AES GENER 3Q-2017 RESULTS 2017 YEAR TO DATE HIGHLIGHTS AES GENER/ 2017

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1 AES GENER 3Q-2017 RESULTS AES Gener achieved LTM EBITDA US$769 million in the twelve months ended September 30, Year-to-date EBITDA reached US$562 million, 2% lower compared to the EBITDA recorded in the first nine-months of AES Gener recorded a quarterly EBITDA of US$182 million during the third quarter of 2017, 20% lower compared to the EBITDA recorded in the same period in Year-to-date Net Income Attributable to Parent ( Net Income ) reached US$114 million, US$76 million less compared to Net Income of the same period in YEAR TO DATE HIGHLIGHTS AES Gener S.A. (hereinafter referred to as AES Gener, Gener, or the Company) continues to maintain its lead position as the largest energy producer in Chile during the first nine-months of 2017, 30% of the total generation on the SIC and SING grids. The 550 MW Cochrane plant is fully contracted and operational since October 2016, making strong EBITDA contributions in 2017 YTD. AES Gener has reached a new agreement with ENEL to ensure revenue contributions in 2018 from Nueva Renca through a profit sharing agreement. Since January 2017, Nueva Renca has been operating a similar agreement with ENEL signed in AES Gener continues to improve its credit profile, through debt prepayments. Since January 2016, the company has prepaid US$127 million and expects to continue reducing debt to improve its credit metrics. In April, the Company declared dividends of US$261 million payable in 2017, equal to 100% of Net Income in US$146 million distributed in May 2017, and US$60 million in September In June the Company launched AES Gener Energía Distribuida a new business line to provide solar-based distributed generation solutions to industrial customers. PV installations have been completed at Viña Miguel Torres and the Ministry of Social Development, with additional projects under development. During 2016 and 2017, our equity method investee, Guacolda, signed ~1,200 GWh/y in contracts with industrial offtakers with three to seven-year tenors, increasing the medium-term contracted level of the company. 1

2 AES Gener has consolidated an important part of its 1,256 MW third phase expansion program, with a portfolio of projects of power generation of diverse technology. During 2016, 573 MW of the third-phase projects came online, with the only remaining project, the 531 MW Alto Maipo hydro project, at 57.2% completion as of September 30, Since February 2016, AES Gener has started the commercialization of energy from SING to SADI through its InterAndes transmission line. Approximately 35 GWh were exported in 2017 year-to-date. Argentina s Secretariat of Energy issued Resolution 19/2017 in February The new regulation improved the Energía Base program s energy and power tariffs, which are now set in US Dollars, and eliminated the retention of payments. For TermoAndes, the power and energy not committed under the Energía Plus contracts will be sold according to this framework. For the third year in a row, Gener will form part of the Dow Jones Sustainability Index in Chile. The 2014 Chilean tax reform incorporated a new tax on air emissions. In the case of CO2, the tax is US$5 per ton of C02 emitted from stationary sources larger than 50MW. The first payment of this tax will take place in April 2018 on the emissions produced in Accrual of the green taxes, payable in 2018, began in 2017 and is accounted for on the Other Cost of Sales line of the Income Statement. CONSOLIDATED FINANCIAL SUMMARY Financial Summary (ThUS$) YTD YTD Var. 3Q 3Q Var % % Revenue 1,771,437 1,722,454 3% 615, ,220-1% Gross Profit 426, ,020-8% 135, ,283-29% EBITDA (1) 562, ,388-2% 182, ,709-20% Net Income 113, ,675-40% 25,525 81,360-69% Net Operating Cash 113, ,866-56% 20, ,971-84% Earnings per share [1] EBITDA is calculated as the sum of gross profit plus administrative expenses, depreciation and other minor adjustments. 2

3 ALTO MAIPO UPDATE AES Gener has consolidated an important part of its third phase of expansion, with a portfolio of projects of power generation of diverse technology for a total of 1,104 MW. Last year, 573 MW worth of projects came online as part of this expansion program, and the 531 MW Alto Maipo project is currently under construction, employing more than 4,000 people. Completion % Project Capacity Technology COD Alto Maipo 531 Mw Run of the river 57,2% 1 half 2019 As of September 30, 2017, completion of the project stood a 57.2%. o o o o o o o o o o o o o o o o Alto Maipo SpA ( Alto Maipo ) underwent a restructuring process in March: AES Gener acquired the entirety of Minera los Pelambres ( MLP ) stake Strabag, the project s main contractor became a minority shareholder with an approximate 7% stake Modifications were made to the PPA between Alto Maipo and MLP The terms and conditions of the Project s senior debt were modified Alto Maipo terminated its contract with Constructora Nuevo Maipo ( CNM ) in June The contract was terminated due to breaches of contract by CNM Alto Maipo took control of the works in order to continue progress Alto Maipo has drawn on US$73 million of Letters of Credit posted by CNM CNM and Alto Maipo entered into judicial and arbitration proceedings The contract termination triggered a technical default Project Finance disbursements stopped until a CNM replacement is found Alto Maipo s financial debt, US$623 million as of September 30, 2017 and its derivative liabilities, US$139 million, must be reported as a current liability on the balance sheet as long as the technical default state persists Alto Maipo is currently in negotiations with several potential contractors to: Find a replacement for CNM Restructure one of the project s main construction contracts to provide greater certainty regarding total costs and delivery date These negotiations could lead to additional costs which have not yet been quantified In light of the technical default announcement on August 1, the three credit rating agencies issued statements: S&P Global indicated that its BBB- rating for AES Gener would not be immediately affected and maintained its stable outlook Moody s reaffirmed its Baa3 rating but lowered its outlook from stable to negative Fitch Ratings confirmed its BBB- rating of AES Gener but put AES Gener and its subsidiaries Eléctrica Angamos S.A., Guacolda Energía S.A. y Sociedad Eléctrica Santiago SpA on Negative Rating Watch 3

4 REVIEW OF OPERATIONS BY MARKET AES Gener operates in four independent markets in Chile, Colombia, and Argentina. In Chile, AES Gener operates on the nation s two largest interconnected electric systems, with 2,744 MW of coal, natural gas, diesel and hydro capacity on the central grid and 1,406 MW of coal and solar on the northern grid. The Central Interconnected System or SIC, supplies a wide range of customer types, including Chile s main population centers, industry and mining operations, with a diverse generation park including thermal, hydro and renewables. The SIC runs from the southern part of Region II to Region X. The Greater Northern Interconnected System or SING primarily supplies mining operations in Northern Chile with a predominantly thermal based generation park and a small but increasing amount of solar based renewables. The SING encompasses Region I and Region XV, as well as part of Region II. AES Gener s Colombian subsidiary, AES Chivor, operates 1,020MW of hydro capacity and is one of the principal electric generators in the Colombian National Interconnected System or SIN, a predominantly hydro-based system. The Argentine Interconnected System or SADI is the main power grid in Argentina and is supplied primarily by natural gas-fired thermal plants, in addition to hydro, coal and nuclear power plants. AES Gener s affiliate, TermoAndes operates a 643MW gas-fired plant selling electricity to the Argentine market and is also connected to the SING market in Chile via the InterAndes transmission line. External Factors Annual Inflation Rate in 3Q 2017 Exchange Rate as of September 30, 2017 and 2016: The following section explains the different market conditions and variations in gross profit, separated by market. Central Interconnected Grid (SIC), Chile Electricity Consumption YoY Growth Var. Chile 1.4% Chile % Chile - SIC 3.8% Colombia 3.5% Colombia % Chile- SING 2.5% Argentina 17.6% Argentina % Colombia- SIN -0.2% Argentina- SADI 13.2% Source: DANE, INE & INDEC During the first nine months of 2017, the SIC grid experienced very dry hydrological conditions, (5 th driest year on record). Reservoir levels at the end of September stood at 68% below historical averages and 36% below the same time last year. Nevertheless, higher solar and wind output caused average spot prices to decline 3.2% in the first nine months of 2017 compared to the same period in These factors were offset by a 3.8% uptick in demand compared to the first nine months of 2016 when demand on the SIC grew a meager 0.1%. In the third quarter of 2017, average spot prices fell 13.5% with demand growing 4.5% on the SIC. 4

