionaire to the EPC
Contractor. While the weather is fairly consistent, there is a seasonality factor that
drives low-water vs high-water seasons; the high-water season (December –
April) presents more challenges to the Project. Arup’s analysis indicates that
weather delay has generally been adequately incorporated into the EPC Schedule.
Arup notes that the Iquitos section of the Project could experience significant
delays in a downside weather delay scenario, however the EPC Contractor has
provided Arup with a contingency schedule that shows multiple work fronts in
the Iquitos section which increases the total float of this line and reduces the risk
of delays
• Access: This risk has been passed from the Concessionaire to the EPC Contractor.
The EPC Contractor has planned for a number of different vehicle access
strategies to manage difficult terrain and seasonal impacts, including helicopters,
caterpillar track vehicles and temporary road construction from cut trees. These
measures should help mitigate access related risks.
8.4 Engineering Schedule Review

The detailed engineering schedule provided by the EPC Contractor starts 6 October
2014 (2 months before the start date noted in the EPC Schedule) and ends 11 January
2016. The engineering period totals 16 months, ending a month before civil works
start. The presented engineering schedule complies with the deadlines defined in the
The critical items in the engineering schedule are the geotechnical study and the
foundation design. Arup notes that changes to the design as a result of the
geotechnical studies could impact the construction time.
Arup notes that the design to date is reasonable and on track with contractual
requirements. Arup notes that additional work needs to be done to finalize the tower
and foundation designs during construction (which is in line with industry best
practices); however, Arup believes it is reasonable to assume that the Concessionaire
will be able to complete designs for the first sections of the Project by their scheduled
construction start date of January 2016.
http://www.osinergmin.gob.pe/seccion/centro_documental/electricidad/Documentos/PROYECTOS
%20GFE/Transmisi%C3%B3n/3%20LT_Construccion_Set_2015.pdf
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8.5 Procurement Schedule Review

Equipment for the Project is expected to start arriving by February 2017. The
procurement schedule complies with the CA, which establishes that major substation
equipment must arrive on site within 42 months of CA Commencement, i.e. by April
6, 2018. In the Concessionaire’s schedule the longest lead items could be ready as
early as April 2017 which is 12 months prior to the CA deadline. Arup believes this
is reasonable.
Table 24 below shows the estimated fabrication and transportation times for key
substation equipment. The maximum lead time is 15 months (for transformers and
line reactors). Given that procurement is scheduled to start in January 2016, the
substation equipment delivery should start prior to the beginning of installation at the
220kV substations in May 2017. Arup recommends ongoing supervision of suppliers
to ensure they stay on schedule.
According to the Concessionaire, the procurement lead time for the structural steel of
the towers is 5.5 months to be fabricated in China after sending the fabrication
drawings, and then an additional 2.5 months to arrive to the site, totaling a lead time
of 8 months. The total lead time for the steel in the foundations is 5 months. Arup
notes these lead times will put the structural steel fabrication on the critical path of
the construction and delays in fabrication drawings could result in a delayed start date
for critical path activities. Such a delay would require construction acceleration to
recover time lost.
Table 24: Substation Equipment Procurement Lead Times
Item Estimated Time for Contract Date first item
Fabrication and Transport Close arrives on site
(months)
220kV Equipment
Power Transformers 200/60/13.8 kV 15 January’16 April’17
SVC +/-50 MVAR 13 January’16 February’17
Bank for Series Compensation, 60% 13 January’16 February’17
Line Reactors (50 MVAR o 40 MVAR) 15 January’16 April’17
Breakers, 220 kV 12 February’16 February’17
High Voltage Switches, 220kV 12 February’16 February’17
Capacitive Voltage Transformer 220 kV 14 February’16 April’17
Inductive Voltage Transformer 220 kV 14 February’16 April’17
Current Transformer 220 kV 14 February’16 April’17
Lightning Rods 220 kV 12 February’16 February’17
60kV Equipment
Breakers, 60 kV 12 February’16 February’17
Switches, 60kV (Línea y Barras) 12 February’16 February’17
Voltage Transformers 60 kV 14 February’16 April’17
Current Transformer 60 kV 14 February’16 April’17
Lightning Rods 60 kV 12 February’16 February’17
8.6 Construction Schedule Review

In Arup’s opinion, the most critical component of the EPC Schedule is the
construction of the tower foundations. Arup’s production rate analysis for these works
indicates that the Project Schedule is generally reasonable and allows sufficient buffer
to absorb potential delays. Arup notes that the section of the Project carried out from
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Iquitos has the greatest risk of delays that could impact the Project completion date,
however there are opportunities to adapt the schedule at a later date to mitigate against
this if necessary, including constructing foundations in parallel at multiple secondary
camps, or altering the sequence of the locations for the cable installation. The
Concessionaire has provided Arup with a contingency schedule that shows multiple
work fronts in the Iquitos section which increases the total float of this line and
reduces the risk of delays.
8.6.1 Construction Sequence

As described in Section 6.7, the Concessionaire plans to lead construction from four
main basecamps, each of them with its own management and operations staff. Each
of the basecamps covers a section of the Project alignment. Each basecamp is further
divided into camps associated with work fronts. Arup considers this approach to be
appropriate. The Project construction proceeds sequentially from clearing of the
access routes and site preparation, through installation of foundations, erection of
towers, hanging of cable and testing, as shown in Figure 22 below.
Figure 22: Construction Sequence
Mobilization
Access Roads
Tower Civil Works
Tower Erection
Cable Pulling
Testing
8.6.2 Construction Production Rates Analysis

Arup identified the construction of the foundations as the schedule component with
the greatest impact on the rest of the schedule and the portion of the works most likely
to experience delays. Therefore, Arup has conducted a bottom up analysis of the
foundation construction schedule based on our estimation of the production rate for
each type of foundation to determine if there is sufficient float in the EPC Schedule
for foundation construction activities.
The Concessionaire has shared a preliminary work plan that shows foundation
construction will employ a peak of 14 teams working simultaneously in six camps.
The foundation construction durations shown in the EPC Schedule assume fair
weather construction rates. The Concessionaire has addressed the risk of delays
through creation of float between completion of the foundations and the subsequent
works, i.e. towers on the same work front and foundations in new work fronts. Arup
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analyzed the adequacy of this float by comparing the Concessionaire assumptions

against our estimates of foundation production rates and considering weather delays.
With the exception of the Iquitos section, Arup considers the EPC Schedule to have
sufficient float to absorb delays due to weather. Arup notes that in the Iquitos section
(work fronts San Juan Ungurahual, Miraflores and Iquitos) there is little or no float
between foundation construction finish and start in sequential work fronts, resulting
in a risk of cumulative delays. The tower construction is planned to overlap with
foundation construction in each section, making it possible that foundation delays
will result in tower construction delays, particularly at the final work front of San
Juan Ungurahual. Cable installation at this front is due to start as soon as tower
construction finishes, and a delay longer than three days would place these works on
the Project’s critical path. Arup notes that in practice, tower erection can begin being
built in one section while foundation works are staggered and in practice it is
recommended to begin tower works as soon as foundations have advanced
sufficiently.
Arup believes the described risk of delays in the Iquitos section described above can
be mitigated in several ways, including constructing foundations in parallel at
multiple secondary camps, or altering the sequence of the locations for the cable
installation. The Concessionaire has provided Arup with a contingency schedule that
shows multiple work fronts in the Iquitos section which increases the total float of
this line and reduces the risk of delays.
8.7 Technical Commentary

• Arup’s analysis indicates that the construction and preliminary operation schedule
of 49 months is achievable. While Arup believes the schedule duration to
generally be reasonable, we have identified potential sources of delay risk (held
by the EPC Contractor) and recommended ways that the EPC Contractor can
mitigate these risks. For example, Arup notes that additional teams may be needed
for foundation construction in the Iquitos section to ensure that foundation
construction is completed on time. Alternatively, the cable hanging sequence can
be adjusted at a later date if necessary to accommodate delays in construction in
this section. In response to this issue being raised by Arup, the Concessionaire
has provided a contingency schedule showing the adjusted total float in this
section assuming multiple work fronts which appears reasonable.
• Arup notes that the proposed Project Schedule leaves a buffer of three months
between the planned EPC Operations Start Date (49 months) and the CA
Operations Start Date (52 months). However, as stated in Section 4.3.7.2, the Base
Case Delay Scenario assumes that the EIA approval will not be obtained until
early March. Therefore, the buffer is reduced to approximately one month. This
remaining buffer will help mitigate the risks identified in this section, but it is not
substantial.
• According to the Concessionaire, the procurement lead time after delivery of the
fabrication drawings for structural steel in the towers is eight months and the lead
time for foundations is five months. Arup notes these lead times will put the
structural steel fabrication on the critical path of the construction schedule and
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delays in fabrication drawings could result in a delayed start date for critical path
activities. Such a delay would thus require construction acceleration to recover
the time lost.
• The duration of the CA Schedule is reasonable in relation to other similar projects
through similar terrain. As stated above and in Section 4.3.7.2, the Base Case
Delay Scenario assumes that due to delays in the Conditions Precedent, including
an EIA approval, the Project Schedule will be approximately 51 months.
• The presented engineering schedule complies with the deadlines defined in the
• In terms of equipment procurement, the CA establishes that major substation
equipment must arrive on site by 42 months after the CA Commencement. In the
Concessionaire’s schedule the longest lead items could be ready as early as April
2017 which is 12 months prior to the CA deadline. Arup believes this is
reasonable.
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9 Operations and Maintenance Review

There are two primary phases to the overall O&M scope of works: 1) Preliminary
Operations Phase, which culminates in the successful completion of a 30-day Trial
Operations Period 2) Commencement of Commercial Operations Phase begins upon
the completion of the Preliminary Operations Phase.
The requirements for the two phases are outlined in the CA, which references the
Peruvian standards, and in particular the requirements of COES (System Economic
Operations Committee or “El Comité de Operación Económica del Sistema”, the
private entity that is responsible for coordinating the operation of the national grid).
Arup opines that the plans and budgets associated with these two phases are
reasonable and in compliance with Peruvian norms and the requirements set forth in
the CA.
9.1 Preliminary Operations Phase

According to the CA (and the Peruvian requirements referenced in the CA), the
steps prior to commencement of commercial operations (the “Preliminary
Operations” phase) include the following:
Operability Study (“Estudio de Operatividad”)
The Concessionaire has presented a Pre-Operability Study that details the effects of
the transmission line on the national electrical grid of Peru (SEIN) as well as the
protection system in place. During the construction and prior to the electrification of
the line, the Concessionaire must present an updated Operability Study to COES and
satisfy their requirements to receive a certificate of compliance from the COES and
register as a member of COES. This step is required before the Trial Operations
Period can begin. Contractually this study is the responsibility of the Concessionaire.
As stated previously, Arup opines that this role should be held by the EPC Contractor.
Commissioning Tests (“Pruebas de Puesta en Servicio”)
The Concessionaire must complete internal equipment and installations tests as part
of the approval from the COES for grid connection. If the tests are approved, the site
will be considered as connected to the SEIN. If the tests are not successful, COES
may allow a period of up to 30 days for additional testing. Contractually these tests
are the responsibility of the EPC Contractor.
Power Line Contractual Verification Tests (“las Pruebas Contractuales de
Verificación de la Línea Eléctrica”)
Prior to the Trial Operations Period, the power lines must be tested for compliance
with the requirements established in Annex 1 of the CA. According to the CA, the
management of these tests must be defined with the Inspector, which will result in a
report on the characteristics of the power line to be approved by the inspector and by
OSINERGMIN within 20 days. Once the approval is received, the Trial Operations
Period can begin. Contractually these tests are the responsibility of the EPC
Contractor, although the cost of selecting and hiring the Inspector for these tests is
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the responsibility of the Concessionaire. As stated previously, Arup opines that the
EPC Contractor should be responsible for hiring the Inspector.
Trial Operations Period (“Período de Operación Experimental”)
The Trial Operations Period begins after the Verification Tests are approved and after
the COES approves the transmission line for connection to the SEIN under the
Commissioning Test Period. This phase consists of the uninterrupted operation, as
well as a series of tests, of the transmission line for 30 days. If the Trial Operations
Period is interrupted for more than 5 days, the timeline will reset. If the interruptions
are caused by the engineering, quality of materials or equipment, or quality of
construction attributable to the Concessionaire, the Trial period can be suspended.
If the phase is concluded without interruptions, the Concessionaire and the
OSINERGMIN will sign an accord to begin commercial operations of the Project.
The first payment for transmission services will also begin with the signing of this
act. Contractually the Trial Operations Period is the responsibility of the EPC
Contractor.
9.1.1 Preliminary Operations Plan

Arup reviewed the Concessionaire’s Preliminary Operations Period Plan
(“Preliminary Operations Plan”) (Informe de Líneas de Transmisión Peruanas N°
OE‐PX‐152‐2015‐INF 1, “Plan para el Período Experimental de Operación”). Arup
opines that the Preliminary Operations Plan is in line with industry standards and the
scope complies with the process as defined by Peruvian standards.
While the Concessionaire uses different nomenclature, the Preliminary Operations
Plan more or less aligns with the CA by covering three main activities for the period:
• Site Acceptance Tests (“Pruebas SAT”) from June 4th to July 6th 2018
• Powering Tests (“Pruebas de Energización”) from July 6th to July 16th 2018
• Trial Operations Period from July 16 to August 16, 2018
The Preliminary Operations Plan is generally considered to be reasonable. However
Arup notes that the Trial O&M Plan, a portion of the Preliminary Operations Plan,
does not clearly include the Verification Tests, which are necessary according to the
CA. The Concessionaire should abide by the CA requirements to receive approval
from the OSINERGMIN for the Verification Tests and the Trial Operations Period.
9.1.2 Preliminary Operations Budget

