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STATEMENT OF INTEREST IN THE "AGUAS DE LIMA SUR II" PRIVATE INITIATIVE PROJECT SUBMITTED BY BIWATER USA INC

UNOFFICIAL TRANSLATION

In case of divergence between the English and Spanish texts, the Spanish version shall prevail

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STATEMENT OF INTEREST IN THE "AGUAS DE LIMA SUR II" PRIVATE INITIATIVE PROJECT SUBMITTED BY BIWATER USA INC

The PROINVERSIÓN Committee in Sanitation and Irrigation Projects ­ PRO AGUA, through Agreement Nº 125-012010-Saneamiento adopted in session dated December 29, 2010, ratified by PROINVERSIÓN Steering Council, adopted in its session dated December 30, 2010, agreed to declare of interest the private initiative called "Aguas de Lima Sur II" Project, submitted by BIWATER USA INC (hereinafter, the PI Holder). The following information shall be taken into account pursuant to Legislative Decree N° 1012 Framework Law on Public-Private Partnerships for generating productive employment and defining regulations for expediting private investment promotion process and its Regulations, approved through Supreme Decree N° 146-2008-EF.

I. Summary of the Project a) Objective and Scope of the Investment Project For this Statement of Interest, the Project shall refer to the project of the "Aguas de Lima Sur II" Private Initiative. The Project includes the design, financing, construction and implementation of a Seawater Desalination Plant, a drinking water storage and distribution system, as well as the Seawater Desalination Plant's maintenance and operation. The Seawater Desalination Plant (hereinafter, PLADEMAR) shall use the reverse osmosis technology, have a 3 design capacity of 100,000 m /day of water for human consumption and an annual minimum operational availability of 96.2%. Likewise, the storage system shall comprise the construction of seven (7) new reservoirs and the construction of the main drinking water distribution system, with a length of about 60 km. The PI Holder declares the following as the Project's objective: "To improve the quality of life of the people living in the influence area of the Project, guaranteeing the 1 supply of drinking water, which shall boost the economic development of these districts as well as support the rendering of sanitation services that are SEDAPAL's responsibility". b) Public Utilities and/or Assets on which the Project shall be Developed: The involved Public Utility is the Drinking Water Service (System for the Collection, Treatment and Main Distribution of Drinking Water). In compliance with Law Nº 26338, General Sanitation Services Law, one of the systems that make-up the Sanitation Services is the Drinking Water Service, which in turn comprises the Drinking Water Production System and Distribution System. c) Contract Modality and Term The private investment participation modality shall be carried out through a BOT (Build, Operate and Transfer) concession by gratuitous title, in accordance with Item b) of Article 14º of Supreme Decree N° 059-96- PCM. This concession qualifies as a Public-Private Partnership, classified as self-sustaining in accordance with Subsection ii), Item a) of Article 4º of Legislative Decree Nº 1012. The Term of the Concession Contract (hereinafter, Contract) is 23 years. d) Investment Referential Amount The total referential cost for the Project, for every concept, including, among others, the technical file, construction and commissioning, amounts to US$ 154,684,641 (one hundred fifty four million six hundred

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Southern Lima Districts: Santa María, Pucusana, Villa El Salvador, Lurín, Punta Negra, Punta Hermosa, San Bartolo

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eighty four thousand six hundred forty one and 00/100 Dollars of the United States of America), without including the General Sales Tax or the design and works supervision cost. e) Preliminary Schedule of the Investment Project

Year 1 Activity 1 Final Studies Financial Closing (2) PLADEMAR Construction (2) Construction of Distribution Lines + Reservoirs Operation and Maintenance

(1) Includes approval from competent authority (2) Includes commissioning

(1)

Year 2 Quarter 4 1 2 3 4 1

Year 3 Quarter 2 3 4 1

Year 4 Quarter 2 3 4

Year 5 to 23 Quarter 1 2 3 4

Quarter 2 3

f)

Proposed Compensation: Payment to the Concessionaire shall be carried out only through the Basic Unit Payment (RUB, as per the Spanish acronym) per cubic meter of drinking water delivered to SEDAPAL. RUB multiplied by a delivered volume in cubic meters of drinking water comprises three payment components: Payment for Investment (RPI), which remunerates the investment made; Payment for Maintenance and Operation (RPMO), which compensates for the costs incurred by the Concessionaire for operating and maintaining the Project, not including electric power; and Payment for electric power consumption.

The Project requires a rate increase, and its final percentage shall be processed by SEDAPAL in compliance with the current legislation.

