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activity overview 2003

Our mission

TRACTEBEL EGI is the SUEZ business line responsible for the company’s energy activities outside Europe.

Its mission is to develop and to manage complexelectricity and gas projects and to offer tailor-madeenergy solutions to industrial and commercial customers internationally.

Our mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover inside

Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Our profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

Our customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

Message from Dirk Beeuwsaert, CEO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7

General Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9

Key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13

Business management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17

South America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-23

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-29

Middle East - Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30-35

LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36-39

Simplified organisational chart per region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40-41

Overview operating companies per region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42-49

Power generation capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50-51

Corporate management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52-53

Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54-55

Sustainable Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56-57

Corporate Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Our values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Contact list . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60-63

Glossary & abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Table of contents

Key figures ■ 4,300 employees in 17 countries■ €4.491 billion in 2003 revenues■ First private power generator in Brazil, Chile and Thailand■ Major importer of LNG in the United States■ Nearly 26,000 MW installed power capacity■ 3,160 km of high voltage transmission lines■ 2,800 km gas transport and 11,750 km gas distribution systems■ Almost 17 billion m3 of natural gas sold in 2003■ 81.4 million MWh of electricity sold in 2003■ 29 million tons of steam sold in 2003

We develop, build and operate energy infrastructure projects.

We undertake major activities in both electricity and natural gas, gaining benefits from the convergence of the two markets.■ We generate electricty;■ We transport gas through pipelines;■ We manage gas distribution systems;■ We liquefy, ship and store LNG;■ We sell power and gas to industrial, commercial, institutional customers and local distribution companies;■ We offer a broad range of energy-related services to industrial, commercial and institutional customers.

Headquartered in Brussels, we have extensive operations in North America, the southern cone of South America, Asia andthe Middle East. Our LNG business based in London operates worldwide and coordinates our expanding LNG activities inboth the Atlantic and Pacific markets.

Areas of expertiseTRACTEBEL EGI has a track record of expertise throughout the energy value chain worldwide. We maintain balanced posi-tions with a strong asset base in most parts of the electricity and gas value chains, (excluding exploration and production ofnatural gas). This allows us to extract value from the synergies between these activities.

Power GenerationOur worldwide power generating capacity reached nearly 26,000 MW(*) at the end of 2003, of which approximately 3,548 MW wasunder construction and 1,389 MW under development. We have a diversified portfolio in terms of geographical spread, fuels, andtechnologies, including combined cycle and hydro-electricity. This enables us to be a low-cost producer and to mitigate risk.

LNG activitiesTractebel’s considerable LNG experience and the growing demand for natural gas have allowed Tractebel to develop a strongposition in liquefaction, LNG shipping, storage and regasification facilities. We are one of the main LNG importers in the USmarket and a significant LNG player in the Atlantic Basin.

Our profile

[ activity overview 2003 Tractebel Electricity & Gas International2

Electricity & GasEurope

Electricity & Gas International

Energy and Industrial

ServicesENVIRONMENT

EGE EGI SUEZ

Tractebel EGI, one of the SUEZ business lines

(*) Power generating capacity figures are expressed in MW equivalent gross, which are made up of electrical energy, thermal energy and demineralised water all converted into MW.

activity overview 2003 Tractebel Electricity & Gas International ] 3

SUEZ is an international industrial and servicesGroup, active in sustainable development, that providesbusinesses, public authorities and individuals with in-novative solutions in Energy and the Environment.Its business is to imagine, design, implement and operate systems and networks in the fields of electricity,gas, water and waste services. SUEZ is listed in Paris,Brussels, Luxembourg, Zurich and New York.

■ 172,500 employees ■ 200 million individual customers ■ 465,000 industrial and commercial customers■ € 39.6 billion in 2003 revenues■ 80% of revenues generated in Europe

Energy

The know-how of SUEZ companies covers practicallythe entire energy value chain and ranges from thesupply of electricity and gas to energy-related andindustrial services. This diversity, combined with theflexibility of their resources, enables them to adapt spe-cific solutions to the challenges faced by any industrialclient, public authority or residential customer.

■ No.1 provider of energy and industrial services in Europe

■ No.5 producer of electricity in Europe■ 20% of the Atlantic liquid natural gas market■ 55,000 MW in installed power capacity■ 100 billion m3 in gas transport capacity

Environment

SUEZ Environment combines the expertise of Ondeo,SITA, Degrémont and Ondeo Industrial Solutions toprovide industrial and municipal clients with equip-ment and services that meet their increasing needs inwater and waste services while applying the standardsthat are essential to the preservation of the environment.

■ No.1 of the water-treatment plant worldwide■ No.2 in environmental services in Europe■ 3,000 municipalities served daily■ 20 million individuals provided with sanitation

services in Europe■ 35 million individuals served in water in Europe

Wholesale and Trading in electricity and gas: part of our central portfolio risk managementapproachWhile wholesale and trading activities are an essential compo-nent of our risk management strategies throughout the energychain, they are not an objective as such. They principally serveto balance our portfolio of assets and contracts and to provideour customers with risk management products and services.

Transport and Distribution of electricity and gasWe have transport and distribution activities in some of themajor gas markets of North America, South America and Asia.

We also own and operate electricity transmission facilities, inconjunction with production capacity, which allow us to connectour units to main consumption areas or to our industrialcustomers in industrial areas.

Sales and marketingIn 2003, we sold 81.4 million MWh of electricity and 29 milliontons of steam.

In 2003, we sold nearly 17 billion cubic meters of natural gasto more than one million customers. Nearly two thirds ofour gas volume is delivered to industrial and commercialcustomers.

Energy-related servicesEnergy-related services have always been an important com-ponent of our strategy in end-user markets. Our aim goesbeyond just offering customers a commodity. We also helpthem optimise the use of energy in their daily environmentand adapt their supply and contracts to their specific needs.

Besides the distribution and sale of natural gas, we supportcustomers in converting their installations to natural gas tominimise costs and to maximise the level of comfort, reliability,efficiency and safety.

We have also developed outsourcing services with cogenerationplants and related power, steam, and water distribution gridswithin industrial estates or on the customer’s premises. Thisguarantees that our industrial customers always have a reliableand high-quality supply of strategic utilities suited to theirproduction processes.

These services illustrate TRACTEBEL EGI’s basic philosophyof continuously adapting our solutions to meet the changingneeds of our customers.

Our customers


Energy companies used to be very asset driven in the days when the markets were dominated by monop-olies. No energy operator today can ignore the important change in the status of the customer that hastaken place following market liberalisation and privatisation of the industry. Even in countries wheremarkets are not open to competition, governments are increasingly keen to invite private operators tobuild and manage projects for them, because they know this is a good way of tapping into a rich sourceof expertise and know-how, and because sometimes they can no longer afford major energy projectsthemselves.

TRACTEBEL EGI's customers include governments, industry, the tertiary sector (commercial and publicundertakings), as well as residential energy users. With all of these, the customer’s interest is crucial,and TRACTEBEL EGI has devoted a great deal of time and resources to ensuring high levels of customercare in all its operations.

While the company may not always have a direct commercial relationship with them, national governmentsare as much ‘customers’ of TRACTEBEL EGI as industry or commerce. For example, in Peru, as part ofthe Camisea gas project, TRACTEBEL EGI has acquired the concession to develop a new natural gasdistribution network for the greater Lima area. TRACTEBEL EGI’s mission is, working within a regu-lated environment, to develop the grid and to market and sell gas to regulated and eligible customers;and to give them the opportunity to make the switch to this new source of energy, thus expanding thenatural gas market. For the Peruvian government, the advantages are increased industrial growth anda more attractive environment for investors.

A similar case will be found in Mexico, where the extension of TRACTEBEL EGI’s natural gas networksin Querétaro, Tampico and Guadalajara will not only introduce a natural gas culture and provide reli-able supply, thus improving the quality of life for Mexican citizens; it will also offer greater potentialfor industrial growth and investment, both highly attractive political goals for the government. Just likeany customer, the Mexican government expects TRACTEBEL EGI to carry out this project efficientlyand cost effectively. When choosing the operator, governments will consider not only the price tendered,but also factors such as the quality and financial strenght of the company, its commitment to the country,its experience in similar projects and its environmental record.

In other cases, TRACTEBEL EGI has a direct commercial relationship with state-owned undertakings, asat the Taweelah A1 power and desalination project in Abu Dhabi, where the offtakers and TRACTEBELEGI’s partners are government-owned utilities. In Thailand, TRACTEBEL EGI was chosen by PTT to beits partner in the gas distribution company PTT-NGD because of its experienced commercial approach,its use of the latest technology, and the opportunity it offered PTT to develop its market and learn newknow-how.

Governments look to the mid and long term, and building a relationship with them, based on sustainabledevelopment, is essential. TRACTEBEL EGI recognises what governments are looking for in a partneror contractor: wealth creation, a more efficient economic base, the development of new industries andemployment, the transfer of know-how, and a better standard of living for its citizens. And this mustbe coupled with policies of profitable development, respect for the environment and involvement withlocal communities.