The table below summarizes the costs associated with the Preliminary Operations
Phase budget.
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Table 25: Preliminary Operations Budget

Phase Responsible Party Cost US$ ‘000 %
Included in EPC Lump
Commissioning and Verification Tests EPC
Sum Construction Cost
Contracting Verifications Tests
Concessionaire $175.50 1.7%
Inspector
Operability Study Concessionaire $193.30 1.9%
Trial Operations Period EPC $3,686.40 35.6%
Concessionaire Support During Trial
Concessionaire $367.59 3.6%
Operations Period
Concessionaire Contingency Concessionaire $5,932.20 57.3%
Total $10,355.00 100%
Commissioning and Verification Tests

The EPC Contractor is responsible to perform the commissioning and verification
tests as part of the scope of works included in the lump sum for the EPC Construction
works. During this period, the Concessionaire is responsible to contract and hire the
Inspector as defined in the CA. The estimated cost to hire this professional is
US$175,500 which appears reasonable.
Operability Study
The Concessionaire estimates that the cost to put together the Operability Study
necessary to register with the COES is US$193,300. Arup notes that this study is
subject to the approval of the COES and may require subsequent versions and
administrative filing costs which may increase this price. The Concessionaire has
noted that this risk is considered in the Concessionaire’s administrative costs during
construction which is reasonable. The cost overruns for this concept are expected to
be within the Preliminary Operations Budget contingency; and therefore, the risk of
cost overrun appears minimal.
Trial Operations
The EPC Contractor is responsible for the activities in the EPC Budget. In the original
EPC Agreement the fees for this service were to be negotiated at a future date9. The
proposed budget equals US$3,686,400 and covers:
• Salaries for 88 employees: 23 in high-voltage equipment, 7 in protection, control,
and communications; 15 in operations, and 43 in transmission lines distributed
among the substations of the Project – US$538,720;
• Workers’ room and board – US$2,010,400;
• Support in case of emergency – US$400,000; and
9
In the latest draft of the EPC Agreement amendment, the cost of the Trial Operations Period is
included as an additional lump sum in the EPC Agreement. See Appendix D for review of EPC
Agreement amendment.
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• Indirect Costs – US$737,280

According to the Concessionaire the budget includes 60 days of support services
considering mobilization, demobilization, potential delays and 30 days of
experimental operations. Arup considers the 60 days in the budget to by conservative.
The Concessionaire has included one month of operations staff in the preliminary
operations budget to support the EPC Contractor equal to US$367,593.
Concessionaire Contingency
In addition to the costs outlined above, the Concessionaire’s budget includes a
contingency of US$5,932,203 which is equal to approximately 57.3% of the
foreseen preliminary engineering. Arup opines that this contingency is sufficient to
cover unforeseen complications during preliminary operations.
9.1.3 Preliminary Operations Plan and Budget Technical

Commentary
• Arup opines that the Preliminary Operations Plan is in line with the CA and
industry standards and complies with the process as defined by Peruvian
standards.
• The Preliminary Operations Plan does not explicitly include the Operability Study
Phase. However, the Site Acceptance Tests cover the scope of the Operability
Studies. The Operability Study is the responsibility of the Concessionaire, and its
approval is required to register with the COES before beginning Trial Operations.
• The Preliminary Operations Plan does not clearly include the Verification Tests,
which are necessary according to the CA; however, these tests are included in the
scope and lump-sum fee of the EPC Agreement.
• The Preliminary Operations Plan nomenclature should mirror the names and
phases for the actual Preliminary Operations Period outlined in the CA, e.g.
“Operability Study” rather than “Site Acceptance Tests”, so that it is easier to
determine compliance of the Preliminary Operations Plan with the CA. This
would help clarify whether or not the Verification Tests are included in the scope
of works.
• The Concessionaire should coordinate with OSINGERMIN and COES to reduce
the period between the completions of the Verification Tests and the start of the
Trail Operations Period. Regular written communication and meetings is
recommended.
• The estimated budget for the Preliminary Operations phase is US$10,355,000.
Arup opines the budget appears adequate with a large contingency of about 57%
to cover unforeseen complications.
• The Concessionaire should abide by the Technical Procedures PR-20 of the
COES for approvals for the Operability Study and the Commissioning Test.
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In regards to the Operability Study phase as per the CA (or the Site Acceptance
Tests as per the Preliminary Operations Plan:
• Arup recommends that SEIN simulations that correspond to the Commissioning
Test Phase conditions are included as part of the scope of the Operability Study.
• As stated earlier, Arup opines that the Pre-Operability and Operability Studies
should be included in the EPC Contractor scope of work rather than be the
responsibility of the Concessionaire.
In regards to the Commissioning Tests phase as per the CA or the Powering Tests as
per the Preliminary Operations Plan:
• The testing should be linked to studies that simulate the SEIN actions in a variety
of circumstances to avoid unforeseeable situations. This is particularly important
given the Project involves is a long transmission line that connects to the
relatively weak generation in the north of the SEIN and depends on other Owner’s
installations.
• The Concessionaire should obtain a Certificate of Integration of the Transmission
Installations in the SEIN (“Certificado de la Integración de las Instalaciones de
Transmisión en el SEIN”), which includes further testing for approval.
In regards to Verification Tests:
• The Commission Test Phase and the Verification Tests be carried out as two
successive testing stages.
9.2 Commercial Operations Phase

The analysis in this section is based on the preventative maintenance proposal (fourth
revision, October 5, 2015) (“O&M Plan”) submitted by PLENA and on additional
Concessionaire costs provided to Arup. Arup believes that the O&M Plan and budget
are reasonable. The Concessionaire has indicated that they will follow to guidelines
and costs presented within the PLENA proposal, but they will only subcontract
PLENA in the capacity as management advisors for a smaller management fee. The
direct labor for the operations phase will instead be hired directly by the
Concessionaire.
9.2.1 Commercial Operations Phase O&M Plan

The term for the Commercial Operations Phase of the Project is 30 years from the
Start of Commercial Operations (“Puesta en Operación Comercial”). During this
phase the Concessionaire is responsible for the quality, efficiency, and continuity of
the services. As a member of COES (established in CC 5.8), O&M services will abide
by COES regulations, which establishes conditions for normal operations and
emergency/recovery alert systems.
PLENA’s proposal covers all four substations and the entire length of the 220kV and
60kV lines and will include the following:
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• Preventative maintenance
• Corrective maintenance
• Emergency maintenance
• Operations
PLENA’s scope of work for O&M is in line with Peruvian norms and, as such, is
sufficient to comply with the CA. The proposal describes the principal classes of
equipment, the frequency and condition of services, a description of principal
activities, and verification of proactive maintenance, monitoring and corrective works
in the installations. The scope of work also includes the following:
• Line Maintenance: visual, ground based inspections, detailed inspections of
towers, management of third parties hired to clear vegetation and maintain the
access roads
• System Operation: creation of operating reports addressing normal conditions
and including contingencies, inspections and minor repairs,, technical and safety
meetings, inspection and maintenance of vehicles, operational tests,
administrative tasks, recording of outputs and abnormal occurrences, budgeting,
substation operations.
Arup opines that the Concessionaire’s scope of work adequately accounts for the
challenges presented by the Project’s geographical isolation and lack of access
roads. Some of the typical risks and mitigation measures for the O&M phase of this
project include:
• Helicopters will likely be necessary to access remote towers, representing
additional cost over normal transmission line O&M costs, and requiring
additional health and safety planning. This cost is included in PLENA’s budget.
• Based on the geography and the line height, the line is prone to frequent lightning
strikes. This is mitigated for in the electrical design of the towers.
• The jungle environment causes higher vegetation clearing efforts. These are
accounted for in the O&M budget.
• There is a risk of tall trees falling on the line, so tall trees adjacent to the line
should be monitored so that they can be removed if they die before they fall.
Commercial Operations Staffing Plan
The table below summarizes the Staffing Plan included in the O&M Plan:
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Table 26: PLENA Staffing Plan

Location
Position Total Intermediate San
Moyobamba Iquitos Lima
Substation Lorezon
Administration
Project Manager 1 1
Administrator 1 1
Safety Engineer 1 1
Operations
0
Engineer
Maintenance
1 1
Engineer
High Voltage Equipment
Supervisor 1 1
Specialist 6 2 2 2
Technician 3 1 1 1
Junior Engineer 0
Protection of Communication Control
Supervisor 1 1
Specialist 3 1 1 1
Operation
Specialist 1 1
Operator 5 5
Transmission Line
Supervisor 1 1
Equipment
4 1 1 1 1
manager
Electrician 8 2 2 2 2
Total 37 7 7 14 3 6
Arup recommends that PLENA reconsider the staffing proposed plan for the
Project, to be able to cover all shifts. In particular, Arup notes that an additional
Operations Engineer will likely act as a COES contact for O&M coordination, when
not covered in real time by COT specialists. COT specialists will be located in Lima
and will require two operators per shift, 6 total staff for three 8-hour shifts. The plan
only includes 5 operators and 1 Operations specialist. When considering breaks and
illnesses, an additional Operations person will likely be needed.
9.2.2 Commercial Operations Phase Budget

Arup reviewed the O&M budget presented by the Concessionaire, and finds it to be
reasonable. PLENA has submitted an offer to perform the direct O&M for the work
for US$3.469 million per year, which Arup opines to be within normal ranges for the
type of service offered. Arup expects the Concessionaire’s O&M budget to be in line
with the PLENA proposal.
The Concessionaire’s total annual O&M budget, including the revised PLENA
management fee, of US$5.011 million is also considered reasonable. This budget is
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shown in the table below. This does not include the initial O&M investment of
US$2,090,000 and the one-month Trial Operations expense (Concessionaire support
during Trial Operations Period) of US$367,593.
Table 27: O&M Annual Cost Breakdown
Item Cost (US$’000/year)
Direct Cost 2,871
Salaries 1211
Camps 487
Vegetation clearing and access road maintenance 122
Vehicles 155
Air inspections 88
Training 79
Communications 44
PLENA Management Costs 598
Replacement Parts 114
Concessionaire General Expenses 827
Personnel and vehicles 316
Offices 123
Advisors 105
Travel expenses 21
Environmental Monitoring 262
Annual O&M Budget (Subtotal) 4,411
Contingency for Penalties (0.8% of income) [approximate value] 600
Total [approximate] 5,011
Arup reviewed benchmarks from the Peruvian Energy network (Red de Energia del
Peru S.A.) for the payment of penalties for service interruption under the Technical
Norms for Quality of Electric Service (la Norma Técnica de Calidad de los Servicios
Eléctricos (NTCSE)). Arup concludes the Concessionaire’s approximate budget of
US$600,000 per year (Contingencies for penalties) is conservative and sufficient to
cover likely penalties. Lightning strikes and equipment failures are the most likely
cause of line outages.
In rare occasions, major penalties may exceed the annual contingency amount set
aside. As per the CA, the Concessionaire is required to maintain a US$3 million
performance bond during operations. Arup opines that this security should be
sufficient to cover major penalties in a given year. A study of Peruvian concessions
demonstrated that a major equipment failure, such as a transformer failure, could
result in a penalty in excess of US$2.5 million.
We note that major maintenance and replacement accounts for less than 10% of the
annual O&M budget; therefore a reserve account for this purpose does not appear
necessary. However, it is recommended that a reserve account is maintained to cover
potential major penalty scenarios in a given year. In our opinion, it is reasonable that
this reserve could be the difference between the exceptional penalty amount (US$2.5
million and the annual penalty budget (US$600,000).
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9.2.3 Commercial Operations Summary Conclusions

