AES Tiete S.A. Summary Rating Rationale. Exhibit 1 Credit Metrics to Stabilize at a Lower Level. Credit Strengths. Improved hydrology conditions

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1 CREDIT OPINION AES Tiete S.A. Update Following Outlook Change to Negative Update Summary Rating Rationale RATINGS AES Tiete Energia S.A. Domicile Sao Paulo, Sao Paulo, Brazil Long Term Rating 2 Type LT Corporate Family Ratings Outlook Negative Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. The 2/Aa1.br ratings reflect AES Tiete's relatively low leverage and adequate credit metrics for the rating category as well as its resilient access to the local banking and capital markets together with management s prudent administration of the generation business. Our rating also incorporates the improved hydrology conditions and the consequent better cash generation although at lower levels compared to the historical threshold mainly due to the termination of the bilateral supply contract with Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. (3 stable) set above market prices. AES Tiete s ratings are constrained by the Capex pressures from the contractual obligation to expand generation capacity by 15% in the State of Sao Paulo (2 negative) coupled with high dividend payout and the potential cash outflow (BRL 315 million, provisioned as of December, 2016) of the judicial dispute over the spot market exposure during the hydrological crisis. Exhibit 1 Credit Metrics to Stabilize at a Lower Level Interest Coverage Ratio (left axis) (CFO Pre-W/C) / Debt (right axis) Contacts 6.00x 60% Aneliza Crnugelj Analyst aneliza.crnugelj@moodys.com 5.00x 50% 4.00x 40% 3.00x 30% 2.00x 20% 1.00x 10% Alejandro Olivo Associate Managing Director alejandro.olivo@moodys.com Camila Yochikawa Associate Analyst camila.yochikawa@moodys.com 0% 0.00x (E) 2018 (E) All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations Source: Moody's Financial Metrics, Moody's estimates Credit Strengths Relatively strong historical credit metrics for the rating category Resilient access to the local banking and capital markets Improved hydrology conditions Credit Challenges Lower level of revenues after the termination of the supply contract with Eletropaulo