TRACTEBEL EGI’s direct customers (i.e. Where there is a direct commercial involvement) include industry,the tertiary sector, and to a lesser extent residential users. Industrial customers can be divided into twotypes: those for whom the most critical issue is the reliability and quality of the energy supply (for under-takings such as copper mines in Chile and petrochemical plants in the industrial estate of Map Ta Phut


(Thailand) where continuous industrial processes take place, interruptions to supply are expensive);and those to whom TRACTEBEL EGI supplies more than just energy. In the latter case, TRACTEBEL EGIoffers advice and solutions, for example when customers are converting to natural gas, as well as helpwith specific applications to increase the quality and throughput of their operations.

Besides industrial customers, the tertiary sector is an important segment for TRACTEBEL EGI. Thiscovers commercial businesses (for example office buildings, hotels, shopping malls); and public undertakingssuch as schools and hospitals. Here, TRACTEBEL EGI offers not only energy, but also help with managingthese complex sites, as well as advice on how to get the best deals on energy in a world of market riskand rapidly changing prices.

TRACTEBEL EGI’s residential users are based mainly in the concession areas of Litoral Gas (Argentina),Hanjin City Gas (South Korea), and the company’s gas distribution operators in Mexico. One ofTRACTEBEL EGI’s aims here is to promote the advantages of natural gas to its consumers, and to givethem the opportunity to make the switch away from inconvenient or more polluting fuels such as bottledgas or heating oil to a clean and efficient new energy source. TRACTEBEL EGI not only looks after itscustomers’ interests in the free-market but also in the regulated environment, ensuring tariffs are set atacceptable levels for the consumer, while bringing a reasonable return on investment for the supplier.Overall, the aim is to improve quality of life and the standard of living.

TRACTEBEL EGI's customers include governments, industry, the tertiary sector,as well as residential energy users.

Message from Dirk Beeuwsaert, Chief Executive Officer


2003 was another challenging year for TRACTEBEL EGI. But challenges are also opportunities.

The economic recovery that had been predicted many times finally started to materialise towards the endof 2003, although it did not spread equally to all regions where TRACTEBEL EGI operates. Nevertheless,TRACTEBEL EGI has performed remarkably well and posted very good results for the year.

Overall, business remained quite challenging for international energy companies in 2003. Several of ourcompetitors ran into problems primarily in their home markets but also because their internationalbusiness model was not sustainable. As a result the financial markets perceived energy, and especiallyinternational energy, as a risky business, and put pressure on all energy companies to restructure andreduce their debt. Profitability and stability became the watchwords, rather than expansion and growth.

The action plan adopted early in 2003 by SUEZ was designed to address these issues, and TRACTEBELEGI played a full part in it. Of course this meant changes in our organisation: we had to slow down ourdevelopment activities, reduce costs, limit our investments and find ways of reducing capital employed.And to counter negative perceptions of the energy business, we also had to demonstrate that the interna-tional energy business of TRACTEBEL EGI was an important contributor to the net earnings of the group.

The results we have achieved demonstrate our ability to do this. In 2003 we saw net current profits atgroup share rise to € 357 million and net profit to € 370 million.

These outstanding results are first of all attributable to the flexibility of our organisation and our abilityto adapt very quickly to new circumstances. It was a considerable challenge to change the mind-set ofour company, to focus on cost reduction and increasing profits and less on developing new projects. Wewill build on the skills and knowledge we acquired in 2003. They are fundamental to the efficiency ofour organisation, and essential to attracting and justifying access to capital for our future growth.

There was also a number of external factors affecting these results. The price of natural gas doubled inthe United States, which boosted our LNG profits while at the same time depressing the profitability ofour new merchant plants. We benefited from the recovery of the Latin American and Asian economies;and we successfully disposed of some assets on favourable terms, making a net financial gain whichwas essential to demonstrate our ability to create value through asset rotation.

TRACTEBEL EGI’s future development will be characterised by more gradual growth. Our business isconcentrated in four ‘strongholds’ – North America, Brazil, Thailand and LNG – with strong positionsaround them. We are focusing our future development on and around our existing portfolio and thesynergies between projects in which we are already involved.

We have a well-established reputation in the world energy business. We are thus well placed to creategrowth from our existing positions, all the more so since we are mainly active in a high growth envi-ronment (around 6% per year) with fewer competitors.

Energy marketing and sales activities are set to play an increasingly important role in our strategy ofstrengthening our strongholds and creating synergies. This means being very proactive towards ourcustomers, ensuring that they are satisfied with the service we provide, and come back to us to renewtheir contracts. This has led us to develop a whole new set of marketing skills, which I believe we havedone successfully in North America with Tractebel Energy Services, Inc., in Brazil with Tractebel Energiaand in Thailand with Glow.


LNG is widely seen as an attractive and flexible form of gas supply, and we believe that our activitiesin this field, helped by the strong prospects in North America and the development of spot LNG tradingworldwide, are and will remain important contributors to our growth and profitability.

We expect that the economies of the US, South America, Asia and the Middle East will continue to expand,increasing the demand for energy and thus creating new opportunities of profitable growth.

Globally, we are long-term players in our strongholds, but we also want to remain flexible and take oppor-tunities to sell assets which no longer fit into our strategy, at the right moment. Our experience showsthat portfolio management is necessary not only to optimise returns, but also to free capital for newopportunities and make our company more resistant to external shocks.

Our employees are a crucial factor in our success. I would like to thank them all for their achievementsin 2003. We have posted a good result at the right moment. I believe that through the changing focusand our actions in 2003 we all learned a lot that will help us to be even more efficient, profitable and in-novative in 2004. We must build on that experience so that we can make 2004 another successful year,and exceed our targets. This is the best way to secure future growth of our business and organisation.

Dirk BeeuwsaertChief Executive Officer

General Management Committee


Dirk BEEUWSAERTChief Executive Officer and member of the SUEZ Executive Committee

Micheline BOSSAERTExecutive Vice President Finance, Treasury & Tax

Philip DE CNUDDEExecutive Vice President Business Control

Derrick GOSSELINExecutive Vice President Strategy and Portfolio Management

Clay HARRISPresident and CEOTractebel LNG

Jan FLACHETPresident and CEO Tractebel South America

Functional managers

Regional managers


Eric KENISExecutive Vice PresidentOperations

Henri MEYERSExecutive Vice President BusinessDevelopment Oversight

Jacques NIEUWLANDExecutive Vice President Human Resources, IT, Communications and Legal Affairs

Nicolas TISSOTChief Financial Officer

Marc JOSZPresident and CEO Tractebel Middle East - Asia

William P. UTTPresident and CEO Tractebel North America

*LNG region includes our liquefaction, shipping and short-term transaction activities only. Our regasification and sales activities in the US are part of the North America region.

EGI’s turnover since 1999 shows a constant upward trend. The first three years this was mainlydue to EGI’s strong external growth. The past two years were characterized by fewer new investmentsand the turnover increase resulted mainly from the completion of the investment program and from the commercial dynamism around the existing activities. The exceptional growth level in 2003 can further be explained by the high number of new power stations being put into service and by the growth of our LNG business.

The EBITDA decreased from EUR 1,203 million in 2002 to 1,124 million in 2003, mainly as a resultof the negative impact of exchange rate variations. Excluding these currency fluctuations andperimeter changes, the 2003 EBITDA increased by EUR 171 million compared with 2002. The main elements which influenced these results are the new power plants being put into servicein North America and Asia and the growth of the LNG business in North America and London.

Key figures



0

100

50

200

150

250

350

300

400

in MEUR

Net Current Result (group share) (1999-2003)

Breakdown 2003 per region19

99

2000

2001

2002

2003

South America

North America

Middle East - Asia

LNG*

�

�

7.83%

22.72%

37.34%

32.11%

�

0

100

50

200

150

250

350

300

400

in MEUR

Net Result (group share) (1999-2003)

Breakdown 2003 per region

1999

2000

2001

2002

2003

South America

North America

Middle East - Asia

LNG*

�42.42%

7.58% 10.35%

39.65%

The 2003 Net Current Result increased by 2% from EUR 349 million to EUR 357 million. At constant exchange rates and perimeter, the growth of the net current result amounted to 30%.

The 2003 Net Result amounted to EUR 370 million, being the combination of the net current resultof EUR 357 million with a positive exceptional result of EUR 13 million. In 2002 the net result wasimpacted by an exceptional loss of EUR 167 million as a consequence of the important devaluationof the Brazilian Real.

Key figures


37.4% LNG

Tractebel LNGNorth America

Middle East - Asia

North America

South AmericaOf the 16.594 bcm sales in 2003, 94.4% were as natural gas and 5.6% as LNG.

Of these natural gas sales, 37.4% were, prior to vaporization and subsequent sale, first transported as LNG.