5 AES Gener in conjunction with Guacolda produced 24% of net generation on the SIC between January and September SIC YTD YTD 3Q 3Q Demand growth (%) (1.9) Average monthly consumption (GWh) 4,281 4,125 4,245 4,063 Average spot price (Quillota 220 kv) US$/MWh In the third quarter, SIC contract sales to regulated and unregulated customers rose US$33 million, up 18% compared to the third quarter of 2016, while contract sales volumes increased 322 GWh. The increase in contract sales revenues on the SIC was attributed to a 50% increase in non-regulated sales volumes due to higher demand from additional contracts in 2017, higher prices on regulated contracts and margin contributions results from the Nueva Renca agreement with ENEL. SIC Spot market sales fell US$29 million, down 92%, as a result of a 273 GWh decrease in spot sales volumes attributed to the lack of sales under the agreement between Nueva Renca and ENAP which took place in It s also worthy to note that 77-day scheduled major overhaul at Unit 2 of the Ventanas complex, and to a lesser extent lower hydro output due to dry conditions in the third quarter of 2017, reduced AES Gener s efficient generation on the SIC. The reduction in efficient generation availability impacted margins due to less output and the cost of purchasing energy to compensate for the lower output. AES Gener reported a US$96 million increase in Other Operating Revenue from the SIC in the third quarter of 2017, which includes coal sales, both intercompany and to third parties, transmission revenue and revenue from services, provided primarily to related companies. The increase was mainly due to an increase in coal sales which in terms of Gross Profit, was counterbalanced by a US$92 million escalation in fuel sales costs. Fuel Costs declined 7% when comparing the third quarters of 2017 and The absences of gas fuel costs associated with the ENAP agreement in 2016 were partially offset by a 9% increase in average coal prices and higher diesel consumption. Costs associated with energy and power purchases including: spot market purchases, purchases under contracts with our Guacolda affiliate and other contract purchases, primarily with no conventional renewable energy (NCRE) generators, increased US$24 million from third quarter 2016 to third quarter The 88% rise was due to an additional 310GWh purchased from other generators and the spot market and greater ancillary service costs. The previously mentioned reduction in efficient generation was the main factor behind the need for additional energy purchases. Other Sales Costs grew US$30 million primarily due to maintenance costs, driven by the Ventanas Unit 2 overhaul, the accrual of new emissions taxes, higher coal handling costs, and higher consulting services fees. 5

6 The third quarter of 2017 saw a 56% decline in gross profit to US$35 million in the SIC market, mainly due to a reduction in efficient thermal and hydro generation, the accrual of green taxes, and lower margins from Nueva Renca compared to the third quarter in The company s Gross Profit from the SIC dropped US$75 million in the first nine months of 2017 primarily as a result of to less generation from the company s efficient thermal and hydro plants due to higher maintenance and drier conditions, the US$17 million accrual of emissions taxes and the lack of margins from the arrangement with ENAP, which took place in All the above-mentioned factors were offset in part by higher prices in regulated contract sales, higher sales volume to unregulated customers, which increased by 758 GWh, and the margins obtained in the 2017 period by the agreement with ENEL in The following tables present gross profit, energy sales, purchases and generation in the SIC for both periods: SIC YTD YTD Var. 3Q 3Q Var. Gross Profit (ThUS$) % % Operating Revenue Regulated customer sales 405, ,392 15% 134, ,683 14% Unregulated customer sales 240, ,452 26% 83,220 66,726 25% Spot sales 14,550 99,917 (85%) 2,525 31,252 (92%) Other operating revenues 386, ,976 45% 179,405 83, % Total Operating Revenue 1,046, ,737 15% 399, ,543 33% Cost of Sales Fuel consumption -166, ,531 (7%) -53,799-57,875 (7%) Energy and capacity purchases -129,847-82,819 57% -51,991-27,617 88% Transmission tolls -59,853-59,475 1% -20,379-18,696 9% Fuel cost of sales -312, ,251 62% -151,814-59, % Depreciation and amortization -83,916-82,176 2% -28,225-27,138 4% Other cost of sales -144,025-89,478 61% -58,350-28, % Total Cost of Sales -897, ,730 31% -364, ,043 66% Total Gross Profit 149, ,007 (33%) 34,747 79,500 (56%) 6

7 SIC YTD YTD Var. 3Q 3Q Var. Energy Sales (GWh) % % Distribution Companies 3,530 3,741 (6%) 1,149 1,209 (5%) Other Customers 2,997 2,239 34% 1, % Spot 159 1,105 (86%) (91%) Intercompany Sales 2,913 3,867 (25%) 1,053 1,283 (18%) Total Energy Sales 9,599 10,952 (12%) 3,373 3,554 (5%) SIC YTD YTD Var. 3Q 3Q Var. Energy Purchases (GWh) % % Other generators 1, % % Spot Intercompany 2,913 3,867 (25%) 1,053 1,283 (18%) Total Energy Purchases 4,311 4,641 (7%) 1,622 1,542 5% SIC YTD YTD Var. 3Q 3Q Var. Net Generation (GWh) % % Hydro 952 1,005 (5%) (11%) Coal 3,946 4,453 (11%) 1,270 1,546 (18%) LNG (99%) Diesel % Biomass (17%) 5 16 (69%) Total 5,280 6,343 (17%) 1,733 2,019 (14%) Greater North Interconnected Grid (SING) Average spot prices on the SING grid decreased by 9.5% while demand growth rose to 2.5% in the first nine months of Market demand was significantly affected by the strike of Minera Escondida activities in the first quarter of If you compare the third quarter of 2017 with the same quarter of 2016, average spot prices fell 21% while demand rebounded in the quarter to 8.1% growth. In the first nine months of 2017, AES Gener generated 48% of the net energy produced of the SING. The table below shows the main variables of the SING at the end of September 2017 and SING YTD YTD 3Q 3Q Demand growth (%) (1.0) Average monthly consumption (GWh) 1,450 1,415 1,514 1,400 Average spot price (Crucero 220 kv) US$/MWh

8 The company s quarterly generation on the SING increased significantly (21% or 361 GWh) due to the start-up of Units 1 and 2 of Cochrane in the second half of 2016 and, to a lesser extent, the start-up of the Andes Solar photovoltaic power plant. Third quarter SING Operating Revenue reached US$199 million a 25% increase as a result of the additional capacity, which helped boost spot sales revenue 158% while total spot sales volumes rose 433GWh, up 214%. The increased capacity helped generated greater power capacity revenues and eliminated the need for spot purchases to cover contract sales. Revenues from contract sales also increased by US$14 million, up 10%, due to higher prices and the COD of Cochrane s Unit 2, while contract sales volumes fell 172 GWh, down 10%. The impact of higher contract sales prices was mostly offset by higher fuel cost in the quarter. Fuel cost increased US$31million due to a 346GWh increase in coal-fired generation and higher coal prices. The 70% reduction of energy purchase costs compared to the third quarter of 2016, helped offset the increase in fuel costs. The third quarter Other Sales Costs grew US$16 million as a result of higher costs associated with the accrual of new emissions taxes, which year-to-date totals US$20 million for the SING operations, and higher expenses associated with Cochrane s COD. The main part of the emission taxes accrual is expected to be recovered and reversed once the amendments to existing PPAs are executed to reflect these costs. Gross profits for the third quarter increased 14% to US$42 million mainly attributable to the margins generated by the two Cochrane units, which came online in the second half of 2017, and to a lesser extent the Andes Solar plant. The increased capacity increased margins on contract sales, and more than doubled spot sales while eliminating the need for spot market purchases. These positive effects were offset by the accrual of emissions taxes, which began in 2017, and lower margins from older contracts of Norgener caused by less sales volume and the increase in fuel costs. In the first nine months of 2017, Gross Profits rose US$32 million, up 30%, in line with trends driving the growth in the third quarter. Revenue from 2016 capacity payment readjustments, paid in the first quarter of 2017, also contributed to the rise in year-to-date Gross Profits. The following tables present gross profit, energy sales, purchases and generation in the SING for both periods: 8

9 SING YTD YTD Var 3Q 3Q Var Gross Profit (ThUS$) % % Operating Revenue Unregulated customer sales 454, ,101 8% 161, ,628 10% Spot sales 122,144 36, % 33,821 13, % Other operating revenues 13,556 5, % 4, Total Operating Revenue 590, ,536 28% 198, ,722 25% Cost of Sales Fuel consumption -230, ,083 87% -78,393-47,222 66% Energy and capacity purchases -20, ,900 (80%) -8,881-29,171 (70%) Transmission tolls -17,002-8, % -5,777-2,932 97% Fuel cost of sales Depreciation and amortization -97,691-70,512 39% -32,652-28,069 16% Other cost of sales -88,887-49,736 79% -30,842-15, % Total Cost of Sales -454, ,514 27% -156, ,563 28% Total Gross Profit 135, ,022 30% 42,298 37,159 14% SING YTD YTD Var. 3Q 3Q Var. Energy Sales (GWh) % % Unregulated customers 4,148 5,180 (20%) 1,507 1,679 (10%) Spot (41%) (20%) Spot Re-Routing portion 1, % % Total Energy Sales 6,020 5,971 1% 2,142 1,881 14% SING YTD YTD Var. 3Q 3Q Var. Energy Purchases (GWh) % % Spot Total Energy Purcharses SING YTD YTD Var. 3Q 3Q Var. Net Generation (GWh) % % Coal 5,987 4,996 20% 2,106 1,746 21% Solar Total 6,031 5,014 20% 2,121 1,760 21% 9