2 Aggressive dividend pay-out policy Contractual obligation to expand generation capacity Judicial dispute from the exposure to the spot market during the hydrological crisis Rating Outlook The negative outlook largely reflects the change of Brazil s sovereign rating outlook given the company s local-content profile. Moody s could consider stabilizing it if Brazil s sovereign rating is stabilized provided that AES Tiete s dividend outflows and any acquisitions or M&A activity will be prudently managed to maintain adequate liquidity and credit metrics for the rating category. Factors that Could Lead to an Upgrade We could upgrade the ratings if AES Tiete s operational performance surpass our expectations or if liquidity improves. If the credit metrics stay above our projections such that cash interest coverage (CFO Pre WC + Interest/ Interest) stays above 4.5x and the CFO Pre WC/Debt above 35% for a sustainable period, we could also consider an upgrade. Nevertheless, AES Tiete s ratings are constrained by Brazil s sovereign rating. Factors that Could Lead to a Downgrade A rapid or significant downturn in AES Tiete s credit metrics such as cash interest coverage (CFO Pre WC + Interest/ Interest) stays below 2.0x and the CFO Pre WC/Debt below 19% on a sustainable basis could prompt a rating downgrade as well as the degradation of the liquidity and overall credit quality. The company's operating margin potentially coming under pressure from a significant mismatch on spot market exposure or on contracted levels could also weigh on the ratings. Key Indicators Exhibit 2 Key Indicators AES Tiete Energia S.A. (CFO Pre-W/C + Interest) / Interest (CFO Pre-W/C) / Net Debt RCF / Net Debt (CFO Pre-W/C) / Debt RCF / Debt 12/ 31/ / 31/ / 31/ / 31/ / 31/ x 35.3% -47.8% 21.3% -28.9% 4.8x 117.6% 68.6% 54.8% 32.0% 4.3x 15.5% -9.8% 9.5% -6.0% 10.9x 151.7% 14.3% 89.7% 8.5% 12.8x 195.2% -0.9% 111.0% -0.5% [1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. Source: Moody's Financial Metrics Detailed Rating Considerations Strong Historical Credit Metrics for the Rating Category to Stay at Lower Thresholds AES Tiete has historically posted strong credit metrics characterized by Cash Flow from Operations before Working Capital Changes (CFO pre-w/c) to Debt of 20.1% in the last three years and interest coverage of 3.8x in the period measured by the CFO pre-wc plus Interest Expense divided by Interest Expense. Nevertheless, these levels are well below the past historical average ( ) of 110% and 10.9x, respectively, driven by the negative effects of the hydrological crisis that impacted costs and cash generation during Going forward, we forecast CFO pre-w/c to Debt and interest coverage to average at 32.2% and 3.6x in the next months due to the lower operating margins after the termination of the supply contract with Eletropaulo, set above market prices. We recognize these lower ratios in our ratings, but the credit metrics remain adequate for its rating category. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Improved Hydrology Conditions but Lower Level of Revenues Going Forward We expect AES Tiete cash flow generation to somewhat improve given the company s lower exposure to the spot market. The hydrological risk significantly receded during 2016 from the combination of a more favorable rainy season, additional installed power capacity and lower electricity consumption, which we expect to continue in the months. However, although improving, we see hydro water reservoir levels still below historical levels. AES Tiete has maintained a 5% uncontracted position in 2016 to work as a cushion to reduce its exposure to the spot market. From 2017 onwards, management indicated the company is expected to maintain a 10-15% buffer through its portfolio management strategy as it did not adhere to the new law 13,203, which hedges the hydrological risk as per the regulator, Aneel s, negotiation. Starting in 2016, the bilateral contract with Eletropaulo expired, leading to lower revenues as the contract was set at much higher prices, of average BRL 218/MWh significantly above AES Tiete s average of BRL 159MWh for This reduction is already contemplated in the ratings as we forecast revenues at around BRL 1,590 million in the next three years compared to BRL 2,600 million from , as per Moody s standard adjustments. Contractual Obligation to Expand Capacity Pursuant to the privatization process carried out by the State of Sao Paulo, AES Tiete has an outstanding contractual obligation to increase its current generation capacity in the State of Sao Paulo by 15% (approximately 400 MW). The Company has had difficulty in meeting this commitment because there are few sites available for new hydroelectric facilities or adequate for wind power projects in the State. Also, green field thermo power projects could constitute some risk for AES Tiete. We do not expect any action from the State in the short to medium term but under such scenario, AES Tiete s credit metrics could deteriorate. The Company will eventually need to comply with the demand from the State of Sao Paulo and we understand its strategy incorporates potential expansion and M&A activity that could pressure leverage and EBITDA margin levels. Additionally, AES Tiete is negotiating a partial acquisition of Renova s assets (Alto Sertao II) that could sum BRL million, which would be the first wind power plant in the company s portfolio. Moody s considers that any acquisitions or M&A activity will be prudently managed to maintain adequate liquidity and credit metrics for the rating category. Judicial Dispute AES Tiete has a legal injunction preventing the payment of costs associated with its exposure to the spot market since May 2015, during the hydrological crisis. The merit of the suit filed by APINE (Brazilian Association of Independent Producers of Electric Energy), which represents the company as well as other generators, has not been decided yet and is not expected to occur over the short term. The company has recognized BRL 315 million, provisioned related to this matter as of December, 2016, but could still face cash outflows in case of unfavorable court ruling. Liquidity Analysis Like other Brazilian companies, AES Tiete does not have committed banking facilities to face unexpected cash requirements but the company proved to have a strong access to the capital markets which we deem will continue in the next years as AES Tiete will tap these markets to complement its funding needs. The company has an adequate liquidity profile given its BRL 578 million cash position as of December, 2016 combined with the favorable debt profile of BRL 256 million short-term debt reflecting only the current portion of long term debt. Also, we foresee AES Tiete will continue to re-leverage, mainly to pay dividends and meet its capex needs while management prudently manages the dividend distributions, financial leverage and liquidity so that its credit metrics remain in line with its rating category. The new debentures have two tranches with 5 and 7-year maturities and biannual interest payments starting in October, The first and second tranches will have two principal payments, 50% in the penultimate year of the tenor (2021 and 2023 respectively) and the remaining at maturity (2022 and 2024, respectively), but only the second tranche s amount is adjusted by inflation (IPCA index). The debentures will have cross-default clauses with the issuer's other debt as well as with relevant subsidiaries and will include acceleration clauses such as: (i) the non-payment of any financial obligation above USD 25 million, (ii) change of control and termination of the concession contract (iii) granting intercompany loans for up to 180 days if not previously approved by creditors, (iv) dividend payments above the minimum required by Brazilian Corporate Law if the company is not in compliance with its obligations including the financial 3