Breakdown of 2003 gas sales volumes & LNG transportper region

"

25.2%

44.1%

25.1%

5.6%

5.6%LNG

Mid

dle

East

- As

ia

North

Amer

ica

Sout

hAm

eric

a

Breakdown of installed 2003power production capacityper region

under developmentunder constructionin operation

in MWeq(Gross)

*

* The power generating capacity figures in this report are expressed in MW equivalent gross which are made up of electrical energy, thermal energy and demineralised water all converted into MW.

0

3000

6000

9000

12000

15000

natural gas

fuel-oil

hydro

others(coal, lignite, wood,…)

18.2% 29.9%

2%

49.9%

Breakdown of 2003 power production capacityby type of fuel


Middle East - Asia

South America

North America

51%

23%26%

Breakdown of 2003 power sales (MWh) per region

long-term

PPA (PowerPurchase Agreement)

merchant

69%

23%

8%

Long-Term: steam sales to industrial customer(s) and power sales to industrial customers and/or a public utility Merchant: sales to a power poolPPA (Power Purchase Agreement): sale of the entire plant production to a public utility

Breakdown of 2003 power sales (MW) per contract type

Middle East - Asia

North America66%

34%

Breakdown of 2003 steam sales (GJ) per region

Business Management

Introduction 16-17

South America 18-23

North America 24-29

Middle East - Asia 30-35

LNG 36-39

Simplified organisational chart per region 40-41

Overview operating companies per region 42-49

Power generation capacity 50-51

Introduction


to the regions, internal governance andcontrol, and focus on global strategy anddevelopment. This matrix approach isdesigned to maintain a series of cross-checks and safeguards throughout thebusiness.

business control, risk & insurance andfinance. The regional functions are ma-trixed with the functional managers atTRACTEBEL EGI HQ in Brussels.

The regional managers are responsiblefor supervising operations in their regionand for the profits of the business,while the functional departments atTRACTEBEL EGI HQ provide support

TRACTEBEL EGI has its headquartersin Brussels, and is organised into fourareas or ‘regions’: North America,South America, the Middle East-Asiaand LNG. Each region is managed bya Regional Manager, based in the re-gion and supported by a local teamcovering areas such as strategy, busi-ness development, operations, legal,

Regional ManagerNorth America

Regional ManagerSouth America

Regional ManagerMiddle East - Asia

Regional ManagerLNG region

AuditChief Financial

Officer

BusinessControl

Finance,Treasury

& Tax

Strategy &Portfolio

Management

Operations

BusinessDevelopment

Oversight

HR, IT,Communications &

Legal Affairs

CEO EGI

EGI Organisation at December 31, 2003

Organisation


Overall, 2003 has been a challenging year,but a successful one. Achievements havebeen made, changes have taken place,lessons have been learned. It is a goodbasis on which to build TRACTEBELEGI’s future prosperity.

risk into account. TRACTEBEL EGI’sconstant concern is to avoid being toodependent on external events, by focus-ing on a limited number of countriesand keeping a good balance betweenmanaged risks and profitability in allcountries where we are active.

The third objective is the developmentof sales and marketing activities fo-cusing on industrial and commercialcustomers.

This implies a very proactive approach,ensuring innovative solutions and high-standard services which fully meet thecustomers’ needs and expectations.

The fourth objective is active portfo-lio management to increase prof-itability through asset rotation and riskmanagement.

Although TRACTEBEL EGI is a long-term player in its strongholds, we alsowant to remain flexible and take oppor-tunities to rotate assets which no longerfit into our strategy. Where credit ratingsare being downgraded and banks areincreasingly risk-averse, asset disposalsare an efficient way of generating cashflow. The challenge with asset rotationis to create value. Asset rotation is notabout selling bad or good projects; it isabout using the company’s capabilitiesto create maximum value and selling(at the right time) to other players whomight be able to extract additional valueon account of their different strategiesand capabilities.

As part of this approach TRACTEBELEGI disposed of a number of projectsin 2003 and demonstrated its ability tocreate value through their sales.

Strategy

TRACTEBEL EGI has built its strategyaround four guidelines or objectives.

The first is value creation and organicgrowth around the company’s existingpositions.

TRACTEBEL EGI’s business is concen-trated in four ‘strongholds’ – NorthAmerica, Brazil, Thailand and LNG -.These are strong positions which havebeen built up gradually over the lastdecade, offering growth potential thanksto the increase in demand for energy (6– 7%) in several countries or to struc-tural developments in the market.TRACTEBEL EGI’s strategy is to createvalue in and around these positions inorder to take advantage of its strong localmarket knowledge, development capa-bilities and good reputation; and to max-imise synergies between its current oper-ations. TRACTEBEL EGI will howeverconsider new developments elsewhere,when the right opportunities arise.

TRACTEBEL EGI’s second objectiveis to maintain a balance between prof-itability, country risk and business risk.

The energy markets in many parts ofthe world proved turbulent since 2002.That TRACTEBEL EGI was wellplaced to ride out those storms is fullydemonstrated by its financial results.We have shown that doing business inemerging countries is profitable andoffers often more attractive returnsthan in mature markets. The strategy forsuccess is rigorous risk management,taking not only country risk but alsocommercial, financial and contractual


Key regionsSouth America

Office

Power station in operation

Power station under constructionPower station under development

Gas distribution

Gas pipe in operation

Gas pipe under construction

Gas distribution network under construction

1 - Passo Fundo2 - Salto Osorio3 - Salto Santiago4 - Alegrete5 - Charqueadas6 - Jorge Lacerda7 - Arjona8 - Itá9 - Machadinho

10 - Lages

Ilo

Tocopilla

MantosBlancos

MejillonesAntofagasta

Lima

Yuncan

Nehuenco

Santiago

San IgnacioColbún

Machicura

Rucúe

Rosario

BuenosAires

Cana Brava

Rio de Janeiro

Florianopolis

Sáo Salvador

Estreito

AricaChapiquiña

Iquique

CarenaCandelaria

”

under control, and the Brazilian cur-rency has risen on foreign exchanges.Financial debt has been reduced, al-though this remains an underlyingproblem.

Following the drought of 2001 whichdrastically reduced the output ofBrazil’s hydro-electric power stations,generation has now returned to normal.However the consequent rationing hasresulted in a continuous lower con-sumption and consequently in overca-pacity which is expected to last forseveral years.

Since 2002 and during 2003, with theprogressive opening of the Brazilianenergy market, Tractebel Energia hasfocused on replacing its initial contractsby new contracts. It successfully recon-tracted the energy with distribution andindustrial companies at attractive pricelevels. The consequence is that todayall old and new generation capacitiesare almost completely contracted until2006 and partially beyond that year.

In December 2003, the Lages biomasspower plant came into operation, severalmonths ahead of schedule. This 31 MWplant, situated in Santa Catarina Stateis fuelled by wood waste produced inlocal factories and thus contributes tothe region’s environment by cuttinggreenhouse gas emissions.

The new Energy Model that is currentlybeing implemented will bring majorchanges to the country’s electricitymarket. In the short term, businesswill be unaffected as most of TractebelEnergia’s energy is already contracted.But the new regulatory frameworkcould open up many new opportuni-ties, if it proves attractive to investors.

The four South American countrieswhere TRACTEBEL EGI operates– Argentina, Brazil, Chile and Peru –generally experienced a bettereconomic climate in 2003 thanin the previous two or three years.Overall, the countries achievedan average of 5.2% growth indemand for electricity and 6%for gas, reflecting increased worlddemand for the raw materials theyproduce. Despite its recent prob-lems, South America offers greatpotential and remains attractiveas a region for investment.

Brazil

Brazil is TRACTEBEL EGI’s main centreof operations in South America. ThroughTractebel Energia, TRACTEBEL EGI isthe largest private generator in thecountry, capturing 6.9% of the genera-tion market in 2003. With an installedcapacity of 7,051 MW, Tractebel Energiasells power mainly to large industrialcustomers and to distribution companiesunder 2 to 15 year long-term contracts.

The election of a new president inBrazil in 2002 caused some initial uncer-tainties in the electricity sector, but thegovernment’s approach proved to bequite pragmatic, aiming at the creationof an environment which will attractinvestment for the new generationcapacities that have to be completedaround 2007. A progressive economicrecovery is underway, inflation is well

Brazil, Chile, Peru and ArgentinaDante Luiz Fecci

Director of Materials &Administrative Service,

International Paper do Brasil

“Brazil

International Paper doBrasil is one of the biggestproducers of writing paperin Brazil. We have a marketshare of about 36% ofphotocopy paper. The contract we have withTractebel Energia offersmany advantages as it allows us to programmeour energy consumption. If for any reason we haveto interrupt the productionprocess, we simply informTractebel Energia and theydecrease the supply of energy without billing usfor the energy we don’tconsume. Supply flexibility,our relationship withTractebel Energia and the advantages offered by our contract are more importantfactors than just the price.


supply flexibility


Nor Andino Chile in order to further im-prove and strengthen its operations inthe North of Chile.

