Corporate Presentation /11

Transcription

1 Corporate Presentation /11

2 AES Corporation Global Company Natural gas and coal fired thermal plants 25.9 GW of installed capacity 36 GW installed capacity Providing services to over 10+ million customers 21 thousand employees Over 8.2 GW of Renewable sources¹ AES Corp is present in 17 countries and 4 continents Distributed energy +70MW of solar PV² projects in operation World leader in Energy Storage Total of 432 MW³ 1 Includes hydro, wind, solar, energy storage, and biomass 2 - PV Photovoltaic; 3 - Operating and under construction 1

3 Leading position in the energy sector in Brazil Generation 1 Market Share Distribution 2 Market Share AES Tietê 2,658 MW Concession ends in 2029 AES Ergos AES Eletropaulo 20m people served 6.9m customers Concession ends in % 11% AES Uruguaiana 640 MW 98% 89% AES Brasil Other 1 installed capacity as of 2016; 2 Consumption (GWh) in 2015 (Source: ABRADEE) 2

4 History in Brazil Solid participation in distribution and generation businesses AES Brasil +20 years presence in Brazil Beginning of AES Uruguaiana s construction AES Corp acquired AES Sul through privatization process Privatization of AES Eletropaulo by a consortium comprised by AES Corp and other local and international companies Privatization of AES Tietê 1999 AES Uruguaiana beginning of operation AES Corp increases its interest in AES Eletropaulo and AES Tietê Incorporation of Companhia Brasiliana de Energia and execution of shareholders agreement with BNDES AES Tietê merged into Cia Brasiliana and was renamed AES Tietê Energia S.A AES Sul was sold to CPFL Energia in June/

5 AES Brasil Mission, Vision and Values Mission To promote well being and development by providing secure, sustainable and reliable energy solutions Vision To be recognized by our customers and shareholders as the main partner for safe, innovative, reliable and affordable energy solutions Values Put safety first Act with integrity Honor commitments Strive for excellence Have fun through work 4 4

6 AES Brasil Environmental Responsibility Reservoirs repopulation Reforesting, borders and archeological management programs Water quality monitoring Recycling and waste disposal programs Programs aiming to reduce CO2 emissions Risk Management and identification of opportunities related to climate change 5 5

7 AES Brasil Social Responsibility Access to reliable energy through social development Education for efficient and safe use of electricity Program which offer cultural and sports activities simulating citizenship practices Sustainable partnership commitment with sustainable development at AES Brasil s value chain 6 6

8 INVESTMENT PLAN [CEL LRA NGE ] [CEL [CEL LRA LRA NGE NGE ] ] R$ 4.0 billion R$ 3.6 billion R$ 403 million Generation 2020 Distribution Services R$ 28 million 7 7

9 AES Brasil Recognitions AES Eletropaulo AES Tietê AES Brasil 8

10 National Interconnected System GENERATION Distribution Substation Thermal Plant Hydroelectric and Solar Plant Renewable Energy Substation Transformer DISTRIBUTION Substation Transformer TRANSMISSION COMMERCIAL AND INDUSTRIAL CUSTOMERS RESIDENTIAL CUSTOMERS 9

11 Energy sector in Brazil: Business Segments Generation¹ Transmission² Distribution² 4,596 power plants 148 GW of installed capacity System based on hydro plants (64% 3 ) Contracting environment: free and regulated markets 104 agents High voltage transmission (>230 kv) +100,000 km of lines (National Integrated System) Regulated tariff (annually adjusted by inflation) 63 distribution companies 339 TWh distributed energy 79 million consumer units Annual tariff adjustment Tariff reset every four or five years Regulated contracting environment Sources: EPE, ANEEL, ONS, ABRADEE and Instituto Acende Brasil 1 Refers to Sep/2016 data; 2 Refers to 2015 data; 3 Includes HPP (hydro power plants) and SHP (small hydro plants) 10