II. Quality Indicators of the Service to be Supplied: The main commitment of the Concessionaire shall be compliance with the quality and quantity of the drinking water delivered to SEDAPAL, which shall comply with the current legislation, with the specific values and with the delivery volumes mentioned in the Contract. PLADEMAR shall use the reverse osmosis desalination process. Other technologies that have not been successfully tested around the world for at least three (3) years, shall be prohibited. Liquid effluents and brines produced by PLADEMAR can be returned to the ocean via Underwater Emissions Outlet(s). The length and final depth shall be approved by the competent authority, so that this return to the receiving body complies with the established National Water Quality Standards. The monitoring points and the frequency of the quality controls of the drinking water after leaving PLADEMAR, as well as the quality of the receiving body in the coastal area, shall be established by the competent authorities. The Concessionaire shall provide the necessary facilities so that the competent authority, the Grantor, SEDAPAL, or those appointed, carry out the corresponding samplings in the monitoring points. In case the current legislation is modified during the Contract's effective term, the Concessionaire shall comply with the new requirements. The State is owner of the liquid effluents, brines, solid residues and other products generated by PLADEMAR. Regarding the final disposition of the residues, only the liquid effluents, brines, solid residues and other products generated by PLADEMAR can be used, provided the provisions and applicable regulations are met. III. Essential Elements of the Draft Contract:

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Objective Design, financing, construction and operation of PLADEMAR and a drinking water storage and distribution system, as well as PLADEMAR's maintenance and operation. Contract Modality BOT (Build, Operate and Transfer) Concession Contract by gratuitous title. Concession Term Twenty three (23) years as from the contract subscription date. Grantor The State of the Republic of Peru represented by the Ministry of Housing, Construction and Sanitation. Concessionaire The legal person incorporated by the successful bidder that signs the Concession Contract with the Grantor. SEDAPAL Abbreviated name of the sanitation service supply company of Metropolitan Lima "Servicio de Agua Potable y Alcantarillado de Lima S.A.". It shall sign, with the Concessionaire, the Service Supply Contract attached to the Concession Contract. Strategic Partner and Minimum Share The strategic partner shall be the legal person, Concessionaire shareholder, that certifies compliance with the operation or construction requirements and that owns the minimum share in the Concessionaire. The Minimum Share percentage of the Strategic Partner, regarding the Concessionaire's corporate capital, shall be twenty five percent (25%) and maintained during the effective term of the Concession Contract or Contract. Assets Regime During the effective term of the Concession, the Grantor will maintain ownership of the Grantor's assets. Grantor's assets include: i) real estate, easements and infrastructure works delivered by the Grantor, including the Concession Area; and ii) the assets resulting from the works and buildings at large within the Concession Area, which are built or acquired by the Concessionaire during the effective term of the Concession. Said assets shall return to the Grantor at Contract's termination. Concessionaire Assets include: all assets destined to the execution of the Contract, other than the Grantor's Assets, that are property of the Concessionaire. At the end of the effective term of the Concession, the Concessionaire shall hand the Project over to the Grantor in operational conditions, replacing those Grantor's Assets which, due to their condition, use or time elapsed may become obsolete, for complete and new equipments that will perform the same function or have the same aim, making sure they fulfill every minimum technical requirement so that at the end of the Concession all the assets shall have optimum quality. Replacement, which shall be carried out near the end of the effective term of the Concession to be established in the Concession Contract, shall be understood as effected provided the replaced assets fulfill the same operational functions as the original assets. The terms and conditions for asset transfer and reception shall be defined in the Concession Contract. Lands and Easements The private initiative proposes to use a land located in the Santa María del Mar district for PLADEMAR's operation. However, other location alternatives in State or private lands can be proposed; nevertheless the availability of these lands shall be irrefutably certified.