In the SIC, Colbún enjoyed a very goodyear with greatly improved resultsthrough increased sales and good cli-matic conditions for the production ofhydro-electricity.

Nehuenco II, an additional 252MW opencycle power plant, was commissioned atthe start of 2003, increasing the capac-ity of the existing station to 737MW.Construction also began on a new opengas cycle plant at Candelaria, which isdue for completion in 2005.

Chile

Chile enjoyed one of the best economicclimates of any South American countryduring 2003. The Chilean Peso appreci-ated on foreign exchanges and therewas strong growth in demand for elec-tricity, reflecting a healthy economyand improving standard of living.

TRACTEBEL EGI has a strong pres-ence in the Chilean energy market.Electroandina and Edelnor are respec-tively the largest and third largest gen-erators in Chile’s northern network(‘SING’); while Colbún is one of thethree leading generators in Chile’s cen-tral network (’SIC’). The stations innorthern Chile are fired by coal, and bynatural gas brought in from Argentinaby the Gasoducto Nor Andino pipeline.Distrinor distributes and markets theremainder of the gas to other industrialcustomers in the region.

TRACTEBEL EGI’s operations in thecountry performed well.

In the SING, efforts were focused ondeveloping operational synergy betweenElectroandina and Edelnor.

TRACTEBEL EGI has also expandedthe industrial services offered byElectroandina, which now serves all in-dustrial customers in the north, includingthose of its competitors.

Gasoducto Nor Andino, which operatesthe trans-Andean natural gas pipeline,enjoyed a trouble-free year of operation,following the incident the previous year.The action taken by TRACTEBEL EGIto control the risk following the accidenthas been effective, and new proceduresnow in place will minimise the likelihoodof any recurrence of such an incident.

TRACTEBEL EGI is currently examiningwith its partners the possible merger ofEdelnor, Electroandina and Gasoducto

“

”

Chile

SQM is the world leader inspecialty fertilizers, iodineand lithium businesses. Wehave a long-term electricitycontract with Electroandina.The strength ofElectroandina is that it isalso capable of offering usmaintenance services forour power grid, and gas viaits subsidiary Distrinor. Weuse gas now for our instal-lations instead of fuel oil,which is more cost efficientand environmentally better.No other energy supplier wasable to meet the terms, qual-ity and range of servicesoffered by Electroandina.

Key regions - South America

quality and range of services

Maurice Le-FortCOO, Soquimich

”

Jorge A.GaravagliaCEO, Tractebel Industrial Services Perú


The Yuncan concession coincided with asignificant equity investment in EnerSurby the Peruvian Pension Funds. ThePension Funds bought a 21.05% stakein EnerSur. The incorporation of thePension Funds in the ownership ofEnerSur will allow some 3 millionPeruvian citizens who participate inthe private pension fund system to be-come, indirectly, TRACTEBEL EGI’spartners in the energy sector.

Peru

Through its EnerSur subsidiary,TRACTEBEL EGI was Peru’s fourthlargest electricity producer in 2003,representing 8% of the market. ThePeruvian economy turned in a goodperformance over the year, with lowinflation and a stable exchange rate, andthe country enjoyed political stability.

EnerSur performed well over the year,benefiting from higher electricityprices.

In 2003 the company negotiated anew long-term contract with its majorcustomer Southern Peru CopperCorporation. In line with its policy ofdiversifying its customer base, EnserSuris further developing its sales activi-ties and has already attracted half adozen new industrial customers underlong-term contracts

TRACTEBEL EGI has an 8% share inthe TGP consortium which is buildingthe pipeline designed to transport nat-ural gas from the Camisea gas fields tothe Peruvian capital Lima.

TRACTEBEL EGI’s wholly-owned sub-sidiary, GNLC, is currently building anew natural gas distribution system inLima and Callao and will be respon-sible for its operation. Construction ofboth the pipeline and gas distributionnetwork is running on schedule, andnatural gas is expected to arrive inLima by August 2004.

Early in 2004, the Peruvian govern-ment granted a 30-year concession toEnserSur for the 130 MW hydro-electricpower station at Yuncan in the Pascoregion of central Peru. Through the con-cession, EnerSur has the right to operatethe plant and sell the electricity it gen-erates. The Yuncan station is scheduledto come into operation in 2005.

technical expertisePeru

In May 2002 Tractebel EGIwas granted the concessionfor the gas distributionnetwork in the greaterLima area. The first gas isscheduled to arrive in Limain the summer of 2004.Tractebel Industrial ServicesPerú was created to pro-mote the industrial use ofnatural gas. Our team iscontacting local industriesto suggest and examinethe possibility of convertingtheir systems to naturalgas, offering them higherenergy-efficiency and amore environment-friendlyfuel than those they cur-rently use. We offer theseindustries technical expertiseand engineering skills. Ourgoal is to convert theirsystems in the most efficient and secure way and to ensure all futuremaintenance works.

Several industrial customersare currently considering theconversion to natural gas.


uncertain. Tariffs have been frozen, andthere is little movement on regulatoryrestructuring.

Against this background, Litoral Gasperformed well, since most of its in-dustrial customers are exporters ofagricultural products and were to a greatextent insulated from the country’sinternal economic problems.

ECS also turned in good results. It con-solidated its presence serving moreclients in different areas of Argentinaand in the surrounding region. It ac-tively participated in the reorganisationof the energy markets in Argentina, of-fering tailor-made, value-added prod-ucts to industrial consumers, whoneeded reliable energy supplies afterthe local crisis of 2002.

Argentina

TRACTEBEL EGI’s operations inArgentina are Litoral Gas, a gas distri-bution company operating in theprovince of Santa Fe, and in the north-west of the province of Buenos Aires;and ECS – in which the company holds aminority share - a small-scale brokerageand energy consultant which buys elec-tricity and natural gas on the marketand sells it directly to industrial cus-tomers in Argentina, but also acrossthe border in Brazil and Chile.

Argentina is still in the process of re-covering from the economic crisis thatrocked the country in 2002. While theeconomy saw 8% growth over 2003and increasing demand for natural gas,the regulatory environment remains

Key regions - South America

prudent and proactive management

highlights 2003 | South AmericaMarch – Peru# EnerSur’s renegotiates successfully its long-term contract with its principalcustomer Southern Peru Copper Corporation (SPCC). Following the decision to diversify its customers’ portfolio, up to 30 MW of its generated capacity,EnerSur signs several new electricity supply contracts in 2003 with the University of Lima(1.8MW), Manufactura de Metales y Alumnio Record S.A.(1.3MW), Miyasato Corporation(2.6MW), Compañía Minera Casapalca S.A.1 (4.5MW) and BH-Bilinton Tintaya2 (6.0MW).May – Brazil# Tractebel Energia starts the remote operation of Cana Brava3 from the controlroom of the Salto Santiago power plant.June – Chile# Gasoducto Nor Andino executes a new gas delivery spot in Chile to supplyChuquicamata copper mine, the largest open copper mine in the world.June – Chile # Colbún4 renews its contract with the distribution company Conafe for the delivery of 800 GWh per year during 15 years.July – Chile# Distrinor finishes the connection of the gas network for the Codelco coppermines of Chuquicamata and Radomiro Tomic.July – Chile # Edelnor signs a contract with the mine "Mantos Blancos" to supply 40 MWfor 8 years and firmed a new contract with Moycop of 20MW for 15 years.August – Peru# Tractebel Industrial Services Perú S.R.L. begins its operations with the goalof providing consulting, development and engineering services for industrial applications ofnatural gas in Peru, and better use of this energy source in general.September – Peru# the Board of Directors of the International Development Bank approves aloan of up to US$ 135 million for Transportadora de Gas del Perú as part of the financial plan to com-plete the construction of the 700Km gas and liquids pipelines from the Camisea fields to Lima/Pisco.September – Brazil # Tractebel Energia participates in an auction of surplus energy withsales from 7 generating companies directly to free customers. Tractebel Energia sells 14.5 MW

1 2 3 4


Conrado BianchiChief Executive Officer,Litoral Gas

“

”5 6

stability

average to major customers such as Alcan, Carbocloro, Döhler, Gerdau Piratini, GerdauGuaíra, Gerdau Rio Grandense, Metalcorte, Norske Skog, Schulz, Tomé, Ultrafertil and WEG.