12 Ownership Structure AES Corp BNDES C = Common Share P = Preferred Share T = Total C 99.99% T 99.99% C 50.00% + 1 share P 0.00% + 7 shares T 46.15% C 50.00% - 1 share P % - 7 shares T 53.85% Brasiliana Participações C 99.99% T 99.70% T 98.26% C 0.00% P 7.38% T 4.44% AES Corp C 61.57% P 0.04% T 24.28% BNDES C 14.38% P 37.40% T 28.33% AES Tietê Energia AES Sul AES Ergos AES Uruguaiana AES Elpa C 77.81% P 0.00% T 30.97% AES Eletropaulo 16.1% 19.2% Free Float Others 1 Market Cap % 8.5% US$ 0.4 bi 24.3% 28.3% 39.4% 7.9% US$ 1.7 bi 1 Includes Federal Government and Eletrobrás shares in AES Eletropaulo and AES Tietê, respectively; 2 Base: 11/21/2016. FX rate BRL/1 USD 11

13 5 th largest private generation company Concession expires in 2029 Market Cap: US$ 1.7 billion 1 Brazil 9 hydroelectric plants and 3 SHP² in São Paulo Installed capacity of 2,658 MW, physical guarantee ³ of 1,278 MWavg Consistent evolution of client portfolio Água Vermelha (1,396 MW) Nova Avanhandava (347 MW) Promissão (264 MW) Ibitinga(132 MW) Bariri (143 MW) Barra Bonita (141 MW) Euclides de Cunha (109 MW) Caconde (80MW) Limoeiro (32 MW) Mogi-Guaçu (7 MW) São Joaquim (3 MW) São José (4 MW) Investment grade (Moody s): - National: Aa1 - International: Ba2 1 Base: 11/21/2016. FX rate BRL/1 USD; 2 - SHP Small hydroelectric plant (installed capacity<30mw); 3 -Amount of energy allowed to be contracted in the long term 12

14 Largest distribution company in Latin America 24 cities attended in São Paulo metropolitan area Concession contract expires in 2028 Market Cap: US$ 439 million¹ Brazil Brazil São Paulo 16% of Brazil s GDP² in its concession area 4,526 km 2 concession area 46 thousand km of distribution and transmission lines 6.9 million customers 20 million people served 32 TWh distributed in 9M16 7,244 employees as of September 2016 West, South, & ABC North & East Investment Grade: Fitch S&P Moody s National AA- A- A3 International BB BB- Ba3 1 Base: 11/21/2016 FX rate BRL/1 USD; 2 - Source: IBGE,

15 Beginning of commercial operations in 2000 Located in the State of Rio Grande do Sul city of Uruguaiana Operations were suspended in 2008 due to lack of gas supply Initiated arbitration against YPF in Argentina ICC¹ awarded the merits in favor of AES Uruguaiana in 2013 Next and final phase refers to the damages calculation Emergency operations in 2013, 2014 and 2015 to support reservoirs recovery in Brazil Looking for long-term solution Fast Facts Combined cycle gas turbine (CCGT) Capacity (MW) 640 MW Authorization expiration International Chamber of Commerce 14

16 In April 2016, AES Serviços became AES Ergos New market strategy positioning as a Energy Solution Integrator Customer-focused Company, offering high-added-value solutions to energy agents, commercial and industrial segments, based on AES Brasil capabilities and Innovation Main Products C&I customer Lighting services Energy efficiency solutions Construction and O&M of substations and transmission lines DG and cogeneration plants O&M DisCos and GenCos Technical Services Newtwork and plants O&M Tree trimming 15

17 Corporate governance Key for investment decision - Operational and Investment Management Committee: robust capital allocation process - Corporate policy of Integrated Risk Management¹ monthly assessed by Companies Executive Officers and quarterly by Fiscal committee and Board of Directors - High level of commitment, with monthly Board of Directors meetings - Listed at BM&FBovespa: ELPL3 and ELPL4: Level II TIET11 (units): Level II - ISE Corporate Sustainability Index portfolio - Tag along rights 1 Based on COSO_ERM and Brazilian Corporate Governance Institute models 16

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19 Investment focused on power plants modernization Investment program totaled R$ 168 million in (e) 2017(e) 2018(e) 2019(e) Expected (e) Actual Power plants modernization process, aiming for continuous improvement in operational conditions and ensuring availability in its generation plants 1 Normalized values 18