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Regarding the lands where the main distribution line shall go through and the location of the new reservoirs, SEDAPAL shall be responsible for the procurement of the easements for the construction and functioning of such lines and reservoirs. Assessments The assessments shall be carried out in no more than nine (9) months counted from the Closing Date. This term includes the necessary authorizations and approvals by the Competent Authorities. The Concessionaire shall prepare the design of PLADEMAR. For this purpose, it shall define the quality of the water to be collected and choose the most convenient for its design, in order to render a continuous water supply service with the quality and quantity established in the Contract, regardless of the conditions of the sea, except in cases of force majeure duly supported by the Concessionaire. The Concessionaire shall implement a pilot plant with a minimum capacity of 100 m /day during the assessments preparation and construction stages in order to determine and refine the final design parameters of PLADEMAR. The Concessionaire commits to prepare and manage all the assessments and procedures needed to obtain the approvals and authorizations by the Competent Authorities for the execution of the Project. It shall be the responsibility of the Concessionaire to prepare and obtain the respective approval of the Environmental Impact Assessment by the Competent Authority. Likewise, the Concessionaire shall include in the EIA the Environmental Monitoring Program, and establish a marine environment baseline, in order to define the quality characteristics of the water of the receiving body before the Project's operation startup so that it can be compared, by the Competent Authority, with the results of the monitoring, receiving body control, liquid effluents, brines and other residues produced during its operation stage. The various components of the Technical File shall be approved by the Competent Authorities for matters within their jurisdiction.

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Project Engineering and Works The development of the designs of the Project's components shall be carried out in compliance with the National Buildings Regulations, as applicable, and pursuant to internationally accepted standards. The main works comprised in the Project are the following: Seawater collection, from the collection point with its entire auxiliary works. Seawater Desalination Treatment Plant. Brine and liquid effluents disposal system, until their immersion in the receiving body, including, if necessary, dilution with seawater works. Pumping stations, main distribution lines and drinking water reservoirs. Power supply for PLADEMAR operation. Instantaneous and accumulated flow meters. SCADA-type data communications system or similar for PLADEMAR and the distribution lines and reservoirs. Accesses. Services required by PLADEMAR. If the Project needs to use pre-existing infrastructure, the Concessionaire, jointly with the Grantor and/or SEDAPAL, as the case may be, shall define the terms and conditions of use. Schedule and Works Execution Term The Concessionaire shall submit as of the Obligations Effective Date, a works execution schedule, including components and headings related to the works until they are finished, as well as an equipment replacement plan, indicating their useful life.

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The term of the Project's works construction shall not surpass twenty four (24) months, counted from the Obligations Effective Date. This term includes the implementation . Obligations Effective Date The Obligations Effective Date shall be set once all and every single one of the following conditions is met by the parties: a) Following SEDAPAL request, the Grantor has obtained or imposed the required easements, pursuant to the conditions established in the Contract. b) The Grantor has delivered the corresponding lands where the Project shall be executed, pursuant to the conditions established in the Contract. c) The Grantor has approved the Technical file as per timely and complete request by the Concessionaire. d) The Concessionaire has obtained the approval for the Project and the disposal authorization by the Competent Authorities. e) The Concessionaire has obtained the water use licenses by the Competent Authority. f) The Concessionaire has obtained the EIA's approval before the Competent Authority. g) The Concessionaire has obtained the authorization to install or build temporary or permanent works in the aquatic areas by the Competent Authority. h) The Concessionaire has obtained from the Competent Authority the Certificate of Non-Existence of Archaeological Remains (CIRA) concerning the Concession Area. i) In case the Constructor is a company hired by the Concessionaire, the latter shall have provided the Grantor with a certified copy of the corresponding construction contract. j) In case the Operator is a company hired by the Concessionaire, the latter shall have provided the Grantor with a certified copy of the corresponding operation contract. k) The Concessionaire has requested and obtained the necessary authorizations and licenses from the Competent Authorities to build the works comprised within the Project. l) The Concessionaire shall accredit the Financial Closing, which means having signed the financing agreements and that the Grantor, SEDAPAL and/or the Concessionaire have complied with the conditions required so that the latter may have fund availability. m) The Concessionaire has a pre-agreement or contract with a sanitary landfill concessionaire or owner to guarantee final disposal of slurries and/or solid residues generated by PLADEMAR. n) The Concessionaire has accredited the cash payment of the corporate capital, pursuant to the Contract. Construction Startup Construction shall start no later than thirty (30) calendar days as from the Obligations Effective Date. Operation Startup Operation Startup shall occur on the date the Implementation Certificate is submitted. The Contract shall specify the maximum term for starting the operation of the works, as it may correspond. Maintenance and Operation The Concessionaire commits to maintain the Concession Assets until the date the Concession expires. After the trial stage and implementation, and in a term established in the Contract, the Concessionaire shall provide to the Grantor the Project's Operation and Maintenance Manual, same that shall detail the Maintenance and Operation works to be carried out during the Concession's effective term and it shall require the Grantor's approval. Basic Unit Payment ­ RUB RUB is the compensation for rendering the services of desalination and delivery of drinking water to SEDAPAL, expressed in Nuevos Soles per cubic meter. RUB multiplied by a nominal volume of 36.5 million of cubic meters of drinking water per year equals the Payment for Investment and for Maintenance and Operation. Payment for Investment (RPI) RPI is the consideration for the investment carried out. Liquidation and payment of RPI shall be done quarterly, pursuant to the procedures established in the Contract.