October – Chile# Edelnor firms a contract of 2 MW with The "mine de Can" and a contractof 12 MW with "Hadelman Mining Company" from January 2004.October – Peru# Tractebel Industrial Services Perú S.R.L. signs its first consulting servicescontract for the conversion of industrial facilities to natural gas with Sudamericana de Fibras S.A.,one of the largest textile firms in the country.November – Peru# Tractebel Industrial Services Perú S.R.L. signs a contract to cover con-sulting services for installing and operating an internal pipe network for the use of natural gaswith ALICORP S.A., one of the largest mass consumption product companies in the country.December – Argentina # Gasoducto Nor Andino transports 82,7 million Nm3 of gas thismonth, a historical record.December – Brazil # The Santa Catarina State environmental protection service FATMAawards Tractebel Energia a licence to operate the Lages Cogeneration Unit5, which is the country'slargest independent biomass-fired thermal power station. The plant starts commercial operationon December 23.December – Chile#Colbún signs a contract to supply power to distributor Chilectra from 2004until 2018 of 687MWDecember – Peru # BNDES' Board of Directors approves US$ 103 million export credit forthe tubes used by Transportadora de Gas del Perú in the construction of the gas and liquidspipelines.February 2004 - Peru# The Government of Peru grants EnerSur a 30-year concession forYuncan, a 130 MW hydropower plant and associated transmission facilities6.

Argentina

Litoral Gas distributes naturalgas to industrial and residen-tial customers in Santa FeProvince and the northernpart of Buenos AiresProvince.

When at the end of 2001,Argentina was hit by a severeeconomic crisis, the govern-ment froze public servicestariffs, a measure fromwhich natural gas tariffsdid not escape.

Litoral Gas proved its resilience in this difficult situation by producingpositive results and fulfillingall its financial obligations.This is explained by thestrong commercial andtechnical relationship wehave built over the yearswith our customers andtheir faith in our company,as well as by our prudentand proactive managementand our flexibility in adapt-ing to new circumstances.

The stability of our com-pany is very important, not only to create value forshareholders, but especiallyfor our customers who counton us for their gas supply.


Key regionsNorth America

LNG regasification terminal

Trigen facility in operation

Trigen facility in construction

Office


Power station under construction

Gas distribution

Chehalis

MacBain

Houston

EnnisWise County

RedHills

Choctaw

TamworthFitchburg BellinghamBethlehem

Sayreville

Appomattox

Ryegate

Boston

Monterrey

Guadalajara

Querétaro

TampicoAltamira

Lincoln

WestWindsor

Hot Spring

Boston

Hot Spring

The North American economy and en-ergy markets presented both challengesand opportunities during 2003. Theelectricity markets were still sufferingfrom the malaise triggered by the col-lapse of Enron and the Californian cri-sis in 2001. The economic recessionand lower electricity consumptionhave led to overcapacity in the market,damaging the merchant sector in par-ticular; while the doubts raised by theCalifornian crisis concerning the mar-ket model have effectively put furthermarket deregulation on hold. Bills onenergy are currently stalled inCongress while the debate goes on,and the regulatory framework remainsunclear. At the same time, the US gasmarket was characterised by underca-pacity, resulting in high gas prices andan increasing demand for LNG.

Tractebel North America reacted quick-ly to the changing market situation andmade certain changes in its organisa-tion. Development was refocused onLNG, the acquisition of distressed assetsand the cogeneration niche market. It

TRACTEBEL EGI has a widerange of interests in the NorthAmerican markets, which it op-erates through its subsidiaryTractebel North America. Its ac-tivities include the development,acquisition, and operation of elec-tricity and cogeneration facilities;marketing and sales of energyproducts and services; the im-port of LNG; and natural gasdistribution.

Tractebel North America’s operationscomprise the following business units:Tractebel LNG North America, whichis responsible for LNG activities;Tractebel Power, Inc., which runs aseries of power stations; TractebelProject Development, Inc., responsiblefor developing new energy projects;and Tractebel Energy Services, Inc.,which markets and sells energy productsand related services to US commercialand industrial customers.


William P. UttPresident and CEO

Tractebel North America

“

”

USA

In North America, we arelooking to establish posi-tions in different segmentsof the energy value chain, focusing on carefully selected geographic mar-kets. We try to integratethese positions in the most optimal way, by linking ourelectricity generation andnatural gas business withmarketing and retail activi-ties. Each of these activitiesare justifiable on a stand-alone basis. But it is theirintegration that provides a lower volatility to ourbusiness, competitive and risk-managed offers to our customers and a higher return to ourshareholders.

convergence electricity and gas

Chris FernaldDirector of Facilities, New England Aquarium, Boston

“

”

USA

The New EnglandAquarium is one of the region's most popularunderwater exhibits, accommodating sharks,sea turtles, barracuda andalso hundreds of smallerexotic tropical fishes. The aquarium systems require a great deal of energy to keep them running and to maintain a proper habitat for theanimals, some of which are extremely sensitive. We absolutely require a reliable source of elec-tricity and of steam. As non-profit organisation,a major concern is also tohave budget certainty.Tractebel Energy Services,Inc. made us feel comfort-able on both issues. That iswhy we decided to sign a deal with them.


With domestic natural gas productionfailing to follow the growing demand,imports of LNG increased to fill the gap,causing prices to almost double. Thishelped Tractebel LNG North Americato make a strong contribution to profits.

The capacity of the Everett LNG termi-nal in Boston was significantly ex-panded in 2002 and is now fullyutilised. Business grew substantially,with 68 LNG cargoes entering Everettin 2003, compared with 44 in 2002.

TRACTEBEL EGI is one of the largestLNG suppliers to the USA, handlingaround 5 billion cubic meters a year.Together with the other SUEZ energycompanies, it is the second largest shipoperator in the region, and has thethird largest market share (around20%) in the Atlantic Basin. As part of itsdrive to build on this position, TractebelNorth America hopes to clear all thehurdles – permits, secured supply andofftake – to start on the construction ofan LNG receiving and vaporisation fa-cility in the Bahamas and related under-sea pipeline that will bring natural gas toSouth Florida in 2007. Tractebel NorthAmerica is also pursuing its search for asuitable site for an LNG receiving andregasification project on the Pacificcoast in Mexico to supply natural gasto the Mexican market.

further integrated Trigen, the formerNorth American subsidiary of Elyo,into its business. The trading businesswas repositioned to pursue merchantenergy activities solely in support ofthe region's existing power, LNG and re-tail energy supply businesses. Activitiesin Mexico were also reviewed and inte-grated more closely into the TractebelNorth America structure. As a result itwas decided to close the corporate officein Mexico City from the end of March2004 and to manage the Mexican oper-ations directly from our operating officein Guadalajara, Mexico, and our regionalheadquarters in Houston, Texas.

Key regions - North America

budget certainty


Joe MurphyVice President Sales, Tractebel LNG North America

“

”

USA

Customers are looking tothree aspects when they arelooking at a supplier : price,reliability and flexibility. I thinkfrom our perspective, theadded advantage we haveis that Everett facilities arelocated right at the heart ofthe market place in NewEngland. This allows us toaddress each one of thethree aspects. Price. We areclose to the market place.We present a price that ismarket based in line withthe customers’ expectations.Reliability. Again having thephysical assets, having a tankphysically located here allowsus to make sure that our reli-ability is very high. And theflexibility. Having the assetsof vaporisation, the tanks,being able to bring ships inquicker or slower, dependingon the scenario, allows us tosell the flexibility to the cus-tomer. Typically on a year, local distribution customersin a winter time have tentimes the demand of thatthey have on a summer time.So they need to be able toramp up in the winter andramp down in the summer.So it fits well with beingclose to customer’s bases.

TRACTEBEL EGI completed two im-portant power projects during 2003. InFebruary the Monterrey power stationwas put into service in Mexico to deliverelectricity and steam to 35 industrialsites belonging to the 3 partners in theproject. In November, Tractebel NorthAmerica inaugurated the Chehalis mer-chant power plant in Washington State,bringing cleaner and efficient thermalenergy to serve the Pacific Northwest.

In 2003, as part of a review of its assetportfolio, Tractebel North America de-cided to sell its San Gabriel and Riponfacilities in California because they werenot geographically aligned with thoseUS markets where its operations arefocused. The sale was completed at thestart of 2004, and brought a net profit.

In Mexico good results were posted bythe gas distribution activities. Querétaroand Tampico achieved their customernumber targets and the Guadalajaragas distribution project is continuingto improve.

In general, the difficulties of the NorthAmerican merchant energy markets overthe year have been well absorbed byTRACTEBEL EGI. Its balanced businessapproach was successful and has in somecases opened up new opportunities.

In 2003 Tractebel LNG North Americaalso expanded its shipping capacity withtwo new LNG tankers – Berge Bostonand Berge Everett - which entered serviceunder long-term charter agreements.These vessels – each with a capacity of138,000 m3, are used to transport LNGprimarily from Trinidad to the EverettLNG receiving terminal and to otherLNG facilities in the Atlantic Basin, suchas the reactivated facility at Cove Pointin Maryland, US. In September 2003Tractebel LNG North America signedan agreement to supply approximately34 billion cubic feet per year of LNG toCove Point.

