Institutional. May, 2013

Transcription

1 Institutional May,

2 AES Brasil Group In Brazil since 1997 Operational Figures: - Customers units: 7.7 million - Population served: 20.2 million - Distributed Energy: 54.4 TWh - Generation Capacity: MW - Generated Energy : GWh 7.6 thousand AES Brasil People Investments : R$ 9.4 billion Solid corporate governance and sustainability practices Safety our #1 Value Disco Genco Service Provider 2

3 AES Brasil widely recognized in Management Excellence Quality and Safety Sustainability (AES Tietê) (AES Eletropaulo) (AES Tietê) (AES Sul) (AES Tietê) (AES Brasil) (AES Eletropaulo) (AES Eletropaulo) (AES Tietê) (AES Brasil) (AES Eletropaulo) (AES Tietê) (AES Tietê) (AES Eletropaulo) (AES Eletropaulo/ Tietê) (AES Tietê) (2011- AES Tietê; 2012 AES Eletropaulo) ( AES Eletropaulo) (AES Eletropaulo) 3

4 Mission & visions Mission Improving lives and promoting development by providing safe, reliable and sustainable energy solutions Visions Be a leader in operational and financial management in the Brazilian energy generation sector and expand installed capacity Be the best distributors in Brazil 4

5 Sustainability - Corporate Social Responsibility: annual investments of R$ 148 million Development and transformation of communities Casa de Cultura e Cidadania Project - Offers courses and activities in culture and sports. Directly benefits approximately 5.6 thousand children and teenagers and indirectly 292 thousand people in 7 units located within AES Brazil companies areas of operation Children educational development Centros Educacionais Luz e Lápis Project - Two units in São Paulo attending 300 children from 1 to 6 years old in condition of social vulnerability Education on safety and efficiency in energy consumption AES Eletropaulo nas Escolas Project - Education about safe and efficient use of energy to 4.5 thousand teachers and 404 thousand students from 900 public schools. The actions include recreational activities offered in adapted trucks. Converting consumers to clients Developed for grid connection regularization. Between 2004 and 2012, more than 500 thousand families in low income communities were benefited from better energy supply conditions and social inclusion. 5

6 Shareholding structure AES Corp BNDES C 50.00% + 1 share P 0.00% T 46.15% C 50.00% - 1 share P 100% T 53.85% Cia. Brasiliana de Energia T 99.70% C 99.99% T 99.99% C 99.99% T 99.99% C 71.35% P 32.34% T 52.55% C 76.45% P 7.38% T 34.87% AES Sul AES Serviços TC AES Uruguaiana AES Tietê AES Eletropaulo C = Common Shares P = Preferred Shares T = Total 6

7 AES Tietê and AES Eletropaulo are listed in BM&FBovespa ¹ ¹ Free Float Others ² Market Cap ³ 16.1% 19.2% 56.2% 8.5% US$ 0.6 bi 24.2% 28.3% 39.5% 8.0% US$ 3.9 bi 1 - Parent companies, AES Corp and BNDES, have similar voting capital on each of the Companies: approx 35.9% on AES Eletropaulo and 32.9% on AES Tietê 2 - Includes Federal Government and Eletrobrás shares in AES Eletropaulo and AES Tietê, respectively 3 - Base: 05/08/2013. Considers preferred shares for AES Eletropaulo and preferred and common shares for AES Tietê 7

8 Ebitda 2012 (R$ billion) AES Brasil among the top five in the electric sector CPFL Cemig Tractebel AES Brasil Neoenergia Cesp Copel Light EDP Duke Coelce Equatorial Celesc Net income 2012 (R$ billion) Cemig CPFL Tractebel Neoenergia AES Brasil Copel Light Coelce EDP Duke Cesp Equatorial Celesc Source: Companies financial reports 8

9 Generation installed capacity (MW) AES Tietê is the 3 rd largest private generator in Brazil Main privately held Companies AES Tietê 2,2% ENDESA CPFL 0,8% 2,4% Light 0,8% Eletronuclear 2,8% DUKE CGTEE 1,7% 0,7% Eletrosul 0,5% EDP 1,5% Neoenergia 1,2% AES Tietê: 3rd largest among private Tractebel 6% generation companies Petrobrás 5% Copel 4% Cemig 6% Itaipu 6% CESP 6% Eletronorte 7% Furnas 8% Demais 28,9% CHESF 9% Approximately 78% of country s generation installed capacity is state-owned 2 18 GW of hydro capacity under construction: Santo Antonio and Jirau (Madeira River): 7 GW Belo Monte (Xingu River): 11 GW Total Installed Capacity: 123 GW Sources: ANEEL Generation Data Source BIG (March, 2012) and Companies websites 2- Source: Banks reports 9

10 Consumers Dec/ % AES Brasil is among the top 3 largest distribution players in Brazil Consumption (GWh) % 30% 5% 7% 7% 6% 16% 13% 6% 6% 12% 12% 7% 12% 11% AES Brasil Brasil CPFL Energia Energia CEMIG Cemig Neoenergia Energia Copel Light EDP Outros 63 distribution companies in Brazil distributing 430 TWh in 2011 AES Brasil is one of the largest electricity distribution group in Brazil: AES Eletropaulo is the largest distribution company in Brazil in terms of energy distributed Source: Brazilian Association of Electricity Distributors (ABRADEE), 2011 and EPE (Energetic Research Company) Energy distributed (TWh) % of the Brazilian market AES Eletropaulo AES Sul