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RPI shall have the contract guarantee of the Grantor, through the Guaranteed Annual Minimum Income (IMAG)2. IMAG's application form and conditions shall be established in the Contract. Payment for Maintenance and Operation (RPMO) RPMO is the consideration for maintaining and operating the Project. Liquidation and payment of RPMO shall be done monthly, pursuant to the procedures to be established in the Contract, and comprises the following: RPMO Fixed Payment (RPMOF), is the fixed component of the RPMO and it shall be paid independently of the quantity of drinking water actually delivered, except in case the required volume is not delivered due to causes attributable to the Concessionaire. RPMO Variable Payment (RPMOV), is the variable component of the RPMO which corresponds to the costs of the products of variable nature in the production of drinking water, without taking into consideration the electric power. RPMOF and RPMOV shall be adjusted when the IPM, published by INEI, varies and exceeds the accrued 3%, pursuant the provisions of the Concession Contract. Payment for Consumption of Electric Power (CEEElect). The Electric Power actually consumed shall be paid by SEDAPAL through the Investment Trust. The Concessionaire shall hire an energy supplier company to provide the service. SEDAPAL shall express its conformity with the energy supply contract before its subscription. The specific energy consumption offered by the Concessionaire shall be considered in the competition factor 3 and shall not exceed 4.5 Kwh/m . Trust Funds The Project financial scheme foresees: Collection Trusts: It is the trust fund SEDAPAL shall constitute so as to guarantee appropriate and timely compliance with obligations derived from the private investment promotion processes granted or to be granted. In this trust fund, SEDAPAL shall pay the amounts the Concessionaire is entitled to pursuant to the provisions of the Contract. Private Trust Fund: It is the trust fund the Concessionaire may constitute, if deemed necessary, and it shall be the one in which the Collection Trust shall transfer the necessary funds to make the guaranteed payments to which the Concessionaire is entitled. Economic Financial Balance The Contract shall stipulate a mechanism to re-establish the economic-financial balance to which the Concessionaire and the Grantor shall be entitled in case the Concession is affected due to changes in the applicable legal regulations. Certificate of Work Progress (CAO) SEDAPAL shall issue Certificates of Work Progress (CAO) after verifying compliance of a Construction Milestone, pursuant to the Contract. CAOs shall be issued in no more than fifteen (15) business days after the Concessionaire has delivered the application. In the case of the last Construction Milestone, the corresponding CAO shall be subject to the issuance of the Implementation Certificate.

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Unconditional and unrestricted minimum quarterly payment that SEDAPAL makes to the Concessionaire in compliance with the terms to be established in the Service Supply Agreement, even in case of Force Majeure.

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The issuance of a CAO generates an irrevocable right for the Concessionaire to receive a percentage of the Payment for Investment (RPI). Each CAO shall indicate the percentage of the executed works' investment and shall be issued following SEDAPAL's previous approval. Construction Milestone Progress of works shall be considered as Construction Milestones and they shall not be less than 10% of the total investment on the works determined in the technical file, and which shall be duly approved by SEDAPAL. The Contract shall define the terms and conditions for SEDAPAL to grant the aforementioned approval. Each Milestone executed by the Concessionaire and accepted by SEDAPAL (pursuant to a procedure to be contractually established) shall generate a CAO issuance. The acceptance of the last Construction Milestone shall be conditioned to the start of the Operation. Insurance Regime The Concessionaire shall hire the following insurance policies, as appropriate: Personal insurance for workers Insurance against all construction and assembly risks Insurance against all finished civil works risks Property insurance against all risks General civil, contractual, extra-contractual and employer liability insurance during the operation stage; and Hazardous solid waste handling and final disposal operations insurance. In the Concession Contract an obligation to hire other insurances may be included. The insurances shall have the terms and conditions established in the Concession Contract. Concession Contract Supervision The Grantor shall supervise and control compliance of the Concessionaire's obligations during Concession effective term, including the Technical File preparation stage, works construction stage, implementation , as well as the Concession's operation and maintenance stage. The Concessionaire shall assume the costs of the works design and construction supervision. The amount to be deposited in the Trust Fund account for the payment of the design and works supervision amounts to S/.28,520,153.76 (twenty eight million five hundred twenty thousand, one hundred fifty three and 76/100 Nuevos Soles), plus Value Added Tax . Concession Termination It shall be consequence of the following causes, in compliance with the provisions of the Concession Contract: Concession term expiration Mutual Agreement Concessionaire breach Grantor breach SEDAPAL breach Unilateral Grantor decision Force Majeure or Act of God Other causes not detailed in the Concession Contract.

