BNDES - ANNUAL INTEGRATED REPORT 2017

At the end of 2017, the first phase of the Pirapora Solar Complex, the first solar power generation project financed by BNDES, began its operations, with capacity to supply about 190,000 households. With a total installed capacity of 150 MW, the solar energy complex in the city of Pirapora (MG) represents significant investments in the sector – in the order of R$ 940 million, of which R$ 529 million is financed by the Bank. Divided into three phases, after its completion the project will be the largest solar plant in Latin America.

The São Paulo State Sewage Company (Sabesp) project to interconnect the Jaguari (Paraíba do Sul river basin) and Atibainha (Cantareira system) reservoirs has the purpose to guarantee the availability of water in the Integrated System of the Metropolitan Region of São Paulo by enabling the water flow between the Jaguari and Atibainha dams. The project will benefit about 10 million people and help prevent supply crisis like the one faced by the population of São Paulo between 2014 and 2016. Costing R$ 555 million, about 33% below the initial budget, the project saved many financial resources. We contributed 90% of the total cost.

The year of 2017 was marked by advances and deliveries in the construction of the Bahia Subway (photo) – with the inauguration of the final stretch scheduled for 2018 – of the VLT Carioca – with the Central Station inaugurated in October 2017 – of the Line 5 (Lilac) of the São Paulo Subway – the Adolfo Pinheiro-Brooklin section began operations in November – and of a 175-meter-long overpass under the Renaissance Square in Niterói linked to the Rio-Niterói Bridge, all financed by the Bank

The implementation of a Raízen production unit of second-generation ethanol (E2G), which we supported, reached a production of 11 million liters of this biofuel in the 2017-2018 harvest. The plant is expected to reach full capacity in the 2019-2020 harvest (40 million liters), making it a candidate to be the first E2G-producing unit in the world to achieve economic viability. Since E2G is obtained from agricultural residues, such as bagasse and sugarcane straw, the project has the potential to change the technological paradigm of the biofuels sector, addressing the concerns of some countries regarding the dilemma "biofuels or food" and thus increasing the international demand for Brazilian ethanol

In 2017 we approved our second financing for a Brazilian gaming company, with funds from the BNDES Program for the Development of the Economy of Culture (BNDES Procult). The financial support, in the amount of R$ 2.6 million, will be allocated to the 2016-2018 investment plan of Sioux Serviços de Informática Ltda., contributing to job creation in areas such as planning, game design, 3D graphics projection, programming, support, project management and press advisory.

Our disbursements to agroindustrial cooperatives totaled more than R$ 2.5 billion in 2017, providing investments in the implantation and modernization of grain processing units, warehouses, pig production units, feed factories, and poultry and pork slaughterhouses. The expansion of production and storage capacity of cooperatives was also the object of new operations approved over the year, such as the financing of R$ 85 million for Cotrijal, for the acquisition of 14 grain reception and storage units, and the operations with Cooperativa Aurora for the acquisition of a poultry and pork slaughterhouse in Erechim (RS) (photo) and the expansion of pig processing units in Chapecó (SC).

Last year, we published the results of two selection processes of the Development, Sustainability and Innovation Plan for the Mining Sector (Inova Mineral), carried out in partnership with Finep and the National Institute of Intellectual Property (INPI). The first selected 24 investment plans for the sector, including projects such as an integrated system for monitoring and managing the integrity and compliance of tailings dams, and a graphene technological platform. The investment amounted to R$ 737 million, with BNDES and Finep contributing R$ 500 million. In the second selection process, another 19 investment plans were selected, totaling R$ 1.4 billion and focusing on the development of more efficient materials, equipment and processes for mineral

We supported the implementation of a new Fibria production facility in Três Lagoas (MG), which will make the company's industrial complex one of the largest pulp production systems in the world. The new line can produce up to 1.95 million tons per year of hardwood pulp, generating revenues of about US$ 1.2 billion in exports. In addition to the production unit, the initiative included the creation of a fully automated nursery of eucalyptus seedlings, with a controlled irrigation system, climate monitoring and automatic transport of seedlings with tracking. The new plant is also environmentally sustainable, being able to return to the environment cleaner water than the one collected, as well as to recover chemicals used in the production process to generate surplus electric energy, available to the national interconnected electric grid.

Throughout the year we endeavored to attract engineering projects to Brazil and consolidate the local technical expertise in the sector. Under the leadership of the Ministry of Industry, Foreign Trade and Services (MDIC), we also provided technical support for the elaboration of the new automotive regime – Rota 2030, which is scheduled for launch in 2018. We also supported various projects related to the automotive industry with a focus on innovation and sustainability, such as the inauguration of a dynamic car simulation center of Fiat Chrysler Automobiles (FCA), in partnership with the Pontifical Catholic University of Minas Gerais (PUC Minas), which aims to generate innovations focused on the safety of vehicles, people and road systems.