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12 AES Tietê overview Generation facilities 12 hydroelectric plants in São Paulo 30-year concession expiring in 2029 Installed capacity of 2,658 MW, with physical guarantee 1 of 1,278 MW average Physical guarantee contracted with AES Eletropaulo (11 GWh) through Dec, 2015 (~R$183/MWh, annually adjusted by inflation) 369 employees as of March, 2013 Company listed at BM&Fbovespa Rating: National International Moody's Aa1 Baa3 1 - Amount of energy allowed to be long term contracted 12

13 Generated energy shows high operational availability Generated energy (MW avarage 1 ) 1Q13 Generated energy by power plant (MW average 1 ) 125% 127% 124% 130% 102% 5% ,753 9% , ,629 1, ,480 11% Q12 1T12 1Q13 1T13 Generation Mwavg Generation/Physical guarantee Geração - MW médio Geração/Garantia física 5% 4% 2%3% Agua Vermelha 5% 3% Agua Vermelha 6% Nova Avanhandava Nova Avanhandava 8% Promissão 44% Ibitinga 5% Bariri Bariri 61% Barra Bonita 12% Barra Bonita Euclides da Cunha Demais Euclides Usinas* da Cunha 17% Other Power Plants * In December 2012, AES Tietê was the first Latin American company to receive the PASS-55 certification of the British Standards Institute, for its reliability and sustainability of assets 1 Generated energy divided by the amount of hours * Caconde, Limoeiro, Mogi and SHPPs 13

14 Max (%) Hydrological conditions improving and rationing is unlikely Brazilian reservoir levels 1 (%) AES Tietê reservoirs levels (%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Historical Data Since % 100% 100% 93% 90% 91% 80% 80% Caconde A. Vermelha B. Bonita Promissão Apr-12 Apr-13 Thermal capacity available for dispatch: 14 GW vs. 4 GW in 2001 AES Tietê Q1 13 impact of R$ 115 million due to hydrological risk sharing estimated impact ranges from R$ 231 million to R$ 441 million 1 Average reservoir levels of the National System (percent of maximum storage capacity) 14

15 System physical guarantee reduction resulted in spot market exposure since September/2012 Allocation of physical guarantee for AES Tietê (MWm) Monthly evolution of the spot price (R$/MWh) Secondery energy Physical guarantee reduction jan feb mar apr may jun jul aug sep oct nov dec

16 89% of net revenues and 73% of billed energy came from the bilateral contract with AES Eletropaulo in 1Q13 Billed energy (GWh) ,728 1, ,729 15,122 1,340 1, , ,141 1, , , ,141 1,340 1,340 1,519 3,834 1,980 1,942 3,834-14% 1,980 1,942 11,108 11,108 11,138 4, , ,108 11,108 11,138 1, ,108 11,108 11, , ,2562,879 3, ,879 3,058 2,879 3, T12 1T Q12 1Q T12 1T13 1 AES Eletropaulo ERM Spot Market Bilateral Contracts #REF! AES Eletropaulo MRE Mercado Spot Outros contratos bilaterais #REF! AES Eletropaulo MRE Mercado Spot Outros contratos bilaterais #REF! Net revenues (%) 2% 1% 8% 89% 2% 1% 8% 89% AES Eletropaulo Eletropaulo Bilateral contracts Spot Market ERM¹ Bilaterais CCEE MRE¹ 1 Energy Reallocation Mechanism 16

17 Investments in power plants modernization Investments (R$ million) major investments in Nova Avanhandava, Ibitinga and Agua Vermelha power plants, that represent 71% of AES Tietê capacity % (e) 1Q12 1Q13 Investments New SHPPs¹ 1- Small Hydro Power Plants 17

18 Growth projects Thermal São Paulo Project (550 MW) Natural gas combined cycle thermal plant Previous license granted in Oct, 2011 valid for 5 years Pending gas supply Next steps: Obtain installation license Thermal Araraquara Project (579 MW) Natural gas combined cycle thermal plant Purchase option acquired in March, 2012 Pending gas supply Next steps: Obtain installation license 18

19 Contracting strategy: driven to free market Clients portfolio evolution in 1Q13 Assured Energy (1,278 MW avg) 265% New client portfolio Consolidated portfolio Antes dez/ T T12 2T12 3T12 4T12 1Q12 1Q13 MWméd MWavg 1T13 Strategy post-2015: contract energy in the free market with large unregulated customers - Currently serving 45 customers (307 MW) with 3-5 year contracts - Current prices for delivery in 2016: $52-$57/MWh 1 (annually adjusted for inflation) driven by supply/demand MWavg sold from 2016 onwards 1 - AES analysis 19

20 Financial highlights Net revenue (R$ million) Net Revenue Ebitda (R$ million) 1,754 1,886 2,112 11% 1,311 78% 1,466 1,542 56% -21% % Q12 1Q13 Net Revenue Q Q13 75% 75% 81% 78% 56% 1T12 1T13 Ebitda Ebitda Margem Margin Ebitda (%) 20

21 Net income and dividend pay-out (R$ million) Steady earnings distribution on a quarterly basis 117% 109% 108% 11% 11% 10% 25% of minimum pay-out according to bylaws Average payout since 2006: 105% Average dividends since 2006: % R$ 741 million per year Q12 1Q13 Net Income Yield PN Payout 21