Service Supply Agreement It is the Agreement which, on the Concession Contract signing date, the Concessionaire and SEDAPAL shall enter into, by virtue of which the Concessionaire commits to provide to SEDAPAL the service of production and delivery of drinking water in the Delivery Point established in the Contract, in exchange of the RPMO. The Concessionaire agrees not to deliver PLADEMAR drinking water to third parties other than SEDAPAL. Process Expenses Reimbursement

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The Concessionaire shall reimburse PROINVERSIÓN, at the Closing Date, for process preparation expenses an amount that shall be established in the Contract or in the Tender Documents, as the case may be.

Contribution to FONCEPRI Pursuant to applicable laws and provisions, the PI Holder, in case of Direct Award, or the Successful Bidder of the Comprehensive Projects Tender, shall make a contribution to FONCEPRI which amount shall be established in the Concession Contract or in the Tender Documents, as the case may be. IV. Performance Bond These bonds shall be issued through warrant bonds granted with the characteristics, model and by the financial institutions indicated in Sub-section 5.1.1. Performance Bond From the Closing Date to the Obligations Effective Date, an amount equivalent to US$ 2,000,000.00 (two million and 00/100 Dollars of the United States of America). From the Operation Startup up to two years after the Concession Contract effective date, the amount of the warranty shall be US$ 3,600,000.00 (three million six hundred thousand and 00/100 Dollars of the United States of America). The amount of the aforementioned warrant shall be re-adjusted in the same proportion as the RPMO. Construction Stage Performance Bond From the Obligations Effective Date up to the Operation Startup, a performance bond of US$ 16,000,000.00 (sixteen million and 00/100 Dollars of the United States of America); and from the Operation Startup and for a two-year period, the amount of the warrant shall be US$ 12,400,000.00 (twelve million four hundred thousand and 00/100 Dollars of the United States of America). V. Shortlisting Requirements 5.1 For the same Project: 5.1.1 Shortlisting requirements for interested third parties: - Expression of Interest Letter pursuant to the model in Section IX. - Joint and several, irrevocable and unconditional bank bond without the benefit of excussio, which is automatically executable in favor of the Private Investment Promotion Agency (PROINVERSIÓN), for an amount of US$ 160,000.00 (one hundred sixty thousand and 00/100 Dollars of the United States of America), issued by one of the financial institutions mentioned in Section XIII of this Statement of Interest and pursuant to the model in Section X. In addition, the Warrant Bond may be issued by a financial institution included in the List of Prime Banks approved by the Banco Central de Reserva del Perú through Circular Letter 042-2010-BCRP published on December 06, 2010 or the one replacing it, in which case the list shall be confirmed by one of the Local Banks included in Section XIII of this Statement of Interest. 5.1.2 Shortlisting Requirements for the Tender: a) General: The Bidder or at least one of its participants in case of a consortium shall certify a share of no less than 25% in the corporation or consortium which has executed at least one concession project or publicprivate partnership for the development of infrastructure and/or utilities supply. b) Operation: Experience shall be accredited, within the last fifteen (15) years, in having operated at least: - Seawater Desalination Plant(s), with reverse osmosis technology, which shall total a desalination 3 3 capacity of at least two hundred thousand m /day (200,000 m /day). One of the plants shall have an

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operating capacity of at least fifty thousand m /day (50,000 m /day), operating continuously for at least three (3) years. - Experience may be accredited through the bidder, by one or more bidder members in case of consortium, by a related company or by one or more specialized operators that shall be hired by the Concessionaire during the Concession effective term. - The Operator shall be jointly responsible with the Concessionaire for the supply of services under its charge pursuant to the terms set forth in the Contract. To accredit compliance with operation requirements, participation in previous projects may be referred to. Interest in such projects shall be at least a twenty five percent (25%) share in the corporation or consortium created to execute the project, or in the company hired to execute the project. Similarly, experience of companies related to the specialized operator to be accredited shall be considered under the same conditions set out in the preceding paragraph.