The principal operations conclusions and recommendations for the Commercial
O&M Phase are:
• The scope of work for operations and maintenance is in line with Peruvian norms
and, as such, is sufficient to comply with the CA. The Concessionaire will hire
the O&M operator, PLENA, to offer management advisory for a management fee
of US$598,000 (~12% of the annual O&M budget), and will directly contract the
remaining works.
• Arup considers the Concessionaire to be adequately accounting for the challenges
presented by the Project’s geographical isolation and lack of access roads.
• Arup recommends that the Concessionaire reconsider the staffing proposed for
the Project; an additional Operations person will likely be needed.
• The Concessionaire’s total annual O&M budget, including the PLENA fee, is
US$5.011 million, is also considered reasonable.
• The direct costs plus the PLENA fee estimate of US$3.469 million per year is
within normal ranges for the type of service offered.
• Arup considers the contingency included in the annual budget for possible
penalties to be adequate, the performance bond of US$3 million performance
provided by the Concessionaire during operations is sufficient to cover a major
• It is recommended that a reserve account is maintained to cover potential major
penalty scenarios in a given year. In our opinion, it is reasonable that this reserve
could be the difference between the exceptional penalty amount (US$2.5 million
and the annual penalty budget (US$600,000).
• To mitigate the risk of power not reaching Iquitos during maintenance or
unscheduled transmission interruptions, the Concessionaire states that after line
construction is complete, there will be available backup generation capacity in
Iquitos from the “Reserva Fria” in Iquitos, a thermal power plant of 70 MW.
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Glossary
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A1 Glossary
Term Definition
AAAC All Aluminum Alloy Conductor
ACAR Aluminum Conductor, Alloy Reinforced
ACSR Aluminum Conductor, Steel Reinforced
Anegado Seco Floodplain with no standing water (foundation condition)
Anegado Sumergido Floodplain with standing water (foundation condition)
ASTM American Society for Testing and Materials
CA Concession Agreement
CapEx Capital Expenditures
CIRA Certificate of non-existence of archaeological remains
(Certificado de Inexistencia de Restos Arqueológicos)
Concessionaire Líneas de Transmisión Peruanas SAC
DBFOM Design, Build, Finance, Operate and Maintain
EIA Environmental Impact Assessment
EPC Engineering, Procurement and Construction
Lenders’ Walsh
Environmental
Advisor
Lenders’ Right of Allpa Mapping
Way Advisor
MVA Megavolt Ampere
O&M Operations and Maintenance
OPGW Optical Ground Wire
OSINERGMIN Organismo Supervisor de la Inversión en Energía y
Minería
Owner The Government of Peru
ProInversion Agencia de Promoción de la Inversión Privada
Project The Moyobamba-Iquitos Transmission Line
ROW Right of Way
Seco Dry land (foundation condition)
SE Substation (Subestación)
SEIN National Electric Grid of Peru (Sistema Eléctrico
Interconectado Nacional)
SGT Guaranteed Transmission System (Sistema Garantizado
de Transmisión)
SVC Static VAR Compensator
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Potential Subcontractors
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B1 Potential Subcontractors
Experience Experience
Subcontractor Country
in Peru with Isolux
Foundations
Peru (Portuguese parent
x x
MOTA ENGIL company)
KELLER Peru (Spanish parent company) x x
TERRATEST Peru (Spanish parent company) x x
CORPESA Peru x
GEOTECNICA S.A.C. Peru x
CONSTRUCTORA RIO
x
HUALLAGA Peru
SERGEPIN Peru x
EDEMSA Colombia
ORDOCOL Colombia
GRUPO UNION Colombia x
BENAPAR OBRAS DE
x
INFRAESTRUCTURA (COGELTA) Brazil
COSTA FORTUNA ENGENHARIA
x
DE FUNDAÇÕES Brazil
GEOFORTE Brazil x
TLL Brazil x
GRAÑA Y MONTERO Peru x
SETPERBOL Peru x
PREIMACU Peru x
Tower Erection and Cable
Hanging
GRAÑA Y MONTERO Peru x
EDEMSA Colombia
ORDOCOL Colombia
GRUPO UNION Colombia x
BENAPAR OBRAS DE
x
INFRAESTRUCTURA (COGELTA) Brazil
TLL Brazil x
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Suppliers
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C1 Substation Suppliers
Suppliers Country or Region Reputation
INTERRUPTORES (Circuit Breakers)
ABB SWITZERLAND Excellent
SIEMENS GERMANY Excellent
ALSTOM FRANCE Excellent
CHINT CHINA Reasonable
SIEYUAN CHINA
SHANDONG-TAIKAI CHINA
CGL INDIA Good
SECCIONADOR (Disconnector)
HAPAM NETHERLANDS Excellent
MESA (SCHNEIDER) FRANCE Excellent
COELME ITALY Very good
SDCEM FRANCE Very good
SIEYUAN CHINA
CGL INDIA Good
EMEK TURKEY Good
TRANSFORMADOR DE CORRIENTE Y TENSION (CT/VT)
PFIFFNER SWITZERLAND Excellent
EMEK TURKEY Good
CGL INDIA Good
ARTECHE SPAIN Very good
TBEA CHINA
TRANSFORMADOR DE POTENCIA (Power Transformer)
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TBEA CHINA
LS SOUTH COREA
CGL INDIA Excellent
HYOSUNG SOUTH COREA Excellent
HYUNDAI SOUTH COREA Excellent
HITACHI JAPAN Good
TAMINI ITALY
TOSHIBA JAPAN Excellent
EMCO INDIA
VOLTRAN WEG BRASIL
GE - XIAN CHINA
PARARRAYOS (Surge Arrestors)
TRIDELTA GERMANY
BOWTHORPE UK
CGL INDIA Good
REACTORES DE POTENCIA (Reactors)
TBEA CHINA
CGL INDIA Excellent
HYOSUNG SOUTH COREA Excellent
HYUNDAI SOUTH COREA Excellent
HITACHI JAPAN Good
TAMINI ITALY
EMCO INDIA
VOLTRAN WEG BRASIL
GE - XIAN CHINA
EQUIPOS SVC (SVC Equipment)
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JEMA JAPAN
HYOSUNG SOUTH COREA Very good
NR Electric China CHINA Good
SHANDONG-TAIKAI CHINA
CONDENSADORES EN SERIE (Series
Capacitors)
NR Electric China CHINA Good
GE - XIAN CHINA
ARTECHE SPAIN Very good
CEPRI CHINA CHINA Good
MOTORES SINCRONOS (Synchronous
condensors)
WEG BRASIL
GE USA Excellent
INDAR (INGETEAM) SPAIN
HYUNDAI SOUTH COREA Very good
C2 Transmission Line Suppliers

Suppliers Country or Region Reputation
INSULATORS
DALIAN TUCHENG INTERNATIONAL
CO.,LTD.(TCI China
SICHUAN YIBIN GLOBAL GROUP CO., LTD China
XIAN XD HIGH VOLTAGE BUSHING CO.,
LTD. China
LAMER POWER & INFRASTRUCTURES PVT.
LTD. India
ADITYA BIRLA INSULATOR India
INDUSTRIAL MAL-JO, S.A. DE C.V. México
K-LINE INSULATORS LIMITED México
GRUPO IUSA México
ZHE JIANG RUI LI ELECTRIC CO., LTD China
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SEDIVER Brasil
LAPP INSULATORS GMBH Germany Excellent
CHINT ELECTRIC China Good
MACLEAN POWER SYSTEMS Francia Good
YAMUNA POWER & INFRASTRUCTURE
LTD. India
PORCELANAS INDUSTRIALES, S.A. España very good
ZHENGZHOU ORIENT POWER CO., LTD China
ELECTROVIDRO S.A – RIO DE JANEIRO Brasil
REPRESENTANTE
GLOBAL INSULATOR GROUP HOLDING Estonia Good
SGD LA GRANJA S.L España
CTC POWER EQUIPMENT China
NGK INSULATORS, LTD. Japón Excellent
POMANIQUE ELECTRIC CO.,LTD. China
PFISTERER | UPRESA España Excellent
CTC INSULATOR CO., LTD. China
CERALEP Francia Excellent
CONDUCTOR & OPGW
ABENCOR SUMINISTROS SA Spain
Tanzania, united
ACHELIS (TANGANIYIKA) LIMITED republic of
ADEA POWER CONSULTING PTY LTD Australia
AFL TELECOMUNICATIONS EUROPE LTD United kingdom
ALUBAR CABOS S.A. Brazil
APAR INDUSTRIES LIMITED India
Tanzania, united
BAHDELA COMPANY LIMITED republic of
CHINA NATIONAL CABLE ENGINEERING C China Very good
CONDUCTORES MEXICANOS ELECTRICOS
SA Mexico
CONDUCTORES MONTERREY SA DE CV Mexico
DIAMOND POWER INFRASTRUCTURE
LIMIT India
DP INTER.SALES CONS. & DEVELOP. INC United states
ECN CABLE GROUP, S.L. Spain
ELSEWEDY CABLES EGYPT Egypt
GALAXY TRANSMISSION PVT. LTD. India
GRUPO GENERAL CABLE SISTEMAS SLU Spain Excellent
GULF CABLE & ELECTRICAL INDUSTRIES Kuwait Good
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GUPTA POWER INFRASTRUCTURE LTD India

HENAN TONG-DA CABLE CO LTD China
HENGTONG OPTIC-ELECTRIC CO. LTD China
HINDUSTHAN VIDYUT PRODUCTS LIMITED India
INCASA-IND.NAVARRA DE CABLES
ELECTR Spain
IUSA MEDICION SA DE CV Mexico
JIANGSU SHANGSHANG CABLE GROUP
LTD China
JIANGSU TONGGUANG OP. FI. CA. LTD China
JIANGSU ZHONGTIAN TECHNOLOGY LTD China
JSK INDUSTRIES PRIVATE LTD. India
KEC International Limited India Reasonable
LS CABLE & SYSTEM LTD Korea, republic of Excellent
MIDAL CABLES LTD Bahrain
MULTINACIONAL TRADE, S.L. Spain
NEXANS IBERIA SL Spain Excellent
NKT CABLES GMBH Germany Excellent
PHELPS DODGE INTERNATIONAL LTDA Brazil
Proveedor 1 TEST Spain
PRYSMIAN CABLES Y SISTEMAS SL Mexico
PRYSMIAN SPAIN SA Spain Excellent
PT VOKSEL ELECTRIC TBK Indonesia
QUINGDAO HANHE CABLE CO LTD China
SERV.ELECTR.LOGISTICOS Y TELECOM, S Spain
SHASHI CABLES LTD. India
SOLIDAL CONDUTORES ELECTRICOS SA Portugal
SOUTHWIRE COMPANY United states
STERLITE TECHNOLOGIES LTD India
SURAL CA Venezuela
SUZHOU FURUKAWA POWER OPTIC China
TAIHAN FIBER OPTICS CO, LTD Korea, republic of Very good
TBEA SHANDONG LUNENG TAISHAN
CABLE China
TOP CABLE SA Spain
TRATOS CAVI IBERICA SL Spain
VISCAS COORPORATION Japan Very good
ZHENGZHOU YIFANG CABLE CO. LTD China
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Project Total CapEx
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D1 Project Total CapEx

Concept
Development Cost 24,156,186
Expenses during the offer 1,500,001

Auction Costs (Proinversion) 1,500,000
Environmental process (EIA) 4,583,278
Community Relations 1,301,275
Pre Operativity Study 231,700
Cut right 1,301,277
Right way 5,054,573
Supervision of the project for Osinergmin 3,366,582
Conection agreement 20,000
Insurance 3,252,500
Guarantee 2,040,000
Register cost 5,000
General Cost of Concession 10,984,681
Adm. Cost Concession during Development Period 1,467,499
Request for Definitive Concession 665
Operativity Study 193,280
Initial CAPEX 61,497
Legal Advisors 617,112
Adm. Cost Concession during Cosntruction Period 2,114,118
Verifications Test during comissioning 175,490
Experimental Period 367,593
Contingency during Experimental Operation 5,932,203
Technical assintance of Isolux Ingenieria Due Diligence 55,224
IGV 1,977,243
Taxes 1,377,756
DEVELOPMENT SPV 38,495,865
Transaction Cost 18,405,194
Due Diligence COFIDE 1st trench 105,719
Due Diligence COFIDE 2nd trench 79,485
Due Diligence Senior Debt, Legal Advisors 3,500,000
Due Diligence Senior Debt Technical Advisors 489,839
Due Diligence Senior Debt Financial Advisors 6,769,116
Fees 7,461,035
TRANSACTION COST 18,405,194
Financial Cost 107,361,250
Up-front Fee 104,981,250
Bridge COFIDE 1st trench 531,250
Bridge COFIDE 2nd trench 500,000
Lenders, 14 years, 660 MUSD 13,200,000
IDC, 660 MUSD Senior Debt 90,750,000
Equity Contribution LC 2,380,000
FINANCIAL COST 107,361,250
EPC CONTRACT* 557,345,918
EPC Contract Construction 553,659,518
EPC Contract Trial Operations 3,686,400
IGV 100,322,265
EPC CONTRACT 657,668,183
TOTAL WITH IGV 821,930,492
* EPC Cost for Trial Operations is equal to the quote received by the EPC Contractor to charge as a lump sum price to include in the EPC Agreement as part of the EPC
Addendum under review. Arup opines that the Trial Operations cost should be included in the lump sum EPC Price.
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October 30, 2015 Draft of the

EPC Contract
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E1 October 30, 2015 Draft of the EPC Contract

No. Topic Current treatment10 Lender Responses11 Sponsor Comments12 Lender Responses Arup Responses
As a general matter, the This issues list will be sent After further discussions with the (c) Santandar's methodology of
1. Consulta N/A
Lenders will need input to the corresponding Independent Engineer, the calculating LC amounts appears
nt
from their technical, consultant so they can Lenders are awaiting Independent reasonable, but that we can't
Review
insurance and E&S comment on the Engineer feedback on (c) the comment on non-technical
(N/A) advisors in order to amendments to be made in adequacy of the prescribed calculations.
complete their due the EPC contract. Many of amounts and caps on liquidated
diligence review of the the changes are in line damages and whether such We are able to comment on a)
EPC Contract. with the recommendations amounts are sufficient to cover (i) duration of penalty scenario
contained in the reports the financing costs due to delay (which is now shorter given EIA
Certain specific matters as (interests and fees, etc) plus (ii) situation) and b) Concessionaire
to which the Lenders will (a) Financial Model has LDs under the Concession if any, fixed costs.
require Independent been shared with the IE plus (iii) the Owner’s costs during
Engineer input are: (a) the a delay (extra cost for staff, Related to item a, based on the
consistency of the EPC (b), (c) , (d), (e), (f) (g) transportation, equipment, Conditions Precedent Analysis is
Contract with the Project’s already contained in the materials, permitting) ; (d) the Section 4.3.7.2, the Base Case
financial model; (b) the latest report technical criteria for achieving scenario suggests that the
scope of work and Provisional Acceptance and Final cushion between Commercial
interface of the EPC (i) information contained Acceptance under the EPC Operations Start Date and the
Contract with the in the report based on Contract, and the commissioning Long Stop Date will be 5 months
Concession Contract; (c) latest public information and acceptance test procedures; instead of the 10 months
the adequacy of the (e) the suitability of the defects considered in Santander’s LD
prescribed amounts and warranty or the defects liability calculations. Based on the
caps on liquidated period; (h) the scope and content Concessionaire Cost review
damages and whether such of the technical annexes to the from Section 7.3 in the Report,
amounts are sufficient to EPC Contract; and (i) the the Concession Fixed Costs
cover the Owner’s costs connection of the transmission (max year. TECHNICAL
10
References to the EPC Contract are to the October 30, 2015 draft of the Contrato llave en mano between Líneas de Transmisión Peruanas (the “Owner”) and
Isolux Ingeniería S.A. Sucursal Peru (the “Contractor”) prepared by Miranda & Amado.
11
Lender comments and responses provided to Isolux on November 9, 2015.
12
Sponsor comments provided to the Lenders on December 23, 2015.
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(including debt service) line to the Charhuaquero – COSTS ONLY) are estimated to
during a delay; (d) the Moyobamba project. be $427,996, including $60,403
technical criteria for for administrative costs during
achieving Provisional Owner’s costs during a delay are the construction period and
Acceptance and Final usually expressed as a “run rate”, $357,593 for one month of
Acceptance, and the by week of delay, or month of operations staff on site.
commissioning and delay.
acceptance test (d) See Section 4.2 in Report:
procedures; (e) the The technical criteria for
suitability of the defects achieving Provisional
warranty and the defects Acceptance and Final
liability period; (f) the Acceptance, as well as the
appropriateness of the commissioning and acceptance
project schedule and the test procedures to which the
completion date; (g) the EPC Contractor must adhere are
appropriateness of the defined in the CA. These criteria
contract price and the and procedures are standard for
payment schedule; (h) the the industry.
scope and content of the
technical annexes to the (e) See Section 4.6.1 for
EPC Contract; and (i) the summary opinion. In our view,
connection of the the warranty package, in our
transmission line to the opinion, is not sufficient.
Charhuaquero –
Moyobamba project. (h) See Section [x] for review.
Some of these issues are (i.) We do not have information

discussed in more detail on the Cobra line schedule
below. beyond the updates provided by
Osinermmin online.
See Section 4.3.7.2 for