22 Debt profile Net debt (R$ billion) 1.0 Amortization schedule 1 st Debenture Issuance (R$ million) Q12 1Q13 Net Debt Net Debt/Adjusted Ebitda Gross Debt/ Adjusted Ebitda Gross Debt/Adjusted Ebitda <= 2.5 Covenants Average Cost Net Debt/Adjusted Ebitda <= 3.5 Debt amortization flow 1Q12 1Q13 Average Cost (%CDI)¹ 115% 121% Average Term (Years) 2,0 0,8 Interest Rate 11.3% 9.8% 1 Brazilian Interbank Interest Rate 22

23 Capital markets 400 AES Tietê X Ibovespa May 2013¹ Daily avg volume (R$ thousand) 1, % 69.6% 66.8% 54.3% ,922 12,584 4,239 3,269 9,683 9, ,113 5,269 15,844 20,246 8,529 11, Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec YTD Mar/12 Preferred Common Shares negotiated (thousand) Ibovespa AES Tietê PN AES Tietê TSR² AES TIetê ON 3 Market Cap: US$ 3.9 billion / R$ 7.8 billion BM&FBovespa: GETI3 (common shares) and GETI4 (preferred shares) ADRs negotiated in US OTC Market: AESAY (common shares) and AESYY (preferred shares) 1 Information until 05/08/2013. Index: 12/29/2005 = Total Shareholders Return 3 Index: 05/08/

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25 AES Eletropaulo overview Concession area 1 Source: IBGE, Largest distribution company in Brazil in terms of energy distribution Serving 24 municipalities in the São Paulo Metropolitan area Concession contract expire in 2028 Concession area with the highest GDP in Brazil (16,8% of Brazilian GDP¹) 46 thousand kilometers of lines and 6.5 million consumption units in a concession area of 4,526 km2 46 TWh distributed in ,168 employees as of March, 2013 Company listed at BM&FBovespa Investment grade: Fitch S&P Moody s National AA AA- Aa1 International BBB- BB Baa3 25

26 Consumption evolution Total market 1 (GWh) Consumption by class 1 1Q13 (%) ,345 7,911 45,102 45,567 8,284 7, % 19 68% 35,434 36,817 37,570 11,156 11,401 1,906 2, % 37 9,250 9, Q12 1Q13 Brasil AES Eletropaulo Captive Market Free Clients Residential Commercial Industrial Others State of São Paulo GDP growth 3.3% (5-year average) - Expectation for %, grows to 3.5% in Net of own consumption 26

27 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Industrial class Industrial class X Industrial production in São Paulo state Consumption of industrial class by activity 1 AES Eletropaulo 15% 10% 5% 0% -5% -10% -15% Economic crisis Economic recovery Economic crisis Other industries 51% Vehicles, Chemical, Rubber, Plastics and Metal Products 49% Industrial production SP (% 12 months) Industrial (% 12 months) 1 As of March,

28 Avg Real Income R$ - SP (Q -2*) Residential - GWh Residential class 258 Residential class X Average income in São Paulo Metropolitan Area 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 Consumption per consumer (in kwh) Rationing 1 Residential Consumption x Real Income - São Paulo (Q-2*) 4,800 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q % 4,300 3,800 3,300 2,800 2,300 Residential consumption reflects GDP per capita growth Average growth of the residential class (aggregate) in the last 5 years: 4.8% Consumption per residential consumer: average growth of 1.5% in the last 5 years Two quarters of delay in relation to consumption 28

29 Investments breakdown (R$ million) Investments focused on grid automation, operational reliability and system expansion investments plan: substation repowering, adding 133 MVA capacity to the system 29.7 km of new transmission lines % maintenance in over 5,200 km of distribution grid regularization of 75,000 illegal connections and replacement of 125,000 obsolete meters (e) 1Q12 1Q13 Own Resources Funded by the clients 29

30 SAIDI below regulatory reference and in its lowest level since 2006 SAIDI¹ (last 12 months) SAIDI 1 (YTD) % Q12 1Q th DEC 6 th (horas) 4 th Referência Aneel Jan-Apr 12 Jan-Apr 13 SAIDI (hours) SAIDI (hours) SAIDI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers 1 - System Average Interruption Duration Index Sources: ANEEL and AES Eletropaulo 30

31 SAIFI below regulatory reference SAIFI¹ (last 12 months) SAIFI 1 (YTD) % Q12 1Q13 3 rd FEC 4 th (vezes) 3 th Referência Aneel Jan-Apr 12 Jan-Apr 13 FEC (vezes) SAIFI (times) SAIFI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers 1 - System Average Interruption Duration Index Sources: Aneel and AES Eletropaulo 31

32 Losses level within regulatory threshold Losses (last 12 months) Regulatory Reference² - Total Losses (last 12 months) Q12 1Q / / / /2015 Non Technical Losses Technical Losses ¹ 1 In January 2012, the Company improved the assessment of the technical losses. 2 Values estimated by the Company to make them comparable to the reference for non-technical losses determined by the Aneel 32

33 Financial highlights Net revenues (R$ million) Ebitda (R$ million) 14,714 15,240 15, ,413 2, ,017 5,405 5, ,697 9,097 9,128-14% 3, ,283 1, ,286 2, Q12 1Q13 Net revenue ex-construction revenue Deduction to Gross Revenue Construction revenues 145 1,648 1, % Q12 1Q13 Adjusted Ebitda Non-recurring¹ Regulatory assets and liabilities 1 Non recurring 2011 : Includes sale of AES Eletropaulo Telecom with a R$ 707 million impact on Ebitda. 33