10 Colombian National Grid (SIN) A reversal from El Niño conditions that affected 2016 to normal hydrology in 2017 caused a significant increase in hydro generation, which put downward pressure on spot market prices in Colombia. Spot prices went from an average of US$112/MWh in the first nine months of 2016 to US$35/MWh in the first nine months of 2017, a 71% drop in terms of Colombian Pesos (COP) versus a 69% fall in US Dollar (USD) terms. On a quarterly basis, the decrease was less drastic as El Niño conditions began to wane mid-year. Average spot prices fell from US$53/MWh in the third quarter of 2016 to US$32/MWh, a ~39% decline in both COP and USD. During the third quarter of 2017, the AES Chivor supplied 8.6% of the demand on Colombia s SIN grid, demand which grew 1.6% in the quarter, compared to the negative growth of 0.2% for the first half. SIN YTD YTD 3Q 3Q Demand growth (%) (0.2) (2.1) Average monthly consumption (GWh) 5,504 5,516 5,653 5,566 Average marginal cost US$/MWh In the third quarter, AES Chivor s contract sales revenue customers rose US$1 million, up 1% compared to the third quarter of The revenue growth was attributed to a 16% increase in average contract prices, up to US$62/MWh, offsetting a 108 GWh decline in contract sales volume. The increase in contract sales helped offset a US$36 million decline in spot sales revenue, due to a 256 GWh decline in sales volumes and the previously mentioned drop in spot prices from the remarkably high prices in Other operating revenue grew 46%, up US$2 million thanks to higher distribution and transmission revenues associated with contract sales to non-regulated customers. Costs associated with energy and power purchases declined US$17 million. The lower spot prices in 2017 coupled with a 55 GWh decrease in spot market purchases were responsible for the 42% drop in purchase costs. Gross Profits fell 21% to US$59 million primarily due to a decline in spot market revenues. Gross Profits of the first nine months of 2017 increased US$11 million as a result of increased contract sales volumes and higher contract sales prices. These factors offset lower spot market margins. The reduction in the exchange rate also had a positive impact of Chivor s gross profit. It should be noted that the increase in revenues associated with the depreciation of the Colombian Peso (COP) against the USD was partially offset by the exchange rate hedges executed for these purposes, which are reflected in the Exchange Differences line. 10

11 The following tables present gross profit, energy sales, purchases and generation in Colombia for both periods: SIN YTD YTD Var 3Q 3Q Var Gross Profit (ThUS$) % % Operating Revenue Contract sales 198, ,760 19% 80,834 79,647 1% Spot sales 42, ,565 (76%) 14,466 50,379 (71%) Other operating revenues 14,387 4, % 4,997 3,424 46% Total Operating Revenue 254, ,841 (26%) 100, ,450 (25%) Cost of Sales Energy and capacity purchases -60, ,814 (65%) -23,631-40,849 (42%) Depreciation and amortization -9,144-8,202 11% -2,968-3,204 (7%) Other cost of sales -40,763-30,164 35% -15,031-15,275 (2%) Total Cost of Sales -110, ,180 (47%) -41,630-59,328 (30%) Total Gross Profit 144, ,661 8% 58,667 74,122 (21%) SIN YTD YTD Var. 3Q 3Q Var. Energy Sales (GWh) % % Contracts 3,131 2,746 14% 1,160 1,268 (9%) Spot 1,703 2,508 (32%) 851 1,107 (23%) Total Energy Sales 4,834 5,254 (8%) 2,011 2,375 (15%) SIN YTD YTD Var. 3Q 3Q Var. Energy Purchases (GWh) % % Spot 1,600 1,853 (14%) (9%) Total Energy Purcharses 1,600 1,853 (14%) (9%) SIN YTD YTD Var. 3Q 3Q Var. Net Generation (GWh) % % Hydro 3,181 3,402 (6%) 1,454 1,741 (16%) Total 3,181 3,402 (6%) 1,454 1,741 (16%) 11

12 Interconnected Argentine Grid (SADI) During the third quarter of 2017, the output of TermoAndes supplied 3.7 % of the demand on Argentina s SADI grid, demand which rebounded to grow 19% in the quarter, and 13% the first nine months on Argentina s Secretariat of Energy issued Resolution 19/2017 in February The new regulation improved the Energía Base program s energy and power tariffs, which are now set in US Dollars, and eliminated the retention of payments. For TermoAndes, the power and energy not committed under the Energía Plus contracts are sold according to this resolution. SADI YTD YTD 3Q 3Q Demand growth (%) (3.5) Average monthly consumption (GWh) 11,360 10,038 11,320 9,820 Average marginal cost US$/MWh Third quarter revenue from Energía Plus contract sales in Argentina increased US$6 million, up 44%. The increase in contract sales revenue was a result of an additional 62GWh in contract sales volume, due to a 40GWh increase in overall output and better prices, compared to the same quarter of Spot sales revenues increased US$2 million, up 18%, result of the new pricing framework stemming from Resolution 19/2017 which caused prices to rise to $17.23/MWh in the third quarter of 2017 from $11.30/MWh in the same quarter last year. This offset the 22GWh drop in spot sales volumes. Third quarter Gross Profits from Argentina increase by more than US$1 million, up 274% while on a year-to-date basis Argentine operations reported a US$109,000 loss, compared to US$1 million gross profit in the first nine months of The decrease in profits was due mainly to higher fuel costs and costs associated with the scheduled maintenance in of The negative impact of the cost increases was diminished in part due to previously mentioned increase in contract sales and higher prices under the Resolution 19/2017 framework. The following tables present gross profit, energy sales, purchases and generation in Argentina for both periods: 12

13 SADI YTD YTD Var 3Q 3Q Var Gross Profit (ThUS$) % % Operating Revenue Contract sales 57,191 45,031 27% 20,862 14,471 44% Spot sales 39,815 33,756 18% 14,057 11,952 18% Total Operating Revenue 97,006 78,787 23% 34,919 26,423 32% Cost of Sales Fuel consumption -61,818-47,997 29% -20,889-16,876 24% Energy and capacity purchases % (23%) Transmission tolls % % Depreciation and amortization -21,137-19,968 6% -7,841-6,394 23% Other cost of sales -12,960-9,057 43% -3,922-2,513 56% Total Cost of Sales -97,115-77,457 25% -33,041-25,921 27% Total Gross Profit , , % SADI YTD YTD Var. 3Q 3Q Var. Energy Sales (GWh) % % Customers % % Spot 2,538 2,836 (11%) 997 1,019 (2%) Total Energy Sales 3,293 3,461 (5%) 1,261 1,221 3% SADI YTD YTD Var. 3Q 3Q Var. Net Generation (GWh) % % Natural Gas 3,293 3,461 (5%) 1,261 1,221 3% Total 3,293 3,461 (5%) 1,261 1,221 3% 13

14 REVIEW OF FINANCIAL RESULTS Income Statement Income Statement ThUS$ YTD YTD Var. 3Q 3Q Var % % Operating Revenue 1,771,437 1,722,454 3% 615, ,220 (1%) Cost of Sales -1,345,146-1,259,434 7% -480, ,937 11% Gross Profit 426, ,020 (8%) 135, ,283 (29%) Other Operating Revenues 373 1,984 (81%) % Selling, general and administrative Expenses -78,164-76,891 2% -25,146-30,003 (16%) Other Operating Expenses -1,834-1,951 (6%) % Other Income / (Loss) -21, , Financial Income 5,762 6,188 (7%) 1,921 1,622 18% Financial Expense -135, ,324 19% -45,378-44,500 2% Equity Participation in Net Income of Associates 11,049 9,865 12% 7,155 3,964 80% Foreign Currency Exchange Differences -9,282-19,298 (52%) -2,254-7,039 (68%) Net Income (Loss) before Taxes 196, ,050 (27%) 54, ,128 (52%) Income Tax Income (Expense) -73,642-80,800 (9%) -26,318-33,232 (21%) Net Income (Loss) 122, ,250 (34%) 28,632 80,896 (65%) Income Attributable to Shareholders of Parent 113, ,674 (40%) 25,525 81,360 (69%) Income (Loss) Attributable to Non-Controlling Interests 9,055-2, , Net Income (Loss) 122, ,250 (34%) 28,632 80,896 (65%) Total EBITDA 562, ,388 (2%) 182, ,709 (20%) Operating Revenue Operating Revenue grew 3% in the first nine months and dropped 1% in the third quarter of 2017, compared to the same periods in 2016, reaching US$1.8 billion and US$615 million respectively. This mixed performance is mainly driven by a drop in revenues from the SIN, due to lower spot prices, which offset increased revenues from the SIC, SING and SADI operations, both on a quarterly and year-to-date basis. Cost of Sales Cost of Sales rose 7% in the first nine months and 11% in the third quarter. Higher fuel costs, the accrual of Chilean emission taxes, which began in 2017, and an increase in depreciation as a result of Cochrane coming online, were the main contributing factors. A reduction in energy and power purchase costs helped offset the rise in Cost of Sales. 14