Conditions Precedent Delay
Analysis.
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2. Subcontr The Contractor may As previously discussed and The Sponsors agree to (a) OK, the definition of (b)
actors subcontract the Works to notwithstanding that the comment in footnote 1 Subcontractor in the EPC
third parties, ensuring Contractor may be below. Contract will be amended
(§3.1) that they comply with the ultimately responsible for so that it covers entities that
standards set forth in the the performance of the supply equipment and
EPC Contract and Works, the Lenders would materials (not only those
Applicable Laws, typically expect that that perform services).
provided that (i) it may subcontracts above a certain
not subcontract the value be entered into with
entirety of the Works and subcontractors approved by Provided that a list of (c) A 20% threshold would be Arup opines that industry best
(ii) each subcontract the Owner (either pre- potential subcontractors is extremely high in the practices suggest that any
contains certain approved or submitted by the EPC Lenders’ view, particularly subcontractor performing at least
minimum requirements contemporaneous approval) Contractor and pre-approved in light of the contract price 20% of the works should be
(waiver of claims against and as such proposed that a by the Lenders, the Sponsor (i.e., subcontracts in an approved by the Concessionaire
the Owner and Lenders, “Major Subcontract” agree to consider the amount of up to $110 and be subject to the same
proportional insurance concept be included in the Subcontracts for an amount million would not require principal clauses of EPC
and confidentiality EPC Contract. In the in excess of 20% of the EPC Owner approval). Agreement that allow for the
requirements and terms absence of such a Contract as Major proper oversight and
generally consistent with mechanism the Owner (and Subcontractors. The EPC The proposed list of management directly by the
the EPC Contract). thus the Lenders) would not Contractor delivered to subcontractors and Concessionaire.
have a means of regulating Independent Enginner the threshold remains subject to
the Subcontractors13 that list of potential Major the Independent Engineer’s We have not received sufficient
perform material portions of Subcontractors.. review. The lenders will information on the
the Works. The Lenders need the IE to opine on (i) subcontractors capabilities.
suggest that the Contractor each main subcontractor’s
share a list of proposed adequacy of staff,
Subcontractors with the experience and expertise as
Independent Engineer for its well as (ii) key terms of the
review. subcontracts – price, LDs,
scope - , as well as (iii)
back-to-back aspect of EPC
Contractor obligations to
the Concessionaire and
subcontractors’ obligations
13
We note that the Owner’s proposed definition of Subcontractor only covers entities that perform services, and not those that supply equipment or materials.
This definition should be corrected.
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to the EPC Contractor
The Lenders will also If an agreement in (d) Pending resolution of the

require, as previously connection with the immediately previous item.
proposed by them, that each definition of Major
Major Subcontract include a Subcontractor is reached, the
provision permitting Sponsor would accept the
assignment to the Owner and Lenders’ proposal regarding
its Lenders without consent conditional assignment of
of the Subcontractor, in the corresponding contracts
order to facilitate any taking
over of the Works in the
context of a Contractor
default.
3. Suppliers The Owner is entitled to Given the consequences of The exercise of such right by OK, Lender approval of Owner
inspect the goods and an Owner-directed change in the Owner being subject to directed change in suppliers is
(§5.2(iv)) equipment used by the suppliers, the Lenders the approval of the Lenders covered in the current draft of the
Contractor in order to previously proposed that is already provided in the Credit Agreement.
ensure that they comply either (i) this option be Credit Agreement (Section
with the requirements of removed from the EPC 5.39).
the EPC Contract, Contract or (ii) any exercise
acknowledging that if of such right by the Owner
they do comply with be subject to approval of the
such requirements it will Lenders under the financing
not be entitled to direct a documents. As the Owner
change of such goods, has rejected any change to
equipment or suppliers. the terms of the EPC
Contract, the Lenders expect
The Contractor may this issue to be regulated by
accept a change in the financing documents.
suppliers selected by the
Owner if the Owner pays
any additional costs
resulting from the same
and assumes all
responsibility for the
performance of the
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relevant goods or
equipment.
4. Schedule The Contractor is Owner to provide an update The Sponsor will provide an (a) Sponsor to provide an See Section 4.3.7.2 for Delay
obligated to perform the regarding the status of the update regarding the status update and confirm the Analysis.
(§§5.3, Works in accordance conditions to of the project.
10.3) expected date for issuance
with the schedule commencement of of the notice to proceed and
attached as Annex C and construction. The Lenders start of construction under
achieve commercial note that the cushion vis-a- the EPC Contract.
operation within 35 vis the guaranteed
months (34 months plus Commercial Operation Date The Lenders note that the
1 month for the set forth in the Concession cushion vis-a-vis the
Experimental Operation Contract (February 6, 2019) guaranteed Commercial
Period) after satisfaction is less than 4 months and Operation Date set forth in
of the conditions will continue to reduce on a the Concession Contract is
precedent to day-for-day basis until such currently only 2 months and
commencement of conditions are satisfied. continues to decrease on a
construction set forth in day-for-day basis.
Section 10.3. The schedule is generally
subject to review and The Lenders expect the
The conditions to comment of the Independent Independent Engineer to
commencement of Engineer.
comment on this 2-month
construction include,
among others, (i) buffer for purposes of the
obtainment by the Owner contingent equity sizing.
of all necessary permits,
(ii) delivery by the Please note that the IE (b) The IE Report will need to See Section 4.3.7.2 for Delay
Owner of the land provides a new analysis and reflect the latest information Analysis and revised Section
necessary for the commentary of the Schedule regarding the schedule, (Project Schedule)
substations, (iii) delivery taking into account a start of including the currently
by the Owner of 50% of construction in January 2016 estimated date for start of
the rights-of-way construction.
necessary for the
performance of the
Works and (iv) payment
of the Advance.
Permits The Owner is responsible The Owner assumes broad (a) The Lenders reiterate their
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(§5.3.1) for obtaining, among permitting obligations, prior observations. Please
5. others, (i) the increasing the risk of refer to the Independent
environmental permit schedule delays and/or price Engineer’s
issued by the MEM, (ii) adjustments as the result of a recommendations regarding
the certificates of non- delay or failure by the responsibility for permitting
existence of Owner to comply with such in Section 4.3.3 of the IE
archaeological remains obligations; this may have Report.
(CIRAs), (iii) recovery of an impact on the sizing of
archaeological remains contingent equity.
(if any), (iv) local
construction permits, (v) Owner to provide an update The Sponsor will provide an (b) Sponsor to provide an
agreements with local on status of permit and update regarding the status of update, including as to the
communities and (vi) all rights-of-way acquisition. the project. status of permit and rights-
rights-of-way and other As noted in the Concession of-way acquisition.
real estate rights Contract Financeability
necessary for the Project. Comments,14 the Owner The draft Rights
should provide a detailed Acquisition Plan remains
The Contractor is solely subject to review by the
responsible for obtaining plan, including a timeline,
explaining how it will Property Rights Consultant,
(i) waste permits, (ii) the Lenders and their
permits for temporary acquire all easements, rights
of way and other necessary Peruvian counsel.
installations, (iii) water
use permits and (iv) rights related to land
quarry and dumping remaining to be acquired, its
permits. estimate for the costs of such
acquisition, and whether
such costs have been
included in the construction
budget.
Please generally refer to (c) Subject to ongoing

ongoing discussions discussion.
regarding permits, land
rights and coordination with
14
“Moyobamba-Iquitos Transmission Line Project: Preliminary High-Level Financeability Comments on the Concession Contract,” White & Case LLP draft
dated February 21, 2015, with Miranda & Amado comments dated March 2, 2015, and Hernandez & Cía Abogados comments dated March 12, 2015.
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local communities.
6. Coordina The Contractor is This language will need to Sponsors agree to tighten the Section 5.5 should be modified as
tion obligated to collaborate be tightened (e.g. the language in Section 5.5 as follows:
with the Owner in the Contractor should be follows:
(§5.5) coordination of the work obligated to coordinate “5.5 Coordinación con
of other Project directly with other “5.5 Coordinación con Contratistas
contractors (including the contractors and such other Contratistas
En aquellos aspectos que
Moyobamba – contractors will not En aquellos aspectos que estén directamente
Carhuaquero project), necessarily be “Project” estén directamente relacionados al presente
without assuming any contractors). relacionados al presente Contrato, el Contratista
responsibility for the Contrato, el Contratista colaborará con el Cliente en
work of such other colaborará con el Cliente en las labores de coordinación
contractors. las labores de coordinación que se lleven a cabo
que se lleven a cabo con coordinará con otros
otros contratistas del contratistas del relevantes
relevantes para el desarrollo para el desarrollo del
del Proyecto (incluyendo el Proyecto (incluyendo el
proyecto Carhuaquero – proyecto Carhuaquero –
Moyobamba). Ello no Moyobamba). Ello no
implicará la asunción de implicará la asunción de
responsabilidad alguna por responsabilidad alguna por
parte del Contratista sobre parte del Contratista sobre el
el cumplimiento de las cumplimiento de las
obligaciones asumidas por obligaciones asumidas por los
los otros contratistas.” otros contratistas.”
7. O&M The Contractor is The Contractor should be Sponsors propose O&M Timing for delivery of the O&M Typically a received and
Manual obligated to prepare and obligated to deliver the Manual to be delivered no Manual remains subject to review approved manual is a Condition
deliver to the Owner an O&M manual by a date later than one (1) month by the Lenders and the Precedent to the completion of
(§5.6) O&M manual for the certain; Independent prior to the commencement Independent Engineer. the construction phase with
Transmission Line, Engineer to advise. of the Experimental sufficient lead time to ensure
including with sufficient Operation Period. timely registration with the
anticipation to allow the COES.
Owner to make
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comments thereto.
8. Transfer The Contractor is The EPC Contract should Sponsors propose to include Section 7.1(vi) should provide as
of Title obligated to deliver the specify precisely when title the following wording as follows:
Transmission Line to the to the Works passes to the Section 7.1(vi):
(§§7.1) Owner in accordance Owner. The Lenders would “(vi) Sin perjuicio de lo
with the technical typically expect title to “(vi) Sin perjuicio de lo establecido en el numeral (ii), las
provisions of the EPC transfer upon the earlier of establecido en el numeral Partes acuerdan que la
Contract. Upon (i) payment for the relevant (ii), las Partes acuerdan que titularidad sobre las Obras será
transferring the Works to Works and (ii) installation of la titularidad sobre las trasladada al Cliente
the Owner, the the Works at the site, with Obras será trasladada al gradualmente, de modo tal de que
Contractor guarantees title to all of the Works Cliente gradualmente, de la propiedad sobre cualquier
that the Works will be passing at Provisional modo tal de que la porción de las Obras pasará
free and clear of any Acceptance. propiedad sobre cualquier automáticamente al Cliente una
liens created by or porción de las Obras pasará vez que: (i) el Cliente haya
attributable to the automáticamente al Cliente efectuado a favor del Contratista
Contractor, its un vez que: (i) el Cliente el pago correspondiente a dicha
Subcontractors, haya efectuado a favor del porción de las Obras de
employees, agents or Contratista el pago conformidad con lo previsto en la
suppliers. correspondiente a dicha Cláusula Décimo Tercera del
porción de las Obras de presente Contrato; o, (ii) dicha
conformidad con lo previsto porción de las Obras haya sido
en la Cláusula Décimo efectivamente instalada en el
Tercera del presente Sitio; lo que ocurra primero,
Contrato; o, (ii) dicha siendo en este último caso (ii)
porción de las Obras haya pagadas las Obras de acuerdo a
sido efectivamente instalada lo indicado en la Cláusula
en el Sitio; lo que ocurra Décimo Tercera. De existir un
primero, siendo en este remanente, la propiedad sobre la
último caso (ii) pagadas las totalidad de las Obras pasará
Obras de acuerdo a lo automáticamente al Cliente una
indicado en la Cláusula vez que se produzca la Recepción
Décimo Tercera. De existir Provisional de las mismas.”
un remanente, la propiedad
sobre la totalidad de las
Obras pasará
automáticamente al Cliente
una vez que se produzca la
Recepción Provisional de las
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mismas.”
9. Insuranc Section 7.5 sets forth the Subject to the review and Considering that Section 7.5 Subject to review by the Lenders
e insurance requirements comment of the Insurance of the EPC Agreement refers and the Insurance Consultant.
of the Parties. Advisor. Among others, the to the obligation of the
(§7.5) Lenders would expect the Client to hire insurances.
Lenders (or their agent) to be The specific requirements of
named as additional insured the Lenders in connection
and, subject to the with these insurance policies
Concession Contract, loss shall be regulated in the
payee as well as a Financing Documents and
requirement that the relevant not in the EPC Contract.
policies contain waivers of
subrogation by the insurer.
10. Performa Within 30 days after the The sizing of all (a) Subject to review by the See Section 4.6 – EPC
nce Construction performance security is Lenders. To the extent Contractor Security Package
Security Commencement Date, subject to the review of the possible, IE will compare
the Contractor is Independent Engineer. the overall performance
(§7.6) obligated to deliver (i) security package to
the Parent Guaranty comparable assets
issued by Grupo Isolux construction contractual
Corsán S.A. in the performance arrangements
amount of
US$30,000,000, (ii) a The creditworthiness of the (b) Subject to review by the
standby letter of credit or parent guarantor is subject to Lenders.
fianza (at the the ongoing review of the
Contractor’s option) in Lenders.
the form attached to the
EPC Contract and in an
The liquidity of the Sponsor propose: (c) The form of performance
amount equal to 4.6% of
instruments described in security remains subject to
the Price to guarantee the “7.6 Garantías
items (ii) and (iii) [in the the review by the Lenders
Contractor’s obligation
column to the left] is not (i) Dentro de los treinta (30) and their advisors;
to pay penalties and
clear. The Lenders and their días calendario siguientes a la assuming the performance
damages and (iii) a
advisors would need to Fecha de Inicio de Construcción security is a truly liquid
standby letter of credit,
fianza or insurance review the proposed forms de la Línea Eléctrica el instrument, the Lenders
of fianza and insurance are evaluating whether
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policy (at the policy in order to take a Contratista deberá entregar al 15% of the contract price
Contractor’s option) in view on the same. Cliente una Garantía de Fiel is acceptable.
the form attached to the Cumplimiento de la Obra, por
EPC Contract and in an The EPC Contract does not un monto equivalente al 15% del Sponsor to provide drafts
amount equal to 5.4% of contain minimum Precio Total del Contrato, of the proposed
the Price to guarantee the requirements (ratings or emitida por entidad financiera performance security for
Contractor’s otherwise) for the issuers of (banco o compañía de seguros) the Lender and their
performance of its the performance security and de la misma categoría de las que counsels’ review.
obligations under the does not contain customary aprueba Proinversion para las
EPC Contract. protections (i) allowing the actuales licitaciones y de (d)Sponsor to explain the
Owner to draw on the acuerdo al modelo del Anexo F. proposed issuer
Upon Provisional performance security in full requirements, including in
Acceptance, the Owner is if it would otherwise expire terms of credit rating.
required to return the prior to Provisional
foregoing performance Acceptance or upon a
security to the downgrade of the issuer and (e) Please note the Lenders’
Contractor, and the (ii) requiring a re-adjustment previous comments
Contractor is obligated to of the amount of the regarding (x) the right of
deliver the Warranty performance security upon the Owner to draw prior to
Security, through the an increase in the Price expiration or upon any
delivery of the Parent (which, as noted elsewhere, failure of the issuer to
Guaranty, in the amount appears likely). These satisfy the minimum
of US$5,000,000. should be included. requirements and (y) re-
adjustment upon an
It is not clear whether the increase in the Price.
Contractor intends that the
different types of
performance security
guarantee different
obligations; Owner to
advise. This would be
unusual in the Lenders’
experience.
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The Lenders would typically (ii) Adicionalmente, el (f) As noted in the Lenders’
expect a parent guarantee to Contratista emitirá una prior comments, the
backstop all of the Garantía Corporativa por un Lenders would typically
contractor’s obligations monto equivalente al 10% del expect a parent guarantee
under the relevant contract, Precio Total del Contrato. to be a full guarantee of
and not be limited to a fixed performance, and not
amount (as would be the limited to a fixed amount
case for liquid performance as in the case of payment
security). security.
While the revised EPC (g) The form of any parent