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c) Construction: Experience shall be accredited within the last fifteen (15) years in building: - Seawater Desalination Plant(s), with reverse osmosis technology, which shall total a treatment 3 3 capacity of at least two hundred thousand m /day (200,000 m /day) and which currently has the client's Works Acceptance Certificate or similar document from the country where the project was executed. 3 One of the plants shall have a seawater desalination capacity of at least seventy five thousand m /day 3 (75,000 m /day). - Underwater emission outlet(s) that together make a total length of at least five hundred meters (500 m) and a diameter of at least or over five hundred millimeters (500 mm), and that currently has the client's Works Acceptance Certificate or similar document from the country where the project was executed. - Water pipe systems, pressure operated, with a minimum flow capacity of 1 m /s, and an accumulated length of thirty (30) kilometers. - Experience may be accredited through the bidder, by one or more bidder members in case of consortium, by a related company or by one or more specialized operators that shall be hired by the Concessionaire. - The Constructor shall be jointly responsible with the Concessionaire for the supply of services under its charge pursuant to the terms set forth in the Contract. To accredit compliance with construction requirements, participation in previous projects may be referred to. Interest in such projects shall be at least a twenty five percent (25%) share in the corporation or consortium created to execute the project, or in the company hired to execute the project. Similarly, experience of companies related to the constructor intended to be accredited shall be considered under the same conditions set out in the preceding paragraph. d) Financial: Minimum Net Equity of US$ 160,000,000.00 (one hundred sixty million and 00/100 Dollars of the United States of America). This requirement may be met adding up the net equity of each member of the Bidder, in case of consortium, or including the net equity of one or more related companies. e) Legal Requirement: Commitment to incorporate a Concessionaire Association in Peru, pursuant to legal regulations in force, which corporate purpose is in line with the Contract, with a minimum capital contribution of US$ 16,000,000.00 (sixteen million and 00/100 Dollars of the United States of America) or its equivalent amount in Nuevos Soles, subscribed and paid-in in cash in the form and time to be defined in the Tender Documents. 5.2 For an alternative project:

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5.2.1 Requirements to qualify as interested third party - New proposal of private initiative on an alternative project, pursuant to Article 16º of Legislative Decree N° 1012. - Joint and several, irrevocable, unconditional Bank Warrant Bond without benefit of excussio, of automatic execution in favor of PROINVERSIÓN, for an amount of US$ 160,000.00 (one hundred sixty thousand and 00/100 Dollars of the United States of America), issued by one of the financial institutions referred to in Section XIII of this Statement of Interest and in accordance with the sample of Section XII. Additionally, the Warrant Bond may be issued by a financial institution included in the List of Prime Banks approved by Banco Central de Reserva del Perú through Circular Letter 042-2010-BCRP published on November 06, 2010, or its replacement, in which case it shall be confirmed by one of the Local Banks listed in Section XIII hereof.

VI. Competition Factor It shall be the lowest Basic Unit Payment, in Nuevos Soles, per cubic meter of drinking water. Likewise, specific consumption of electric power shall be considered within the competition factor. Notwithstanding this, some complementary criterion may be introduced. The mechanism and procedure of the competition factor shall be defined in the Tender Documents.

VII. Tender procedure if other interested parties exist: The Tender would have three (3) stages using the three (3) envelope system: - Envelope N° 1: Shortlisting credentials. - Envelope N° 2: Technical Proposal. - Envelope N° 3: Economic Proposal. At the first shortlisting stage, in the period to be defined in the Tender Documents Schedule, shortlisting requirements (technical, financial, legal and/or others) shall be evaluated, through documents to be included in Envelope N° 1 deemed necessary to continue with the second selection stage. Once the shortlisting is carried out, on the date to be defined in the Tender Document Schedule, shortlisted bidders shall be called for the submission of Envelope N° 2 and Envelope N° 3, and for opening Envelope N° 2, which contains documents required to certify the in-force status and truthfulness of submitted information, the acceptance of the Contract's general conditions, and warrant bonds to ensure the economic proposal and technical proposal validity and in-force status. Within the period set out in the Tender Documents Schedule, documentation of Envelope N° 2 shall be ev aluated. Only shortlisted Bidders whose technical proposals contained in such envelope duly comply with the minimum requirements, and hence having been declared as technically accepted by PROINVERSIÓN's Committee, shall proceed to the third selection stage. Opening of Envelope N° 3 shall take place at the th ird stage only for shortlisted Bidders. Envelope N° 3 contains the economic proposal, among others. VIII. Reimbursement of expenses effectively incurred by the bidder for preparing the Private Initiative In accordance with Article 17º of Legislative Decree Nº 1012, the amount of US$ 1,489,227.64 (one million four hundred eighty nine thousand two hundred twenty seven and 64/100 Dollars of the United States of America), not including General Sales Tax, shall be recognized in favor of the PI Holder. Similarly, pursuant to Article 20º of Supreme Decree Nº 146-2008-EF, expenses incurred during the preparation of the private initiative shall be assumed by the successful bidder. IX. Expression of Interest Letter EXPRESSION OF INTEREST LETTER SAMPLE (in the same Project)