15 Gross Profit From an operational standpoint, Gross Profit in the first nine months decreased 8% to US$426 million, while declining 29% to US$135 million in the third quarter, when compared to the respective periods of the previous year. The negative variation in Gross Profit on a year-to-date basis mainly explained by poorer performance in the SIC and SADI down US$75 million and approximately US$1million respectively, partially offset by better results in the SING and SIN. On a quarterly basis, the drop in gross profit is explained by lower results in SIC and SIN by US$45 million and US$15 million respectively, partially offset by higher results in SING and SADI. YTD YTD Var. 3Q 3Q Var. Gross Profit (ThUS$) % % Operating Revenue SIC 1,046, ,737 15% 399, ,543 33% SING 590, ,536 28% 198, ,722 25% SADI 97,006 78,787 23% 34,919 26,423 32% SIN 254, ,841 (26%) 100, ,450 (25%) Consolidation adjustments -216,590-69, % -117,939 4, Total Operating Revenue 1,771,437 1,722,454 3% 615, ,220 (1%) Cost of Sales SIC -897, ,730 31% -364, ,043 66% SING -454, ,514 27% -156, ,563 28% SADI -97,115-77,457 25% -33,041-25,921 27% SIN -110, ,180 (47%) -41,630-59,328 (30%) Consolidation adjustments 213,874 69, % 115,554-4, Total costs of sales -1,345,146-1,259,434 7% -480, ,937 11% Total Gross Profit 426, ,020 (8%) 135, ,283 (29%) The Consolidation Adjustment line mainly accounts for intercompany coal sales from AES Gener to Eléctrica Angamos and Eléctrica Cochrane in the SING, meanwhile, in SIC's revenues, these sales are included as "Other Ordinary Income". EBITDA AES Gener achieved US$562 million in EBITDA year-to-date and US$182 million in the three months ended September 30, 2017, a -2% and -20% decrease respectively. The year-to-date EBITDA drop was driven by lower margins in the SIC, mainly due to less efficient generation, higher maintenance costs and the accrual of the new emissions taxes. These negative factors were partially offset by better margins in the SING market due to the start of operations of Cochrane despite lower margins from Norgener s contract sales and the accrual of green taxes, together with better margins in the SIN, mainly due to higher contact sales at higher prices. EBITDA for the three-month periods ended September 30, 2017, and 2016, was US$182 million and US$227 million respectively. This US$45 million decrease is due to the 15

16 negative variation in the SIC s EBITDA caused by lower efficient generation of hydroelectric and coal power plants, lower margins in the spot market as a result of the decrease in natural gas-fired generation due to the absence of the contract with ENAP which supplied gas during a portion of 2016, higher maintenance expenses and to the accrual of new emissions taxes. The decrease in the SIC s earnings was partially offset by the start-up of operations at Cochrane on the SING. YTD YTD Var. 3Q 3Q Var. EBITDA by Market (ThUS$) % % SIC 177, ,714 (30%) 43,033 84,474 (49%) SING 225, ,649 33% 72,969 63,287 15% SIN 142, ,333 11% 57,845 72,876 (21%) SADI 16,795 17,692 (5%) 8,315 6,072 37% Total EBITDA 562, ,388 (2%) 182, ,709 (20%) YTD 2017 YTD 2016 US$ 562 million US$ 571 million Non-Operating Expenses Non-Operating expense for the year-to-date of 2017 increased by 27% to US$150 million. Other Losses experienced negative variations of US$21 million year-to-date and US$15 million for the third quarter, associated mainly with water rights write-off registered during the third quarter of 2017 and the positive impact the Angamos debt refinancing had on Other Gains in Financial Expenses increased US$22 million year-to-date, and US$878,000 on a quarterly basis, primarily due to the lower capitalization of financial interests tied to Cochrane s start of operations. Foreign exchange losses decreased by US$10 million when comparing the results recorded in the nine-month period ended September 30, 2016 and 2017, and down US$5 16

17 million in the third quarter, associated mainly with a reduction in FX losses from TermoAndes as a result of the sale of Bonds denominated in Argentine pesos during YTD YTD Var. 3Q 3Q Var. Financial Results (ThUS$) % % Other income / (loss) -21, , Financial income 5,762 6,188 (7%) 1,921 1,622 18% Financial expense -135, ,324 19% -45,378-44,500 2% Equity in earnings of associates 11,049 9,865 12% 7,155 3,964 80% Foreign currency exchange differences -9,282-19,298 (52%) -2,254-7,039 (68%) Income Tax On a year-to-date basis, income tax expense decreased to US$7 million, and slightly less than US$7 million in the third quarter. This variation is mainly driven by a significant reduction in the pre-tax results of AES Gener s Chilean businesses, offset by an increase in the Colombian business pre-tax income. It is important to note that the impact of these variations are also determined by the tax rates in each country as Colombia s during 2017 tax rate was 40%, while the rate applied in Chile was 25.5%. Net Income AES Gener reported US$26 million in Net Income for the quarter and US$114 million yearto-date, down 69% compared to the third quarter of 2016 and down 40% decrease from the first nine months of Cash Flow The ending balance of cash and cash equivalents as of September 30, 2017, was US$391 million, 13% less than on the same date in AES Gener s reported a negative net cash flow of US$78 million year-to-date, compared with the positive flow of US$176 million at the end of September Quraterly YTD YTD Var. 3Q 3Q Var. Cash Flow (ThUS$) % % Net cash from operating activities 113, ,866 (56%) 20, ,971 (84%) Net cash from investing activities -368, ,580 (11%) 10, , Net cash from financing activities 175, ,899 (47%) 1,634-6, Total Net Cash Flow for the Period before exchange variations -79, , ,243-10, Effects of Foreign Exchange Variations 1,651 5,877 (72%) 3, % Total Net Cash Flow for the Period -78, , ,914-9, Cash at the beginning of the period 469, ,233 76% Total Cash at the End of the Period 391, ,295 (13%) 35,914-9, Operating Cash Flow decreased US$143 million, mainly due to greater dividend payments offset in part by better margins, driven by Cochrane, and higher collections at TermoAndes. Lower collections than those recorded at the beginning of 2016 from Chivor as a result of the extraordinary generation of the month of December of 2015, also had a negative effect on Operating Cash Flow. 17

18 Cash Flow from Investment Activities recorded a positive variation of US$45 million compared to the same period in 2016 as a result of lower purchases of property, plant, and equipment partially offset by lower inflows from the liquidation of financial assets. Cash Flow from Financing Activities in the first nine months of 2017 fell US$158 million, compared to the same period in This was due to US$364 million decrease in loan disbursements associated primarily with Cochrane, Alto Maipo, and Angamos, the latter due to the refinancing carried out in the third quarter of These negative variations were counteracted by a US$180 million reduction in loan payment outflows related to the previously mentioned Angamos refinancing. Total net cash flow in the third quarter of 2017 was a positive flow of US$36 million, compared with the negative flow of US$10 million in the same period of at the end of 2016, due to primarily the improvement in Cash Flow from Investment Activities, also boosted by the positive variation in Cash Flow from Financing Activities. Balance Sheet As of September 30, 2017, Assets totaled US$8.19 billion, higher than the US$7.85 billion as of the end of 2016, due primarily to a US$110 million increase in current assets, and US$161 million decrease in non-current assets. Total liabilities and equity grew by US$338 million as a result of a US$914 million increase in current liabilities and a US$161million increase in shareholders' equity, offset by a US$737 million decrease in non-current liabilities. Balance (ThUS$) September 30 December 31 Var % Current Assets 1,170,518 1,060,382 10% Non-Current Assets 7,016,185 6,788,522 3% Total Assets 8,186,703 7,848,904 4% Current Liabilities 1,592, , % Non-Current Liabilities 3,875,440 4,612,015 (16%) Total Net Equity 2,719,162 2,558,593 6% Total Liabilities and Equity 8,186,703 7,848,904 4% Current assets increased by US$110 million, mainly due to a US$136 million increase in payables for commercial debtors, US$45 million increase in inventories, partially offset by a US$78 million decrease in cash and equivalents. 18