Contract does not attach the guarantee, if any, remains
form of Parent Guaranty, the subject to review by the
Lenders assume for the time Lenders and their advisors.
being that the Owner
proposes the same form Also please note the
attached to the prior version Lenders’ prior comments
of the EPC Contract, to regarding the terms of the
which the Lenders and their parent guarantee.
counsel had the following
observations:
- the guarantor’s obligations
are subject to a maximum
cap; we would not typically
expect a guarantor’s
obligations to be capped
beyond the limitations on
the contractor’s obligations
under the underlying
contract;
- the Guaranteed Obligations
do not specifically reference
the Contractor’s obligations
under the EPC Contract;
- the guarantor does not
waive the benefits of
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división, excusión y órden,
which could affect the
Owner’s ability to draw on
the guaranty;
- the guarantor is not
obligated to pay default
interest on late payments;
- the guarantor is not
obligated to cover costs and
expenses arising from
enforcement of the
guaranty;
- the guarantor does not
provide standard
representations and
warranties;
- the guaranty should be
executed by the Owner as
well in order to ensure the
validity of the pacto de
liquidez and
- the guaranty should be
elevated to a public
instrument in order to
qualify as a título ejecutivo.
The Lenders would also La Garantía de Fiel (h) Please note the Lenders’
expect the delivery of Cumplimiento de Obra deberá prior comments regarding
performance security to be a estar vigente hasta la fecha de the timing for delivery of
condition to commencement Recepción Provisional de la performance security.
of construction (which may Obra y garantizará la correcta
be waived by the Owner, ejecución de las obras y trabajos
subject to Lender consent) de construcción, así como la
and in any event a condition provisión de bienes, equipos y
materiales en general para la
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to payment of the Price. ejecución del Proyecto en los
términos, plazos y condiciones
establecidas en el presente
Contrato.
(iii) Para la liberación del pago (i) It is not clear from the To be reviewed upon receipt.
del Adelanto a que se refiere el language in the column to The advanced payments can be
numeral 8.1.2 de la Cláusula the left how the Advance amortized according to the
Octava y su posterior Payments will be progress of the construction. The
amortización como indica el amortized; Owner to outstanding advanced payment
numeral 8.1.3 de la Cláusula advise. should be 100% guaranteed by a
Octava, el Contratista deberá liquid security.
presentar garantías adicionales Subject to review by the
de los mismos importes emitida Lenders and the
en el mismo formato y Independent Engineer.
condiciones que la Garantía de
Fiel Cumplimiento de la Obra,
las cuales se reducirán
progresivamente conforme al
porcentaje de certificación
realizado.
Esta Fianza podrá ser cubierta (j) It is not clear from the
por las Fianzas que reciba el language in the column to
Contratista por parte de los the left how the Advance
Subcontratistas. Payments security would
be “covered by the
Fianzas received by the
Contractor from
Subcontractors”. The
Lenders expect the Owner
to require advance
payment security in its
name issued on behalf of
the Contractor.
See Section 4.6.1 for summary
The Contractor is not (iv) Ocurrida la Recepción (k) The proposed 3% of the
opinion on warranty. In our view,
obligated to provide the Provisional de la Obra, el contract price is subject to
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Owner with any liquid Contratista deberá entregar la review by the Lenders the warranty package (0.9% of
performance security in Garantía de Calidad de Bienes y following input by the EPC Price), in our opinion, is not
support of its obligations Reposición de Componentes, Independent Engineer on sufficient.
during the Warranty Period, mediante la entrega de Garantía the adequacy of the 3% as
which is very unusual in the por un monto de 3% del Precio compared to similar
Lenders’ experience. In the Total del Contrato, emitida por contracts.
event of a Contractor breach entidad financiera (banco o
(and assuming amounts compañía de seguros) de la As to the language
available to be set-off by misma categoría de las que providing that the security
the Owner are insufficient), aprueba Proinversion para las may be “covered by the
the Owner (and by actuales licitaciones y de Fianzas received the
extension the Lenders) may acuerdo al modelo del Anexo F, Contractor from
not have an efficient means y el Cliente deberá restituir la Subcontractors”, see the
to collect damages during garantía descrita en el numeral Lenders’ comments in the
the Warranty Period. (i) que antecede al momento de immediately previous row.
la Recepción Provisional de la See also the Lenders’
The Lenders also note that Obra.
the proposed amount of the comments above regarding
performance security during Esta Fianza podrá ser cubierta form of performance
the Warranty Period (less por las Fianzas que reciba el security and issuer
than 1% of the Price) is Contratista por parte de los requirements.
very low in their Subcontratistas.
experience; the Lenders
would typically expect the La Garantía de Calidad de
liquid performance security Bienes y Reposición de
to step down by no more Componentes deberá estar
than 50% at Provisional vigente por un período igual al
Acceptance. Periodo de Garantía y
garantizará: (a) el
funcionamiento de la Línea de
Eléctrica de acuerdo con los
estándares requeridos por el
Contrato; (b) la calidad de los
materiales, equipos,
instalaciones y bienes en general
que hayan sido suministrados
por el Contratista conforme al
presente Contrato; y, (c) la
reparación o reemplazo de
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componentes cuya utilización,
técnica o manipulación se vea
afectada por causas imputables
al Contratista.
En caso la Garantía de Calidad
y Bienes de Reposición de
Componentes sea ejecutada total
o parcialmente, el Contratista se
obliga a renovarla por un monto
equivalente al ejecutado, y su
vigencia deberá ser prorrogada
por el mismo plazo reconocido
en el Periodo de Garantía con
respecto a los trabajos y equipos
objeto de reparación o
reemplazo.
Las Garantías Corporativas
deberán ser devueltas una vez
transcurridos los plazos de
vigencia que se indican en la
presente cláusula.”
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11. Deposit Upon execution of the Independent Engineer to Sponsor propose: (a) The size of the Deposit Up-front payments typically
and EPC Contract, the Owner comment on the size of the and the Advance Payment consist of payments to
Advance is required pay a Deposit Deposit and Advance “8.1.2 Adelanto remain subject to review manufacturers and working
Payments of US$16,000,000, Payments. Asimismo, el Cliente se by the Lenders following capital for contractor. The
which will qualify as obliga a entregar al discussions with the working capital is determined by
(§8.1) arras confirmatorias in The Lenders are reviewing Independent Engineer. evaluating the EPC Contractor's
the treatment of the Deposit Contratista un Adelanto por
accordance with articles los conceptos del cash flow model, to which Arup
1477, 1478 and 1479 of with Peruvian counsel. As noted in the IE Report, does not have access. Advance
Presupuesto de Obra que se the Lenders would expect
the Peruvian Civil Code. indican a continuación y por payments can range from 10% -
As a condition to all advance payments to be 40% of the EPC price; thus, the
las sumas indicadas fully backed stopped with
commencement of seguidamente (en adelante, total amount (down payment
construction, the Owner liquid security. plus mobilization) is within the
el “Adelanto”). Dicho
is required to make the Adelanto será destinado The Lenders’ Peruvian typical range.
Advance Payments set para la ejecución de las counsel has advised that it
forth in Section 8.1.2. actividades de construcción sees no tax or legal
The Deposit and the de la Obra y será una disadvantage to
Advance Payments will condición esencial para la backstopping the Deposit
be amortized Fecha de Inicio de with liquid security.
proportionally from each Construcción de la Línea
payment of the Price. Eléctrica.
The Contractor must - 10%. % del Precio
deliver advance payment Total del Contrato
security in amount equal antes del Inicio de la
to the Advance Payments Construcción de la
(but not the Deposit) as a Línea eléctrica.
condition to payment.
- 10%. % del Precio
Total del Contrato a los
3 meses del Inicio de la
Construcción de la
Línea eléctrica.
Adicionalmente, para efectos del
pago de suministros se aplicarán
Adelantos de acuerdo a lo
descrito en la Cláusula Décimo
Tercera.”
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The Lenders note that the (b) See Issue 10 above.