20 Investments and Best Practices in Asset Management, translates into outages reduction Unscheduled outages (%) 2.03 Best practices in asset management¹: PAS 55 Certification ISO Certification Unscheduled Outage Rate EFOF² 1 - AES Tietê was the first Latin American company to receive the certification from the British Standards Institute 2 Equivalent Forced outage Factor - EFOF 19

21 Raise in generated energy reflects ONS higher dispatch 109% Generated energy (MW average 1 ) 80% 117% Hydropower plants are dispatched by ONS² Dispatch is also related to hydrological conditions: Low hydrology translates into low generation levels 1,392 67% 71% 1, Generation / Physical Guarantee 9M15 Generation - MWavg 9M16 1 Generated energy divided by the amount of hours; 2 National System Operator 20

22 Low hydrology throughout 2016 contributed to the reduction of the reservoir levels Historical Level of Brazilian Reservoirs (%) Reservoirs (%) vs. Thermal Dispatch (GW avg 1 ) SIN s Average Annual Inflows: % % % 90% 80% % 14 60% 12 50% 10 40% 8 30% 6 20% 4 10% 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Historical data since 2001 Thermal Dispatch Reservoirs 1 Generated energy divided by the amount of hours 21

23 Elevated out of order dispatch due to risk aversion, drought in the Northeast and intermittence of wind power generation R$/MWh (Spot Price SE/CO) GWavg¹ ² Increase in Thermal Dispatch out of Order of Merit Thermal Dispatch out of the Order of Merit Thermal Dispatch in the Order of Merit + Inflexibility Total Thermal Dispatch Spot Price SE/MW 1. Source: ONS ( PEN 2016) 22

24 Energy Reallocation Mechanism (ERM) for hydrological risk sharing 1) Equilibrium (GE 1 = PG 2 ) Buy at MRE 3 2A) Deficit (GE 1 < PG 2 ) Buy at MRE 3 Buy at Spot 2B) Surplus (GE 1 > PG 2 ) Sell at MRE 3 Buy at Spot A physical guarantee (assured energy) is assigned to support contracts Energy dispatch optimized by centralized system operator (ONS) on a tight pool PG 2 PG 2 PG 2 Key drivers for hydrological risk Generated Energy MRE Genco A Assured Energy Generated Energy MRE Genco A Assured Energy Generated Energy MRE Genco B Assured Energy Generated Energy (hydro) in the entire system (ERM) - influenced by hydrology Spot Price - marginal cost influenced by hydrology and thermal dispatch - System GSF = PPA = PG - System GSF < PPA = PG - System GSF < PPA = PG 1 GE: Generated Energy; 2 PG: Physical Guarantee; 3 Enough to cover variable O&M costs 23

25 AES Tietê Energia New commercial solutions: Distributed generation and Energy Storage Solar Distributed Energy Market potential: Installed capacity of 600MW until 2020 in Brazil¹ BOT Model Build, Operate, and Transfer² AES expertise: + 65MW of distributed solar generation in operation Projects of distributed generation in the State of São Paulo Energy Storage AES global leader in Energy Storage with 432MW³ in 7 countries Main advantages/applications: Integration in renewable sources; postponement and optimizing of investments in transmission and distribution; leading technology in generation Pilot project in hydroelectric plant in Bariri, São Paulo, initating operation in Projection ANEEL; 2. Project, Investment, Construction and O&M conducted by AES Tietê Energia; 3. Assets in operation, construction, and advanced stage in development 24

26 AES Brasil growth perspectives Natural Gas Power Plants & Cogen ~1.5GW of dispatchable source 2 natural gas combined cycle power plants ready to go to energy auctions Cogeneration: distributed generation based on natural gas solutions Assessing M&A opportunities Renewable Energy Solar and Wind 180 MW solar project: in São Paulo and Minas Gerais State¹. Distributed generation²: AES owns globally 65 MW and Brazil s potential is 600MW up to 2020³ Assessing M&A opportunities Energy Storage AES Corp is the leader (patented system): Operations in 7 Countries (+432MW capacity; + 8 years experience) Medium and large size systems: utilities and behind the meter (industrial and commercial) 1 Close to Água Vermelha HPP, an existing AES Tietê hydro power plant on the border of the states of Minas Gerais and São Paulo 2 Business model considers the payment of the plant using the economy from the distribution consumption 3 According to ANEEL 25