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Lima, ............... To: President of PROINVERSIÓN Committee in Sanitation and Irrigation Projects Reference: Messrs., We, ................... (name of legal person), identified with ........................ (type of document and number), domiciled in ........................ (street name, district, province, department, or its equivalents, and country), duly represented by ............... (name of legal representative), identified with ............. (identity document and number), hereby declare our firm interest in participating in the execution of the investment project contained in the above referred private initiative. Therefore, pursuant to Legislative Decree N° 1012, its Regulations and the contents of the statement of interest of the aforementioned private initiative, we attach Warrant Bond N° ......, issued by the ............ Bank, for the amount of ..............., as well as ............ (other required documentation, if necessary, in accordance with the Private Initiative's Statement of Interest)....... Sincerely yours, "Aguas de Lima Sur II" Private Initiative Project

______________________________ Name and signature of Legal Representative Name of Legal Person Address Telephone E-mail Fax

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X. Warrant Bond WARRANT BOND SAMPLE (Parties interested in the same investment Project) Lima, ............... ......, ......... To:. Private Investment Promotion Agency - PROINVERSIÓN Reference: Warrant Bond N° ..........

Expiration date: ................

Messrs., Upon request of our clients, ...................... we hereby issue this joint and several, irrevocable, unconditional and automatically executable bond without benefit of excussio up to the amount of US$ 160,000.00 (one hundred sixty thousand and 00/100 Dollars of the United States of America), in favor of the Private Investment Promotion Agency ­ PROINVERSIÓN, to guarantee the seriousness of our client's expression of interest letter and participation in the shortlisting process to be called for the execution of the investment project contained in the "Aguas de Lima Sur II" Private Initiative. Furthermore, we certify that this bond shall become effective if our client fails to sign the corresponding Concession Contract or to submit a valid economic proposal in the convened shortlisting process, as the case may be. Payment shall be effective upon the sole request in writing by PROINVERSIÓN Executive Director or person acting as such, in our offices located in ..................... To honor this Bond in your favor, a notarized written request sent by PROINVERSIÓN Executive Director shall suffice, and any delay on our part in honoring this Bond shall accrue interest equal to the maximum LIBOR rate plus a 3% spread. The LIBOR rate shall be the one established by the daily Reuters Cable received in Lima at 11:00 AM. Interests shall be accrued since the date on which its compliance is requested, until the actual date of payment. Our obligations under this Bond shall not be affected by any dispute between you and our client. This Bond shall be in force for .........., beginning on ............ ....., ........ until .......... ....., .........

Sincerely yours,

Signature........................ Name............................. Bank institution.................

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XI. Letter to Present an Alternative Project

SAMPLE OF LETTER TO PRESENT AN ALTERNATIVE PROJECT

Lima, ............... To: President of PROINVERSIÓN Committee in Sanitation and Irrigation Projects

Reference: Messrs.:

"Aguas de Lima Sur II" Private Initiative Project

We, ................... (name of legal person), identified with ........................ (type of document and number), domiciled in ........................ (street name, district, province, department, or its equivalents, and country), duly represented by ............... (name of legal representative), identified with ............. (identity document and number), hereby declare our firm interest in participating in the execution of a project alternative to the one stated in the reference, called ".................................................". Therefore, pursuant to Legislative Decree N° 1012 a nd its Regulations, we attach the necessary information for the evaluation of our private initiative, pursuant to the provisions of Article 15° of Supreme Decree N° 146-2008EF, Regulations of the aforementioned Legislative Decree.

Sincerely yours,

______________________________ Name and signature of Legal Representative Name of Legal Person Address Telephone E-mail Fax

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XII. Warrant Bond for Presentation of Alternative Project

WARRANT BOND SAMPLE (Parties interested in Alternative Project) Lima, ............... ......, ......... To:. Private Investment Promotion Agency ­ PROINVERSIÓN Reference: Warrant Bond N° ..........