EPC Contract does not
impose any requirements on
the advance payment
security that must be
delivered by the Contractor
in respect of the Advance
Payments; the Lenders
expect the Advance Payment
security to comply with the
same requirements as the
performance security.
12. Owner The Owner is obligated Please see Issue 5 above. The Sponsor will provide an Please see Issue 5 above.
Obligatio to, among others: update regarding the status
ns of the project.
1) Permit access
(§8.2) to the Site and
any other areas
as necessary to
carry out the
Works;
2) Obtain all
necessary
rights-of-way
and real estate
rights in
accordance
with the
schedule to be
attached to the
EPC Contract;
3) Obtain and pay
for all access
roads
necessary for
the Project, to
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be identified by
the Contractor
at least 1
month prior to
the
commencemen
t of work;
4) Comply with
the conditions
to the
Construction
Commencemen
t Date;
5) Deliver the
Environmental
Impact Study
and
Environmental
Management
Plan to the
Contractor; and
6) Deliver the
CIRAs to the
Contractor and
undertake
archaeological
monitoring.
13. Recovery If at any time during the The Lenders believe that 60 The EPC Contractor (a) As noted in Issue 4 above, See Issue 4 above.
and performance of the days is excessive, consider that 60 days is a the cushion between the time
Accelerat Works, the Contractor is particularly in light of the reasonable period. Please the Contractor is required to
ion Plans delayed by more than 60 diminishing cushion note that due to the Lenders achieve commercial
days it will deliver to the described in Issue 4 above. request, LTP and the operation and the
(§10.4) Owner for its approval a To be reviewed in light of Sponsors have agreed to: (i) Commercial Operation Date
recovery plan. In the final project schedule. incorporate this provision in set forth in the Concession
addition, the Owner may the EPC Agreement; and, (ii) Contract is currently 2
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at any time direct an reduce the applicable term months and will continue to
acceleration of the from 90 to 60 days. reduce on a day-for-day basis
schedule at a price to be until construction
mutually agreed. commences. In light of the
foregoing and in order to
preserve such cushion, the
Lenders expect that an
acceleration plan may be
required now and reflected in
the project budget. To be
discussed following the
Sponsor’s update on the
project schedule.
As drafted, the Owner in The EPC Contractors do not (b) As noted previously, if the
practice has no right to direct agree with the Lender´s right to accelerate is subject
an acceleration of the Works proposal regarding the to mutual agreement on
because the Contractor must introduction of a mechanism price, then in practice there is
always agree to the price. If to calculate the price of the no right to accelerate. To be
a pre-agreed price-per- acceleration works. In their discussed in light of the
kilometer is not feasible, the experience, it is highly increasing likelihood that the
Lenders propose that the important for the parties to Works will need to be
price of the accelerated reach an agreement prior to accelerated to achieve the
Works be equal to the the execution of any Commercial Operation Date
Contractor’s reasonable and additional plan. If this is not by the date required under
documented direct costs plus the case, the chances of the Concession Contract.
a pre-agreed margin, subject facing a conflict that will
to a cap. end on arbitration are much
more likely. The Sponsors
consider that it would be
preferable to regulate that
the Parties shall agree to a
price acting in good faith.
Acceleration of the Works
may imply costs for the
Contractor that are not
known in advance. This
possibility should always be
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subject to agreement with
the Contractor.
The Owner may at any time (c) This proposal is not clear in To be reviewed upon receipt.
direct an acceleration of the light of the Contractor’s
schedule, but the Contractor previous comment which
shall present an acceleration rejects any pre-agreement on
plan with the reasonable and price; Sponsor to advise. In
documented direct cost any event, a 25% margin
resulting from the seems extremely high in the
acceleration plan plus a 25 Lenders’ view and will need
% margin. This margin to be evaluated in light of the
includes indirect costs. This likelihood of the need for an
plan should always be acceleration plan.
submitted to the Owner for
approval. The Lenders will require that
any acceleration plan
delivered by the Contractor
be subject to regulation under
the financing documents,
including a requirement that
such plan be validated (in
terms of schedule and
budget) by the Independent
Engineer.
14. Schedule The Contractor is entitled (a) In general terms and as (a) (a) The Lenders’ reiterate their
Relief to extend the schedule if previously discussed, the prior observations.
any of the following Contractor has broad rights
(§10.6) events affects the critical to schedule relief, thereby
path: increasing the likelihood of
cost and schedule
1) Changes to the adjustments. This may
Project or impact the sizing of the
scope of work contingent equity.
that affect the
schedule,
including (b) With respect to item 1 [in (b) OK but changes requested (b) This is acceptable in
the left-hand column], the by the principle as long as any
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changes Lenders would expect this administration/granting such change is not the result
required by the to be limited to changes entity should also be of an act or omission of the
Environmental directed by the Owner. covered Contractor.
Impact Study;
2) Material
breach by (c) Given that the EPC (c) The geotechnical studies (c) The EPC Contract should Arup recommends that this risk
Owner of its Contract is silent regarding have been carried out by the expressly provide that the be passed to the EPC
obligations; site/underground risk, this Contractor, who assumes Contractor bears the risk of Contractor
3) Suspension of item would appear to the correlating risk. The list site/geotechnical conditions
the Works by provide the Contractor of events which may cause and that it will not be
the Owner not relief in such circumstances schedule relief does not entitled to make a claim for
attributable to and shift such risk to the include geotechnical events, schedule or price relief
the Contractor; Owner. This is a which is in line with the arising from the same.
significant issue as site foregoing. Silence on the issue is not
4) Delays by the conditions are one of the sufficient, as there are a
Owner, the most common causes of number of open-ended
Supervisor or claims, and owners relief factors (e.g. items 1, 3
any third party typically attempt to have and 5 in the left-hand
for which contractors assume the risk column) which could be
Owner is of site conditions to the used by the Contractor to
responsible in extent discoverable by a make a claim as the result
complying reasonably experienced of site/geotechnical
with their contractor in order to conditions.
respective mitigate this risk.
obligations;
5) Force Majeure (d) Owner to provide update (d) The Sponsor will provide (d) Sponsor to provide an
or acts of third regarding the status of the an update regarding the update.
parties; approval of the status of the project
Environmental Impact
6) Stoppages Study and potential costs
caused by arising from the same; to
inspections or the extent the
supervision; Environmental Impact
Study will be issued prior to
7) Delays in the
the execution of the EPC
issuance of
amendment, the Lenders
necessary
would expect any such
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permits; impacts to be included
within the EPC Contract
8) Delays in and the removal of all
delivery of references to changes
necessary arising from the same.
rights-of-way
or other real
estate rights; (e) While item 2 [in the left- (e) (e) The Lenders reiterate their
and hand column] is a comments.
customary delay event, the
9) Delays in Lenders note that in light of
payments to the Owner’s broad
the Contractor. obligations in respect of
permits and real estate
The Contractor should rights, there would seem to
notify the Owner within exist a reasonably high
60 days after becoming potential for claims for
aware of the relevant schedule relief arising out
event and is entitled to of a breach by the Owner of
recover the amounts set its obligations.
forth in Section 14.1 in
such circumstances.
(f) The Lenders previously (f) The Sponsors agree to (f) Item 8 should be deleted as
proposed to delete items 4, delete items 4, 6 and 9. Item it is duplicative of Item 2.
6, 8 and 9 as they are 8 should remain.
duplicative of item 2. The
Lenders ask that the Owner
reconsider the Lenders’
request.
(g) The Lenders previously (g) The Sponsors agree to the (g) OK
proposed to delete the Lenders’ proposal.
reference to “acts of third
parties” in item 5 because it
is unclear and the relevant
event should have to
qualify as Force Majeure.
The Lenders ask that the
Owner reconsider the
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Lenders’ request.
(h) The Lenders previously (h) This is not acceptable. (h) The practical effect of this
proposed to delete item 7, Considering the relevance of relief event is that the
as it is unclear why there is permits, it is important and Contractor will be entitled
a separate event for delays reasonable to expressly to schedule relief upon any
in the issuance of permits; include permits in this delay in the issuance of a
this item should be covered section. permit, regardless of
by (and subject to the whether such delay
requirements of) the Force otherwise satisfies the
Majeure provision. The requirements of Force
Lenders ask that the Owner Majeure. Subject to review
reconsider the Lenders’ by the Lenders.
request.
(i) The Lenders note that the (i) All relevant aspects of the (i) This concern can be easily See Section 4.2.
Contractor has much Concession Agreement addressed by distinguishing
broader rights to schedule regarding the construction between relief factors that The penalties that relate to
relief under the EPC responsibilities of the are within the Owner’s responsibilities/risks held by
Contract than the Owner Project has been passed control (and for which the EPC Contractor are
under the Concession down to the Contractor. As Owner should not be appropriately passed down to
Contract, creating the in other projects, certain entitled to corresponding EPC Contractor for items
potential for a scenario obligations remain at relief under the Concession controlled by the EPC
where the Owner is liable Owner’s side since they Agreement) and relief Contractor..
for delays under the have direct control of such factors that are not within However, some obligations and
Concession Contract works during development the Owner’s control (and risks related to Conditions
without any recourse to the phase. Please note that there for which the Owner should Precedent for construction
Contractor. While this are several matters (as it is be entitled to corresponding (obtaining EIA approval, ROW
issue was previously the case of the obligations relief under the Concession acquisition, obtaining Project
mitigated to a large extent that correspond to LTP) that Agreement). To be and construction licenses, etc.;
by the cushion between the are not controlled by the discussed in connection See Section 4.3.4 for details)
guaranteed dates under the EPC Contractor and, hence, with the sizing of the have not been fully passed from
two agreements, as noted regarding which the EPC contingent equity. the Concessionaire to the EPC
above this cushion has been Contractor is not liable. Contractor, resulting in the
reduced significantly and Concessionaire holding risks
will continue to reduce until that could impact cost and/or
commencement of schedule. Best practices suggest
construction. The Lenders that all design and construction
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recommend that a back-to- related activities, including all
back provision be included, environmental and permitting
such that the Contractor is requirements, are passed down
only entitled to relief to the to the EPC Contractor such that
extent the Owner is entitled the CA and EPC Agreement are
to corresponding relief “back to back.” Consultation
under the Concession with a legal advisor is
Contract. recommended to determine
inconsistencies between the CA
and the EPC Agreement;
(j) The 60-day notification (j) Considering that it is a (j) It is not clear how the
period is far too long in the 600km work it is not length of the transmission
Lenders’ view (the Lenders reasonable for the term to line is relevant to the
had previously proposed 7 run from the occurrence of commencement of the
business days) and should the event. However, the notification period; the
begin to run once the event Sponsors agree to reduce the Contractor should utilize
occurs. In addition, as term from 60 to 45 days. the resources necessary to
previously proposed by the The introduction of a waiver appropriately monitor the
Lenders and in order for the of rights is not accepted. progress of the Project in
required notification period light of the scope of the
to have meaning, the same.
Contractor should waive
any rights to make a claim The Lenders reiterate their
if it fails to submit notice previous comments
within the required period. regarding the length of the
notification period and the
waiver of rights; without
such a waiver, the required
notification period will be
of limited value as in a
dispute scenario the
Contractor will bring claims
regardless of its compliance
with the requirements.
In addition, the proposed
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45-day notification period is
still too long.
(k) Please see Issue 21 below (k) Please see Issue 21 below
regarding Price regarding Price
adjustments. adjustments.
15. Contract The Contractor is entitled Given the significantly The EPC Contractor do not (a) The Lenders reiterate their
or to suspend the Works harmful effects of agree to limit the suspension prior comments with
Suspensi upon any grave and suspension on project right to payment defaults. respect to the events that
on repeated breach by the development, the Lenders may trigger the Contractor’s
Owner of its obligations. previously proposed that the suspension rights.
(§10.7) Contractor’s suspension
rights to be limited to The Sponsor is only willing (b) The Lenders may be in a
payment defaults subject to a to accept a 30-day cure position to accept a 30-day
cure period of 30 days. The period in general. cure period; provided that
Lenders believe that their such period begins at the
position is even further time the Contractor
justified because Peruvian provides notice of the
counsel has advised that Owner’s breach.
there is not a clear definition
of “grave and repeated
breach” under Peruvian law.
The Lenders ask that the
Owner reconsider the
Lenders’ request.
16. Provision Among the conditions to The Lenders propose that if Sponsors to consider this Subject to review by the Lenders For discussion.
al Provisional Acceptance a payment dispute is subject proposal over the basis of and the Independent Engineer.
Acceptan is that the Contractor has to dispute resolution, the the amount of the cap will be
ce paid all penalties and Contractor be entitled to 3% of the Contract.
other amounts owed to achieve Provisional
(§11.1) the Owner, unless the Acceptance so long as the
payment of such amounts amount subject of the
is subject to dispute dispute is less than a cap to
resolution in accordance be agreed.
with Section 19.
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17. Final Among the conditions to The underlined qualifier Considering the Lender´s The reference to “standard
Acceptan Final Acceptance is that imposes much too high of a concern and that pending operating conditions” is still
ce the Warranty Period standard, as there is a whole non-material work may somewhat vague and may not
(including any extension) host of work that may be persist, the Sponsors propose cover work necessary to ensure
(§11.2) has expired and the important to the Project but to amend section 11.2 (iii) as the long term operation of the
Contractor has completed not result in a complete follows: Project after the end of the
any warranty work that shutdown of the Warranty period.
prevents operation of the Transmission Line; the (iii) “haya expirado el Periodo
Transmission Line. Contractor should be de Garantía (incluyendo
required to complete all cualquier extensión a dicho
warranty work in order to periodo) y se haya
achieve Final Acceptance, as completado cualquier
is customary. trabajo derivado de una
reclamación de garantía
que imposibilite la
operación de la Línea
Eléctrica se requiera a
efectos de que la Línea
Eléctrica pueda ser
operada en condiciones
estándar de conformidad
con lo previsto en el
Contrato de Concesión;”
18. Delay The Contractor is Subject to the Independent Sponsors to await the review (a) The adequacy of the See response to Issue #1
Penalties obligated to pay a Engineer’s comment on the and comments of the prescribed amounts and
penalty equal to 0.01% proposed sizing of the delay Independent Engineer and caps on liquidated damages
(§12.1) of the Price for each penalties and caps; the any specific proposals by the remains subject to review
week of delay in Lenders would expect these Lenders which may be by the Lenders and the
Provisional Acceptance. penalties to be sized so that derived therefrom. Independent Engineer.
Upon passage of the 52 they are sufficient to cover
months specified in the all of the Owner’s costs
Concession Contract to during the delay
achieve Commercial
Operation, the Contractor .The Lenders note that if the Please note that a financial (b) This sizing of the
is obligated to pay the Contractor is only obligated exercise was already performance security is a
same daily penalties to pay the penalties set forth provided by Santander as related, but separate, issue.
specified in the in the Concession Contract, financial advisor taking into The Lenders expect that the
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Concession Contract, then such penalties will be account a worst case penalties will cover all of
subject to (i) a daily cap insufficient to cover the scenario of 10month delay the Owner’s costs during
of US$85,000 for each of Owner’s other costs (e.g. (vs 5 month delay in the CA) the period of delay.
the first 30 days, (ii) a debt service) during the in order to calculate LDs
daily cap of US$165,000 relevant delay. (debt service + Owner’s Sponsor to advise whether
for the next 30 days, (iii) other costs). This was taking proceeds of the proposed
a daily cap of The sub-cap for delay into account when proposing LDs will cover the
US$250,000 for the next penalties is low in the the liquid instruments as part Contractor’s obligations
90 days and (iv) an Lenders’ experience; the of the security package. As generally.
overall cap of Lenders typically see sub- you can see in this issues
US$30,000,000 (i.e. caps of no less than 10% of list, we have grouped the
4.6% of the Price). the contract price. different liquid guarantees
into a Garantía de Fiel
In order to collect the Cumplimiento de la Obra
delay penalties, the and elevated the threshold
Owner is obligated to from 10% to 15% in order to
prove that the delay is meet Lenders’ request and
directly attributable to a IE recommendations
breach by the Contractor
of its obligations. Please note that the penalties
have been agreed in the
context of the pre-
contractual negotiations and
this was taken into account
at the moment in which the
offer was prepared by the
EPC Contractor. It is likely
that any increase in the
penalties or the cap will
result in an increase in the
contract price.
The Lenders previously (c) Please note the Lenders’