19 Non-current assets increased by US$228 million since December 2016, with an increase of US$222 million in property, plant, and equipment, mainly associated with the construction of the Alto Maipo hydroelectric project. Current liabilities increased US$914 million since December 31, 2016, mainly driven by a US$703 million increase in other financial liabilities and an additional US$108 million in current accounts payable to affiliated entities. These increases are mainly driven by the reclassification of Alto Maipo's non-current bank obligations as current liabilities as a result of the technical default event, in addition to the US$124 million increase in accounts payable related to the projects. These effects were partially offset by a US$15 million decrease in current tax liabilities related 2016 income tax, as well as a US$6 million decrease in non-financial liabilities associated with the payment of personnel bonuses. Non-current liabilities decreased by US$737 million, mainly due to the US$498 million decrease in financial liabilities associated with the previously mentioned reclassification of Alto Maipo s bank liabilities, as well as the US$241 million reduction in accounts payable to affiliated entities, as a result of the restructuring agreement between AES Gener and Minera Los Pelambres, which resulted in the latter selling its ownership stake in Alto Maipo. Shareholders' equity increased by US$161 million. The equity increase was attributed to the US$287 million increase in Other Reserves as a result of AES Gener's acquisition of Minera Los Pelambres stake in Alto Maipo, valuation of derivatives and the variation in the foreign currency exchange reserve. These increases in equity were partially offset by a US$147 million decrease in retained earnings Financial Debt As of September 30, 2017, approximately 93% of AES Gener s debt is at a fixed rate, including a significant portion of the debt held by the subsidiaries Eléctrica Cochrane and Alto Maipo for which interest rate swap agreements have been executed. The remaining portion of the Company s debt is subject to variable interest rates. As of September 30, 2017, approximately 97.5% of AES Gener s debt was denominated in USD, including the CLF denominated bond issued in December 2007 for which a crosscurrency swap was executed. Of the remaining debt, 0.9% was denominated in CLF (Eléctrica Santiago s bond) and 1.6% in Colombian pesos (the leasing executed by AES Chivor to finance the Tunjita Project). In April 2016, Eléctrica Angamos partially refinanced a portion of its US$800 million bond through a tender process, buying back US$199 million. The Company refinanced this debt with syndicated loans under the same terms and conditions with local bank facilities at a lower average interest rate of 4.50%. In January 2017, AES Gener partially executed a buyback on its 2025 bonds for a total amount of US$2 million, (financed with cash from operation). As of March 31, 2017, the outstanding notional reached US$390 million. Afterward, the AES Gener 2025 Bonds were retired. 19

20 In January 2017, AES Gener partially prepaid US$25 million on its US$100 million Credit Agreement due in December In February AES Gener paid an additional US$50 million. As of September 30, 2017, the outstanding notional reached US$25 million. As a result of the previously mentioned CNM contract termination and consequential technical default of the Alto Maipo financing contracts, the debt repayment schedule could be modified. For more information see Note 30 in the Financial Statements. The following table details AES Gener s consolidated amortization schedule for the outstanding principal of US$3.97 billion as of September 30, 2017, excluding issuance costs and including non-recourse project finance debt. Schedule of Maturities as of September 30, 2017 US$ million Avg. Rate Fixed Rate (UF con swap a US$) 7.34% (US$) 5.25% (US$) 7.95% (US$) 5.00% (US$) 8.38% (UF) 8.97% (US$) 4.88% (CLP/UF con swap a US$) 4.50% (US$) 6.31% (Col$) 4.06% Variable Rate (US$) Libor % % (US$) Libor % % (Col$) IPC + 5.5% (US$) Libor + Spread Total ,

21 RISK ANALYSIS Market and Financial Risks Market risks include the following three categories: foreign currency risk, interest rate risk and commodity price risk. Financial Risk relates to the potential occurrence of events, which could have a negative financial impact on the Company and specifically includes credit risk and liquidity risk. Foreign Currency Risk With the exception of operations in Colombia, the Company s functional currency is the US Dollar ("USD") given that its revenue, expenses, and investments in equipment and debt are mainly denominated in or linked to the USD. In addition, the Company is authorized to file and pay its income taxes in Chile in USD. There is an exchange rate risk associated with any revenue, expenses, investments, and debt denominated in any currency other than USD. The main items denominated in Chilean pesos ("CLP") are some energy receivables and tax credits primarily associated with VAT. As of September 30, 2017, AES Gener maintained several currency forwards with banks to mitigate its exposure to foreign exchange variations associated with the collection of energy sales, given that even though most of the Company s energy supply agreements have USD denominated prices, payments are made in CLP at an exchange rate that is fixed for a specific period of time, and VAT payments. Given the Company's net asset position in CLP as of September 30, 2017, the impact of 10% devaluation in the exchange rate of the Chilean peso with respect to the USD would have resulted in a realized negative impact of approximately US$12 million in net income for AES Gener. 21

22 During the nine-month period ended September 30, 2017, approximately 87% of operating revenue and 85% of the Company s costs of sales were denominated in USD compared to 78% of operating revenue and 90% of costs of sales during the same period of The functional currency of Chivor, the Company s Colombian subsidiary, is the Colombian peso ("COP") since the majority of its revenue, particularly contract and spot sales and operating costs are linked to the COP. For first nine months of 2017, sales in COP represented 13% of the Company s consolidated operating revenue, compared to 19% in Additionally, AES Chivor s dividends are denominated in COP, although financial hedge instruments are used to fix the amount to be distributed in USD. Given AES Chivor's net liability position in USD as of the end of September 2017, a 10% devaluation in the COP/USD exchange rate would have generated a negative impact of approximately US$258,000 to AES Gener s net income. Spot prices in the Argentine market are denominated in USD as of February These sales in Argentina accounted for 2% of the Company s consolidated operating revenue in the first nine months of 2016 considering that at they were still set in Argentine pesos ("ARS"). Given TermoAndes' net asset position in ARS as of September 30, 2017, a 10% devaluation in the ARS/USD exchange rate would have generated a negative impact of approximately US$1 million in AES Gener s net income. In consolidated terms, investments in new plants and maintenance equipment are principally USD denominated. Short-term investments are also mostly held in USD. As of September 30, 2017, 88% of short-term investments and current account balances were in USD, 10% in CLP, 1% in COP and 1% in ARS. Cash balances in Argentina are subject to exchange rate volatility, specific to the Argentine market. The end of December 2016, 87% of investments and balances were in USD, 12% in CLP and 1% in ARS. With regards to non USD denominated debt (bank loans and bonds), AES Gener has executed hedges in the form of cross-currency swaps to reduce the associated exchange rate risks. AES Gener executed a cross-currency swap for the Chilean UF-denominated bonds issued in 2007 for approximately US$220 million, AES Gener executed exchange rate swaps with the same amount and term of the debt. The portion corresponding to the series O of the bond maturing in 2015 was liquidated in June 2014, remaining outstanding the part associated with the series N of this bond, maturing in 2028, for a total amount of US$172 million. At the end of September 2017, 97.5% of the debt of AES Gener and its subsidiaries is USD denominated, including the previously mentioned N series bonds and the associated swap. The following table shows the composition of the debt by currency based on principal owed, as of September 30, 2017, and December 31, 2016: Currency September 30th December US$ 97.5% 97.8% UF 0.9% 0.9% Col$ 1.6% 1.3% 22

23 Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company s exposure to the risk of changes in market interest rates relates primarily to the Company s long-term debt obligations with variable interest rates. AES Gener manages its interest rate risk by having an important percentage of its debt at a fixed rate or with interest rate swaps, to fix it. As of September 30, 2017, AES Gener had interest rate swaps for an important part of the debt associated with subsidiaries Eléctrica Cochrane and Alto Maipo. A 10% increase in variable interest rates would not have a significant impact on net income as 93.1% of the Company's debt is at fixed interest rates or has rate swaps. The following table shows the composition of debt by type of interest rate as of September 30, 2017, and December 31, 2016: Rate September 30th December 31st Fixed or with Swap 93.1% 90.9% Variable 6.9% 9.1% It should be noted that the subordinated bond issued in December 2013 for a total of US$450 million with a 60-year tenor, is at a fixed interest rate of 8.375% for 5.5 years from the issuance. From that period onwards, the interest rate is recalculated based on the 5- year swap rate published by Bloomberg plus a margin (spread) established in the offer and subsequently recalculated, based on the same conditions, every 5 years until maturity of the debt. Commodity Price Risk AES Gener is affected by the volatility of certain commodity prices. The fuels used by the Company, mainly coal, diesel and liquefied natural gas (LNG), are commodities with international prices set by market factors outside of the Company s control. In Argentina, the Company s subsidiary TermoAndes purchases natural gas at a fixed price under shortterm contracts, which is reflected in the energy contract price fixation. The price of fuel is a key factor in plant dispatch and spot prices both in Chile and Colombia. Since AES Gener s portfolio has a large component of thermal generation, fuel costs represent a significant portion of the cost of sales. Currently, the majority of the Company s PPAs include indexation mechanisms that adjust prices based on variations in the price of coal in accordance with the indexes and adjustment periods specified in each contract, in order to mitigate the risk of major variations in the cost of fuel. Currently, AES Gener s contracted energy is balanced with energy generation of facilities with high probability of dispatch (efficient generation) and the remaining facilities (backup facilities) which utilize diesel or LNG are expected to generate only during periods with limited market supply, such as dry hydrological conditions in the SIC, selling energy on the spot market. Diesel and LNG purchases are not currently hedged, as spot market sales allow for variations in fuel prices to be transferred to the sale price. However, the price of 23