27 Reduction of net revenue in the period reflects the end of the bilateral contract with AES Eletropaulo Billed energy (GWh) Net Revenue (R$ millions) -40% 15,797 15,075 14,485 1,989 11,108 11,108 11,108 10,671 12,096 8,768 1,808 2, ,692 1,197 2, , , M15 2, M M ,128 9M16 32 AES Eletropaulo / Regulated and Free Market ERM 1 Spot/Others CCEE AES Eletropaulo / Regulated and Free Market ERM 1 Spot/Others CCEE 1 Energy Reallocation Mechanism; 2 Includes the selling to AES Eletropaulo at A-1 Auction 26

28 Contracting environment and opportunities 2016 and beyond Regulated Market Free Market Spot Market Existing Energy Auctions Bilateral contracts Non contracted energy Via auctions organized by federal government Distribution companies Via bilateral agreements Free Consumers¹ Exposed to Spot Market price CCEE Settlement 1 Free Consumers (Conventional free consumer - demand above 3MW and connected to a line of 69kV and incentivized/ special free consumer - demand above 0.5MW) 27

29 Commercialization strategy post-2015 leveraging cash flow Our goal is to sell the major part of Company physical guarantee in the free market Customized energy with global experience Focus on long term contracts and off takers with a strong financial background aiming to ensure Company s cash flow Practices and policies to ensure an adequate risk-profile assessment Client relationship actions to promote AES Tietê and identify clients needs (i.e.: workshops, site visits, satisfaction surveys) 28

30 Free Market Dynamic and competitive market Price formation methodology Short term Spot price (hidrology and reservoirs) Medium Term Supply and demand Long Term Marginal Expansion Cost Regulated Market price 29

31 Tendency of higher free market prices due to uncertainties in hydrology and changes in the spot price methodology in 2017 Client portfolio 1 (MWavg) Contracting level Average price A R$/MWh 2 100% 100% 100% 95% 88% 72% 39% 27% ,268 1,268 1,268 1,178 1, Energy available for sale³ Own energy already sold AES Eletropaulo PPA 1.Only Conventional Energy. Includes energy contracts firmed until September 30 th, 2016; Excludes losses and internal consumption. 2.Nominal Average price based on September, 2016; 3.Excludes losses and internal consumption 30

32 Lower average price of the contract portfolio and exposure to short term market influenced the quarter s results Net revenue (R$ million) EBITDA (R$ million) 3,205-18% 65% 29% 53% 50% 53% 2,337 2,626 1,989-40% 1,198 1, % 1, % M15 9M M15 9M16 EBITDA Margin 31

33 And returns 881 Net income (R$ millions) Minimum of 25% dividend payout of annual net +62% % 79% 6.4% 5.6% income according to bylaws Distribution practice: quarterly basis Average payout from 2008 to 2015: 99% Average dividends since 2008: R$ 809 million/yr % Management proposed the payment of R$ 97.5 million in dividends for 3Q Dividend yield of 1.5% and payout of 99.6% - Dividend of R$ 0.25/unit, equivalent to M15 Pay out Dividend yield Net Income 9M16 aprox. R$ 0.05 per common and preferred share 32

34 Low leverage level Net debt (R$ billion) Debt amortization schedule Q15 3Q Net Debt / Adjusted EBITDA¹ Net Debt Amortization (R$ million) Covenants Net Debt/Adjusted EBITDA < 3.5x Adjusted EBITDA/Financial Expenses > 1.75x Debt Cost 3Q15 3Q16 Average cost (% CDI) 106% 110% Average term (years) Effective rate 16.18% 13.83% 33

35 and consistent cash flow R$ millions Q16 Initial Cash Operating Cash Flow 1,187 1, Investments (41) (42) (13) Net Financial Expenses (38) (93) (10) Net Amortization (0) Income Tax (33) (24) (15) Free Cash Flow FINAL CASH CONSOLIDATED and 2015 refer to the cash flow of consolidated AES Tietê S.A. 34