deleted the requirement that prior comment regarding
the Owner prove that the burden of proof; this is
relevant delay is directly important and the relevant
attributable to the language should be
Contractor; such a eliminated.
requirement is unusual in the
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Lenders’ experience, as its
shifts the burden of proof to
the Owner and significantly
undermines the effectiveness
and liquidity of the delay
penalties. This language
should be eliminated.
19. Bonus If the Contractor Pending receipt of the To be define (a) Pending receipt of the
achieves Provisional Owner’s proposal. Owner’s proposal.
(§12.3) Acceptance prior to the
guaranteed date, it may
be entitled to receive a (b) The Contractor should not
bonus as shall be agreed be entitled to a bonus if
between the Parties. Provisional Acceptance is
achieved prior to the
guaranteed date due to an
Owner’s acceleration plan.
20. Global The Contractor’s The Contractor’s liability It is neither standard nor (a) The Lenders disagree as to Arup opines that the 25%
Liability aggregate liability under cap is very low in the reasonable to include a cap what is “standard” in light liability cap seems
Cap the EPC Contract shall Lenders’ experience; the of 100%. Please note that, of recent and directly appropriate from a technical
not exceed 25% of the Lenders have seen caps of due to Lender’s requests, the relevant precedents point of view.
(§12.4) Price, with carve-outs for 100% of the contract price in parties have already agreed financed by international
willful misconduct (dolo relevant precedents. to increase the liability cap lenders under a project
o culpa inexcusable) and from 10% to 25%. Any finance model.
third-party indemnities. further increase is not
acceptable. (b) The size of the global
liability cap remains subject
to review by the Lenders
and the Independent
Engineer.
Other customary items Due to Lender´s requests we (c) The Lenders reiterate their (d)
should also be carved out have already excluded the previous comments. The
from the liability cap, indemnities arising from issue is not whether the
including amounts received third party claims. Contractor is entitled to
from insurance and Considering that, in keep the proceeds, but
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subcontractors and damages accordance with the terms of rather that to the extent the
arising from a breach of the EPC Contract, the EPC Contractor receives
warranty obligations or Contractor can decide proceeds of insurance or
abandonment. whether to hire from subcontractors in
subcontractors or to hire respect of claims by the
additional insurances, it is Owner under the EPC
reasonable for the EPC Contract, then it is
Contractor to keep those essentially acting as a pass
proceeds. through; as such, these
amounts should not count
against the Contractor’s
liability cap, as is
customary.
21. Price The Contractor is entitled (a) In general terms and as (a) Please refer to our (a) Please generally see our
Adjustme to adjust the Price in the previously discussed, the comments to item 14 above. responses in Issue 14.
nts following circumstances: Contractor has broad rights
to price relief (both in terms
(§13.1) 1) If the of the scope of events
Transmission which give rise to relief and
Line route is the amounts to which the
extended as the Contractor is entitled),
result of the thereby increasing the
Environmental likelihood of cost overruns.
Impact Study, This may affect the sizing
the Owner will of the contingent equity
pay the price
per kilometer
set forth in (b) The Lenders also note that (b) Please refer to our (b) Please generally see our See responses to Issue #14
Annex A; the Contractor is entitled to comments to item 14 above. responses in Issue 14.
much broader price relief
2) Changes in the under the EPC Contract
Transmission than the Owner under the
Line route as Concession Contract.
the result of the Please see Issue 14 above.
Environmental
Impact Study; (c) Please see Issue 14 above (c) Please refer to our (c) Please generally see our
3) Changes regarding the status of the comments to item 14 above. responses in Issue 14.
Environmental Impact
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requested by Study.
the Owner;
4) Any of the (d) As noted above, these (d) Please refer to our (d) Please generally see our
events entitling provisions would seem to comments to item 14 above. responses in Issue 14
the Contractor shift all Site risk to the
to schedule Owner.
relief under
Section 10.6; (e) The Lenders many times (e) This is not acceptable. The (e) Subject to ongoing review by
see contractors assume the risk of force majeure shall the Lenders as part of the
5) Force Majeure; risk of increased costs be assigned to the EPC contingent equity sizing
6) Stoppage of the resulting from Force Contractor. Please note that, analysis.
Works for Majeure, and thus proposed unlike the other events, no
reasons not the deletion of item 5. The profit is included herein.
attributable to Lenders ask that the Owner
the Contractor; reconsider the Lenders’
request.
7) Changes in
suppliers (f) The Lenders also proposed (f) In the Sponsor’ opinion, the (f) The Lenders reiterate their
directed by the the deletion of items 4, 6, 7 items 4, 6, 7 and 8 are not previous comments; as just
Owner and 8 because they overlap overlapping (i.e. those items one example, item 4 covers
pursuant to with, and in some cases are may cover different any event entitling the
Section 5.2; inconsistent with, other scenarios) or inconsistent. Contractor to schedule relief,
8) Delays of more provisions. The Lenders Please let us know if you which includes (among
than 7 days in ask that the Owner have any specific concern others) “suspension of the
signing the reconsider the Lenders’ Works by the Owner not
Provisional request. attributable to the
Acceptance Contractor”, which overlaps
Certificate or with item 6.
Final
Acceptance (g) The Lenders note that the (g) It is important and standard (g) While the Lenders agree that
Certificate; inclusion of price relief for practice to include a change it is common for contractors
Change in Law is new. in law provision. The EPC to be entitled to certain relief
9) All general, Contractor shall not bear the for changes in law, the
direct and risk of changes in law. Lenders note that this relief
indirect costs factor was not included in the
incurred by the executed EPC Contract
Contractor originally provided to the
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during the Lenders for review. In light
Experimental of the Contractor’s repeated
Operation assertion that the Lenders’
Period; requests are inconsistent with
the commercial deal struck
10) Any amounts by the parties, it would seem
agreed by the appropriate for this
parties as the commercial deal to cut both
result of an ways.
acceleration
request by the
Owner (h) Independent Engineer to (h) Subject to Independent (h) Subject to Independent Regarding escalation, we
pursuant to comment on the Engineer’s review and Engineer review. recommend that the EPC
Section 10.4; appropriateness of the comments. Agreement should be lump sum
inclusion of the proposed without escalation. However, if
11) Change in escalation indices; many applied, escalation indices are
Law; and times prices are not subject governed by Peru's "formula
to escalation. polinomica"
12) Escalation in
accordance
with the US (i) In general terms, the (i) The Contractor is entitled to (i) The 25% margin is extremely
finished goods Lenders would expect the reasonable and documented high in the Lenders’ view. It
less food and Contractor’s recovery to be direct costs plus a 25 % is also unclear why the
energy index limited to reasonable and margin when it comes to an Contractor would be entitled
and Peruvian documented direct costs increase of works volume to a fixed US$2 million
consumer and, in circumstances and 2 million USD for each payment for each month of
prices index. where the relevant event is month of schedule relief. schedule relief regardless of
within the Owner’s control, the actual impact.
Except in the cases of a pre-agreed profit. It is not
items 1 (fixed price per clear what the concept of
kilometer), 5 (Contractor “general expenses” is
entitled to direct costs intended to cover; Owner to
and general expenses) comment.
and 13 (escalation), in
each case the Contractor (j) The 30-day notification (j) The 30-day term is (j) Please see our comments to
is entitled to direct costs, period is too long in the reasonable (especially Issue 14 above.
general expenses and Lenders’ view (the Lenders considering the complexity
profit in a percentage to had previously proposed 7 and length of the Project and
be determined. business days) and in any the information that shall be
event inconsistent with the included in the notice). The
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The Contractor should notice period for schedule reference to the Contractor
notify the Owner within delays. It should also begin waiving its rights to make a
30 days after becoming to run once the event claim is not acceptable.
aware of the relevant occurs. In addition, in
event. order for the required
notification period to have
meaning, the Contractor
should waive any rights to
make a claim if it fails to
submit notice within the
required period.
22. Payments The Price shall be paid Independent Engineer to Subject to Independent (a) Subject to Independent See Section 4.5 in Report. See
through monthly advise generally regarding Engineer’s review and Engineer review. Issue #11 regarding Advanced
(§§13.4, progress payments within proposed payment schedule, comments. Payments
13.5) 30 days after receipt of including split of progress
the relevant invoice by payments for construction
the Owner. In addition, and milestone payments for
the Owner shall pay for procurement, measurement
equipment through of progress and 5 business
milestone payments day invoice review period
(15% upon issuance of provided to the Owner.
the purchase order, 75%
upon arrival of the The Owner should be As a general rule, the (b) The Lenders reiterate their
equipment at the port of expressly entitled to set-off Sponsors consider that the previous comments; there
entry and 10% upon any amounts owed by the right to set-off amounts could be any number of
arrival at the Site) within Contractor from amounts it without prior authorization amounts owed by the
30 days after receipt of owes to the Contractor; should be limited to the Contractor in addition to
the relevant invoice. while Section 12.1 allows penalties. In case there is penalties (indemnities,
the Owner to set-off any specific payment (other warranty claims, etc.) and to
amounts owed from the than the penalties) that is limit the set-off provision in
Contractor for delay causing a concern in such a way would be very
penalties, there are many connection with this matter unusual.
other circumstances where please let us know.
the Contractor may owe
amounts to the Owner. Set-
off may be the most
effective mechanism for the
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Owner to recoup amounts
owed, particularly in
circumstances where the
Owner does not benefit from
liquid performance security.
23. Force Force Majeure is defined While the general definition As mentioned by the (a) The fact that the Concession For discussion.
Majeure as any event, condition of Force Majeure is Lender’s the general Agreement and EPC
or circumstance that is generally consistent with the definition of Force Majeure Contract are separate
(§14) beyond the reasonable definition set forth in the under the EPC Contract is agreements is not
and foreseeable control Concession Contract, please generally consistent with the determinative; it is common
of the affected party that note that the Grantor must definition under the in projects anchored by a
results in a breach by agree to any extension of the Concession Agreement. concession or revenue
such party of its schedule under the However, considering that contract for contractors to
obligations under the Concession Contract, thus the Concession Agreement agree that they will only be
EPC Contract. there could be circumstances and the EPC Contract are entitled to force majeure
where the Contractor is different agreements and that relief to the extent the project
Force Majeure includes, entitled to Force Majeure the EPC Contractor is not owner is entitled to
without limitation: relief under the EPC liable for all the obligations corresponding relief under its
1) War, Contract while the Owner is under the Concession contract.
insurrection, not entitled to corresponding Agreement, it is not possible
relief under the Concession to subject the existence of a In any event, the Lenders,
acts of following consultation with
terrorism, etc.; Contract. force majeure event under
the EPC Contract to the Independent Engineer,
2) Strikes by recognition by the Grantor will consider the potential
employees that under the Concession mismatch in schedule relief
do not have a Agreement. in sizing contingent equity,
labor among others.
relationship
with the The Lenders previously As mentioned before, we do (b) Subject to review by the
Contractor, proposed the following not agree with the proposed Lenders.
from and after customary carve-outs to the carve-outs (proposed carve
the 5th day of definition of Force Majeure, outs that are not included in
the strike; precisely because they could the Concession Agreement).
otherwise fall within the In our experience it is
3) Earthquake, general definition of Force preferable to evaluate
flood, Majeure: (i) economic possible force majeure
hurricane, hardship, (ii) changes in events on a case-by-case
tornado and
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similar events; market conditions, (iii) basis instead of including
and failures by subcontractors, ex-ante exclusions. The
(iv) lack of equipment, conditions for a force
4) Destruction of labor, goods or materials, (v) majeure event have been
the Works for breakdown of machinery and clearly regulated in Section
causes not (vi) strikes of employees of 14.2 and, hence, no events
attributable to Contractor´s affiliates and that fail to comply with such
the Contractor. subcontractor/suppliers. The conditions shall be deemed
Lenders ask that the Owner as a force majeure event.
reconsider the Lenders’
request.
24. Terminat The Owner may (a) The 30-day period for (a) The Sponsors accept the (a) OK
ion for terminate the EPC replacement of credit Lenders’ proposal.
Contract Contract upon: support should run from the
or occurrence of the event, not
Breach 1) Insolvency of request.
(i) the
(§15.2) Contractor or
(ii) any issuer (b) The reference to dispute (b) This is not acceptable. (b) Sponsor to explain why the
of credit resolution in item 3 is not Lenders’ comments are not
support if the appropriate and in any acceptable. The Owner’s
relevant credit event is not consistent with payment default does not
support has not the Owner’s corresponding include such language.
been replaced payment default in Section
within 30 days 15.3.
of request;
(c) The reference in item 4 (c) The Sponsors accept the (c) OK
2) Failure to should be to any liability Lenders’ proposal.
deliver the cap, so that it picks up the
Transmission sub-cap for delay penalties
Line within as well.
150 days
following
February 6, (d) Given that Peruvian counsel (d) The Sponsors accept (d) The request was not to
2019; has advised that there is no exclude item 7. exclude item 7 (which would
clear legal definition of be prejudicial to the Owner),
3) Payment “grave and repeated” but rather to include a
breaches, the Lenders standard that may be enforced
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default (subject recommend a clear standard by the Owner.
to a 30-day that may be enforced by the
cure period and Owner.
the amount not
being the (e) Items 1, 3, 4, 5 and 9 (e) Sponsors agree to exclude (e) Subject to review by the
subject of should also be excluded items 1,3, 4 and 9 from the Lenders.
dispute from the cure period. cure period. In the case of
resolution); item 5 the cure period is
4) Reaching the necessary
liability cap; : “(iii) Falta de pago por
5) Abandonment; parte del Contratista al
Cliente durante un periodo
6) Breach of mayor a treinta (30) días
representations siempre que haya
and warranties; transcurrido un periodo de
cura de treinta (30) días y
7) Any other que el monto no pagado no
grave and haya sido sometido al
repeated mecanismo de solución de
breach by the controversias previsto en la
Contractor; Cláusula 19.”
8) Duration of
Force Majeure
for more than
12 months; or
9) Termination of
the Concession
Contract.
All termination events
are subject to a 30-day
cure period other than
items 2 and 6.
25. Conseque Unless terminated due to The reference to “without The Sponsors propose to (a) The Lenders reiterate their
nces of extended Force Majeure prejudice to the other amend the wording in the prior comments. The Owner
Terminat or a termination of the obligations of the Contractor final paragraph of section should be entitled to exercise
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ion for Concession Contract for under the Contract” is 15.2 as follows: all appropriate remedies and
Contract reasons exclusively not unclear. As previously recover all damages under
or attributable to the noted, the Owner should be (…) el Contratista estará applicable law (subject to any
Breach Contractor, the expressly entitled to recover obligado a abonar al Cliente agreed liability caps),
Contractor is obligated to all of its damages arising en concepto de gastos por regardless of whether the same
(§§15.2; pay the Owner a from the breach and the terminación anticipada un are expressly contemplated in
15.6) termination fee equal to Contractor should be 5% sobre la parte del precio the EPC Contract.
5% of the portion of the obligated to vacate the Site, correspondiente a la obra
Price corresponding to deliver all material and dejada de ejecutar, sin
the work pending to be equipment purchased by the perjuicio de las otras
performed, without Owner and assign any obligaciones del Contratista
prejudice to the other subcontracts requested by derivadas del Contrato, tales
obligations of the the Owner. . como el pago de penalidades
Contractor under the e indemnizaciones que
EPC Contract. In podrían resultar aplicables.
addition, the Owner is
entitled to receive an Sponsors agree to the EPC (b) The Contractor should be
amount equal to double Contractor being obligated obligated to assign any
the unapplied Deposit as to vacate the site, deliver all subcontracts requested by the
of the date of material and equipment Owner.
termination. purchased by the Owner and
assign any Major See the Lenders’ comments in
Subcontracts requested by Issue 2 above.
the Owner.
26. Terminat The Contractor may Given that the Owner’s The Sponsors accept exclude OK
ion for terminate the EPC fundamental obligation is to item 3.
Owner Contract upon: pay the Price and in light of
Breach the potentially catastrophic
1) Insolvency of consequences to the Project
(§15.3) the Owner; of a termination of the EPC
2) Payment Contract, the Lenders
default, subject previously proposed to
to a 60 day delete the termination right
cure period; arising from “grave and
repeated” breaches. The
3) Any other Lenders believe that this
grave and request is further justified
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repeated because Peruvian counsel
breach by the has advised that such terms
Owner; has no clear legal meaning
under Peruvian law. The
4) If the Lenders ask that the Owner
Construction reconsider the Lenders’
Commencemen request.
t Date has not
occurred
within 365
days following
completion of
engineering;
and
5) Duration of
Force Majeure
for more than
12 months.
27. Conseque Unless terminated due to The Contractor has more This matter has already been It remains unclear why the
nces of extended Force Majeure, favorable termination clarified in item 25 above. Contractor is entitled to both its
Terminat the Owner is obligated to remedies than the Owner, as The Sponsors do not costs and a fixed fee.
ion for pay the Contractor (i) all it is expressly entitled to consider that the Contractor
Owner termination payments both termination costs as has more favorable
Breach owed to subcontractors well as the 5% fee. The termination remedies.
and suppliers and any Contractor’s recovery should
(§15.3) others related to the be limited to amounts owed
termination and (ii) a for work performed and
termination fee equal to reasonable and documented
5% of the portion of the direct costs resulting from
Price corresponding to the termination.
the work pending to be
performed. In addition,
the Contractor is entitled
to retain the unapplied
Deposit.
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28. Confiden Neither party may The confidentiality provision Please propose a specific The Lenders and their counsel
tiality disclose the existence of is both insufficient (it only replacement or change to the will propose a revised clause.
the EPC Contract or the covers very specific sub-sets confidentiality provision.
(§17) activities to be performed of information) and overly
under the same without restrictive (e.g. as written the
the prior consent of the Owner would be in breach
other party (except for today for sharing the
communications to the agreement with the Lenders
Grantor or and their advisors). The
OSINERGMIN under the Lenders recommend
Concession Contract). In replacing Clause 17 with a
addition, the Contractor standard confidentiality
may not reveal clause.
information disclosed by
the Owner relating to its
installations or the use of
the Transmission Line.
In either case, the parties
may disclose information
required by a
Governmental Authority
under Applicable Law
subject to complying
with certain mitigating
actions.
29. Represen Section 18 contains the The Lenders will require The Sponsors proposes the Subject to review by the Lenders
tations Contractor’s representations relating to following provisions: in light of their internal
and representations and anti-corruption, sanctions requirements; the Lenders note
Warranti warranties. and anti-money laundering, “19.12 Cumplimiento de that sanctions are not covered by
es (§18) as previously proposed by Leyes Aplicables the proposed provisions.
them.
El Contratista no se encuentra
en incumplimiento en cualquier
aspecto sustancial de cualquier
Ley Aplicable o autorización
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emitida por una Autoridad