24 fuel (particularly LNG or diesel) directly affects the spot price and plant dispatch. It is estimated that a 10% increase in the cost of diesel would have resulted in a negative impact of approximately US$5 million on the Company's gross profits in the SIC, and a positive impact of US$4 million on the SING gross profits, for the nine-month period ended September 30, It is worth noting that Eléctrica Santiago s Nueva Renca plant can use either diesel or LNG and acquires defined volumes of LNG volumes using short-term contracts when the LNG price is more competitive than diesel. Credit Risk Credit risk relates to the credit quality of counterparties with which AES Gener and its subsidiaries establish relationships. These risks are reflected primarily in accounts receivables and financial assets including bank and other deposits and other financial instruments. With regards to accounts receivable, AES Gener s counterparties in Chile are mainly distribution companies and high solvency industrial customers, and a significant percentage of these customers or their parent companies have local and/or international investment grade credit ratings. Additionally, sales by the AES Gener Group companies on the spot market must be made to other generators, members of the ISO, in accordance with the economic dispatch determined by this entity. In Colombia, AES Chivor performs risk assessments of its counterparties based on an internal credit quality evaluation, which in some cases may include guarantees. In Argentina, the main counterparties are CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico S.A.) Argentina s wholesale electric market administrator, and large unregulated consumers with contracts under the Energía Plus program. TermoAndes carries out internal credit evaluations of its unregulated customers and therein include guarantees to secure payments. Financial investments by AES Gener and its subsidiaries such as mutual funds, time deposits and derivatives, are executed with local and foreign financial institutions, which have national and/or international credit ratings greater than or equal to A under the S&P and Fitch scale and A2 under the Moody s scale. Similarly, derivatives for financial debt are executed with first class international entities. Cash, investment and treasury policies direct the management of the Company's cash portfolio and minimize credit risk. Liquidity Risk Liquidity risk relates to the funding requirements to meet payment obligations. The Company's objective is to maintain a balance between continuity of funding and financial flexibility, through internally generated cash flows, bank loans, bonds, short-term investments, committed credit lines and uncommitted credit lines. As of September 30, 2017, AES Gener had US$391 million in available funds including cash and cash equivalents. Meanwhile, as of the end of December 2016, the balance totaled US$470 million in cash and cash equivalents. The balance of cash and cash equivalents includes cash, term deposits with an expiration of less than 90 days, securities, 24

25 low risk immediately available mutual funds in USD and short-term repurchase agreements and fiduciary agreements. As of September 30, 2017, AES Gener had approximately US$251 million in committed and unused lines of credit and US$78 million of uncommitted and unused lines of credit. For more detail of the cash restrictions see Note 8 in the Financial Statements As a result of the previously mentioned CNM contract termination and consequential technical default of the Alto Maipo financing contracts, the debt repayment schedule could be modified. For more information see Note 30 in the Financial Statements. Operational Risks Operational risks relate to the possibility of future outages or deficiencies that can negatively affect the Company s strategic operational and/or financial objectives. Hydrology AES Gener s operations in the SIC and Colombia may be affected by hydrological conditions, as hydrology is key to plant dispatch and prices on both grids. The Company uses its own statistical models to evaluate the risks associated with its contractual commitments. In general terms, AES Gener s commercial strategy in Chile is to execute long-term contracts for its efficient generation plants, reserving other more expensive units as backup. In Colombia, the commercial strategy focuses on the optimal use of the reservoir with the general objective of contracting on average 75% of expected generation. Currently, efficient generation of AES Gener s facilities in the SIC is balanced with contracted volume, which mitigates most of the exposure to hydrology variations, and additionally, the Company has backup facilities which limit maximum exposure. Natural Gas Supply The combined cycle plants in Chile, including Eléctrica Santiago s Nueva Renca plant, currently operate with diesel or LNG alternatively. Eléctrica Santiago does not have longterm LNG contracts and acquires volumes on the spot market or under short-term contracts according to dispatch projections. In Argentina, TermoAndes holds natural gas supply contracts with Argentine producers and the Company estimates that in the case of potential gas supply restrictions, TermoAndes has certain alternatives to mitigate the impact of gas supply interruptions which include contract price indexation mechanisms, spot gas purchases and backup supply from other generators. Operational Failures and Maintenance Mechanical failures, accidents, planned or unplanned maintenance that affect the availability of the Company s efficient capacity could have a material adverse effect on results. 25

26 Although the Company performs regular maintenance and operational enhancements to guarantee the commercial availability of its generation plants and operational insurance policies remain in effect, mechanical failures or accidents could result in periods of commercial unavailability. Significant periods of unavailability of AES Gener s efficient plants as a result of mechanical failure or maintenance (planned or unplanned) would require the Company to meet its contractual obligations by using more expensive backup generation or by purchasing energy on the spot market, both of which could result in higher costs that would adversely affect operating results. In the SIC, the maximum exposure to this risk is limited by the variable costs of our backup facilities. Projects under construction The execution of the investment projects being developed by the Company depends on numerous factors that could defer from the original projections. Among these factors, projects can experience increases in costs of construction or investment in equipment, potential delays, difficulty in finding skilled labor, financing costs, and the effect of potential delays or difficulties in the regulatory authorization and permit process, including potential litigation or lawsuits. It should be noted that adequate project development includes making investments related to diverse project areas such as studies, easements, land preparation and construction of roads, among others, before the approval and final execution of the project. Currently, power generation projects are facing a high level of opposition from organized groups or local communities. The Company cannot ensure that this opposition will not affect projects under construction. AES Gener, in its interest in being a good neighbor and through its Policy for Relations with Local Communities, works to be locally respected and to be valued by its good economic, social and environmental performance and by its contribution to the sustainable development to the communities where the Company is inserted. Decoupling Risk Given certain transmission restrictions in Chile due to the concentration of renewable energy plants, there be a decoupling between injection and withdrawal prices. The effect of the difference in price is assumed by the generation companies and can, in turn, affect their operating margins. Currently, there are contracts in which this risk cannot be passed through, however, clauses to mitigate this risk are being negotiated in new contracts with unregulated customers. Regulatory Risks AES Gener, its subsidiaries, and related companies are subject to several different aspects of regulation in the countries in which they operate. Modifications to the existing legislation could adversely affect the Company s financial results. 26

27 AES Gener cannot guarantee that the laws or regulations in the countries in which it operates or has investments will not be modified or interpreted in a manner that could adversely affect the Company, or guarantee that governmental authorities will grant any requested approval. AES Gener however actively participates in the development of the regulatory framework, submitting comments and proposals to the proposed regulations presented by authorities. Market Regulatory Framework As power generation companies, AES Gener, its subsidiaries, and related companies are subject to regulation in diverse aspects of their business. The current regulatory framework, which governs all electricity supply companies, has been in effect in Chile since 1982 and in Colombia since Meanwhile in Argentina, on February 2, 2017, Resolution 19/2017 of the Secretariat of Electric Energy was published in the official bulletin. The new regulation modifies the remuneration framework for energy and power to the generators included in Resolution S.E. 95/2013 and its amendments. In the case of TermoAndes, these changes impact the power and energy not committed in the contracts of Energía Plus. The new regulation establishes that prices must be set in USD, to be converted into ARS at the exchange rate at the end of the month of the corresponding transaction. All the concepts determined in the resolution will be paid at the expiration date of the economic transaction of each month, eliminating the retention of unpaid amounts and the accumulation of receivables with CAMMESA. During February 2017, Argentina s electricity regulator ENRE carried out the Integral Rate Review (RTI) of the electric energy transportation system, setting new tariffs for users of high voltage transport and trunk distribution systems, which affect TermoAndes. During 2017 Colombian authorities published new regulation that could have an impact on AES Gener s activities: i. CREG Regulation of the natural gas market, indicating the information that the market regulator will collect, verify, publish and retain about the wholesale natural gas market. ii. CREG Commercial aspects of the Natural Gas Wholesale Market in relation to 2-month fixed contracts. iii. CREG Approval of the reconfiguration auction for sales, associated with the reliability charge. iv. CREG New Proposal for energy distribution sector remuneration methodology. v. CREG Proposal to modify the block sale rate and indexation with which electric sector transfers are calculated in relation to environmental impact. vi. CREG Proposal to establish procedures for execution of natural gas supply projects. 27