In another effort to support exports, the BNDES Exim Post-Shipment Goods and Aircraft line throughout 2017 financed US$ 662 million for the export of 25 aircraft.

The operations to support the export of Brazilian engineering services underwent a reassessment. The following criteria were established for its continuity: level of physical implementation of the project; equalization of the sources of financial resources of each project; level of additional risk of the debtor country for each operation; inexistence of illegal acts linked to the project. In addition, we have begun to sign agreements with the debtor country, the exporting company and BNDES in order to institute new enforcement mechanisms in case of irregularities.

We selected, through a public call, a manager for the first venture debt fund to support innovative small and medium-sized companies. The initiative is part of our effort to support the development of the long-term corporate credit market, facilitating access to credit by MSMEs, lengthening financing terms, reducing interest rates and making guarantees more flexible, through investment in private corporate credit funds, in partnership with other institutional investors.

We structured a public call for the Angel Co-investment Fund to select startups in the priority sectors of agribusiness, biotechnology, smart cities, creative economy, nanotechnology, new materials, health, and information and communication technologies. This ten-year fund will have an estimated equity of R$ 100 million, of which R$ 40 million in BNDESPAR's interest, and will support companies with annual net operating revenues of a maximum of R$ 1 million.

Vinci Partners was selected to structure and manage the Sustainable Energy Fund, an energy sector investment fund focused on sustainable projects. Announced in 2016, the fund was registered in August 2017 and is currently raising funds with investors. Its equity will be up to R$ 500 million, with a maximum of 50% in BNDESPAR participation.

With the renewal of the support, another 6,821 cisterns will be installed in 68 municipalities in the region, distributed over nine states. In addition to using social technology for access to water, the operation includes resources for the purchase of productive inputs, such as seeds, seedlings and small animals, and for infrastructure for vegetable gardens, orchards, sheepfolds or chicken coops, according to the preference and vocation of the family supported. In this new phase, the project includes the provision of family monitoring services for social and production inclusion for families in poverty or extreme poverty (monthly income per capita of up to R$ 170 and R$ 85, respectively). Thus, they begin to receive technical assistance on productive management practices for up to 24 months. This will allow beneficiaries to be eligible for the Rural Productive Activities Promotion Program, a Federal Government’s program that grants nonreimbursable financial resources for the implementation productive projects, disbursed by the Ministry of Social Development (MDS).

The year 2017 was marked by a record disbursement of the fund, in the total amount of R$ 223.7 million, representing an increase of 67% in relation to the previous year. The total disbursements for projects approved in the year also showed an increase of 45% compared to 2016, reaching R$ 235 million. Two public calls were launched last year to support new projects. The first, providing up to R$ 150 million, is earmarked for the selection of ten projects aimed at promoting the consolidation or strengthening of community preservation projects. The second, amounting to R$ 200 million, focused on the choice of up to five forest recovery projects that could contribute to the technical and managerial structuring of the productive chain of the reforestation sector and to the environmental regularization of rural properties.

We have continued to advance our education initiatives and have prioritized innovation and management issues. We set the focus of our efforts on the use of digital technologies and connectivity. We have taken a step in this direction by helping to develop the Connected Education Innovation Program (Federal Decree 9,204/2017) and committing ourselves to participate in its advisory committee. We expanded our sponsorships related to education initiatives, which are essential for the country's development. With a support of R$ 3.4 million, we sponsored several events and actions of the Brazilian Mathematics Biennial (2017-2018) program, which brought the International Mathematical Olympiad (photo) to the country and stimulated students from all over the world to expand their knowledge in the discipline and in scientific matters.

For the first time, we sponsored Copacabana's New Year's Eve festivities, one of the biggest events in the city of Rio de Janeiro, in an action that sought to contribute to the recovery of the self-esteem of Rio de Janeiro and to the resumption of tourism in the city. With a total audience of 2.8 million people, our sponsorship has stimulated hotel occupancy and local economic growth.

We offer a diverse cultural program at the Espaço Cultural BNDES, which houses a theater and a gallery and is located in our building in the center of Rio de Janeiro. Throughout the year, we carried out more than eighty cultural activities, such as musical shows and exhibitions, all entirely free and selected by public calls open to producers from all over the country. In this way, we contribute to the democratization of access to culture and stimulate Brazilian artistic production. In 2017, the Espaço Cultural BNDES received 30,409 visitors.

In 2017, we invested a total of R$ 8.75 million in the maintenance of training centers and in the organization of competitions. Thus, we helped our athletes to obtain important results in the main championships of the modality. In addition to the title in the South American Championship held in Paipa (Colombia), in which Brazil won the highest number of medals (50), prizes were won in the U-23 World Championship, in the Canoeing Sprint World Cup and in the Slalom World Championship, in which Ana Sátila won the bronze medal (photo). Paracanoeing also brought important results for the country, such as titles in South American and Pan American competitions, and fifth place in the World Cup.