Tractebel Energy Services, Inc. succeededin launching its operations in 4 states(Massachussetts, New York, Texas andNew Jersey). Its success is based on theavailability of high quality staff; a busi-ness approach clearly focused on theneeds and expectations of the cus-tomers; and careful timing of its entryinto the retail market. Tractebel EnergyServices, Inc. is now aiming to expandits operations to 11 states by 2005,principally in the Northeast, UpperMidwest and Texas. Overall, TractebelEnergy Services, Inc. enjoyed a verysuccessful first year of operation, ex-ceeding expectations by achieving a2003 turnover of US$ 165 million and atotal contract value of US$ 633 million.

close to customer’s bases


One of TRACTEBEL EGI’s main objec-tives for 2004 will be to build synergybetween the energy retail business andTractebel North America’s other activ-ities. Within Tractebel North America’sintegrated business model, the aimwill be to locate generation capacity inthose regions where the energy retailbusiness is active. This could eventual-ly lead to the sale or swap of somemerchant power plants or even to theacquisition of distressed assets.

Another goal is the successful develop-ment of at least one new LNG projectwhich will be important to TRACTEBELEGI’s ambitions in this sector.

customer service

Key regions - North America

1 1 2 3

highlights 2003 | North AmericaFebruary - Mexico# The Monterrey power plant is inaugurated1.

July - US # Tractebel LNG North America announces that it has supplied half of all of theUnited States' imported liquefied natural gas to the Everett LNG terminal it owns and operates,since late 1971 and to LNG facilities in Penuelas (Puerto Rico), Lake Charles (Louisiana) andElba Island (Georgia).

August - US# Tractebel Energy Services, Inc. announces it received approval from the NewJersey Board of Public Utilities to supply retail electricity to New Jersey customers.

September - US# Tractebel LNG North America signs an agreement with Statoil for the deliveryof approximately 34 billion cubic feet per year of LNG at the Cove Point LNG import facility inMaryland (US)2.

November - US # Tractebel North America inaugurates the Chehalis3 power plant inWashington State.

November - US# Tractebel Energy Services, Inc. announces that it has exceeded its first-year expectations, achieving over US$ 500 million in total contract value. The company


innovative solutions

launched its marketing and sales activities in September 2002 to provide end-user electricityand related energy services and products to commercial and industrial customers. InDecember 2002 it began serving its first clients, which include industries, mass merchandisers,supermarkets, office buildings, hotels, etc.

January 2004 - US # Tractebel North America sells the cogeneration assets of Ripon andSan Gabriel2 in California.

March 2004 - US# The Federal Energy Regulatory Commission grants its final approval tothe Tractebel Calypso3 natural gas pipeline that will link the proposed LNG regasification terminalin the Bahamas and the Florida gas market.

April 2004 - US # The Florida governor and his cabinet approve the Tractebel Calypsopipeline. Tractebel Bahamas LNG is awaiting further approvals of the Bahamian authorities.

2 3

”

Jane PageSVP Asset Manager

Crescent

“USA

Crescent is a US$ 5 billionreal estate investment trust,managing approximately 29 million square feet ofclass A office products. Itreally came down to oneattribute that let us feel thatTractebel Energy Services,Inc. was the company thatwe wanted to be associatedwith and that is customerservice. They came withinnovative solutions. In thereal estate business, energyprices are about the secondhighest expense that a build-ing incurs. So it can be ex-tremely detrimental if ourenergy prices are too high.Tractebel Energy Services,Inc. has done a great job incommunicating with us,giving us different solutions,different risk factors, risktolerances. They have reallyworked with us in gettingto know of who we are andwhat needs we have so thatwe can provide office envi-ronments for our customerswith reliability and pricesthey can depend on.


Key regionsMiddle East - Asia

Energy and Facilities Management

Office


Power station under construction

Gas distribution

Baymina

Al Taweelah

Al Manah

Seoul

Houay Ho

Glow Group

Singapore

Zhenjiang

Bangkok

”

provide TRACTEBEL EGI with the op-portunity to diversify away from itsmore merchant-based energy activitiesin other parts of the world.

During 2003, economies in both Asiaand the Middle East performed well,with Asia in particular showing betterresults than the global economy. Chinawas the main engine for growth in theregion, and Asian countries becameless dependent on exports to non-Asian countries, relying more on thestrength of their own domestic mar-kets. Asia continued to be the fastestgrowing energy market in the world.

Many of TRACTEBEL EGI’s competitors– particularly European and US players– have withdrawn from the Asianscene altogether, leaving TRACTEBELEGI as the most important non-Asianplayer in the region next to new do-mestic operators who have filled thevacuum created by the departure ofthe European and US players.

Asia

Thailand & Laos

Thailand represents around 70% ofTRACTEBEL EGI’s investments in theregion. Through its subsidiary Glow,TRACTEBEL EGI generates and sup-plies electricity, steam and treatedwater to about 30 large-scale industrialclients in the Map Ta Phut petrochemicalcomplex in Thailand’s Rayong province,

In May 2003, the Asia Pacific andthe MEEA (Middle East EasternEurope and Africa) regions weremerged into one new region,Middle East-Asia (MEA). Themove reflects TRACTEBEL EGI’sstrategy of building stronger po-sitions, and concentrating onthose areas where it already hasa significant presence, i.e. Asiaand the Middle East. While newdevelopments in Eastern Europeand Africa are not ruled outshould the opportunity arise, pri-ority is now given to developingexisting assets in Asian andMiddle Eastern countries.

In this region, TRACTEBEL EGI’smain activities are located in Thailandand the United Arab Emirates, withother assets in Turkey, Oman, SouthKorea, Laos, Singapore and China.

Broadly speaking, the markets in thisregion are less mature than those ofEurope and the US in terms of deregu-lation, which has either been put onhold or stopped altogether. Howeverthere is a strong trend towards the de-velopment of hybrid markets in thesecountries, i.e. with a mixture of publicand private sector operators. An im-portant advantage of these markets isthat they can offer stable long-termPower Purchase Agreements with re-turns secured in US dollars. They also

Thailand & Laos, South Korea,Singapore, China, Gulf States and Turkey

Adisorn PloysangwarnMD Rayong Olefins

“ThailandRayong Olefins is a producerof upstream petrochemicalsmainly used as feedstockfor polyethylene andpolypropylene resins. Our facility is located inthe industrial estate ofMap Ta Phut, near the Glowpower generation facility.From our experience withseveral power suppliers, weknow that to calculate thetotal electricity cost, it isnot only sufficient to lookat the price per kWh.Other elements have to betaken into considerationsuch as the cost of apower interruption, thecost of the facilities, etc.

Glow not only provides usthe kWh; it also delivers usgood services, commitmentand above all reliability andstability. And for this we areprepared to pay the price.


reliability


industrial estate to support expansionby its customers who mainly operate inthe petrochemical and chemical industry.

In December 2003 the Glow group suc-cessfully completed a refinancing opera-tion and put in place new debt facilitiesof 13 billion Thai Baht (approximatelyUS$ 325 million), taking advantage of lowThai interest rates. These include newdebentures with terms of five and sevenyears, which will save the companyUS$ 40 million.

In Laos, TRACTEBEL EGI owns a con-trolling stake in the Houay Ho PowerCo project, which runs the Houay Hodam-reservoir hydroelectric plant. 98%of the output is sold to EGAT under a30-year power purchase agreement, andthe project was constructed under abuild-operate-transfer agreement withthe government of Laos.

using cogeneration and combined cycletechnologies. A large portion of theelectricity generated is sold under long-term contracts to EGAT (ElectricityGenerating Authority of Thailand), thestate utility. The remaining electricityand all steam produced is sold to indus-trial clients under long-term contracts.

TRACTEBEL EGI also has a 40% sharein PTT-Natural Gas Distribution, a jointventure with the Petroleum Authorityof Thailand, which distributes naturalgas to industrial clients in the greaterBangkok area.

The organisation of the energy indus-try in Thailand has been under review.The Thai government has decided tomove away from establishing a powerpool market. It has confirmed the statusof its regulated monopoly utilities inpower generation, transmission, distri-bution and sales and intends to retainthe Single Buyer model. Existing pri-vately owned power generators willcontinue to sell their power produc-tion to industrial customers and EGATunder the old IPP and SPP schemes.The government is considering thefloatation and partial privatisation ofState-regulated energy undertakings.

Thailand enjoyed an economic boomin 2003, with a growth in GDP of 6.7%.This prosperity was reflected in in-creased sales of electricity, gas and steamby TRACTEBEL EGI’s operationalcompanies.

In January 2003, the Glow IPP (for-merly Bowin) power plant came intocommercial operation. Its total grossgenerating capacity is 730 MW all ofwhich has been sold to EGAT under a25-year power purchase agreement.