34 28.6% 17.1% 2.8% Average payout of 74% p.a. since ,572 Net income and dividend payout 1 (R$ million) 28.6% 17.1% 1, % 28.6% 17.1% 358 1, , , % % 25.0% (174) (121) (30) Q12 1Q13 Adjusted Net Income Non-recurring² Pay-out Non-recurring² Regulatory Regulatory assets assets and liabilities and liabilities 1 Gross amount Yield PN Yield PN 2 Non recurring 2011 :Includes sale of AES Eletropaulo Telecom with a R$ 467 million impact on net income 2.8% 1, % of minimum pay-out according to bylaws Average payout since 2006: 74% per year Average dividends since : (174) R$ (121) 890 million per year (30) Q12 1Q (174) 229 (121) 218 Adjusted Net Income 29 (30) (1) Non-recurring² (1) Regulatory assets and liabilities Q12 1Q13 Adjusted Net Income Yield PN (1) 34

35 Cost management excellence Efficiency programs and results PMSO¹ per customer (R$ million) Started in 2007 and evolved from cost cutting to business process transformation - Strategic sourcing - Shared services - Process redesign - IT tools implementation cumulative P&L savings of R$ 331 million Reducing manageable costs estimated at R$ 100 million from 2013 onwards AES Eletropaulo among the lowest cost operators in the country AES Eletropaulo Comparable peers² 1 - Personnel, Material, Third Party Services and Other Costs and Expenses 2 - Eletropaulo peers: CPFL Paulista, Light, Cemig. EDP Bandeirante. Sul Peers: Elektro, RGE, CPFL Piratininga. Eletropaulo metric excludes SIRP (one timer R$29) 35

36 Debt refinancing conclusion of R$ 1 billion with more flexible covenants Benefits Decrease in debt amortization volume for by R$ 750 million Increase in the average debt maturity from 6.6 years to 7.2 years Debt average costs decrease from CDI+1.29% to CDI+1.27% More flexible covenants Debt amortization schedule Before restructuring (as of September, 2012) 857 After restructuring (as of October, 2012) R$ 1,063 million R$ 319 million Local Currency (ex FCesp) Moeda Market Nacional debt in R$ (s/ Fundação (ex-pension CESP) plan debt Fundação ) CESP Local Currency (ex FCesp) Market Moeda Nacional debt in R$ (s/ Fundação (ex-pension CESP) plan debt Fundação ) CESP 36

37 Covenants change FROM TO Financial Index Gross debt / Adjusted Ebitda < 3.5 Net debt / Adjusted Ebitda < 3.5 (equivalent to 4.5x Gross Debt / Adjusted Ebitda) Default If the limit is exceeded in any quarter If the limit is exceeded for two consecutive quarters Regulatory assets and liabilities Not considered in the calculation Considered in the calculation (same as before IFRS adoption) Pension plan debt Total debt recognized in liabilities Debt recognized in liabilities excluding the corridor concept Compulsory loans Considered in the calculation of debt Out of debt calculation 37

38 Covenants limits amended due to tariff reset delay and higher energy costs Accounting impacts due to tariff reset postponement Covenants consider Ebitda adjusted by regulatory assets/liabilities Jun/12: tariff reset regulatory liability final release (R$ 287 million) Amendment of covenants limits completed in March/2013: Net Debt / Adjusted Ebitda: - 5.5x in 1Q13; x in 2Q13; - 3.5x from 3Q13 onwards Higher net debt Higher cost of energy since Sep/12 lowered cash position Covenants breach is not expected to repeat since: - no impact on LTM Ebitda after May/13 related to regulatory liability (Jul11/Jun2012); - higher cost of energy funded by CDE or reflected in tariff adjustment 38

39 Debt profile Net debt Average cost x 4.4x x 0.8x 1.1x % 109.8% Q12 1Q13 Covenants Net Debt (R$ billion) Net Debt/Ebitda Adjusted¹ Net Debt/Adjusted Ebitda <= 3.5x - Q1 13: limit amended to 5.5x - Q2 13: limit amended to 3.75x Adjusted Ebitda/Financial Expenses >= 1.75x 0.0% 0.0% 0.0% 0.0% Q Q % of CDI² Average Time - years 12.0% Interest Rate 11.7% Average Time - years Average Time - years % of CDI % of CDI 1 According the new covenants 2 Brazilian Interbank Interest Rate 3 Inflation Index 39

40 Debt profile Debt amortization schedule (financial liabilities as of March, 2013) 2,578 1, Local Currency (ex FCesp) Fcesp (ex Corridor¹) Fcesp (Corridor¹) Due to the ICVM 695, the corridor (accumulated gains and losses) became fully recognized in the Company balance sheet from January, 2013 on 40

41 AES Eletropaulo: challenges Criando Valor (Creating Value) project launch Filling of administrative appeals at Aneel Beginning of out-of-the-merit thermals dispatch, affecting discos cash flows Pension plan accounting changes imposed by CVM Resolution 695 Covenants limits amendment Starting to receive monthly CDE 1 funding to cover higher energy costs 2013 Tariff Adjustment 2010 Jul/12 Sep/12 Dec/12 Jan/13 Mar/13 Apr/13 Jul/13 3 rd Tariff Reset Cycle and 2012 Tariff Adjustment Debt restructuring (R$ 1 billion) Sale of real estate property Cambuci (R$ 160 million), subject to Aneel s approval Extraordinary Tariff Adjustment due to Energy Cost Reduction Program, with 20% average tariff reduction Expected events: Decision by Aneel regarding administrative appeals and regulatory liabilities start to be returned through tariffs, due to the postponement of the 3rd Tariff Reset Cycle 1 CDE: Energy Development Account 41