28 vii. CREG Additional Dispatch regulation in which the ISO can agree with the operator an alternative usage configuration, than that declared by the operator, in order to ensure that the system demand is met. viii. CREG Temporary measures to ensure energy supply in the Putumayo Department. x. CREG Natural gas market protocols in the event of limited supply or emergencies xi. CREG Modifications to Generator guarantees and flexibility of restrictions on projects transmission capacity transfers. xii. CREG Modifying CREG which pertains to natural gas supply contract negotiations. xiii. CREG Modifying CREG in relation to the scarcity price associated with the reliability charge. xiv. CREG Ordering contributions paid by entities subject to CREG regulations be made public. xv. CREG Related to back-up capacity calculations. xvi. CREG Pertaining to the regulation of small-scale self-generation and distributed generation on the national grid. xvii. CREG Modifies CREG regarding the commercial aspects of the wholesale natural gas market. xviii. CREG adjusting CREG which defines reliability charge perceived by solar plants. xix. CREG Laying out the centralized mechanisms to accelerate the execution of prioritized natural gas supply projects. xx. CREG055 Published at the end of 3Q-2017, the resolution laid out the regulatory agenda for the last quarter of the year including adjustments to the framework which assigns the reliability charge, standardized contracts, and promotion of renewable energy. Environmental Regulation AES Gener, its subsidiaries, and associates are subject to environmental regulations, which, among others, require environmental impact studies for project development and regulatory permits. AES Gener cannot guarantee that governmental authorities will effectively grant any requested environmental approval. New and increasingly demanding environmental regulations are continuously under development, which may modify operations and/or require additional investments to comply with such regulation. 28

29 On October 4, 2017, Chile s Environment Ministry approved a draft of a bill regarding PM 10 air quality and submitted it to a 60-day Public consultation process. In its current version, the draft does not introduce significant changes with respect to the current legislation. In Chile, new plans for Environmental Prevention and Decontamination (for the Concón, Quintero, Puchuncaví municipalities and the Metropolitan Region) are in the approval phase and are expected to be promulgated during the fourth quarter of These plans were made public and had formal participation through the mechanism of Citizen Participation, which the Company was a part of. Public drafts that have been accessed would indicate that the Company may need to make operational adjustments and investments to meet the new requirements. On August 30, 2017, Decree 38/2017 was enacted, which established a new Atmospheric Pollution Prevention Action Plan for Huasco and surrounding zone (the Prevention Plan ). The Prevention Plan for Huasco establishes additional requirements for particulate matter ( PM ) emission control for Guacolda, being the main ones: i. Keep stack PM emissions below 30 mg/m3n for each stack, and below 730 ton/year on aggregate of all stack emissions ii. Reduce PM emissions on coal transfers points and on coal conveyors iii. Pave the ash deposit access road iv. Sweep and vacuum the PM that falls during material transportation, wind action or vehicle movement. Requirement i. is effective from January 1, 2018, while action items ii. iii. and iv. must be defined and detailed in a Control Plan that should be submitted to the authority for approval within six months, and executed within up to 3 years. An assessment of the Prevention Plan shall be carried out within 5 years of the enactment of the decree. Tax Regulation AES Gener, its subsidiaries, and affiliates are subject to existing tax legislation in each country where they operate. Amendments to laws or modification in tax rates may have a direct impact on earnings. In Colombia, as of January 1, 2017, a new structural tax reform came into effect. In general terms the reform: unifies the corporate taxes, reduces corporate rate, eliminates CREE tax and sets an additional and transitory tax rate of 6% and 4% for 2017 and 2018 respectively, thus gradually lowering the corporate tax, from 40% in 2017 to 33% from 2019 onwards. Also, new normative taxes dividend distribution with a rate of 10%, puts in place new tax evasion regulation, applies VAT to new activities, among other modifications. The new tax law reduces the tax burden of AES Gener, taking into account the lower corporate tax rate and the fact that the new dividend distribution tax is not applicable because the Company falls under article 10 of the convention between Chile and Colombia to avoid double taxation. It is also noteworthy that the law reiterates that electricity is not considered a good, and therefore is not subject to VAT. 29

30 In Argentina, a new tax law entered into force on July 23, Among the most relevant measures is the removal of the 10% tax on dividend distribution, reduction of the personal income tax rate from 0.5% to 0.25%; and the elimination of alleged minimum tax as of January 1, Green Taxes The 2014 Chilean tax reform incorporated a new tax on emissions from stationary sources with boilers or turbines that have a thermal capacity equal or greater than 50 MWt. In the case of CO2, the tax is US$5 per metric ton of C02 emitted. The first payment of this tax will take place in April 2018 based on the Chilean Environmental Authority s certification of the 2017 emissions, carried out in March A large portion of the Company s energy sales contracts contain clauses that allow the pass-through of the costs associated with the new taxes to the offtaker, mitigating the negative effect of the green tax. 30

31 AES GENER AND SUBSIDIARIES Consolidated Balance Sheet As of September 30, 2017 and December 31, 2016 International Financial Reporting Standards (IFRS). September 30th December 31st Assets ThUS$ Current Assets Cash and Cash Equivalents 391, ,560 Other Current Financial Assets 18,433 21,692 Other Current Non-Financial Assets 17,467 3,007 Trade and Other Receivables 508, ,146 Related Party Receivables 20,321 18,833 Inventory 180, ,235 Taxes Receivables 33,058 37,909 Total Current Assets 1,170,518 1,060,382 Non-Current Assets Other Non-Current Financial Assets 18,306 12,824 Other Non-Current Non-Financial Assets 23,381 33,620 Trade and other Receivables 20,356 20,021 Investments in Associates 432, ,468 Intangible Assets 51,280 51,857 Goodwill 7,309 7,309 Property, Plant and Equipment 6,372,502 6,150,290 Deferred Taxes 90,696 93,133 Total Non-current Assets 7,016,185 6,788,522 Total Assets 8,186,703 7,848,904 31

32 AES GENER AND SUBSIDIARIES Consolidated Balance Sheet As of September 30, 2017 and December 31, 2016 International Financial Reporting Standards (IFRS). Liabilities and Shareholders' Equity ThUS$ September 30th December 31st Current Liabilities Other Current Financial Liabilities 934, ,814 Trade and Other Payables 481, ,154 Related Party Payables 119,071 10,654 Provisions Taxes Payable 23,516 38,180 Employee Benefits 3,420 3,858 Other Current Non-Financial Liabilities 29,819 35,724 Total Current Liabilities 1,592, ,296 Other Non-Current Financial Liabilities 3,174,332 3,672,070 Trade and Other Payables 15,965 17,266 Related Party Payables 0 241,031 Provisions 74,518 71,662 Deferred Taxes 568, ,597 Employee Benefits 32,222 28,570 Other Non-Current Non-Financial Liabilities 9,993 9,819 Total Non-Current Liabilities 3,875,440 4,612,015 Total Liabilities 5,467,541 5,290,311 Net Equity Issued Capital 2,052,076 2,052,076 Retained Earnings (Losses) 397, ,760 Share premium 49,864 49,864 Other Components of Equity 237, ,408 Other Reserves -161, ,378 Total Equity Attributable to Shareholders of Parent 2,575,793 2,426,730 Non-Controlling Interest 143, ,863 Total Net Equity 2,719,162 2,558,593 Total Liabilities and Equity 8,186,703 7,848,904 32

33 AES GENER AND SUBSIDIARIES Consolidated Income Statement for the periods ended on September 30, 2017 and September 30, 2016 (accumulated and quarterly results) International Financial Reporting Standards (IFRS). Income Statement (ThUS$) YTD YTD Var 3Q 3Q Var Operating Revenue % % Energy and capacity sales 1,573,526 1,516,047 4% 544, ,855 2% Other operating revenue 197, ,407 (4%) 70,506 91,365 (23%) Total Operating Revenue 1,771,437 1,722,454 3% 615, ,220 (1%) Cost of sales Fuel consumption -458, ,611 31% -153, ,973 26% Fuel cost of sales -97, ,304 (22%) -34,425-64,489 (47%) Energy and capacity purchases -211, ,723 (41%) -84,574-97,729 (13%) Transmission tolls -77,413-68,003 14% -26,474-21,674 22% Other cost of sales -287, ,935 63% -110,034-61,267 80% Depreciation and amortization -211, ,858 17% -71,686-64,805 11% Total Cost of Sales -1,345,146-1,259,434 7% -480, ,937 11% Gross Profit 426, ,020 (8%) 135, ,283 (29%) Other operating revenues 373 1,984 (81%) % Selling, general and administrative expenses -78,164-76,891 2% -25,146-30,003 (16%) Other operating expense -1,834-1,951 (6%) % Other income / (expense) -21, , Financial income 5,762 6,188 (7%) 1,921 1,622 18% Financial expense -135, ,324 19% -45,378-44,500 2% Equity in earnings of associates 11,049 9,865 12% 7,155 3,964 80% Foreign currency exchange differences -9,282-19,298 (52%) -2,254-7,039 (68%) Net Income (Loss) Before Tax and Non-Controlling Interest 196, ,050 (27%) 54, ,128 (52%) Income tax -73,642-80,800 (9%) -26,318-33,232 (21%) Net Income (Loss) After Tax 122, ,250 (34%) 28,632 80,896 (65%) Income (Loss) Attributable to Shareholders of Parent 113, ,675 (40%) 25,525 81,360 (69%) Non-controlling interest 9,055-2, , Net Income 122, ,250 (34%) 28,632 80,896 (65%) 33