In July 2003, Glow started construc-tion of additional generation capacityof 36 MW of electric power and 70 tonsper hour of steam in the Map Ta Phut

Key regions - Middle East - Asia

knowledge of efficient technologies


South Korea

In South Korea TRACTEBEL EGI holdsa 75% stake in Hanjin City Gas, a naturalgas distribution company operating inthe north-east metropolitan districts ofSeoul and Kyunggi Province. Despitea depressed economic performance inthe country as a whole, Hanjin CityGas saw an 8% increase in its gas dis-tribution activities. It also pursued itsdevelopment of compressed natural gasfor public transport in Seoul.

Power and gas sector deregulation isstill in its early stages in South Korea.After the delay in the partial privatisa-tion of one of Korea Power Co’s thermalgenerators, little progress was made in2003 towards opening up the electricitysector.

Singapore

In December 2003 TRACTEBEL EGIsold its minority stakes in three jointventures in Singapore to its partnerSembCorp Utilities Pte Ltd. The deal isworth some € 93 million and produceda capital gain of around € 40 million.Tractebel EGI remains active in energyand facilities management in Singaporethrough its subsidiary Elyo South EastAsia.

China

TRACTEBEL EGI holds a 27.4% sharein the Zhenjiang Power Station. Theproject is located 300 km West ofShanghai, close to the City of Zhenjiang,in Jiangsu Province. Following anagreement reached with TRACTEBELEGI’s Chinese partners, the ZhenjiangPower Plant was completed and cameinto operation in June 2003.

flexibility


The completion of this facility strength-ens TRACTEBEL EGI’s presence in aregion where the potential for growthin electricity production is high, espe-cially in combined electricity-waterproduction. This project and similar onesprovide an excellent opportunity to useand benefit from the synergies betweendifferent units of the SUEZ Group.

Turkey

TRACTEBEL EGI has a presence in theTurkish power generation sector throughits 95% stake in the Baymina power gen-eration project. This 770MW CombinedCycle Gas Turbine (CCGT) power sta-tion is located some 40km from thecapital Ankara. The plant came intooperation in February 2004, and isTRACTEBEL EGI’s first operation inthe fast-expanding Turkish energymarkets. Early in 2004, Baymina put inplace a US$ 350 million non-recourseproject financing facility.

Middle East

Gulf States

TRACTEBEL EGI’s main investmentsare in Oman, where it owns 32.81% ofUnited Power Company (UPC); and inAbu Dhabi, where it has a 20% stake in theAl Taweelah A1 power and desalinationproject (GTTPC).

The regulatory environment in Omanand Abu Dhabi is stable, employingthe Single Buyer model. Competitionremains limited to public tenders ofIndependent Water and Power Project(IWPP) long-term contracts, which aretypically financed on a limited-recoursebasis. Both countries have an increasingdemand for power and seawater desali-nation projects, and the opportunities fornew investments in this region are good.

The Al Taweelah power and waterdesalination plant in Abu Dhabi wasinaugurated in May 2003. The facility,providing a total power generation ca-pacity of 1,808 MW and a daily wateroutput of 385,000 cubic meters, repre-sents roughly 25% of the total electricityand water production of the Emirate.

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expertise in complex projects

highlights 2003 | Middle East - AsiaJanuary - Thailand# Glow IPP1 power plant starts its commercial operation.

May# Tractebel EGI merges two of its regions – Asia Pacific and Middle East Eastern EuropeAfrica – into one combined region.

May - Abu Dhabi# The Al Taweelah2 power and water desalination plant is inaugurated.

July - Thailand# Glow starts the construction of a new cogeneration unit capable of supplying36 MW power and 70 tons per hour steam in addition to the existing capacity.

July - Thailand# TRIS, the Thai rating agency, gave an A- rating to Glow group, allowing thecompany to be refinanced in the local market under good conditions.

Key regions - Middle East - Asia

Abdullah Al NeaimiDirector ADWEA

“

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Abu Dhabi

As part of the privatisationof Abu Dhabi’s power andwater industry, the AbuDhabi Water & ElectricityAuthority (ADWEA) selectedthe consortium of Tractebeland Total to implementthe Taweelah A1 generationand desalination project.We choose this combinationfor several reasons. First ofall they know the regionand the procedure of projectevaluation. They also havethe experience and know-how, which make themmore qualified on complexprojects. Obtaining thebest price for the existingassets was also a top priority for the ADWEA. Andfinally, there was the non-price issue, more preciselythe attractive technicalproposal which made themmore attractive and competitive comparedwith the other bidders.


Philippe LekaneCFO Baymina

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Turkey

At the beginning ofFebruary 2004, the 770 MWgas-fired Baymina powerplant in Turkey, enteredinto commercial operation,delivering electricity to theTurkish grid operator TETASunder a long-term contract.When we acquired theproject in 2001, our goalwas to construct an energy-efficient producer of elec-tricity. We achieved this,first of all, by choosing themost efficient technologyfor gas-fired power plants- 9FA++ gas turbines.Secondly we introduced anew style of managementand approach towards operating and maintainingthe power plant. Thiscombination allows us tobe a low-cost producer.

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Future Objectives

Looking forward to 2004 and beyond,TRACTEBEL EGI has set itself fourmain objectives in this region.

The first is to continue its organic development in Thailand, which is thestrongest position in this region.

The second objective is to develop theMiddle East as a ‘stronghold’. Buildingon its presence in this area, the aim is toadd one or two more IndependentWater and Power Producer projects toTRACTEBEL EGI’s portfolio in 2004.

Third, TRACTEBEL EGI will continueto monitor the market very closely inAsia, and especially in South Korea,where it already has a good invest-ment in a gas distribution company(Hanjin City Gas), and where it intendsto examine investment opportunitiesin the power sector, when they arise.

And fourth, since the Middle East isthe world’s biggest LNG producing re-gion and Asia is the world largest LNGconsuming region, it makes sense tocontinue to foster synergies betweenthe Middle East and the LNG regions.

a low-cost producer

August - South Korea#Hanjin City Gas starts the construction of pipelines to deliver natural gasto more than 60 factories, mainly tissue colouring industries, in the Geom Jun industrial area inKyunggi Province.

December - Thailand# Glow group successfully completes the refinancing of the equivalentof 13 billion THB (US$ 325 million).

December - Singapore# Tractebel EGI closes the sale of its minority stakes in SembGas,SembCorp Cogen3 and SUT Sakra.

February 2004 – Turkey # The Baymina power plant4 starts its commercial operation andthe refinancing is successfully closed.

’


Key regionsLNG

Gas trading

Tractebel regasification terminal

Tractebel liquefaction plant

Third party regasification terminal

Tractebel LNG flow

Trinidad & Tobago

Everett

Over the last few years, LiquefiedNatural Gas (LNG) has grownmassively in importance and isnow as visible on the energymarkets as natural gas, oil or coal.TRACTEBEL EGI is involved inthe liquefaction, transport, stor-age and regasification of LNG,thus having a position in mostparts of the value chain, with theexception of exploration andproduction.

The SUEZ energy companies are wellestablished in LNG circles, and have astrong presence in the Atlantic Basin,mainly through the control of LNGregasification terminals on both sidesof the Atlantic. These terminals areZeebrugge, Belgium, operated byFluxys, and Everett, Boston, operatedby Tractebel LNG North America.

Tractebel LNG in London is building onthis presence to promote TRACTEBELEGI’s growing interests in the interna-tional LNG scene, particularly in theAtlantic and Pacific, and to identifyand develop new sources of LNG sup-ply to support further development ofits sister companies in the regionaldownstream gas markets.

Tractebel LNG coordinates the group’sLNG shipping capacity, which consistsof 8 LNG tankers with a total capacityexceeding 1 million m3. The HoeghGalleon and Excalibur, which are di-rectly chartered by Tractebel LNGLondon are utilised for merchant trad-ing. In 2003, the vessels transportedLNG from Oman to customers in NorthAmerica, Europe and the Far East under

a medium-term supply contract agreedby Oman LNG and Tractebel LNG. Allof the cargoes purchased from OmanLNG were originally destined for theLake Charles regasification terminal inLouisiana, US. However, due to marketdemand in the Far East most of thecargoes were sold to KOGAS (Korea)and TEPCO (Tokyo Electric PowerCompany).

Tractebel LNG also manages the group’s10% equity participation in AtlanticLNG, a liquefaction plant in Trinidadand Tobago. The Atlantic LNG facilityin Trinidad is the primary source ofLNG for Tractebel LNG North Americafor deliveries to terminals at Everett(Massachussetts), Cove Point, (Maryland),Penuelas (Puerto Rico) and Lake Charles(Louisiana).

Tractebel EGI currently purchases andships approximately 7.5 million tonnesof LNG a year from Trinidad, Omanand Qatar.

2003 was a year of change in the globalLNG market. In response to the currenthigh gas prices and the belief that LNGis the answer to the supply gap in theUS, many oil and gas majors are nowtaking great interest in the developmentof LNG assets. What was originally asmall community of specialist opera-tors has expanded rapidly. At the endof 2003, there were over 40 LNG proj-ects in various stages throughout theworld, compared with fewer than 20at the start of the year.