42 AES Eletropaulo X Ibovespa May 2013¹ 21, Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 13,922 4, % 66.7% 23,606 14,824 12,584 3,269 26,897 24,496 Capital markets Daily avg volume 26,897 (R$ thousand) , ,427 9,683 9,315 21,113 19,589 5,269 8,529 15,844 23,057 22,895 11, YTD -69.1% September 1,387 28,254 20, YTD Acm Mar Mar/13 Preferred Preferred Common Preferred Shares negotiated (thousand) Ibovespa AES Eletropaulo PN AES Eletropaulo TSR² Market cap³: US$ 0.6 billion/r$ 1.3 billion BM&FBOVESPA: ELPL3 (common shares) and ELPL4 (preferred shares) ADRs at US OTC Market: EPUMY (preferred shares) 1 Information until 05/08/2013. Index: 12/29/2005 = Total Shareholders Return 3 Index: 05/08/

43 Attachment AES Sul and AES Uruguaiana Overview

44 Overview and Business Drivers AES Sul overview Overview Serving 118 Municipalities in the State of Rio Grande do Sul Concession area: 99,512 km2 1.2 million consumption units 1,308 directed employees Concession valid until November, 2027 Business drivers Regional GDP growth 2.5% (5-year average) - Expectation for %, grows to 4.3% in tariff reset concluded in April in-line with our expectations Quality of services: SADI/SAIFI ~30% better than 2009 levels Consolidation of efficiency programs, leading to operating costs below regulatory levels (~2%) Dividend payout of 63% in clearing of regulatory restrictions allowed distribution of dividends) 44

45 AES Sul financial highlights Net revenues (R$ million) Ebitda (R$ million) Net income (R$ million) 2,341 2,027 1,866-7% Q12 1Q % % Q12 1Q Q12 1Q13 45

46 AES Uruguaiana overview Overview and Business Drivers Overview Independent natural gas-fired thermal power generation Company with commercial operations achieved in 2000 Authorization expiration in 2027 Installed capacity of 640 MW Located in the State of Rio Grande do Sul city of Uruguaiana Suspended operations in 2008 due to lack of gas supply from YPF in Argentina (pending arbitration) Business Drivers Emergency operation from February 2013 to March 2013 to support reservoir recovery Working to return the plant to long-term service Leveraging on AES Brazil-Argentina relationship 46

47 Attachment Energy Sector in Brazil

48 Energy sector in Brazil: business segments Free Clients Distribution Transmission Generation Consumption of MWavg 64 companies 68 companies 13 groups controlling 76% of (26% of Brazilian total market) 448 TWh of energy 68% private sector total installed capacity Conventional sources: above distributed in 2012 High voltage transmission 22% private sector 3,000 kw 72 million consumers (>230 kv) 2,809 power plants Alternative sources: between 67% private sector 103,362 km in extension lines 121 GW of installed capacity³ 500 kw and 3,000 kw Annual tariff adjustment (SIN¹) 66% hydroelectric Large consumers can purchase energy directly from generators Free contracting environment Tariff reset every four or five years Regulated public service Regulated contracting Regulated public service with free access Regulated tariff (annually adjusted by inflation) 27% thermoelectric 3% SHPP² 2% wind environment 2% nuclear and others 1 - Interconnected National System, as of Small Hydro Power Plants 3 - Aneel Fiscalization Report Sources: EPE, Aneel, ONS and Banks reports Contracting environment free and regulated markets 48

49 Energy sector in Brazil: contracting environment Regulated market Free market Generators, Independent Power Producers (IPPs), Trading companies and Auto producers Generators and Independent Power Producers (IPPs) Auctions: New Energy and Existing Energy Bilateral contracts (PPAs 1 ) Distribution companies Free clients 1 Power Purchase Agreement Main auctions (reverse auctions): New Energy (A-5): Delivery in 5 years, years regulated PPA 1 New Energy (A-3): Delivery in 3 years, years regulated PPA Existing Energy (A-1): Delivery in 1 year, 5-15 years regulated PPA Extraordinary (A-0): Delivery at the same year, 1-yearr regulated PPA 49

50 Electric sector in Brazil: generation market overview Installed capacity (GW) Growth by source - new auctions (GW) Total: 25 GW Thermal 5 GW 2 Wind 10 GW Hydro 10 GW Current installed capacity Auctioned Upcoming Auctions ~ 3% annual GDP growth over the last 5 years ~ 4% annual demand growth through 2021, implying 60 GW of additional capacity needed (~6 GW/year) 35 GW already auctioned Gas-fired thermal to leverage on the dispatchability benefit and on the hydrology risk Sources: EPE (Energetic Research Company): Ten-year Energy Plan 2021; AES analysis 50

51 Attachment Regulatory Environment

52 Distribution companies: tariff methodology Tariff reset and adjustment Tariff Reset is applied each 4 years for AES Eletropaulo Next tariff reset: Jul/2015 Parcel A: costs are largely passed through to the tariff Parcel B: costs are set by ANEEL Tariff Adjustment: annually Parcel A : costs are largely passed through to the tariff Parcel B: cost are adjusted by IGPM +/- X (1) Factor Energy Purchase Transmission Sector Charges Regulatory Opex (PMSO) Parcel A Costs Non-manageable costs that are largely passed through to the tariff Incentives to reduces costs Regulatory Opex: Efficient operating cost determined by ANEEL (National Electricity Agency) Remuneration Asset Base X WACC X Depreciation Investment Remuneration Depreciation Remuneration Asset Base: Prudent investments used to calculate the investment remuneration (applying WACC) and depreciation 1 X Factor: index that captures productivity gains Regulatory Ebitda Parcel A - Non-Manageable Costs Parcel B - Manageable Costs 52