Expiration date: ................

Messrs., Upon request of our clients, ...................... we hereby issue this joint and several, irrevocable, unconditional and automatically executable bond without benefit of excussio up to the amount US$ 160,000.00 (one hundred sixty thousand and 00/100 Dollars of the United States of America), in favor of the Private Investment Promotion Agency ­ PROINVERSIÓN, to guarantee the seriousness of our client's Letter to Present an Alternative Project and the signing of the corresponding contract by them if their private initiative is declared of preference, of interest, or no parties interested in the private initiative appear and it is directly awarded to our client. Furthermore, we certify that this bond shall be effective if our client fails to meet the requirements set forth by PROINVERSIÓN as on the contract signing date, or if it fails to sign the respective Concession Contract arising from the corresponding shortlisting process or to submit a valid economic proposal during the convened shortlisting process, as the case may be. Payment shall be effective upon the sole request in writing by PROINVERSIÓN Executive Director or person acting as such, in our offices located in ..................... To honor this Bond in your favor, a notarized written request sent by PROINVERSIÓN Executive Director shall suffice, and any delay on our part in honoring this Bond shall accrue interest equal to the maximum LIBOR rate plus a 3% spread. The LIBOR rate shall be the one established by the daily Reuters Cable received in Lima at 11:00 AM. Interests shall be accrued since the date on which its compliance is requested, until the actual date of payment. Our obligations under this Bond shall not be affected by any dispute between you and our client. This Bond shall be in force for .........., beginning on ............ ....., ........ until .......... ....., .........

Sincerely yours,

Signature........................ Name............................. Bank institution.................

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XIII. Bank institutions and prime banks Local banks meeting the minimum qualification mentioned in the preceding paragraph are the following: BBVA BANCO CONTINENTAL BANCO DE CRÉDITO DEL PERÚ BANCO INTERAMERICANO DE FINANZAS ­ BIF BANCO INTERNACIONAL DEL PERÚ S.A.A. ­ INTERBANK CITIBANK DEL PERÚ S.A. BANCO SCOTIABANK BANCO FINANCIERO DEL PERÚ HSBC BANK DEUTSCHE BANK PERU S.A. BANCO SANTANDER PERÚ S.A. MIBANCO ­ BANCO DE LA MICROEMPRESA S.A.

Foreign prime banks included in the list approved by Banco Central de Reserva through Circular Letter Nº 0422010-BCRP, published on November 06, 2010, shall be taken into account. XIV. Institutions to which "Expression of Interest Applications" may be submitted Private Investment Promotion Agency ­ PROINVERSIÓN. Front Desk. Av. Paseo de la República 3361, Piso 1, Lima 27 (San Isidro), Perú.

XV. Legal Framework The project falls within the objectives of the National Sanitation Plan 2006-2015 of the Ministry of Housing, Construction and Sanitation, which shall contribute to increase the drinking water coverage for southern Lima districts, under the following legal framework: Law N° 29338, General Law on Water Resources. Law N° 26338, General Sanitation Services Law and its regulations Single Uniform Text (TUO). Supreme Decree N° 059-96-PCM, TUO of norms with f orce of law governing the concession of infrastructure and utilities public works to the private sector and its regulations. Law Nº 28660, Law determining the legal nature of the Private Investment Promotion Agency ­ PROINVERSIÓN. Legislative Decree Nº 1012, approving the Framework Law on Public-Private Partnerships for generating productive employment and defining regulations for expediting private investment promotion processes. Law N° 28059, Framework Law on the Promotion of D ecentralized Investment and its regulations. Law Nº 27314, General Law on Solid Wastes and its regulations. Law N° 28611, General Environment Law. Law N° 26786, Law on environmental impact assessm ent for works and activities. Supreme Decree N° 011-2006-VIVIENDA, Technical St andard of the National Buildings Regulations. Technical Standard OS.020. "Water Treatment Plants for Human Consumption" of the National Buildings Regulations. Law Nº 28296, General Law on the Cultural Heritage of the Nation and applicable amendments and complementary norms. Law Nº 26620, Law for the Control and Supervision of Maritime, River and Lake Activities and its regulations. Law Nº 27446, Law of the National Environmental Impact Assessment System. Law N° 28245, Framework Law of the National Envir onmental Management System. Law Nº 26856, declaring coastal beaches as assets for public use and its regulations. Other legal regulations in force in Peru and applicable to the Project. International Technical Standards, of supplementary application.

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