Gubernamental en materia de
regulación o prevención de (a)
lavado de activos y
financiamiento de terrorismo
(“Leyes Anti-Lavado de
Activos”), o (b) actos de
corrupción (“Leyes Anti-
Corrupción”) que sea aplicable
al Contratista o a sus
documentos constitutivos.
19.12.1 Leyes Anti-Corrupción
(a) Ni el Contratista ni
cualquiera de sus
directores o gerentes
(actuando en
representación del
Contratista) ha, durante
los cinco (5) años
precedentes:
(i) Utilizado
cualesquiera fondos
corporativos para
cualquier
contribución, regalo
o entretenimiento
ilegal o cualquier
otro gasto ilegal
relacionado a la
actividad política, en
cada caso respecto
del Proyecto y las
transacciones
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contempladas bajo el
presente Contrato;
(ii) Ofrecido, pagado,
dado, prometido dar,
autorizado el pago
de, o tomado
cualquier acción para
efectos del pago de
cualquier valor
directa o
indirectamente a una
Autoridad
Gubernamental o
cualquier otra
Persona para
influenciar de manera
ilegal las acciones
del receptor o de otra
manera obtener o
retener negocios o
procurar una ventaja
indebida de negocios,
en cada caso respecto
del Proyecto y las
transacciones
presente Contrato; o,
(iii) De otro modo violado
o incumplido
cualquier aspecto
material de cualquier
estipulación de
cualquier Ley Anti-
Corrupción respecto
del Proyecto y las
transacciones
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presente Contrato.
(b) El Contratista ha
implementado y mantiene
en efecto políticas y
procedimientos
diseñados para asegurar
el cumplimiento con las
Leyes Anti-Corrupción
aplicables por parte del
Contratista, sus
directores y gerentes
(actuando en
representación del
Contratista), en cada
caso respecto del
Proyecto y las
transacciones
presente Contrato.
(c) El Contratista no ha
cometido o realizado,
respecto del Proyecto o
cualquier transacción
contemplada bajo el
presente Contrato,
cualquier violación de
cualquier Ley Anti-
Corrupción o Ley Anti-
Lavado de Activos que
podría esperarse
razonablemente que
tenga un efecto material
adverso sobre la
capacidad del
Contratista de cumplir de
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manera oportuna con
cualquiera de sus
obligaciones materiales
bajo el presente
Contrato.
19.12.2 Leyes Anti-Lavado de
Activos
Las operaciones del Contratista
respecto del Proyecto y las
transacciones contempladas
bajo el presente Contrato son y
han sido conducidas (dentro de
los cinco (5) años precedentes)
en cumplimiento con las Leyes
Anti-Lavado de Activos y no se
encuentra pendiente ninguna
acción, demanda o proceso ante
cualquier Autoridad
Gubernamental o tribunal
arbitral que involucre al
Contratista respecto de Leyes
Anti-Lavado de Activos
relacionadas al Proyecto y las
transacciones contempladas
bajo el presente Contrato y, a su
leal saber y entender, ninguna
acción, demanda o proceso
similar está siendo actualmente
iniciada.
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El Contratista no es una Persona

cuyos fondos y recursos
económicos están embargados o
a la cual no es permitido hacer
disponible fondos o recursos
económicos de conformidad con
cualquier sanción financiera o
económica impuesta por la
República del Perú.
30. Environ The Contractor is not Subject to the review and Subject to the review and Subject to review by the
mental required to comply with comment of the Lenders’ comments of the Lenders and comments by the
and any specific E&S consultant and E&S Independent Engineer. E&S Consultant as to whether
Social environmental and social teams, particularly in light of contractors, including the
Require requirements. the Lenders’ understanding The Sponsor agree to Contractor, are also in a
ments that the Project may qualify include the obligation of the position to comply with the
as a category “A” project Contractor and Equator Principles and other
(N/A) under the Equator Principles. Subcontractors to follow the E&S Requirements.
E&S requirements approved
The Lenders would expect by the Peruvian authorities. Based on the E&S
the Contractor’s E&S Consultant’s input and review
obligations to be consistent by the Lenders’ E&S teams,
with the Owner’s additional requirements
corresponding obligations regarding E&S matters
under the finance applicable to the Contractor
documents. may need to be imposed.
31. Performa The Contractor does not Independent Engineer to Please refer to our comments Please note that this is a For discussion.
nce provide any performance comment; the Lenders have to item 10. different issue than item 10
Guarante guarantees subject to the seen similar contracts above.
es payment of penalties. structured both with and
without performance The need or advisability of
(N/A) guarantees. guaranteed performance
levels subject to the payment
of penalties remains subject to
review by the Independent
Engineer.
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32. Intellectu The EPC Contract does The Lenders previously The Sponsors would agree to The Lenders reiterate their
al not contain a grant of any proposed a standard the intellectual property previous comments. In particular
Property intellectual property intellectual property provision proposed by the the license should extend to third
rights. provision which was not Lenders subject to the parties so that operators, Lender
(N/A) accepted by the Owner. The following change being designees, etc. are covered.
Lenders ask that the Owner made to the wording of the
reconsider the Lenders’ fourth paragraph of such
request. proposal:
“(…)
El Contratista concederá
una licencia mundial para el
Proyecto no exclusiva,
irrevocable y libre de cargas
al Cliente o a cualquier
tercero que el Cliente
autorice para el uso o copia
o modificación de dicha
información que permita al
Cliente utilizarla para
completar, mantener,
reparar las Obras y operar
la Línea Eléctrica. (…)”
33. Survival The EPC Contract does A standard survival The Sponsors propose to The provisions relating to
not contain a survival provision should be include a survival provision warranties and intellectual
(N/A) provision. included, as certain with the following text: property should also survive the
provisions will need to termination of the EPC Contract.
survive beyond any “Sin perjuicio de cualquier
termination of the EPC disposición en sentido
Contract, including contrario contenida en el
indemnities, governing law Contrato, las estipulaciones
and dispute resolution, etc. previstas en las Secciones
12.4, 17 y 19 sobrevivirán a
la terminación del Contrato
de conformidad con lo
previsto en la Cláusula
Décimo Sexta, quedando
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vigentes hasta el
vencimiento del plazo de
prescripción más largo
establecido por las Leyes
Aplicables.”
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COFIDE

Final | January 20, 2016

This report takes into account the particular

Job number 240242-00

Arup Latin America, S.A.U.

2 Project Participants Review 24

3 Concession Agreement Review 32

4 EPC Agreement Review 43

6 Transmission Line Design Review 66

| Final | January 20, 2016 | Arup Colombia S.A.S

6.2 Geotechnical Studies 68

8 Project Schedule 104

9 Operations and Maintenance Review 113

| Final | January 20, 2016 | Arup Colombia S.A.S

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 3

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 4

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 5

Figure 1: Transmission Line Alignment

The key construction works include:

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 6

Project Participants Review Summary

Concession Agreement Review Summary

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 7

• The Concessionaire assumes the risk for compensations, restrictions, and

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 8

provided by the Concessionaire during operations appears sufficient to cover a

EPC Agreement Review Summary

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 9

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 10

Design Review Summary

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 11

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 12

- List of load combinations indicating the load factors considered in each of

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 13

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 14

Cost Review Summary

Schedule Review Summary

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 15

O&M Review Summary

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 16

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 17

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 18

1.2 Project Context

1.3 Project Description

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 19

Table 1: Principle Differences between Owner’s Referential Design and Concessionaire’s

1.3.1 Key Construction Works

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 20

1.4 Basis for the Report

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 21

1.5 Role of Arup

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 22

• Assess the adequacy of the headcount proposed to operate the facility.

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 23

2 Project Participants Review

2.1 Project Participants

2.1.1 Owner – Government of Peru

2.1.2 Concessionaire – Lineas de Transmisión Peruanas

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 24

2.1.2.1 Concessionaire Organization

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 25

Figure 3: Concessionaire Organizational Chart

| Final | January 20, 2016 | Arup Latin America, S.A.U. Page 26