53 3 rd Cycle of tariff reset X factor Distribution companies: tariff methodology X FACTOR = Pd Q T + + DEFINITION Distribution productivity Quality of service Operational expenses trajectory OBJECTIVE Capture productivity gains Stimulate improvement of service quality Implement operational expenses trajectory APPLICATION Defined at tariff reset, considers the average productivity of sector adjusted by market growth and consumption variation Defined at each tariff readjustment, considers variation of SAIDI and SAIFI and comparative performance of discos Defined at tariff reset, considers reference company and benchmarking methodologies 53

54 3rd Cycle of Tariff Reset for AES Eletropaulo Tariff Review Gross Regulatory Asset Base: R$ 10,748.8 million Net Regulatory Asset Base: R$ 4,445.1 million Parcel B: R$ 2,007.1 million Non Technical Losses (referenced in the low voltage market): start point at 11.56% and get to 8,56%, by the end of the cycle Average effect to be perceived by the consumer: -9.33% Economical Effect: -5.60% Tariff Adjustment Average effect to be perceived by the consumer : +5.51% Economical Effect: +4.45% Tariff Review + Adjustment Average effect to be perceived by the consumer : -2.26% Administrative Appeal In 17 th July, Company filed as administrative appeal at Aneel about the Regulatory Asset Base and the non-technical losses trajectory. Aneel s decision expected to be rendered by July,

55 Discussions with the Regulator Discussion Arguments Shielded RAB Exclusion R$ 1,260 million from shielded RAB: - Exclusion of cables: R$ 728 million - Reclassification/equipment volume: R$ 533 million Shielded RAB approved in 2003, reconfirmed in 2007, based on global consistency criteria Investments R$ 446 million investments not recognize, related to Minor Components and Additional Costs ( CA ) Adequacy of regulatory standards versus actual spending Losses Changed the benchmark in Public Hearing (regulatory losses reduction from 0.49% to 1%) Benchmark company is an outlier, previous number of 0.49% shall be restored 55

56 3rd Cycle of Tariff Reset for AES Sul Gross Regulatory Asset Base: R$ 2,503.0 million Tariff Review Net Regulatory Asset Base: R$ 1,488.5 million Parcel B: R$ million Non Technical Losses (referenced in the low voltage market): start point at 4.91% will be kept during the entire tariff cycle (no trajectory) Average effect to be perceived by the consumer: 3.92% Economical Effect: 4.49% Administrative appeal The Company will file an administrative appeal at Aneel about Regulatory Technical Losses, that were not adequately calculated by the methodology 56

57 Regulatory pressure to lower tariffs Overview Energy Cost Reduction Program established by Provisional Measure 579 and Law Valid for concessions granted before % average reduction in electricity costs, funded by: - Generation and transmission concessions expiring : -13% - Lower sector charges: -7% -Minimal impact on AES Brasil businesses concessions expire between Generation & Transmission Concessions Extension for 30 years with effects anticipated for 2013: - Evaluation of assets using new replacement value methodology Concession renewal will be based on O&M costs, industry charges, fees and network usage Distribution Concessions Extension for 30 years, as per contract Rules for renewal has not been defined 57

58 combined with poor hydrological conditions impacted discos cash position Out-of-merit-order: higher EES¹ Low affluence impacting reservoirs level Thermals dispatch of 12 GW since Sep, 2012 Within-the-merit-order: rising energy costs Energy Cost Reduction Program 2 Hydrological risk transferred to discos through quotas allocation Non-renewal of some generation concessions Exposure to the spot market (~ 2 GWavg) Impact on cash position of discos since Sep/ ESS (Service System Charges), which pays for the dispatch of thermals that are out-of-merit 2 Provisional Measure 579 and Law

59 resulted in a measure to preserve discos financial stability Component After Decree #7.945 Energy Purchase (within-the-merit-orderthermal-dispatch) Tariff Adjustment ESS¹ (out-of-themerit-order thermal dispatch) Hydrological risk¹ CDE funding via CCEE settlement Involuntary Exposure¹ 1 Before Decree # 7.945, such costs would be passed-through via Tariff Adjustment. 59

60 Spot price new methodology Previous Regulation CNPE Resolution # 3/2013 Transitory regulation (April to July, 2013) From August, 2013 on Resolution CNPE #3/2013: Charged from: Discos Free cust. ESS² Spot Price Other 50% for: Agents with exposure to spot prices ESS ESS Spot Price Charged from all market agents: 1 Discos Free cust. Generators Traders ESS Spot Price Includes out-of-themerit-order thermal dispatch Methodology for adequacy of risk aversion mechanisms for spot prices formation - Risk Aversion Curve ( CAR ) of 5 years (starting from Aug/2013) System Service Charges ( ESS ): prorated among all market players (including generators) Uptrend in spot prices, which should influence prices in energy contracts representing an opportunity to AES Tietê 1 - Proportional to average commercialized energy of the last 12 months. 2 - ESS (System Service Charges), which pays for the dispatch of thermals that are out-of-merit 3 Risk Aversion Curve 60

61 Attachment AES Tietê: Expansion Obligation AES Eletropaulo: Eletrobrás Lawsuit

62 AES Tietê's expansion obligation Privatization Notice established the obligation to expand the installed capacity in 15% (400 MW) until 2007, either in greenfield projects and/or through long term purchase agreements with new plants Aug/08 Oct/08 Jul/09 Company faces restrictions until deadline: Insufficiency of hydro resources Environmental restrictions Insufficiency of natural gas supply New Model of Electric Sector (Law # 10,848/2004), which forbids bilateral agreements between generators and distributors Aneel informed that the issue is not related to the concession agreement and must be addressed with the State of São Paulo In response to a Popular Action (filed by individuals against the Federal Government, Aneel, AES Tietê and Duke), the Company presents its defense before the first instance Judicial Notice: The Company was notified by the State of São Paulo Attorney's Office to present its understanding on the matter, having filed its response on time, the proceedings were ended, since no other action was taken by the Attorney's Office Sep/10 Popular Action: Due to the plaintiffs failure to specify the persons that should be named as Defendants, a favorable decision was rendered by the first Instance Court (an appeal has been filed) AES Tietê was summoned to answer a Lawsuit filed by the State of São Paulo, which requested the fulfillment of the obligation in 24 months. An injunction was granted in order to have a project submitted within 60 days. Sep/11 Lawsuit: Nov/11 The Company appealed to the State of Sao Paulo State Court of Appeals and the injunction was kept In March, 19 th the Company s appeal was denied. Thus, on April, 26 th AES Tietê presented Thermo São Paulo project as the plan to fullfill the obligation to expand the installed capacity. Apr/12 Dec/12 In December 6 th was joined to the process a manifestation of the State of São Paulo over the Expansion Plan Capacity presented by AES Tietê Next Steps: shortly, the Company shall be intimated to pronounce on the manifestation Efforts being made by the Company to meet the obligation : Long-term energy contracts (biomass) totaling an average of 10 MW SHPP São Joaquim - started operating in July, 2011, with 3 MW of installed capacity SHPP São José - started operating in March, 2012, with 4 MW of installed capacity Thermal SP - Project of a 550MW gas fired thermo plant Thermal Araraquara - Acquisition of a purchase option 62

63 Eletrobrás lawsuit Stated-owned Eletropaulo borrowed money from Eletrobrás State-owned Eletropaulo was spunoff into four companies and, according to our understanding based on the spin-off agreement, the discussion was transferred to CTEEP Eletrobrás, after winning the interest calculation discussion, filed an Execution Suit aiming the collection of the amounts that were in default Eletrobrás and CTEEP appealed to the Superior Court of Justice (SCJ) Nov/86 Dec/88 Jan/98 Apr/98 Sep/01 Sep/03 Oct/05 Jun/06 State-owned Eletropaulo and Eletrobrás disagreed on how to calculate interest over that loan and two lawsuits, which were later merged into one, were initiated Privatization event. State-owned Eletropaulo became AES Eletropaulo Based on the spin-off protocol, the 2 nd Instance Court excluded AES Eletropaulo from the lawsuit The SCJ annulled the 2 nd Instance Court decision and sent the Execution Suit back to the 1 st Instance Court, with the determination to identify the amount to be paid and who should be liable for such payment, which should be done through an appraisal procedure. 63

64 Eletrobrás lawsuit In accordance to the procedure that was stipulated by 2 nd Instance Court after an appeal from AES Eletropaulo, Eletrobrás requested the 1 st Instance Court to appoint an expert May/09 Dec/10 Eletrobrás requested the beginning of the appraisal procedure before the 1 st Instance Court The 1st Instance Court determined AES Eletropaulo and CTEEP to present their arguments, which occurred in August Jul/11 Eletrobrás requested the withdrawal of the judicial deposit made by state-owned Eletropaulo in 1988, which now amounts for R$ 95 MM (principal of the loan taken in 1986), as a direct consequence of Eletrobrás victory on the merits The 1st instance Court dismissed the parties requests of producing evidences and rendered a decision stating AES Eletropaulo s responsibility for the debt pursuant to the Spin-Off Protocol Dec/12 The Rio de Janeiro State Court of Appeals, granted on 15th a preliminary injunction that suspended the effects of the December 2012 decision Jan/12 AES Eletropaulo filed an appeal on Jan 7 th arguing that the decision is invalid, because the procedure preceding such decision should encompass full discovery, pursuant to Superior Courts determination. Also, the Company requested a preliminary injunction to stay the execution proceedings until the ruling of the appeal Feb/12 On 21st, AES Eletropaulo became aware of the favorable decision granted by the TJRJ, which fully annulled the first instance decision and determined the return of the case to the 1 st instance Next Steps: 1 - The appraisal procedure (AP) is expected to begin in the 1st half of 2013 and is expected to last over 6 months 2 AP is not expected to be concluded in a period shorter than 6 months from its beginning 3 - After AP s conclusion, a 1 st Instance Court decision will be issued > In case of an unfavorable decision: 4 Appeal to the 2 nd Instance Court and file an injunction to stay the execution proceedings 5 If the injunction is not granted, the execution proceeding can be resumed and Eletropaulo will have to post a guarantee 6 Eletrobrás can request the seizure of the guarantee 7 - Appeals to the Superior Courts and file an injunction to stay the execution proceedings 64

65 Attachment AES Eletropaulo: Pension plan

66 Pension plan expenses and disbursements are calculated using different assumptions ACCOUNTING EXPENSE CASH DISBURSEMENT Regulatory Agency CVM (Brazilian SEC) PREVIC (Pension plans regulator) Determination Difference between interest on actuarial liabilities and assets Result of the FCesp actuarial valuation Discount rate Calculated in accordance to market value (National Treasury Notes/NTN-B) on 12/31/2012: 3.75% p.a. Calculated in accordance to a study performed by FCesp (Resolution CNPC No. 9): 5.5% p.a. Recognition Company Financial Statements FCesp Financial Statements 66

67 Main amendments on accounting rules Until (Res. CVM 600)¹ From (Res. CVM 695) Expected return on plan assets Determined by a study of a specialized company (6.79% for 2012) Corresponds to the actuarial liabilities discount rate (3.75% for 2013) Actuarial Gains and losses Accrued over the years in the "corridor" (10% excess of actuarial liabilities recognized in the income statement) Fully recognized in the Company's balance sheet (Liabilities and Shareholders Equity) Corridor over 10% of plan liabilities Amortized over the average future service period of active participants and recognized in income statement There is no impact (fully recognized in the balance sheet of the Company) 1 Revoked by CVM Resolution 695, on December 13,

68 2012 R$ million Impact on the income statement due to changes imposed by CVM 2013 R$ milllion Service cost 16.3 Discount rate decreases from 5.5% to 3.75% 29.3 Rate costs Discount rate decreases from 5.5% to 3.75% 1,018.1 Expected return on plan assets (788.6) Rate of return decreases from 6.79% to 3.75% (696.5) Amortization of actuarial gains and losses 15.3 Extinction of the corridor method - Total expenditure Increase on expense shall be reversed through equity in the coming years due a grater expected profitability of the plan compared to the expected return on plan assets used in the calculation Average return over the last five years on 16% (above the actuarial target period) 68

69 Cash impacts with the plan Amendments set forth by CVM 695 has no influence on assumptions and on the calculation method of the pension plan cash disbursement 2012 R$ million +4.4% 2013 R$ million Cash disbursement before and after CVM IGP-DI discount rate decreases from +6% to +5.5%, offset by marking securities to market For 2014 is not expected a significant increase on cash disbursement, since the actuarial assumptions were maintened 69

70 Attachment Other subjects

71 Shareholders agreement On Dec-2003 AES and BNDES executed a Shareholders Agreement to regulate their relationship as shareholders of Brasiliana and its controlled companies. The Agreement is available at and Shareholders can dispose its share at any time, considering the following terms: Right of 1st refusal Any party with an intention to dispose its shares should first provide the other party the right to buy the corporate interest at the same price offered by a third party Tag along rights In the case of change in Brasiliana s control, tag along rights are triggered for the following companies (only if AES is no longer controlling shareholder): AES Eletropaulo: Tag along of 100% on its common and preferred shares AES Tietê: Tag along of 80% on its common shares AES Elpa: Tag along of 80% on its common shares Drag along rights Once the offering party exercises the Drag Along clause, offered party is obligated to dispose of all its shares at the time, if the Right of 1 st Refusal is not exercised by offered party 71

72 Costs and expenses Costs and operational expenses 1 (R$ million) % Q12 1Q13 Energy Purchase, Transmission,Connection Charges and Water Resources Other Costs and Expenses ² 1 Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 72

73 Energy costs pushed the costs and operating expenses in the 1Q13 Operating costs and expenses¹ (R$ million) Q12 electric energy purchased for resale operat. Provisions and Other Exp. personnel, material and third party services transmission and Conection financ. comp. for use of wat. resources 1Q Not including depreciation and amortization 73

74 Costs and expenses Costs and operational expenses 1 (R$ million) PMS 2 and other expenses (R$ million) 1,551 6,927 1,255 1, ,609 5,715 1, ,255 1,251 15% % 4,354 4,464 5,376 1,632 1, ,211 1, Q12 1Q13 Energy Supply and Transmission Charges¹ PMS² and Others Expenses Q12 1Q13 Personnel and Payroll Material and Third Party Others 1 Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 74

75 PMS and other expenses¹ 1Q13 (R$ million) Manageable PMSO¹ items below the inflation in 1Q13 (65) -1.4% (60) (3) 1 (3) Q12 FCesp Contingencies, 1Q12 ADA and Manageable Write-Offs Personal Materials and Others Third Party Services 1Q13 Contingencies, Manageable ADA and Write-Offs FCesp 1Q Personnel, Material, Third Party Services and Other Costs and Expenses 75

76 Brazilian main taxes AES Tietê Income Tax / Social Contribution: 34% over taxable income ICMS (VAT tax) deferred tax PIS/Cofins (sales tax): Eletropaulo s PPA: 3.65% over Revenue Other bilateral contracts: 9.25% over Revenue minus Costs AES Eletropaulo Income Tax / Social Contribution: 34% over taxable income ICMS: 22% over Revenue (average rate) Residential: 25% Industrial and commercial: 18% Public entities: free PIS/Cofins: 9.25% over revenue minus Costs 76

77 Contacts: The statements contained in this document with regard to the business prospects, projected operating and financial results, and growth potential are merely forecasts based on the expectations of the Company s Management in relation to its future performance. Such estimates are highly dependent on market behavior and on the conditions affecting Brazil s macroeconomic performance as well as the electric sector and international market, and they are therefore subject to changes.