34 AES GENER AND SUBSIDIARIES Consolidated cash flow statements for the periods ended on September 30, 2017 and September 30, 2016 International Financial Reporting Standards (IFRS). Consolidated Cash Flow Statement (ThUS$) September 30th September 30th Net Cash Flows provided by (Used in) Operating Activities Receipts from Customers 1,935,130 1,845,229 Other Receipts from Operating Activities 9,575 0 Payments to Suppliers -1,254,892-1,151,477 Payments made to Employees -64,136-62,665 Other Payments for Operating Activities -82,280-71,004 Payments of Dividends -205,320-93,256 Dividends Received 1,910 0 Payment of Interests -115, ,379 Interests Received 2,875 10,732 Income Tax Paid -96,859-92,237 Other Operating Outflows from Operating Activities -16,672-23,077 Net Cash Flows Provided by (Used in) Operating Activities 113, ,866 Net Cash Flows provided by (Used in) Investing Activities Proceeds from sale of financial assets Investments on financial assets Purchases of Property, Plant and Equipment -381, ,149 Proceeds from sale of Intangible Assets 109 1,098 Purchases of Intangible Assets Proceeds from other Long-Term Assets 8, ,920 Purchases of other Long-Term Assets Other Outflows (Inflows) from Investing Activities 5,228-11,307 Net Cash Flows provided by (Used in) Investing Activities -368, ,580 Net Cash Flows provided by (Used in) Financing Activities Proceeds from Share Issuance 22,156 15,268 Proceeds from Long Term Borrowings 242, ,737 Proceeds from Short Term Borrowings 11,245 23,600 Payments of Loans -97, ,712 Payments on Financial Leasing ,204 Other Inflows (Outflows) of Cash and Cash Equivalent -2,578-20,790 Net Cash Flows From (Used In) Financing Activities 175, ,899 Increase (Decrease) in Net Cash and Cash Equivalent -79, ,185 Effects of Foreign Exchange Variations on Cash and Cash Equivalents 1,651 5,877 Increase (Decrease) in Net Cash and Cash Equivalents -78, ,062 Cash and Cash Equivalents at the Beginning of Period 469, ,233 Cash and Cash Equivalent at the End of Period 391, ,295 34

35 ANNEX 1: GUACOLDA ENERGÍA S.A Summarized income statement and balance sheet for the period ended on September 30, 2017 and September 30, 2016 International Financial Reporting Standards (IFRS). Income Statement (ThUS$) YTD YTD Var. September September Var s % % Contract sales 313, ,895 23% 112,425 88,200 27% Spot sales 0 5, Other operating revenues 45,277 27,383 65% 14,860 11,780 26% Operating Revenues 358, ,008 25% 127, ,450 27% Fuel consumption -81,966-83,192 (1%) -27,752-26,002 7% Energy and capacity purchases -60,726-17, % -22,332-8, % Transmission tolls -37,836-24,757 53% -13,094-9,276 41% Other cost of sales -53,201-40,159 32% -16,137-12,450 30% Depreciation -55,172-51,928 6% -18,023-18,250-1% Total Costs of Sales -288, ,435 33% -97,338-74,122 31% Total Gross Profit 69,698 70,573 (1%) 29,947 26,328 14% Administrative expenses -11,501-10,225 12% -4,307-3,516 22% EBITDA 113, ,276 1% 43,663 41,062 6% Financial Income Financial expenses -27,225-33,153-18% -8,942-11,056-19% Other income(losses) % % Foreign currency exchange differen 1, % 3, Net Income (Loss) before Taxes 32,026 27,223 18% 19,664 11,133 77% Income Tax Income (Expense) -9,933-7,497 32% -5,358-3,207 67% Net Income (Loss) 22,093 19,726 12% 14,306 7,926 80% Balance (ThUS$) September 30 December 31 Var % Current Assets 250, ,285 64% Non-Current Assets 1,547,829 1,600,890 (3%) Total Assets 1,798,538 1,754,175 3% Current Liabilities 154, ,154 27% Non-Current Liabilities 760, ,663 (2%) Total Net Equity 883, ,358 3% Total Liabilities and Equity 1,798,538 1,754,175 3% Cash and Equivalents 121,430 38, % Financial Debt 743, ,500 (4%) 35

36 Guacolda Energy Generation, Purchases and Sales Energy (GWh) YTD YTD Var. 3Q 3Q Var % % Generation Thermal 2,474 3,397 (27%) 870 1,081 (20%) Purchases Spot Other generators (8%) % Total Purchases Gains/(Losses) % % Sales Regulated (10%) (6%) Unregulated 2,570 2,179 18% % Spot Total Sales 3,162 3,413 (7%) 1,078 1,091 (1%) In the third quarter of 2017, the 11% increase in contract sales volume is explained by new contracts with industrial customers and greater demand on existing contracts. It is important to mention the decrease in the efficient generation of Guacolda, down 211 GWh, is explained by lower dispatch driven by transmission decoupling and higher NCRE availability in the northern SIC. This explains the US$14 million increase in energy and power purchases, as a result of an additional of 197 GWh in physical purchases, and also explains the US$470,000 reduction in the spot sales. The US$4 million increase in Other Selling Costs is due primarily to higher costs associated with the accrual of emissions taxes. Likewise, the increase in Other Operating Revenues of US$3 million is mainly due to higher transmission revenues. 36

37 ANNEX 2: EMPRESA ELÉCTRICA ANGAMOS S.A Summarized income statement for the period As of September 30, 2017 and September 30, 2016 International Financial Reporting Standards (IFRS). Income Statement (ThUS$) YTD YTD Var. 3Q 3Q Var % % Contract sales 196, ,578 5% 72,668 53,082 37% Spot sales 39,675 33,962 17% 5,792 20,217 (71%) Other operating revenues 12,117 3, % 4, Operating Revenues 248, ,766 11% 82,477 73,116 13% Fuel consumption -93,414-71,965 30% -31,756-23,504 35% Energy and capacity purchases -14,387-18,955 (24%) -6,057-5,917 2% Transmission tolls -9,269-2, % -2, % Other cost of sales -53,321-31,568 69% -18,260-8, % Depreciation -36,540-36,791 (1%) -12,204-12,373 (1%) Total Costs of Sales -206, ,414 28% -71,176-50,229 42% Total Gross Profit 41,547 63,352 (34%) 11,301 22,887 (51%) Administrative expenses -3,653-5,916 (38%) ,426 (59%) EBITDA 75,438 95,643 (21%) 22,848 33,312 (31%) Financial Income 14,404 10,302 40% 5,150 3,820 35% Financial expenses -32,785-32,589 1% -10,936-10,949 (0%) Other income(losses) 55 7,943 (99%) % Foreign currency exchange differe -1, Net Income (Loss) before Taxes 18,259 42,970 (58%) 4,356 13,881 (69%) Income Tax Income (Expense) -4,928-10,638 (54%) -1,526-3,939 (61%) Net Income (Loss) 13,331 32,332 (59%) 2,830 9,942 (72%) September December Balance (ThUS$) Var % Current Assets 144, ,330 35% Non-Current Assets 1,303,651 1,264,362 3% Total Assets 1,448,463 1,371,692 6% Current Liabilities 128,739 47, % Non-Current Liabilities 859, ,377 (2%) Total Net Equity 460, ,934 3% Total Liabilities and Equity 1,448,463 1,371,692 6% Cash and Equivalents 29,306 35,846 (18%) Financial Debt 800, ,

38 Energy (GWh) YTD YTD Var. 3Q 3Q Var % % Generation Thermal 2,563 2,913 (12%) (8%) Total Generation 2,563 2,913 (12%) % Purchases -- - Total Purchases Sales Unregulated 2,012 2,352 (14%) (0%) Spot (49%) (43%) Spot Re-Routing % (36%) Total Sales 2,563 2,913 (12%) (8%) On a quarterly basis, Angamos s Gross Profit decreased 51% to US$11 million, mainly driven by a 127% increase in Other Cost of Sales. The increase was primarily attributed to the accrual of emissions taxes, in force since the beginning of 2017, and a US$2 million increase in maintenance expenses. A US$3 million increase in the management fee charged by AES Gener, due to the transfer of Angamos personnel to AES Gener payroll, and US$7 million increase in other fuel costs also had a negative impact on gross profits. Revenues from ancillary services Angamos provides the neighboring Cochrane plant generated a US$4 million increase in Other Operating Revenue. 38