The market is now much more compet-itive, but TRACTEBEL EGI is wellplaced to meet this challenge. It candraw on 30 years of expertise in theLNG business and has a thoroughknowledge of the industry. Its pres-


Fluxys operates the Belgian gas transmission network and storage facilities. Its subsidiary Huberator operates the Zeebrugge hub. Fluxys LNG owns and operates the Zeebrugge LNG terminal. www.fluxys.net

Distrigas is a Belgian natural gas and LNG merchant active in the European market in supplying industrial companies, power producers, resellers and distribution companies. Distrigas controls two LNG carriers. www.distrigas.be

Tractebel LNG (for more details see pages 36-39, 48-49)

Tractebel LNG North America (for more details see pages 24-29, 44-45)

Tractebel Gas Engineering is one of the world’s leading engineering contractors for the storage of LNG, LPG and petrochemical gases. The company offers high-value engineering by means of its core competence in turnkey contracting. www.tractebel.de

SUEZ

EGEElectricity & Gas Europe

EGIElectricity & Gas International

Energy &Industrial Services


ence in most parts of the value chain,and its involvement in downstreamactivities such as distribution give it acompetitive edge.

TRACTEBEL LNG is also one of thefew truly global players, and in 2003 itfurther consolidated this position. Ithas established a new presence in sup-plying LNG from the Middle East,with sub-charter agreements withOman LNG and RASGAS in Qatar. InSouth Korea, it has established a newrelationship with KOGAS as a spotsupplier, and has also supplied LNGto the Tokyo Electric Power Company(TEPCO). TRACTEBEL LNG has ex-panded its presence in Spain and NorthAmerica on the spot cargo market, oper-ating as a merchant player moving spotcargoes to the highest value markets. In2003, Tractebel LNG became the largestspot supplier to KOGAS. It now haswell established relationships with allLNG suppliers across the globe, andwith most buyers of spot cargoes.

Overall, the global LNG market offersgreat potential for expansion and islikely to be one of the main drivers ofTRACTEBEL EGI’s growth in theyears to come.

SUEZ energy companies active in the LNG business

Key regions - LNG

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highlights 2003 | LNGFebruary# Tractebel LNG negotiates a contract with Oman LNG for 11 cargoes to be delivered to the US.

March-November# The Excalibur1 lifts 7 cargoes from Oman. 4 cargoes are delivered to KOGAS in South Korea; the 3 other cargoes aredelivered to TEPCO in Japan.

September# First cargo from Trinidad & Tobago (ALNG) to TEPCO in Japan on the Berge Everett2.

September# Tractebel LNG negotiates a spot cargo on the Hoegh Galleon3 from Oman to Lake Charles with Total.


September# Tractebel LNG signs a MOU4 with Peru LNG, agreement under which Tractebel will ship 2.7 million metric tonnes pa for a periodof 18 years from Pampa Melchorita, Peru, to its proposed LNG receiving terminal and regasification facility on the Pacific Coast of Mexico. Thisproject is currently in preliminary development, with a targeted operational start-up planned for 2008.

End 2003# Tractebel LNG North America along with Tractebel LNG negotiates two supply deals into Lake Charles with BG in 2003 and 2004.

LNG carriers owned or chartered

NAME CAPACITY SERVICE START OWNERSHIP/CHARTERS

EGIBerge Boston 138,000 m3 Q1 2003 51/49% ownership by Bergesen and Distrigas; chartered

under a long-term agreement by Tractebel LNG North America

Berge Everett 138,000 m3 Q2 2003 100% owned by Bergesen; chartered under a long-term agreement by Tractebel LNG North America

Excalibur 138,000 m3 Q4 2002 100 % owned by Exmar ; chartered under a medium-term agreement by Tractebel LNG

Hoegh Galleon 87,000 m3 Q3 2002 100 % owned by Leif Hoegh; chartered under a long-term agreement by Tractebel LNG

Inigo Tapias 138,000 m3 Q3 2003 100% owned by Naviero F. Tapias; chartered under a medium-term agreement by Tractebel LNG North America

Matthew 125,000 m3 Q4 1998 100% owned by Tractebel LNG North AmericaEGE

Methania 130,000 m3 Q4 1978 100% owned by Exmar; chartered under a long-term agreement by Distrigas

Mourad Didouche 126,000 m3 Q4 1989 100% owned by Sonatrach ; chartered under a long-term agreement by Distrigas

4

North America

USA Mexico

Tractebel LNGNorth America

TractebelNorth America

TractebelPower, Inc.

Tractebel EnergyMarketing, Inc.

Tractebel ProjectDevelopment, Inc.

Tractebel Energy Services, Inc.

Tractebel Mexico*

* Corporate office closed on March 31, 2004.

South America

Tractebel EGISouth America

(Brazil)Tractebel Brasil Tractebel Energia

TractebelArgentina Litoral Gas ECS

Gasoducto Nor Andino(Argentina)

South America

Argentina

Tractebel Perú

EnerSur Gas Natural deLima y Callao

Tractebel IndustrialServices Perú

TGP

Peru

Tractebel Andino Electroandina Edelnor ColbúnGasoductoNor Andino

(Chile)Distrinor

Chile

Brazil

Simplified organisational chart per regionat December 31, 2003


Middle East - Asia

Asia Thailand Laos

Tractebel Asia(Thailand)

Singapore

Elyo South East Asia

Glow Houay Ho PowerCompanyPTT-NGD

South Korea

TractebelKorea

Middle East

EGI Middle East(Dubai)

Adu Dhabi

TractebelAbu Dhabi

Oman

United PowerCompany

Turkey

Baymina EnerjiGulf Total Tractebel

Power Company(Abu Dhabi)

Hanijn City Gas

Regional headquarters/ Coordination of country activities/Representative Office

Operating Company

United Kingdom Luxemburg

LNG

Tractebel LNG TradingTractebel LNG


SOUTH AMERICACountry

Argentina

Argentina-Chile

Brazil

Chile

Peru

Company name

ECS

Litoral Gas

Gasoducto Nor Andino

Tractebel Energia

Colbún

Distrinor

Edelnor

Electroandina

EnerSur

Gas Natural de Lima y Callao

Tractebel Industrial Services Perú

Transportadora de Gas del Perú (TGP)

Activity

Gas and electricity marketing and consulting company

Gas distribution and transport

Gas transport

Power generation

Power generation and transmission

Gas marketing and distribution




Gas distribution

Gas-Related Services

Gas transport

Overview operating companies per region


at December 31, 2003

$ Tractebel share: 46.67%$ Independent intermediary bringing together electricity and natural gas buyers and sellers % Buys electricity and natural gas on the open market and sells it on directly to large industrial customers and distributors$ Distributes and transports natural gas in Santa Fé and northern part of Buenos Aires province (136,387 km2) $ Tractebel share: 64.16% % 462,791 customers of which 50 are large industrial customers, 17 sub-distributors and 6 power stations % Sales 2003: 3.179 billion m3

% Provides gas transportation services between northern Argentina and northern Chile % Tractebel share: 84.7%% Customers: 4 power stations% Sales 2003: 0.842 billion m3

% Brazil’s largest private power generator with activities in the States of Santa Catharina, Rio Grande do Sul, Parana, Mato Grosso do Sul andGoias. Its generating park is composed of 6 hydropower plants and 5 thermal plants with a total installed capacity of more than 7,000 Mweq

% Tractebel share: 78.3% % Customers: industrial clients, distributors and traders% Third largest power generator in the SIC system (Sistema Interconectado Central) which covers the central and southern part of Chile.

Its generating park is composed of 5 hydropower plants and 3 thermal plants with a total installed capacity of more than 1,500 Mweq.% Owner and operator of a 412km HV transmission line connecting Colbún to Santiago % Holds a 42.5% stake in the gas pipeline linking Santiago and the Nehuenco power plant % Tractebel share: 29.21% % Customers: power output sold to the industry, principally copper mines, and the grid% Markets and distributes natural gas in northern Chile % Tractebel share: 33.25% % 1 cooperative and 6 industrial customers % Sales 2003: 0,159 million m3

% Third largest power generator in the SING system, operating 9 units with a total installed capacity of 720 MWeq. % Owner and operator of 1,056 km of transmission lines.% Tractebel share: 27.38% % Customers: copper mines, distributors, refineries, port, mines, real estate, desalination plants. % Largest power generator in the SING system (Sistema Interconectado del Norte Grande) that covers northern Chile.

Its generating park of 10 units located in Tocopilla totals an installed capacity of 1,027 Mweq. % Owner and operator of a 907km HV transmission line % Tractebel share: 33.25% % Customers: power output sold under long-term contracts to copper, gold and nitrate industries% Fourth largest power producer operating 2 thermal power stations in southern Peru representing 369 MWeq. % Owner and operator of a 222km HV transmission line % Tractebel share: 100% (78.95% as from February 2004 after the Peruvian Pension Funds too

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