36 Capital markets AES Tietê x IEE x Ibovespa¹ A B C D Mar/2012: 4Q11 results above market expectations Sept/2012: announcement of the Energy Reduction Program, through the PM Feb/2013: High thermoelectric dispatch to conserve water in the reservoirs increase spot prices Aug/2013: 2Q13 results above consensus due to higher-than-expected spot prices A B C D E F G H I J K L E Nov/2013: weak 3Q13 results affected by seasonality strategy F Feb/2014: 4Q13 results slightly below consensus but market show high expectations on 2014 commercialization strategy 100 G May/2014: 1Q14 EBITDA above expectation benefited from seasonality strategy 80 H Jan/2015: Hydrology for rainy season worse than expected Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 GETI4 GETI3 IEE IBOV TSR - GETI4 TIET11 TSR - TIET11 Market cap³: US$ 1.7 billion / R$ 5.7 billion BM&FBOVESPA: TIET3 (common shares); TIET4 (preferred shares) and TIET11 (units) Restricted ADR program (Reg S and 144A) I J I K L K Dez/2015: Corporate Restructuring concluded May/2016: AES Tietê s stock returned to the MSCI Index Aug/2016: Capital Increase Oct/2016: Conclusion of Capital Increase 1 Base 100: from 01/01/2012 to 11/21/2016; 2 Total Shareholders Return; 3 Index: 11/21/2016; 4 Government program to reduce energy tariffs. 35

37 We have strong capabilities and business governance Asset Management - ISO certification, 1 st Generation company in America AES Tietê has been included in the Corporate Sustainability Index (ISE) since 2007 Attractive returns to investors. Strong cash generation; Maximization of payout Cost efficiency and optimized capital allocation Established risk management capability 36

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39 2016 investments focused on system expansion and customer service Investments (R$ million) 2,769 9M16 Investments focused on: (e) 316 2, (e) M15 31% M16 R$ 78 million in system expansion for the addition of new clients and focus on customer satisfaction R$ 154 million in operational reliability through the maintenance of distribution and transmission lines Third-party resources Own resources 38

40 Quality indexes Recovery plan already in place Quality Indexes Recovery Plan: 1600 electricians, 173 dispatch technicians and supervisors, 707 installation of 707 reconnectors, among others Improvement of the emergency response process SAIFI¹ (times) SAIDI² (hours) +22% -6% Q15 3Q16 Aneel s Reference : 5.95 times / 2016: 5.91 times Q15 3Q16 Aneel s Reference : 8.06 hours / 2016: 8.01 hours Last twelve months (October15 to September/16) 1 - System Average Interruption Frequency Index; 2 - System Average Interruption Duration Index 39

41 Losses reduction efficiency over the last four years p.p reduction in technical losses between the 3Q15 and 3Q Q15 3Q16 Aneel Reference¹ Technical losses² Non-technical losses 1 Aneel benchmark with standardized values for the calendar year; 2 - Values estimated by the Company to Aneel reference for non-technical losses of the low voltage market 40

42 Historical market performance Total Market 1 (GWh) Consumption Breakdown 3Q15 x 3Q16 3Q15 3Q16-1.0% 10,71410,607 41,268 6,832 43,345 7, % 45,101 45,557 8,284 7,987 46,216 8, % 46,415 44,237 8,589 8,058 3,966 4,055 Household 3,437 3,343 Commercial 2,277 2,209 Industrial 1,034 Other 999 Total Consumption Breakdown 9M15 x 9M16 34,436 35,434 36,817 37,570 37,474 37,827 36,179 9M15 9M16-2.4% 33,13632, ,03912,013 10,96110,735 7,003 6,505 3,133 3,074 Free Clients Captive Market Household Commercial Industrial Other Total 1 Own consumption not included; 41

43 Consumption expansion is mostly in residential and commercial classes Consumption by class ¹ 28% 38% 18% 38% 31% 21% 16% 9% Brazil AES Eletropaulo Household Commercial Industrial Other 1 3Q16 (Own consumption not included) Source: EPE. 42

44 Household Class consumption in line with São Paulo State real income GWh R$ 4,500 2,600 2,500 4,000 3,500 3,000 2, Real Income (SP) Household Consumption / Quarter 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1, Q16 Household consumption grew an average of 2.5% in the last 9 years¹ 1 base date:

45 Industrial class consumption tied to the industrial production performance in the State of São Paulo 0,15 Industrial class X Industrial production in SP¹ Economic crisis Economic recovery Economic crisis Economic crisis Industrial consumption impacted by lower industrial production in Brazil 0,1 0,05 0-0,05-0,1-0,15 Industrial Production in SP (% 12 months) Industrial consumption AES Eletropaulo (% 12 months) 1- São Paulo metropolitan area. Information until August

46 Gross revenue decrease in the 9M16 due to lower Parcel A costs Gross revenue (R$ million) Costs (R$ million) Costs and Expenses (R$ million) 12, ,599 8,203 15, ,968 9, ,565 10,898 13,057 17, ,757 9,833-14% 15, ,801 8,086 8,553 1,670 6,883 7,474 1,640 5,834 9,501 1,621 7,880 12,093 2,209 9,884 9,042 1,631 7,411-16% 7,580 1,865 5, ¹ Regulatory Assets and Liabilities Construction Revenue M15 9M16 Deductions to Gross Revenue Net Revenue (ex-construction revenue) 2012 Opex² Energy costs and sector charges 9M15 9M16 1- Adjusted by regulatory assets and liabilities; 2 ex-construction Costs and Depreciation and Amortization 45

47 32% reduction of the Adjusted Ebitda mainly due to increase in operating expenses Adjusted Ebitda 1 (R$ million) Adjusted Net Income (Loss) 2 (R$ million) (132) , ,138 1, % % M15 9M M15 9M16 Adjusted Ebitda Reported Ebitda Adjusted Net Income (Loss) Reported Net Income (Loss) 1 - EBITDA adjusted by Pension Plan expenses, regulatory assets and liabilities and possibly non-existent asset; 2 Net income (loss) adjusted by regulatory assets and liabilities and possibly non-existent asset 46

48 Operational cash flow generation Adjusted Cash Flow - R$ Million Q16 Initial Cash Balance ,339 Operating Cash Generation Investments (501) (634) (154) Net Financial Expenses / Net Amortization (53) (36) (154) Pension Fund Expenses (210) (195) (129) Income Tax (49) (106) (1.2) Cash Restricted and/or Locked (6.7) Free Cash 4 (378) (3.5) Final Cash Balance ,335 47

49 Leverage level within financial covenants Net debt (R$ billion) Amortization Schedule (R$ million) Fundação Cesp - FCesp National currency (w/o Fcesp) 3,774 2, ,257 1, Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q Net Debt (R$ billion) Net Debt/Adjusted Ebitda¹ Covenants within limits Net Debt/EBITDA < 3.50x Adjusted EBITDA/Financial Expenses > 1.75x Debt Cost 3Q15 3Q16 Average cost (CDI+) 1.66% 1.85% Average term (years) Effective rate % 13.40% 1 EBITDA adjusted by Pension Plan expenses and regulatory assets and liabilities; 2 Average rate during the period; 3 Considered amortizations in Oct/16 and Nov/16, totaling R$ 491 million 48

50 Capital markets AES Eletropaulo x IEE x Ibovespa¹ A B C Apr/2012: Aneel announced 3PTRC proposal (tariff cut of 8.81%) Jul/2012: Aneel announced official 3PTRC (tariff cut of 9.33%) lowering dividend payout expectations Dec/2012: Court deems Eletropaulo liable for Eletrobras lawsuit. Eletropaulo appealed the decision A B C D E F G H I J H D E Feb/2013: 4Q12 EPS affected by energy costs and regulatory charges Jul/2013: Low tariff adjustment due to payment of 2/3 of 3PTRC Bubble 80 F Aug/2013: 2Q13 results above expectations. Efficiency in cost reduction. 60 G Jul/2014: Tariff readjustment approved by ANEEL including 50% of cable restitution 40 H May/15: 4 th Tariff Reset Cycle preliminary numbers released 20 I July/15: 4 th Tariff Reset Cycle final numbers released 0 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 ELPL4 IEE IBOV TSR - ELPL4 Market cap³: US$ 0.4 billion/r$ 1.4 billion BM&FBOVESPA: ELPL3 (common shares) and ELPL4 (preferred shares) ADRs at US OTC Market: EPUMY (preferred shares) J H Sep/15: Market expectation on the Eletrobras Court Case outcome Jun/16: Utilities sector intense M&A activities followed by signal of economic recovery 1 Base 100: from 01/01/2012 to 11/21/2016; 2 Electric Power Index; 3 Base Date: 11/21/