4 covenants (v) covenant breach in two consecutive quarters on the following: Net Debt/EBITDA maintained at levels equal or below 3.5x and if AES Tiete performs any acquisition the ratio is 3.85x during 36 months after the deal conclusion; interest coverage ratio measured by EBITDA/ Net Interest expense equal to or above 1.5x. Corporate Profile AES Tiete is a hydropower generation company with a 30-year concession, granted in December 1999 to operate an installed capacity of 2,658 MW, equivalent to around 2% of Brazil's electricity capacity, and 1,278 MW of assured average energy. The company has 9 hydro-power plants (HPPs) and 3 small hydro-power plants (SHPPs) located in the State of Sao Paulo. As reported in the FY2016, AES Tiete has 88% of its energy contracted for 2017 and did not adhere to the law 13,203 that hedges the hydrological risk for a premium as negotiated with the regulator, Aneel, although we expect the company to maintain an uncontracted 10-15% cushion through its portfolio management. According to Moody s standard adjustments, AES Tiete reported net operating revenues of BRL1,561 million and EBITDA of BRL886 million in the FY2016. AES Tiete Energia is directly controlled by AES Holdings Brasil Ltda. (24%) and BNDES (28%) as well as indirectly controlled by The AES Corporation (3, positive). The group went through a reorganization with the main objectives: (i) strengthen AES Tiete as an exclusive growth platform of AES group in Brazil in the generation sector; (ii) improve the corporate governance with the migration to Level 2 on the BM&FBovespa (100% tag along); (iii) consolidate the liquidity with the creation of Units (1ON and 4PN) and (iv) simplify the decision-making process. Rating Methodology and Scorecard Factors Exhibit 3 Rating Factors AES Tiete Energia S.A. Unregulated Utilities and Unregulated Power Companies Industry Grid [1][2] Fact or 1 : Scale (10%) a) Scale (USD Billion) Fact or 2 : Business Profile (40%) a) Market Diversification b) Hedging and Integration Impact on Cash Flow Predictability c) Market Framework & Positioning d) Capital Requirements and Operational Performance Fact or 3 : Financial Policy (10%) a) Financial Policy Fact or 4 : Leverage and Coverage (40%) a) (CFO Pre-W/C + Interest) / Interest (3 Year Avg) b) (CFO Pre-W/C) / Debt (3 Year Avg) c) RCF / Debt (3 Year Avg) Rat ing: a) Indicated Rating from Grid b) Actual Rating Assigned Current FY 12/ 31/ 2016 Moody's Month Forward View As of 3/ 19/ 2017 [3] Measure Caa Score Caa Measure B Score B 3.8x 20.1% -3.4% Caa 3.6x 32.2% 6.6% B [1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. [2] As of 12/31/2016(L) [3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures Source: Moody's Financial Metrics 4

5 Ratings Exhibit 4 Category AES TIETE ENERGIA S.A. Outlook Corporate Family Rating Senior Unsecured -Dom Curr NSR Corporate Family Rating NSR Senior Unsecured Moody's Rating Negative 2 2 Aa1.br Aa1.br ULT PARENT: AES CORPORATION, (THE) Outlook Corporate Family Rating Sr Sec nk Credit Facility Senior Unsecured Speculative Grade Liquidity Stable 2 1/LGD2 2/LGD4 SGL-2 Source: Moody's Investors Service Recent Developments In May 2017, Moody s changed AES Tiete s outlook to negative from stable and affirmed its ratings, following Brazil s sovereign rating outlook change to negative. On March 20, 2017, Moody's assigned ratings of 2/Aa1.br (respectively, in global scale and Brazil s national scale) to AES Tiete Energia S.A. s ( AES Tiete or the company ) planned BRL 1.0 billion senior unsecured debentures. The outlook remained stable. On March 17, 2017, Moody s changed AES Tiete s outlook to stable from negative and affirmed its 2/Aa1.br senior unsecured ratings. At the same time, Moody s assigned corporate family ratings (CFRs) of 2/Aa1.br to AES Tiete and withdrew its 2/Aa1.br issuer ratings. On March 15, 2017, Moody's changed the outlook on Brazil's 2 issuer rating to stable from negative On Nov 08, 2016, Moody's assigned a 2 rating on the global scale and Aa1.br rating on the Brazilian national scale (NSR) for the BRL 180 million senior unsecured debentures to be issued by AES Tiete with 7 year and 1 month maturity. The outlook remains negative. On July 5, 2016, AES Tiete announced that its Board of Directors approved unanimously the proposal of BRL 155 million capital increase by the issuance of 37,036,400 new preferred shares and 24,081,050 new common shares. On May , Moody's repositioned the national scale ratings (NSRs) of certain Brazilian infrastructure issuers, including AES Tiete, as a result of the recalibration of the Brazilian national rating scale. This resulted in a repositioning of AES Tiete s NSRs as follows: Issuer and Senior Unsecured ratings to Aa1.br from Aa2.br. On January 06, 2016, company concluded its corporate reorganization resulting in the split of Companhia Brasiliana de Energia assets (former controlling company) to Brasiliana Participações S.A. Therefore, AES Holdings Brasil Ltda and BNDES will directly control AES Tiete with the same proportion Brasiliana Participações used to have. The new structure is effective from December, 31, On February 25, 2016, Moody's downgraded AES Tiete's issuer ratings to 2/Aa2.br from 3/Aa1.br, under review for downgrade on the global scale and on the National scale, respectively. Outlook changed to negative. At the same time, Moody's downgraded senior unsecured debentures issuances to 2/Aa2.br from 3/Aa1.br, under review for downgrade on the global scale and on the National scale rating, respectively. Outlook changed to negative. On February 24, 2016, Moody's downgraded Brazil's issuer and bond ratings to 2 from 3, with a negative outlook. 5

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