51 We have strong capabilities and corporate governance AES Corporation and BNDES as major shareholders: long-standing reputation in the market First power distribution company in the Americas to obtain ISO certification of the Asset Management Program investment plan of R$ 2.8 billion mainly focused on customer services and better quality indicators Efficiency on recognizing investments on the RAB 50

52 Brazilian Opportunities and Recent Events

53 Recents events in course in the energy sector Fourth Tariff Reset Cycle Financial sustainability GSF Generation Scaling Factor Tariff Flags % of red flag reduction Extraordinary tariff reset 23.4% average increase Energy Surplus Tariff coverage up to 105% Eletropaulo at 111.6%¹ in 2016 Third Tariff Reset Cycle Squeeze Discos EBITDA margin MP 579 / Law 12,783 18% of tariff reduction encouraged consumption Hydrological challenges Discos cash flow mismatch Government funding mechanism CDE and CCEE Loan Tariff Flags % Red Flag increase Tariff Flags Assist with cash flow mismatch 1- Estimate as of September 30 th,

54 Appendix 53

55 Tariff methodology for distributors Tariff Reset is applied each 4-5 years AES Eletropaulo next Tariff Reset: Energy Purchase Transmission Sector Charges Parcel A Costs Non-manageable costs passed on through to the tariff Incentives to reduce costs Jul/2019; AES Sul next Tariff Reset: Apr/2018 Parcel A: costs are passed on Regulatory Opex (PMSO) Regulatory Opex Efficient operating cost determined by ANEEL through to the tariff Parcel B: costs are set by ANEEL Annual Tariff Adjustment 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 Parcel A: costs are passed on through to the tariff Parcel B: costs are adjusted Remuneration on Special Obligations Special Obligations Recognition of the opportunity cost of equity capital over third party investments by IGPM +/- X Factor¹ Regulatory Ebitda Parcel A - Non-Manageable costs Parcel B - Manageable costs 1 X Factor: index that capture productivity gains 54

56 X Factor 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 the sector adjusted by market growth and consumption variation Defined at each Tariff Readjustment, considers variation of SAIDI and SAIFI and comparative performance of discos. Includes commercial indexes Defined at Tariff Reset, makes the transitions to operational costs verified in the last 12 months to the one set in the benchmarking models 55

57 4 th Tariff Reset Cycle Parcel A + Financial Components 13.96% Annual impact R$ million R$ 1,936m Energy CVA including FX rate variation associated with Itaipu CDE charge increase (loans and CDE share) Reduction of AES Tietê s energy participation due to end of contract in Dec/15 Involuntary exposure in 2015 Parcel B 1.27% R$ 176m WACC of 8.09% Special Obligations remuneration Opex adjusted to match the concession area s reality Tariff Reset Effect 15.23% R$ 2,112m 56

58 Breaking down Parcel B Remuneration (RAB) Depreciation R$ 732m R$ 458m Net RAB of R$ 6.0 billion WACC of 8.09% Gross RAB of R$ 12.2 billion Depreciation Rate of 3.75% Special Obligations R$ 39m Remuneration of 3.34% Annuity (Other Assets) R$ 134m Remuneration and depreciation of IT, vehicles and administrative assets Operational Expenses R$ 1,373m Xt Factor of -2.37%; Inclusion of labor liabilities, São Paulo salaries and underground network Bad Debt R$ 198m 0.85% of bad debt, considering Tariff Flag revenues Other Revenues - R$ 88m ~60% of non-distribution revenues Productivity Gains - R$ 33m Xp Factor of 1.13% Parcel B R$ 2,812m 57

59 Ranking of distribution tariffs in Brazil Tariff excluding tax (R$/KWh) CEA Eletropaulo Boa Vista RGE Copel CPFL Jaguari Celesc CPFL Paulista Eletroacre Coelce Bandeirante Elektro CPFL Piratininga Celpa Cemig-D Light Ranking (out of 63) Source: Aneel s website. Tariffs as of August/

60 AES Brasil Investor Relations Ave. Dr. Marcos Penteado de Ulhôa Rodrigues, 939-7th floor Barueri - SP Brazil ZIP: Websites: Phone: Fax: