Company overview Introduction Letter from the chairman Identification of the company Brief history AES Gener group companies Ownership and control

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3 2 AnnualReport AES Gener 2010 Table of contents 04 Company overview Introduction Letter from the chairman Identification of the company Brief history AES Gener group companies Ownership and control Finance and administration Administration Investment and financing policies Credit ratings Financial highlights from 2010 Earnings distribution Dividend policy Share transactions Summary of shareholders comments and proposals Insurance Brand names and internet domains Commercial operations Chilean electric system Colombian electric system Non-electric business Operations and maintenance Electric business in Chile International electric business Business development Projects under construction Projects under development Corporate social responsibility Corporate values and business ethics Responsibility to shareholders and investors Responsibility to workers Responsibility to customers Responsibility to suppliers and contractors Responsibility to the community Financial statements Consolidated financial statements Management analysis of the consolidated financial statements Summarized financial statements from subsidiaries Additional information Relevant Events Information on related companies Addresses and telephone numbers of generating plants Signing and statement of responsibility

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6 Company overview Introduction Letter from the chairman Identification of the company Brief history AES Gener group companies Ownership and control

7 6 AnnualReport AES Gener 2010 Company overview Introduction AES Gener S.A. (AES Gener or the Company) is an open stock corporation whose primary activity is to generate electricity in Chile efficiently, safely, and sustainably, meeting its commitments with customers, shareholders, employees, communities, suppliers, and other individual and group stakeholders. As of December 31, 2010, with all its plants in operation*, the Company provides electricity to the Sistema Interconectado Central (SIC, Central Interconnected System) through four run-of-river hydroelectric plants, one coal-fired thermoelectric plant, and four diesel oil-fired gas turbine plants, all of which are owned directly by AES Gener. It also provides the SIC with electricity generated by a combined cycle plant fired by either natural gas or diesel oil, and by a diesel oil-fired plant owned by its subsidiary Sociedad Eléctrica Santiago S.A. (Eléctrica Santiago), a coal-fired thermoelectric plant owned by related company Empresa Eléctrica Guacolda S.A. (Guacolda), and two cogeneration plants and one diesel oil-fired gas turbine plant owned by its subsidiary Energía Verde S.A. (Energía Verde). Additionally, the Nueva Ventanas coal-fired plant owned by the subsidiary Empresa Eléctrica Ventanas S.A. (Eléctrica Ventanas) went into operation in The Company also provides electricity to the Sistema Interconectado del Norte Grande (SING, Greater Northern Interconnected System) through its subsidiaries Norgener S.A. (Norgener) and TermoAndes S.A. (TermoAndes). The former, Norgener, has a coal-fired thermoelectric plant in the city of Tocopilla; and the latter, TermoAndes, has a natural gas-fired combined cycle plant located in Salta, Argentina that is connected to the SING through a transmission line owned by the subsidiary InterAndes. The SING will also receive energy from the Angamos plant owned by the subsidiary Empresa Eléctrica Angamos S.A. (Angamos), which as of December 2010 was almost complete and in the synchronization testing phase. This thermoelectric plant s two coal-fired units will contribute 518 MW to the system. This combination of electric generation options provides AES Gener with comparative advantages in the Chilean electric market, as it does not depend exclusively on a particular energy source to produce electricity. In addition to its participation in the Chilean electricity industry, AES Gener produces electricity in Colombia through its subsidiary AES Chivor, and its subsidiary TermoAndes supplies electricity to the Sistema Argentino de Interconexión, or SADI, the Argentine Grid. AES Gener also owns assets in steam generation and natural gas transport, and participates in the business of coal sales. At the end of 2010, the Company has two additional generating plants under construction in Chile, Angamos and Campiche. As of December 31, 2010, 71% of AES Gener stock is owned by Inversiones Cachagua Ltda., a subsidiary of AES Corp (AES), a United States-based international power and infrastructure company that does business in 28 countries. * Some of the plants specified below have more than one generating unit.

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9 8 AnnualReport AES Gener 2010 Letter from the chairman Dear Shareholders: It is my pleasure to report to you on the business activities of AES Gener S.A. (AES Gener) during the 2010 fiscal year. We faced huge challenges from the ravages of nature this year, challenges we overcame successfully through the strength, professionalism, and dedication of our people. Our capacity to continue adding new generation plants to the grid, as a result of the investment plan we put into place in 2006, has played a crucial role in keeping Chile s electrical supply reliable. We started out 2010 with the harrowing events of the earthquake on February 27. At AES Gener, and with the firm support of our parent company AES Corporation, we became a proactive player after the tragedy in finding solutions to help the country s basic services, particularly electric power, return to normal as quickly as possible. We created an Emergency Coordination Committee that same day to act rapidly on the three fronts we considered priorities: our people, the operation of our plants, and the damage to the towns where our plants are located. Fortunately, we lost no lives in the disaster, and in the communities neighboring our plants we contacted the local authorities and emergency services directly to find out what needed to be done. We provided drinking water, fuel, food, and generators to power the service stations, health clinics, city halls, and other locations that had been left without power. Over the course of the year, we have continued working to help the country rebuild. It is in this spirit of cooperation that we have been involved in repairing two schools in the town of San José de Maipo and a children s home in the city of Talca. AES Gener operations demonstrated their high standards of performance as they responded quickly and efficiently to help restore the power supply by putting backup plants into operation, which was key to getting the system going again just hours after the quake. The international presence of our parent company, AES Corporation, gave us the support of AES Argentina, whose subsidiary EDELAP provided Chilean power distribution companies with five work crews to help restore power to the areas most severely damaged in the earthquake. Our most important commitment to Chile is to provide the country with safe, reliable electricity in a way that is sustainable with the environment and with the communities

10 Company overview 9 neighboring our facilities. It is in this spirit that we have continued developing and receiving the fruits of our business. We added 424 MW of installed capacity to the country this year through the startup of the Nueva Ventanas plant (272 MW) and Unit 4 of the plant owned by subsidiary Guacolda (152 MW) on the Sistema Interconectado Central (SIC, Central Grid). This gave us a total capacity of 4,281 MW, including that of the Chivor plant in Colombia. We also continue to make progress with our expansion plan. On the Sistema Interconectado del Norte Grande (SING, Northern Grid), we have continued with the construction of the two units of the Angamos thermoelectric project (518 MW) located in Mejillones, which will go into operation in We will reach a new milestone in our business when this occurs, as this project will be the largest-capacity power generation plant to go into operation in the far north in recent years. In financial matters, at the end of 2010 the Company had recorded a consolidated EBITDA of US$474 million, 10% lower than the 2009 EBITDA of US$528 million, due primarily to a decline in gross earnings in The Company s profits for the fiscal year were US$170 million, compared with profits of US$328 million the previous year. This result stems primarily from a one-time loss of US$72 million from the final resolution of subsidiary Eléctrica Santiago s natural gas transport litigation and from a lower gross margin. Among the challenges we successfully resolved during 2010 were the operational, commercial, and financial changes made in our subsidiary Eléctrica Santiago to strengthen its long-term financial soundness and economic viability. Over the course of the year, after a long period of discussions and compromise among the parties, the subsidiary reached agreements with the natural gas transport companies Metrogas S.A., Transportadora de Gas del Norte S.A., Gasoducto GasAndes S.A., and Gasoducto GasAndes S.A. (Argentina) that put an end to all of the legal disputes that had arisen among the parties. Another important development was that in September AES Gener bought the minority share of approximately 7% that Compañía General de Electricidad S.A. held in Eléctrica Santiago. Another aspect contributing to the financial viability of the Company was that during the last quarter of 2010 a new supply contract was signed with Metrogas for liquefied natural gas to be supplied to the Nueva Renca combined cycle plant. This fuel was used to generate 32% of the plant s total output, which, as part of the Renca thermoelectric complex, plays a vital role in keeping the Metropolitan Region s energy supply reliable. The importance of this role was demonstrated at the end of 2010, when a new energy shortage affected the south-central portion of the SIC due to a combination of low rainfall and the weakness of some sections of the transmission system. As a consequence of the Supreme Court s June 2009 decision to revoke the Campiche thermoelectric plant s environmental approval, the plant s construction works were suspended. For a year and a half, the Company focused all its professional effort on obtaining permission to continue with construction in accord with current legal guidelines. A new environmental permit was granted at the end of February 2010, and in January 2011 the Supreme Court upheld the rejection of the claims filed against the construction permits granted by the Municipality of Puchuncaví. This paved the way for us to restart work on the plant, which in fact had gotten underway at the end of Our portfolio of projects under development remains active. This year, we will install a new bank of rechargeable lithium batteries, this time at the Angamos plant, which will enable us to increase the plant s generation. Also, on the SING, we have obtained environmental approval for the Cochrane thermoelectric plant (560 MW) to be located in the municipality of Mejillones. On the SIC, we are facing the great challenge of starting construction on our Alto Maipo hydroelectric project (531 MW), which consists of two run-of-river plants in the Maipo River basin. The year 2010 saw this project progress in terms of obtaining a number of different permits and advancing in the prequalification process to select contractors. Over the coming years, Chile faces the challenge of developing diversified energy projects to double its energy capacity efficiently, competitively, and sustainably in order to keep apace with the current economic growth rate. AES Gener will continue to contribute the energy efficiency and reliability of its plants in operation, will start up the plants that are currently under construction, and will develop initiatives based on efficient non-conventional renewable energy sources (Energías Renovables No Convencionales, ERNC). All of this will be done as we incorporate modern emissions control equipment in new facilities and improve older ones in order to meet our environmental responsibilities. Ladies and gentlemen shareholders, I sincerely appreciate the trust you have placed in the Company s Board of Directors and in its people, and I would also like to extend my thanks to those who, in their day-to-day work, are building the present and laying the foundations for an auspicious future for this great organization. You can be sure that as a company, working with the criteria of operational excellence and striving for improvement, we will place all of our energy, reliable energy, at the service of competitive, sustained development. ANDRÉS GLUSKI W. Chairman of the Board

11 10 AnnualReport AES Gener 2010 Identification of the company Corporate name AES Gener S.A. Chilean taxpayer ID Number Type of company Registration in the Securities Registry Nº 0176 Address Open Stock Corporation Mariano Sánchez Fontecilla 310, 3 rd Floor, Las Condes, Santiago, Chile Telephone (56-2) P.O. Box Web page Stock exchange sticker symbol Fax (56-2) Nº 3514, Santiago Gener

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13 12 AnnualReport AES Gener 2010 Brief history AES Gener S.A. was founded on June 19, 1981 in a public deed registered by Santiago Notary Public Patricio Zaldivar Mackenna. The name of the Company at the time was Compañía Chilena de Generación Eléctrica S.A. (Chilectra Generación S.A.). Its by-laws were approved by the Chilean Securities and Insurance Authority in resolution 410-S of July 17, 1981 and were published in Official Gazette Nº 31,023 on July 23 of the same year. The Company is registered in the Business Registry of the Santiago Property Registrar on pages 13,107 Nº 7,274 of The origins of the Company, however, date back to 1889, only eight years after Thomas Alva Edison invented the light bulb. That was when the Chilean Electric Tramway and Light Company was founded in Santiago, whose assets later merged in 1921 with those of the Compañía Nacional de Fuerza Eléctrica, created in 1919, to form the Compañía Chilena de Electricidad (Chilectra). This was a privately owned company until 1970, when it was nationalized and taken over by the Corporation for the Development of Production (CORFO). In June 1981, it was restructured into a holding company, Chilectra S.A., and three subsidiaries: Chilectra Metropolitana S.A., a distribution company serving the Santiago metropolitan area; Chilectra Quinta Región S.A., a distribution company serving Valparaiso and the Aconcagua Valley; and Chilectra Generación S.A., an electricity generation company and owner of the former Chilectra s transmission assets. Chilectra Generación S.A. began operating as an independent company on August 1, In 1986, CORFO began privatizing the company, and by January 1988, 100% of its ownership had been transferred to the private sector.

14 Company overview 13 At the annual shareholders meeting in September 1989, it was agreed to change the Company s name to Chilgener S.A. At that time, the Company had an installed capacity of 579 MW distributed throughout Chile s Metropolitan and V Regions. Nine years later, in March of 1998, the Company s shareholders agreed once again to change its name, this time to Gener S.A. The primary reason for the change was to reflect the Company s new international standing as it expanded its operations to new markets and businesses both in Chile and abroad. In addition to participating in the electricity generation business in Chile, Argentina, Colombia, and the Dominican Republic, Gener was also engaged in other activities such as the generation of steam; the extraction and sale of coal; the exploration, extraction, and transportation of natural gas; the exploration and production of oil; the production and sale of densified biofuel; shipping and port services; and engineering services provided primarily to the electric and sanitation sectors. In April 2000, Gener began the search for a strategic partner or investor that would enable it to continue growing within the industry s new structure. This decision was based on the growth and development restrictions imposed on the Company by its smaller size and debt capacity as compared to its large international competitors. At the end of this process, AES, through its subsidiary Inversiones Cachagua, launched a tender offer for a controlling percentage of the Company. Additionally, it entered into an agreement with the French company TotalFinaElf under which the latter agreed to purchase Gener s electricity assets in Argentina if the tender offer was successful. Both operations were subject to a due diligence process. On December 28, 2000, the Santiago Stock Exchange auctioned Gener shares, and Inversiones Cachagua Ltda. purchased 61.11% of the Company s capital stock. On the following day in the United States, Gener s ADRs, representing a 34.56% stake in the Company, were exchanged for AES shares. After taking control of the Company, Inversiones Cachagua Ltda. held a second public offering in Chile in February 2001, acquiring an additional 2.87% of the Company s stock. At this point, Inversiones Cachagua s ownership equaled 98.54% and would later increase to 98.65% through other minor purchases on the stock market. As part of the AES group, Gener changed its name to AES Gener S.A. in 2001 and began to sell assets in order to concentrate the Company s business activities in power generation, primarily in Chile. In 2004, through a capital increase, Inversiones Cachagua s stake in the Company increased to 98.79%. In April 2006, Inversiones Cachagua sold 7.59% of its shares in AES Gener to other investors. In May 2007, Inversiones Cachagua sold 0.91%, and in October it sold an additional 10.18%, which left it with participation of 80.11% in the Company. In June 2008, AES Gener concluded the preemptive right period of a capital increase process for approximately US$272 million. Inversiones Cachagua took part in the process and increased its ownership to 80.16% by the end of the preemptive period. Later, in November 2008, Inversiones Cachagua sold 9.55% of AES Gener on the market, reducing its participation to 70.61%. In February 2009, AES Gener concluded the preemptive right period of a capital increase process for approximately US$246 million. Inversiones Cachagua took part in the process and increased its participation slightly. As of December 31, 2010, Inversiones Cachagua s stake in the Company totaled 70.67%.

15 14 AnnualReport AES Gener 2010 AES Gener group companies 99.99% 99.99% 94% 92.04% Sociedad Eléctrica Santiago S.A. Energía Verde S.A. Energen S.A. 6% 7.96% Gener Argentina S.A. 0.01% 66.99% 86.99% 50% Empresa Eléctrica Guacolda S.A % TermoAndes S.A. InterAndes S.A % 13% 13% 99.99% 99.99% Gasoducto GasAndes S.A. Gasoducto GasAndes Argentina S.A. Empresa Eléctrica Ventanas S.A. Empresa Eléctrica Angamos S.A. 0.01% 0.01% Note: This chart lists each company with its full legal name (i.e. AES Gener S.A. and Sociedad Eléctrica Santiago S.A.). In the rest of this annual report, except for the financial statements, an abbreviated form of the name is used to refer to the companies (i.e. AES Gener and Eléctrica Santiago). Additionally, AES Gener Group refers to AES Gener, its subsidiaries, and its related companies.

16 Company overview % 99.99% Norgener S.A. 0.01% Energy Trade & Finance Corporation 50.62% 99.99% 100% 100% 99.98% AES Chivor S.A. 0.62% Inversiones Nueva Ventanas S.A. 0.01% Gener Blue Water Ltda. Genergía Power Ltda. AES Chivor y Cía. SCA E.S.P % 99.99% 99.90% 99.99% 99.99% Empresa Eléctrica Campiche S.A. Empresa Eléctrica Cochrane S.A. Inversiones Termoenergía de Chile Ltda. Genergía S.A. 0.01% 0.10% Subsidiary Related Company

17 16 AnnualReport AES Gener 2010 Ownership and control AES Gener is an open stock corporation with shares traded on three stock exchanges: the Santiago Stock Exchange, the Valparaiso Stock Exchange, and the Chilean Electronic Stock Exchange. As of December 31, 2010, shareholders equity stood at US$2,549 million, divided into 8,069,699,033 shares and distributed among 1,591 shareholders. At the end of the fiscal year, Inversiones Cachagua held a 70.67% stake in AES Gener. Inversiones Cachagua has direct control of the Company, has no common voting agreement with other shareholders, and is approximately 99.9% owned by the United States company AES; therefore, the latter has ultimate control of AES Gener. Due to the fact that the ownership of AES is widely dispersed, the names of the individual shareholders of that international corporation are omitted from this report. Principal Shareholders as of December 31, 2010 Name Nº of Shares Ownership Inversiones Cachagua Limitada 5,703,106, % Celfin Capital S.A. Corredores de Bolsa 265,829, % Fondo de Pensiones Provida C 127,187, % Fondo de Pensiones Habitat C 126,066, % Fondo de Pensiones Cuprum A 105,592, % Fondo de Pensiones Capital A 103,001, % Fondo de Pensiones Cuprum C 102,477, % Fondo de Pensiones Capital C 101,763, % Fondo de Pensiones Habitat A 96,934, % Banco Itau por Cuenta de Inversionistas 86,934, % Fondo de Pensiones Provida A 86,483, % Banco de Chile por Cuenta de Terceros 86,211, % Total 12 Principal Shareholders 6,991,588, % Other Shareholders (1,579) 1,078,110, % Total Shareholders 8,069,699, % Shareholders by type as of December 31, 2010 Type of Shareholder Number of Shareholders Number of Shares Ownership Chilean individual 1,340 29,102, % Foreign individual 1 1, % Chilean legal entity 247 7,948,149, % Foreign legal entity 3 92,445, % 15% Pension Funds (AFP) 14% Other 71% AES Total Shareholders 1,591 8,069,699, %

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20 Finance and administration Finance and administration Administration Investment and financing policies Credit ratings Financial highlights from 2010 Earnings distribution Dividend policy Share transactions Summary of shareholders comments and proposals Insurance Brand names and internet domains 19

21 20 AnnualReport AES Gener 2010 Finance and administration Administration Board of directors as of December 31, 2010 Regular directors Andrés Gluski (Chairman) Master in Economics, University of Virginia Ph.D. in Economics and International Finance, University of Virginia Passport N : Venezuelan citizen Jorge Rodríguez B.A. in Business Administration, Universidad de Chile Master of Arts in Economics, Boston University Chilean ID N : Chilean citizen Juan Andrés Camus B.A. in Business Administration, Pontificia Universidad Católica de Chile Chilean ID N : Chilean citizen Andrew Vesey B.S. in Engineering, Union College, New York Passport N : United States citizen Bernerd da Santos B.A. in Business Administration, Master in Finance and Business Management, Universidad José María Vargas, Venezuela Passport N : Venezuelan citizen Arminio Borjas Attorney-at-Law, Universidad Católica Andrés Bello, Venezuela Passport: D Venezuelan citizen Iván Díaz-Molina B.S. in Civil Engineering, Universidad Nacional de Córdoba, Argentina Master of Science, Carnegie-Mellon University Chilean ID N : Argentinean citizen

22 Finance and administration 21 Alternate directors (1) Jorge Rauber B.S. in Electrical Engineering, Universidad Nacional de la Plata Passport N : N Argentinean citizen Britaldo Soares B.S. in Metallurgical Engineering and Business Administration, Fundacao don Cabral Universidad Federal de Minas Gerais Passport N : CP Brazilian citizen Pedro Pellegrini Attorney-at-Law, Pontificia Universidad Católica de Chile Chilean ID N : Chilean citizen Fernando Pujals B.S. in Mechanical Engineering, Universidad Nacional de Rosario MBA de I.M.D., Laussane, Suiza Passport N : M Argentinean citizen Edgardo Víctor Campelo Public Accountant, Universidad de Buenos Aires, Argentina Passport N : N Argentinean citizen Jaime Andrés Tupper B.S. in Electronic Engineering, Universidad Simón Bolivar, Venezuela Chilean ID Nº: Chilean citizen Executives as of December 31, 2010 Chief Executive Officer Luis Felipe Cerón B.S. in Civil Industrial Engineering, Pontificia Universidad Católica de Chile Master of Science in Accounting and Finance, The London School of Economics Chilean ID N : Chilean citizen Chief Operations Officer Javier Giorgio B.S. in Electronic Engineering, Universidad Tecnológica Nacional, Argentina Chilean ID N : Argentinean citizen Chief Development Officer (2) Derek E. Martin Attorney-at-Law, Bachelor of Arts, Tulane University MBA / Doctor of Law, George Washington University Chilean ID N : United States citizen (1) The Director, Mr. Jorge Errázuriz Grez, Alternate Director of Regular Director Mr. Juan Andrés Camus, submitted his resignation on December 29, 2009, due to an inability of Article 36 of the Chilean Corporation Law affected him. To date, the Board of Directors has not proceeded to appoint a replacement in that position. B.A. in Administration and Finance Daniel Stadelmann Lic. Administración y Finanzas, Universidad de St. Gallen, St. Gallen, Suiza Master of Foreign Service, MBA IMD, Lausanne - Suiza Chilean ID N : Chilean citizen Chief Engineering and Construction Officer Iván Jara B.S. in Mechanical Engineering, Universidad de Chile MBA Universidad Adolfo Ibañez Chilean ID N : Chilean citizen Legal Counsel Alberto Zavala Attorney-at-Law, Pontifica Universidad Católica de Chile Chilean ID N : Chilean citizen Chief Corporate Affairs Officer Mariana Soto Attorney-at-Law, Universidad de Chile Chilean ID N : Chilean citizen (2) Mr. Derek Martin submitted his resignation as Chief Development Officer on December 31, 2010, having appointed as his replacement Mr. Michael Whittle.

23 22 AnnualReport AES Gener 2010 Remuneration and activities Board of directors The Board of Directors is the qualified organization that, in accordance with the Chilean Corporation Law Code and the Company s by-laws, is responsible for the administration of the Company. It is composed of seven regular members and their respective alternates, all of whom are elected for a three-year term at the ordinary shareholders meeting and are eligible for reelection. AES Gener s by-laws specify that its directors are not to be remunerated for their duties as such. During fiscal year 2010, the Company s directors did not receive remuneration of any kind for additional duties; neither for expenses of representation, travel, gifts, nor any other stipend. However, those directors that are also Board Committee members received remuneration as detailed in the following section. The Board of Directors did not incur expenses for consultation services in Audit committee Members In accordance with Article 50 bis of Law Nº 18,046 governing stock corporations, which was amended by Law Nº 20,382, and per the instructions from the Chilean Securities and Insurance Authority (SVS) contained in Official Bulletin Nº 560 issued on December 22, 2009, at the January 21, 2010 board meeting it was left on record that Director Iván Díaz-Molina had submitted a sworn statement of independence on January 20 as required under Paragraph 5 of the aforementioned Article 50 bis; it was therefore not necessary to have an early renewal of the Board. As Mr. Iván Díaz-Molina was the only director legally qualified as independent, in that capacity he designated the other two members of the Audit Committee, Directors Juan Andrés Camus Camus and Jorge Rodríguez Grossi. Thus, until the close of fiscal year 2010, the Company s Audit Committee members were Iván Díaz-Molina (President and Independent Director), Andrés Camus Camus, and Jorge Rodríguez Grossi and their respective alternates. Remuneration and budget At the ordinary shareholders meeting held on April 29, 2010, it was agreed to set Audit Committee members fees at 160 UF per month. During fiscal year 2010, remuneration was paid to the directors who are Audit Committee members in the amounts shown in the following table. During fiscal year 2010, the Committee did not make use of the annual expense budget of US$25,000 approved at the ordinary shareholders meeting. Board Committee Remuneration (UF) Axel Christensen Jorge Rodríguez 1,920 1,920 Juan Andrés Camus 1,920 1,920 Iván Díaz-Molina 1,920 1,280 Total 5,760 5,760

24 Finance and administration 23 Annual report on audit committee activities In accordance with Article 50 bis of the Chilean Corporations Law Code, amended by Law Nº 20,382, the Audit Committee met on 11 occasions in 2010 to make decisions regarding the Company s operations and contracts with related companies in accordance with Title XVI of Law Nº 18,046 governing corporations and to discuss other matters within its legal capacity, subsequently notifying the Board of Directors of its decisions and recommendations. The operations between related companies examined by the Committee were in accordance with market conditions and in the interest of the corporation, so the Committee recommended their approval by the Board of Directors. At the January 21 meeting, the Committee examined the information and approved the following operations with related companies: i) to include coverage of the Nueva Ventanas plant, owned by subsidiary Eléctrica Ventanas, in the operations insurance policy the Company holds with related company AES Global Insurance; ii) to enter into a energy sales agreement with related company Eléctrica Guacolda; and iii) to enter into a Signal Peak coal supply agreement with the company Global Coal Sales, and a price swap agreement with related company AES Hawaii. A Special Committee was designated to determine the specific conditions of these operations. At the March 10 meeting, the Committee examined the information and approved i) the annual renewal of the insurance policy held with related company AES Global Insurance covering AES Gener and its subsidiaries against all risk and business interruption; and ii) the 2010 salary and compensation plans for managers, executives, and workers. At the March 17 meeting, the Committee was informed of, analyzed the information, and approved the Company s balance sheet and financial statements for the fiscal year ending December 31, 2009, as well as the external auditors report. At the March 24 meeting, the Committee agreed i) to recommend to the Board that the Ernst & Young auditing firm be proposed at the Company s next ordinary shareholders meeting as external auditors for fiscal year 2010; and ii) to approve the hiring of Ernst & Young to provide services other than auditing that are not expressly forbidden, under the condition that the firm inform the Company, for each case and on each occasion, that its providing that particular service does not affect its independence. At the April 26 meeting, the Committee examined the information and approved the following operations with related companies: i) to amend the power purchase agreement (PPA) the Company holds with TermoAndes; and ii) to enter into an agreement with Eléctrica Ventanas for the temporary and permanent disposal of waste from the Nueva Ventanas plant. At the May 26 meeting, the Committee examined the information and approved the signing of an administrative and engineering service agreement with its subsidiary Eléctrica Angamos. At the June 24 meeting, and with only Director Jorge Rodríguez abstaining, the Committee agreed to recommend that the Board of Directors continue to support the research programs at Alberto Hurtado University s School of Economics and Business in 2010, especially those aimed at improving public policy on the country s economic and social development, through a Company donation of UF2,000 to that institute of higher education. At the August 30 meeting, the Committee examined the information and approved the following operations with related companies: i) a 15-year power purchase agreement between the Company and its subsidiary Eléctrica Angamos (Angamos) under which AES Gener will purchase the additional generation capacity produced by the BESS battery bank system at the Angamos plant; ii) a power interconnection agreement between the Company and Angamos for the BESS at the Angamos substation, as well as an agreement to connect the communications systems with the Angamos substation s control room; iii) a lease agreement between the Company and Eléctrica Angamos for the

25 24 AnnualReport AES Gener 2010 building housing the BESS system; and iv) a transport and coal exchange agreement with related company Guacolda. At the September 22 meeting, the Committee examined the information and approved the following operations with related companies: i) to permit the management to amend the electric power and capacity purchase agreements and mercantile accounts the Company holds with its subsidiary Eléctrica Santiago; ii) to recommend that the Board hire the internal auditing services of AES Corp; iii) to approve the Company s issuance of the guarantee required of Eléctrica Angamos to execute the urbanization works included in the property purchase agreement with the Ministry of National Assets; and iv) to ratify the mandate agreement with Norgener for the Company to administer the contract for the services of coal offloading, reception, handling, and storage that subsidiary holds with ElectroAndina S.A. At the October 26 meeting, with Director Juan Andrés Camus abstaining, the Committee recommended that the Board approve the financial services consultation agreement with Celfin Capital. It also recommended that the Board approve bonus payments to two project executives. Executives Total remuneration for the Company s executive officers during 2010 amounted to 70,904 UTM (monthly tax units). This includes fixed monthly remuneration and variable bonuses based on corporate earnings and performance, which are also awarded to the other AES Gener employees. The Company s incentive plan for executives consists of an annual variable bonus based on corporate earnings and performance; the amount of the bonus is determined on a yearly basis, according to the aforementioned parameters. It should be noted that Company policy stipulates that AES Gener executives who are members of related companies boards of directors do not receive remuneration for their duties as directors or that they may decline the allowance due them as individuals. A total of 11,057 UTM was paid to the Company s main executives in severance pay during At the November 23 meeting, the Committee examined the information and approved the following operations: i) to amend the electrical power and capacity purchase agreement with Eléctrica Santiago, extending its suspension date; ii) to capitalize accounts receivable in Eléctrica Angamos for US$103,256, for the Angamos project, through subsidiaries Norgener and Inversiones Nueva Ventanas; and iii) to enter into a SCADA data transmission agreement with Eléctrica Guacolda.

26 Finance and administration 25 Investment and financing policies In accordance with the agreement reached at the extraordinary general shareholders meeting held on July 4, 2001, the Company s by-laws make no reference to investment, financing, or commercial policies either for the Company or for its subsidiaries. Notwithstanding the above, the by-laws state that in order for the Company to fulfill its corporate purpose, it may manage the investments that it makes in each and every one of the companies that it forms or to which it makes contributions; it may supervise and coordinate the management of the companies that it forms and to which it makes contributions; and it may provide, to the companies that it forms or to which it makes contributions, management services, auditing services, financial consulting, and commercial, technical, and legal services; and, in general, services of any kind that are deemed necessary for best performance. The by-laws also state that in the event that it forms companies by contributing assets directly related to the generation of electricity, AES Gener will retain at least 51% of the ownership. Credit ratings During 2010, the three main international credit rating agencies maintained AES Gener s rating at the investment grade level. In January, Fitch Ratings confirmed the Company s investment grade rating at BBB-, but upgraded the outlook from negative to stable. In June, S&P maintained the Company s investment grade rating at BBB- with a negative outlook. Moody s October rating maintained the Company s investment grade steady at Baa3, but changed the outlook from negative to under review. At the close of the fiscal year, the Company s shares were classified as First Class Level 2 by both Fitch Ratings and Feller Rate. Financial highlights from 2010 Conversion of Eléctrica Ventanas loan In June of 2010, after construction was completed on the Nueva Ventanas plant in December 2009 and its commercial operations got underway in February 2010, the Eléctrica Ventanas construction loan was converted to a long-term loan that matures in June of This loan, in the amount of US$404 million as of December 31, 2010, is a project finance loan that is secured with the project s assets, shares, and flows. Subsidiary Eléctrica Santiago AES Gener and its subsidiary Eléctrica Santiago implemented operational, commercial, and financial changes in 2010 designed to strengthen Eléctrica Santiago s financial soundness and long-term economic viability. To this end, the Company reached settlement agreements in 2010 with Metrogas S.A., Transportadora de Gas del Norte S.A., Gasoducto GasAndes S.A., and Gasoducto GasAndes S.A. (Argentina), all natural gas transportation companies, putting an end to all of the disputes pending with those companies. AES Gener also purchased the non-controlling interest of approximately 7% held by Compañía General de Electricidad S.A. in September 2010, and provided Eléctrica Santiago with financial assistance by contributing capital on three occasions during 2010 for a total of US$138 million. Hedging strategy Since the U.S. dollar is AES Gener s functional currency, a hedging strategy was implemented in 2010 to limit the Company s exposure to exchange rate risk with regard to the Chilean peso. Although most of the Company s energy supply agreements have prices denominated in dollars, they are actually paid in pesos at an exchange rate that is fixed for a specific period of time. Therefore, a strategy was established using exchange rate forwards to hedge against the Company s net exposure in pesos against the dollar. Investors relations During 2010, AES Gener carried out and took part in a number of activities aimed at maintaining an ongoing flow of accurate, reliable communications with current and potential shareholders and with investors, market analysts, and other interested parties. In March, the Company sponsored a visit to the Alfalfal run-of-river hydroelectric plant by a group of approximately 30 executives, managers, and research analysts, mostly from investment banks and pension fund companies. AES Gener also participated in various national and international conferences for investors over the course of the year, and continued with its biannual breakfasts to present its earnings results.

27 26 AnnualReport AES Gener 2010

28 Finance and administration 27 Earnings distribution Earnings Distribution Earnings attributable to net equity holders of parent, 169, fiscal year Less: interim dividends paid (73,031) Balance of Earnings Attributable to Net Equity Holders of 96,741 Parent, Distributable 2010 Fiscal Year Retained earnings as of ,781 Dividend reserve proposed ,823 Final dividends year 2009 charged against 2009 earnings (159,982) Reversal of minimum dividend 2009 fiscal year 56,628 Retained Earnings and Reserve for Proposed Dividends 705,250 Accumulated for Distribution Dividend policy 2010 dividend policy As instructed in Chilean Securities and Insurance Authority (SVS) Bulletin Nº 687, the Board of Directors, at meeting 551 held on March 24, 2010, agreed on the dividend policy it considers suitable for the Company s 2010 fiscal year. This policy is stated below. Considering by-law restrictions, the Board intends to distribute up to 65% of the net income generated during 2010 in dividends among its shareholders. The Board also intends to distribute interim dividends during the 2010 fiscal year. At the same time, the Board also stated expressly that compliance with this dividend policy is subject to net income actually earned, the results of periodic projections made by the Company, the need for Company funds to finance investment projects, and restrictions on dividends both in the Company s by-laws and those contained in existing loan agreements, which consist largely of being in compliance with the negative covenants of those loans agreements and with Company cash and investment policy. Regarding dividends in upcoming years, the Board agreed to maintain a dividend policy similar to the above over the medium term. This policy was reported at the AES Gener S.A. ordinary general shareholders meeting held on April 29, The previous year s dividend policy was as follows: 2009 dividend policy At the Board of Directors meeting held on March 25, 2009, the Board agreed to distribute up to 65% of the net income generated during 2009 in dividends and to distribute interim dividends during the year. It also stated expressly that compliance with the aforementioned dividend policy is subject to net income actually earned, the results of periodic projections made by the Company, the need for Company funds to finance investment projects, the Company s cash and investment policy, and restrictions on dividends both in the Company s by-laws and those contained in existing loan agreements. Regarding dividends in upcoming years, the Board agreed to maintain a dividend policy similar to the above over the medium term. This policy was reported at the AES Gener S.A. ordinary general shareholders meeting held on April 28, 2009.

29 28 AnnualReport AES Gener 2010 Dividends paid against 2009 fiscal year earnings At the ordinary shareholders meeting, it was agreed to distribute minimum obligatory dividends of US$70,279,009, or 21.43% of fiscal year 2009 net income, by distributing a minimum obligatory dividend of US$ per share; payment of the dividends began on May 11. The interim per-share dividend of US$ , or 12.21% of fiscal year 2009 net income, that had been distributed in December of 2009 was charged against the minimum obligatory dividend. At the meeting, the shareholders also agreed to distribute two additional dividends of US$ per share each, for a total of US$89,702,774, or 27.35% of fiscal year 2009 net income. Payment of these dividends began on July 7 and October 7, 2010, respectively. All of the above amounts to a total distribution of US$200,007,490, or approximately 61% of fiscal year 2009 net income. Then, and in accordance with the dividend policy the Board of Directors reported to Dividends Paid per Share in the Last Years in Dollars per Share Dividend Number Type of Dividend Payment Date shareholders at the April 29, 2010 ordinary shareholders meeting, at its December 13, 2010 meeting the Board of Directors agreed to distribute US$73,030,776 in interim dividends of US$ per share, to be charged against fiscal year 2010 net income. Payment of this dividend to shareholders began on January 5, Dividend per Share Charged Against the Fiscal Year % of Net Income* 81 Interim % 82 Definitive % 83 Interim % 84 Definitive % 85 Definitive % 86 Definitive % 87 Additional % definitive 88 Interim % 89 Definitive % 90 Additional % definitive 91 Additional % definitive 92 Interim % * Net income from 2005 to 2008 based on CHGAAP financial statements and net income for 2009 and 2010 based on IFRS financial statements.

30 Finance and administration 29 Share transactions On January 14, 2010, Regular Director Jorge Rodríguez Grossi sold 46,500 shares of Company stock at a price of Ch$230.0 per share. On September 21, 2010, Regular Director Jorge Rodríguez Grossi sold 48,409 shares of Company stock at a price of Ch$280.0 per share. Share Transactions* Year Period Nº of Shares Total Ch$ Average Price (Ch$) st quarter 374,099,529 70,250,879, nd quarter 443,645,743 92,173,590, rd quarter 298,599,080 54,787,027, th quarter 1,291,795, ,719,345, st quarter 556,682, ,903,979, nd quarter 935,978, ,021,074, rd quarter 391,419,735 92,382,308, th quarter 297,378,356 68,250,655, st quarter 343,117,110 82,026,088, nd quarter 234,164,206 54,258,261, rd quarter 440,907, ,407,633, th quarter 428,946, ,170,776, * Includes transactions on the Santiago Stock Exchange, the Valparaíso Stock Exchange, and the Electronic Stock Exchange of Chile. Price and Volume of Shares Traded on the Santiago Stock Exchange, 2010 Month Volume Average Closing Price (Ch$) January 152,464, February 90,612, March 78,102, April 68,679, May 83,748, June 70,078, July 169,504, August 116,125, September 110,954, October 127,671, November 92,329, December 155,234, Average 109,625, Gener Share Price (Ch$) Ch$ US$

31 30 AnnualReport AES Gener 2010 Summary of shareholders comments and proposals During 2010, the Company did not receive comments or proposals regarding the management of the Company from shareholders or their representatives owning 10% or more of shares with voting rights, in accordance with Article 74 of Law Nº 18,046 governing Chilean stock corporations and Article 13 of that law s regulations. Insurance Insurance is an integral part of the Company s risk management, and AES Gener s use of insurance is aimed at guaranteeing the continuity of its business. Among its relevant operation insurance coverage is all-risk policies for all of its plants, including material damage and financial losses resulting from machinery breakdown, fire, or acts of nature. Assets that must be imported, such as coal, replacement and spare parts, and other supplies, are covered under all-risk maritime, land, or air shipping policies. AES Gener is also covered with general liability insurance. Finally, AES Gener makes an insurance program available to its contractors and subcontractors with liability and personal accident coverage, and requires additional coverage in special cases. All-risk policies are taken out during each project s construction period to cover asset transport, construction and assembly, and general liability. All AES Gener employees enjoy complementary health insurance coverage, which includes a life insurance policy. Brand names and internet domains The Company has duly registered trademarks or trademark applications in process for all of its brand names and those of its subsidiaries, including registration of the different company names and corporate logos. The Company has also registered its brands Internet domain names to protect its intangible interests and assets.

32 Finance and administration 31

33 32 AnnualReport AES Gener 2010

34 Commercial operations Commercial operations Chilean electric system 33 Colombian electric system Non-electric business

35 34 AnnualReport AES Gener 2010 Commercial operations Chilean electric system General description Since 1982, the Chilean electricity industry has been based on a private initiative and property structure, with a competitive framework for the generation market and new transmission facilities, and regulated framework for distribution and transmission based on an efficient company model. In accordance with the country s constitution and current legislation, certain government agencies, including those related to the electricity sector, perform a regulatory and oversight role. These agencies are grouped under the Ministries of Energy and the Environment, and include, among others, the Comision Nacional de Energía (the National Energy Commission or CNE), which establishes, regulates, and coordinates energy policy. It also publishes the semi-annual indicative investment plan for generation and transmission activities, a document that is non-binding for companies in the industry. Other agencies include the Superintendencia de Electricidad y Combustibles (Electricity and Fuels Commission or SEC), which oversees compliance with quality and reliability of service regulations, and the Comisión Nacional del Medio Ambiente (National Environmental Commission or CONAMA), which administers the environmental impact system that evaluates projects. The Dirección General de Aguas (DGA), an agency in the Ministry of Public Works, issues the water-use rights for hydroelectric generation, while the Ministry of Energy grants the concessions for distributing electricity for public use. Concessions or other types of rights are not required from government agencies to build and operate thermoelectric plants. The Chilean electric system has a Panel of Experts, an independent technical agency whose purpose is to study and promptly resolve controversies that may arise between companies within the electricity sector, or between one or more of these companies and the energy authorities.

36 Commercial operations 35

37 36 AnnualReport AES Gener 2010 The electricity sector s different activities are regulated by the General Electricity Services Law, DFL Nº 1/1982 enacted by the Mining Ministry, with its subsequent amendments Law Nº 19,940/2004, known as Short Law I, and Law Nº 20,018/2005, or Short Law II, which did not modify the fundamentals of Chile s stable electricity sector model. These laws were redrafted and systematized under DFL Nº 4/2007. Sector activities are also governed by the corresponding technical regulations and standards. Electricity generation is based primarily on long-term contracts between generation companies and customers that specify the volume, price, and conditions for the sale of energy and capacity. The law recognizes two types of generation company customers: unregulated and regulated customers. Unregulated customers are principally and obligatorily customers whose connected capacity is higher than 2 MW, generally industrial or mining customers, and those with connected capacity of between 500 kw and 2 MW who have opted for the unregulated pricing mechanism for a period of at least four years. These customers are not subject to price regulation; therefore, generation and distribution companies are free to negotiate the prices and conditions for supplying electricity to these consumers. Regulated customers are those whose connected capacity is less than or equal to 500 kw as well as those with a connected capacity of 500 kw to 2 MW who have selected also for a four-year period the regulated pricing system. These customers receive electricity from distribution companies, which must hold public bids to award electricity supply contracts to meet consumption needs. New supply contracts assigned by distribution companies must be awarded to generation companies offering the lowest supply price in regulated public bid processes. These prices, termed long-term node prices, include indexation formulas and are valid for the entire term of the respective contract, up to a 15-year maximum. More precisely, the long-term energy node price for a particular contract is the lowest energy price offered by the generation companies participating in the respective public bid, while the long-term capacity node price is that set in the node price decree in effect at the time of the bid process. The average node prices are composed of the weighted average of long-term node prices for energy and capacity and short-term node prices for energy and peak capacity. The short-term prices are determined every six months by the CNE based on a comparison between projected prices and the average price offered by generators to their unregulated

38 Commercial operations 37 and regulated customers. One important characteristic of the average node price is that an individual price is determined for each distribution company and an adjustment procedure is applied so that the average node price of each distribution company does not exceed by more than 5% the average system price at a designated point of comparison. The average price is determined by the CNE which issues a Technical Report informing the Ministry of Energy of the results. The Ministry of Energy then proceeds to set the prices in a decree which is published in the Official Gazette. Within the regulatory framework, each bid process establishes specific indexation formulas applicable to the long-term node prices and the respective indices are verified monthly to confirm the price variations. In Chile, except for the small isolated systems of Aysén and Punta Arenas, electricity is generated by two major systems: the Central Interconnected Grid (known as the SIC), which covers the country from the southern area of Region II (the Paposo roadstead) to Region X (the town of Quellón) and supplies electricity to approximately 92% of the national population; and the Northern Interconnected Grid (the SING), which covers Regions I, II, and XV and whose primary customers are mining and industrial companies. In each of these grids, electricity generation is coordinated by the respective Independent Economic Load Dispatch Center, or CDEC, to minimize operational costs and to ensure the highest economic efficiency of the system while meeting all service quality and reliability requirements established by law. Specifically, in order to satisfy demand at the lowest possible cost at all times, each CDEC orders dispatch from generation plants based strictly on their variable generating costs, starting with the lowest variable cost, and does so regardless of the contracts held by the generation company that owns each plant. Thus, while the generation companies are free to enter into supply contracts with unregulated and regulated customers and are obliged to comply with such contracts, the energy needed to satisfy demand is generally produced by the CDEC member whose variable production costs are lower than the system s marginal cost at the time of dispatch. In addition, the Chilean market is designed to include payments for capacity (or firm capacity), which are explicitly paid to generation companies for contributing to the system s sufficient availability. These payments are assigned according to the output each generation company can guarantee during critical events, particularly droughts, fuel shortages, and plant failures, and are added to the final electricity price paid by both unregulated and regulated customers. As a result, differences arise between the energy actually produced and the energy under contract by each generation company and between the capacity assigned and that under contract by each generator, which gives rise to energy and capacity transfers among the different CDEC members. In these spot transactions, the companies which, as a result of the CDEC s economic dispatch, have generation levels higher than their contractual energy sales (companies with generation surpluses) sell energy to those companies with production levels lower than their contractual energy sales (companies with generation deficits). A similar situation occurs with capacity transactions, which are determined annually by the CDEC and result in transfers from generation companies that have firm capacity surpluses with respect to their peak capacity commitments to their own customers, to those companies which, in contrast, are experiencing capacity deficits. The physical and financial transfers are determined by the CDEC and are valued, in the case of electrical energy, at the hourly marginal cost of the system s operation. For capacity, the price corresponds to the marginal cost of capacity, which corresponds to the short-term peak capacity node price. The law permits generation companies and regulated customers to agree to voluntary, temporary reductions or increases in electricity consumption through the use of incentives. The purpose is to encourage these customers to conserve electricity and to make efficient use of their consumption, particularly during shortages. In addition, Law Nº 20,257 enacted in 2008 promotes non-conventional renewable energy sources such as solar, wind, minihydro, and biomass power. Specifically, this law requires that a certain percentage of generation companies new supply contracts signed after August 31, 2007 be supplied by renewable sources. The percentage of renewable energy required starts at 5% for the years 2010 to 2015 and gradually increases to a maximum of 10% in For high voltage transmission, the law guarantees transmission line owners the right to recover all of their capital, operating, maintenance, and administrative costs. This is done by dividing the transmission network into three subsystems: the trunk line, comprised of transmission lines that are essential to keeping the entire system supplied; sub-transmission lines, which are primarily power lines that satisfy consumption in distribution companies licensing areas; and additional lines consisting of those that mainly provide electricity to unregulated customers or evacuate electricity from generation plants. The CNE sets regulated tariffs every four years for the trunk and sub-transmission line systems based on studies done by independent consultants on the investment value and expansion of each of these networks. These studies appraise the value of existing facilities and recommend works to be carried out over the next ten years. However, and principally for the trunk line system, it is market interaction

39 38 AnnualReport AES Gener 2010 that finally determines which works are undertaken since the opinions of the CDEC and the CNE are also taken into account, and when controversies arise, the issue is submitted to the Panel of Experts for resolution. The works are finally assigned to the company offering the lowest annual charge in public bids held by each CDEC. Commercial policy The Company s commercial policy seeks to minimize cash flow volatility in its electric business, managing its risks based on market and industry conditions. In order to do so, the following factors are among those analyzed: contract levels, proportion of unregulated and regulated customers that make up AES Gener s and its subsidiaries client portfolio, and contract terms. In its commercial analyses, AES Gener estimates demand growth and projects marginal costs and prices within the system. Based on this information, the Company determines the level of contractual sales that will allow it to stabilize cash flow and manage an acceptable level of risk. A business factor that is particularly relevant for the Company is the fact that it is Chile s principal thermoelectric generation company in the SIC, which provides it with a highly reliable supply regardless of hydrological conditions. Overall participation in the SIC and the SING Total installed capacity for electricity supply in Chile, including the plants owned by all CDEC-SIC and CDEC-SING members, amounted to 15,899 MW at the close of Of this capacity, 35.7% was hydroelectric, 63.3% was thermoelectric, and 0.1% was wind-generated. AES Gener s and Subsidiaries Principal Supply Contracts During 2010 Principal Energy and Capacity Sales Contracts The AES Gener Group contributed 3,281 MW, or 20.6%, to this total, including 3,310 MW of thermoelectric and 271 MW of hydroelectric capacity. During the fiscal year, the AES Gener Group continued to be the country s second-largest generator and its largest thermoelectric power generator. These figures include the Salta plant owned by subsidiary TermoAndes, which is located in northwest Argentina and is connected to the SING by a transmission line. Energy (GWh) Regulated Customers Chilectra S.A. 4,939.1 Chilquinta Energía S.A Empresa Eléctrica Atacama S.A Empresa Eléctrica Puente Alto Ltda Empresa Eléctrica de Talca S.A LuzLinares S.A LuzParral S.A Compañía Eléctrica del Litoral S.A Energía de Casablanca S.A Empresa Eléctrica de Casablanca S.A Empresa Eléctrica de Casablanca S.A. 9.6 Empresa Eléctrica de Antofagasta S.A. 9.5 Unregulated Customers Minera Escondida Ltda. 1,825.6 Cemento Polpaico S.A SQM Salar Mantos de la Luna S.A Proacer Ltda Principal Energy and Capacity Purchase Contracts Empresa Eléctrica Ventanas S.A.* 1,650.8 Sociedad Eléctrica Santiago S.A.* 1,357.5 TermoAndes S.A.* Energía Verde S.A.* 77.4 Energía Coyanco S.A Compañía Eléctrica Los Morros S.A * Intercompany contract with Gener

40 Commercial operations 39 Contracts for transmission system use in 2010 AES Gener has several contracts with companies that use its transmission systems, including agreements with Chilquinta, CGE, GNL Quintero, and others. In turn, the Company also has contracts with Chilquinta, Chilectra, and Translec for the use of their transmission systems and facilities. electric power production in the SIC in 2010 was 43,255 GWh, 3.5% higher than in The increase in marginal costs from December 2009 to December 2010 is explained by higher fuel prices, primarily diesel, and a decline in hydroelectric power generation due to little rainfall during the year. In December 2009, the average marginal cost was US$65.4 per MWh, while in December 2010 it was US$207.8 per MWh at Alto Jahuel. Central Interconnected System Total installed capacity in the SIC, including the plants owned by all the CDEC members, amounted to 12,201 MW at the close of 2010, which accounts for 76.7% of all installed capacity in the SIC and SING grids in Chile. Of the total, 46.4% is hydroelectric, 52.2% is thermoelectric, and 1.3% is windgenerated. Hydrology continues to be a relevant factor for the SIC, given that the river flow volumes and initial water levels in reservoirs largely determine the dispatch from the system s hydroelectric and thermoelectric plants. The year 2010 began with 0.5% less hydroelectric energy available in reservoirs than in the previous year; 7,063 GWh was available on January 1, 2010, while at year-end, the system had sufficient water in reservoirs to generate some 4,484 GWh, 36.6% less than on December 31, Node Price vs. Marginal Energy Cost in the SIC at Alto Jahuel 220 kv US$/MWh * Real figures CPI adjusted (December 2010) Marginal Cost Node Price In 2010, 49.1% of total energy demand was supplied by hydroelectric plants, 50.1% by thermoelectric generation, and the remaining 0.8% was supplied by wind power. Total

41 40 AnnualReport AES Gener 2010 Marginal Energy Cost at Alto Jahuel 220 kv Month 2006 (US$/MWh) 2007 (US$/MWh) 2008 (US$/MWh) 2009 (US$/MWh) 2010 (US$/MWh) January February March April May June July August September October November December Average * Figures in real dollars as of December 2010 Node Energy and Capacity Price at Alto Jahuel 220 kv Validity Energy Capacity Decree Nº From To [Ch$/kWh] [Ch$/kW month] 283 indexation (Of.1760) , indexation (Of.0275) , / , / , / , indexation (RE N 446) , indexation (RE N 639) , / , / , indexation (RE N 537) , / , / , indexation (RE N 1063) , / , indexation (RE N 172) , / , indexation (RE N 465) , indexation (RE N 731) , * Figures in nominal pesos.

42 Commercial operations 41 The AES Gener Group s participation in the SIC The AES Gener Group s electricity generation capacity in the SIC was 2,361 MW as of December 31, The parent company AES Gener contributes 953 MW, produced by four hydroelectric and five thermoelectric plants. The Alfalfal, Maitenes, Queltehues, and Volcán hydroelectric plants generate 271 MW, while the Ventanas plants, with their two units, the Laguna Verde TV (steam turbine), the Laguna Verde TG (gas turbine), the Los Vientos TG, and the Santa Lidia TG plant account for the Company s thermoelectric generation, with 683 MW of installed capacity. The Renca thermoelectric complex has an installed capacity of 479 MW and is composed of the Renca and Nueva Renca thermoelectric plants, both owned by subsidiary Eléctrica Santiago. Of the plants belonging to the Group s other companies operating in the SIC, subsidiary Energía Verde contributes 49 MW through its Constitución and Laja cogeneration plants and its Mostazal gas turbine plant, while subsidiary Eléctrica Ventanas contributes 272 MW through its new coalfired Nueva Ventanas plant. Related company Guacolda contributes 608 MW to the system with its four-unit Guacolda thermoelectric plant. AES Gener Group Thermoelectric Plants in the SIC Installed Capacity (MW) AES Gener Central Ventanas (1) Central Laguna Verde TV 54.7 Central Laguna Verde TG 18.8 Central Los Vientos TG Central Santa Lidia TG Eléctrica Santiago Central Nueva Renca Central Renca Energía Verde Central Constitución 11.1 Central Laja 12.7 Central San Fco.de Mostazal TG 25.0 Eléctrica Ventanas Nueva Ventanas Guacolda Central Guacolda (2) Total 2,090.3 (1) Unit 1: 118 MW; Unit 2: 220 MW. (2) Unit 1: 152 MW; Unit 2: 152 MW; Unit 3: 152 MW; Unit 4: 152 MW AES Gener Group Hydroelectric Plants in the SIC Installed Capacity (MW) AES Gener Alfalfal Queltehues 48.9 Maitenes 30.8 Volcán 13.0 Total 270.7

43 42 AnnualReport AES Gener 2010 During 2010, AES Gener itself sold to customers and other generators in the SIC a total of 7,843 GWh, of which 7,502 GWh was sold to distributing companies. AES Gener s contractual commitments in the SIC as of December 31, 2010 were up 12.3% compared to those at the close of 2009 due largely to new contracts with distributors awarded through bids. When the Nueva Ventanas unit went on line, dispatch from AES Gener plants increased 27.9% as compared to 2009 dispatch, meaning that 68% of total client sales was covered by its own generation. Of the 32% remaining, 14% was supplied through spot market purchases and 18% was acquired under contracts the Company holds with Los Morros, EnorChile, and Coyanco, which are other generators in the SIC, and through agreements with its subsidiaries Eléctrica Santiago and Energía Verde. Energía Verde sold a total of GWh, of which 35.5 GWh was in sales to its customers CMPC Maderas, Aserraderos Arauco, and Forestal Copihue. Another 77.4 GWh was sold in the SIC through contracts with AES Gener. The Nueva Renca plant generated GWh with natural gas, 1,300.3 GWh with diesel oil, and 0.9GWh with propane over the course of 2010, 56% more than in 2009; this was the result of increased dispatch due to the higher marginal costs in the system and to the availability of liquefied natural gas. Eléctrica Santiago kept only one power sales agreement in effect with its parent company AES Gener in The AES Gener Group plants, including Guacolda, accounted for 28% of the SIC s gross generation in AES Gener s 2010 Energy Balance in the SIC Energy (GWh) Net Production 5,308.9 Purchases CDEC - SIC 1,122.5 Eléctrica Santiago 1,357.5 Los Morros 17.0 Energía Verde 80.7 EnorChile 1.6 Energía Coyanco 20.8 Total Purchases 2,600.1 Sales CDEC - SIC 98.7 Regulated customers 7,502.0 Non-regulated customers Total Sales 7,847.4 System Losses 61.5 Energía Verde s 2010 Energy Balance in the SIC Energy (GWh) Net Production 80.7 Purchases AES Gener 38.9 Total Purchases 38.9 Sales AES Gener 80.7 Non-regulated customers 35.8 Total Sales System Losses 3.1 Eléctrica Santiago s 2010 Energy Balance in the SIC Energy (GWh) Net Production 1,838.9 Purchases CDEC - SIC Total Purchases Sales CDEC - SIC AES Gener 1,357.5 Total Sales 2,002.7 System Losses 1.0

44 Commercial operations 43 Recent developments in the SIC Supply contracts with distribution companies On January 1, 2010, AES Gener began supplying power under the first five longterm agreements with distributing companies that were awarded in competitive bid processes. These contracts were signed with Chilectra, Chilquinta, and Emel, and were awarded in the 2006, 2007, and 2008 tenders. On April 30 and December 31, 2010, AES Gener terminated its power supply agreements with Chilquinta and Chilectra, respectively. These were the Company s last short-term node price contracts. New capacity in the SIC The Nueva Ventanas (272 MW, coal) and Guacolda IV (152 MW, coal) plants, both of which belong to the AES Gener Group, went into commercial operation in the SIC in Plants owned by other companies that also initiated operations during 2010 are La Higuera (154 MW, hydroelectric), La Confluencia (158 MW, hydroelectric), Guayacán (12 MW, hydroelectric), San Clemente (5 MW, hydroelectric), Totoral (46 MW, wind), Monte Redondo (38 MW, wind), Punta Colorada (15 MW, wind), and KDM (2 MW, biogas).

45 44 AnnualReport AES Gener 2010 Greater Northern Interconnected System The SING is characterized by having very scarce water resources for electricity generation. Therefore, 99.7% of the system s total installed capacity, which was 3,698 MW at the close of 2010, comes from thermoelectric generation. Of this, 56.1% comes from natural gas plants, 39.6% from coal plants, and 3.9% from oil-fired plants. The consumption areas, primarily mining companies, are far apart, and some have demand that accounts for a relatively high proportion of the system s total consumption. A total of 15,100 GWh was generated in the SING in 2010, 1.4% higher than in Coal generated 58% of the SING s energy demand for the year, while 27% was generated by natural gas and 15% by diesel or fuel oil. The system s average marginal cost rose from US$113.1 per MWh in 2009 to US$122.2 per MWh in 2010 due to higher fuel prices, primarily diesel. Node Price vs. Marginal Energy Cost in the SING at Crucero 220 kv Marginal Cost Node Price * Real figures CPI adjusted (December 2010) Marginal Energy Cost at Crucero 220 kv Month 2006 (US$/MWh) 2007 (US$/MWh) 2008 (US$/MWh) 2009 (US$/MWh) 2010 (US$/MWh) January February March April May June July August September October November December Average * Figures in real dollars as of December 2010.

46 Commercial operations 45 The AES Gener Group s participation in the SING The AES Gener group has installed generation capacity of MW in the SING. The subsidiary Norgener contributes MW from its plant of the same name, and the remaining MW comes from the Salta plant belonging to the subsidiary TermoAndes. TermoAndes is located in the Argentine province of Salta and is connected to the SING by means of a 345 kv, 408-kilometer long transmission line that connects the Salta substation to the Andes substation located in Chile s II Region. Part of the TermoAndes plant is also connected to the Argentine system. Norgener also has a 12 MW BESS system (Battery Energy Storage System) installed at the Andes substation in the SING that enables it to replace a portion of its base reserve and increase its maximum dispatch capacity. During 2010, the Norgener and Salta plants contributed gross production of 2,270 GWh and 956 GWh, respectively, equivalent to 21.4% of the total production in the SING. Generation from Salta decreased by 390 GWh with respect to 2009 due to a restricted natural gas supply during the winter. TermoAndes sold 2,399 GWh in 2010 in the Argentine System, the SADI, which accounted for 2% of the system s total generation. In the SING, AES Gener purchased net GWh generated by the Salta plant at the Andes substation, and sold net GWh on the spot market over the course of the year. Total 2010 consumption of AES Gener customer Minera Mantos de la Luna was 75.8 GWh. Norgener generated a total of 2,123.7 net GWh and sold net GWh on the spot market during the year. Overall consumption of its customers SQM Nitratos, SQM Salar, and Minera Escondida was 1,950.0 GWh. AES Gener Group Thermoelectric Plants in the SING Installed Capacity (MW) Norgener Central Norgener (1) TermoAndes Central Salta Total (1) Norgener Unit 1: MW; Norgener Unit 2: 141 MW. AES Gener s 2010 Energy Balance in the SING Energy (GWh) Net Production Purchases CDEC - SIC 17.9 Total Purchases 17.9 Sales CDEC - SIC Non-regulated customers 75.8 Total Sales System Losses 38.6 Norgener s 2010 Energy Balance in the SING Energy (GWh) Net Production 2,110.2 Purchases CDEC - SIC 33.8 Total Purchases 33.8 Sales Escondida 1,825.6 S.Q.M. Salar S.Q.M. Nitratos 15.4 CDEC - SIC Total Sales 2,105.9 System Losses 38.1

47 46 AnnualReport AES Gener 2010 Recent developments in the SING Norgener s generation at record high The BESS energy storage system, installed at the SING s Andes substation, going on line in December 2009, combined with well-managed operations at Norgener s units during 2010, were two factors that enabled this plant to surpass its previous generation record. The implementation of the BESS system enabled Norgener to replace the 4% spinning reserve that, like all SING plants, it must maintain in order to inject energy into the system in the event of contingencies that could jeopardize supply stability. With the incorporation of this cutting-edge technology, Norgener continues to contribute to the reliability of the power supply, but now with lower system operating costs. Preparing for commercial operations of the Angamos Plant Construction works continued on the Angamos project in 2010, and preparations for the commercial operations began. As of December 31, the thermoelectric plant was 96% complete, and one of the milestones reached was the first synchronization, which took place on December 21, The AES Gener Group s participation in the SADI TermoAndes Salta plant operated normally during 2010, with the two gas turbines connected to the Argentine SADI and the steam turbine to the Chilean SING. The plant operated with this configuration on natural gas for most of the year, except for a few specific occasions when specific requirements of the CDEC required gas turbines not being dispatch to the SADI to generate with diesel sold to the SING. On September 13, 2010, the Argentine Undersecretariat of Electric Power appro- Energy Prices in the Argentine System US$/MWh ved TermoAndes Energía Plus contracts, allowing sales of energy to unregulated customers and improving commercial margins. Under this agreement, TermoAndes increased its electric capacity contracted by customers from approximately 38.6 MW in 2009 to MW in The plant sold 3,350.6 GWh during 2010, of which 3,342.8 GWh were generated with natural gas and 7.8 GWh with diesel oil. It delivered a total of 2,397.5 GWh to the SADI, and GWh to the SING. It sold GWh to customers in the SADI, and sold 2,155.9 GWh on the spot market. Spot Price * Real figures CPI adjusted (December 2010)

48 Commercial operations 47 Colombian electric system General description Since 1994, the electricity sector in Colombia has allowed private companies to participate in the different types of businesses in the industry chain, with a free market framework for the generation and sale of electricity and a regulated framework for transmission and distribution. The different activities of the electricity sector are governed by the Public Service Code, Law Nº 142 of 1994; and the Electricity Code, Law Nº 143 of The industry s activities are also governed by the regulations and technical standards issued by the Energy and Gas Regulation Commission (CREG). The wholesale energy market began operating in July 2005, and since that time generating companies have to submit price bids and report the quantity of energy available on a daily basis in a competitive environment. The market includes two types of customers: non-regulated and regulated. Nonregulated customers can negotiate freely with generation, distribution, or traders, and they must have a minimum consumption of 100 kw or 55,000 kwh per month. Regulated customers must purchase energy through public bids and establish two-party agreements, which normally last from one to three years. During 2010, AES Chivor worked to develop strategies to give the margin added value, which included a constant search to optimize use of the reservoir in view of hydrological fluctuations, back-up sales or firm energy to cover maintenance costs, and market exposure by managing an adequate level of contracts with customers with low credit risk to the company. The successful application of these business strategies resulted in a 17.5% increase in AES Chivor s business margin over that of Overall participation in the SIN The Colombian National System, SIN The Colombian electricity system is structured around a single National Interconnected System (SIN), which had actual installed capacity of 13,502 MW as of December 31, Of this total, 69.2% is hydroelectric generation, 30.7% is thermoelectric, and 0.1% is wind-generated. Energy demand during 2010 reached 56,148 GWh, a growth of 2.69% compared to 2009 demand. International energy transactions, or TIES, with Ecuador and exports to Venezuela meant that Colombia continued to be a net energy exporter, with approximately 797 GWh exported. This accounted for 1.4% of the demand served by the Colombian generating system, and it imported only 10 GWh. Commercial policy Chivor s commercial policy seeks to maximize the business margin and reduce its volatility. To achieve this objective, it carries out integral business risk management to determine the desired level of bilateral contracts for each year depending on the plant s generation profile and its customer credit rating policy. Energy Prices in the Colombian Market US$/MWh Spot Price * Real figures CPI adjusted (December 2010)

49 48 AnnualReport AES Gener 2010 The AES Gener Group s participation in the SIN AES Chivor owns the third largest hydroelectric plant in the country, with an installed capacity of 1,000 MW. In 2010, water flowed into its La Esmeralda reservoir at 81% of the historical average, and the reservoir s level was at 96.5% of its useful capacity by the end of the year. AES Chivor s net power production during the year was 3,306 GWh. It sold 5,542 GWh, of which 2,743 GWh were traded on the energy market, and the remaining 2,799 GWh were sold through long-term agreements. Gener AES Group Plants in Colombia Installed Capacity (MW) Chivor AES Chivor hydroelectric plant 1,000 Total 1,000 Chivor s 2010 Energy Balance in Colombia Energía (GWh) Net Production 3,305 Purchases 2,211 Total Purchases 2,211 Sales Contracts 2,799 Energy exchange (spot) 2,743 Total Sales 5,542 System Losses (26)

50 Commercial operations 49 Recent developments in the SIN Hydrological year in Colombia The year 2010 started with the presence of the El Niño phenomenon, one with the greatest impact on the Colombian climate in recent years. Conditions were such that the regulating agency established additional directives to preserve the reliability of the power grid, and AES Chivor, through its extra efforts to adapt its business strategy and internal processes, was able to prevent potentially adverse conditions from affecting the Company. Then, in the second half of the year, La Niña conditions began to develop rapidly and were also categorized as the severest experienced in Colombia in 80 years. The amount of water flowing into the AES Chivor basin was at 81% of the historical average, while water levels were at 107% of the average for the country as a whole. The outcome was that hydroelectric plants satisfied 73% of the national demand for power. Energy derivatives The Colombian stock exchange (Bolsa de Valores de Colombia S.A.) and the company that manages the SIN s energy market (XM) developed an energy derivative market in Colombia (Derivex) to trade commodity futures, particularly electricity futures, under trading regulations similar to those of the Colombian stock exchange. The purpose of this market is to manage the risks from fluctuating stock market prices better and more efficiently, but it also allows for more efficient, transparent price negotiations. The futures market complements the current twoparty agreement market, and could be applicable to other contract frameworks. It is an anonymous mechanism, one that is backed by a system of guarantees through a central risk entity serving as counterpart, and it is expected to grow in size and reach significant liquidity levels over the medium term. The market opened in October 2010 for trading electricity futures, and it will also handle transactions in natural gas, coal, and carbon gas emissions in the future. Non-electric business In addition to its activities in the electricity industries in Chile, Colombia, and Argentina, as of December 31, 2010, Gener holds a minority share in GasAndes and GasAndes (Argentina), which are engaged in the transportation of natural gas. GasAndes pipeline and GasAndes (Argentina) pipeline These related companies own and operate the pipeline that connects La Mora, Argentina with Santiago, Chile. The pipeline is 463 kilometers long, of which 314 kilometers are in Argentina and 149 are in Chile. This was the first pipeline to go into service between the two countries, in August As of December 31, 2010, Gener holds a 13% stake in GasAndes and GasAndes (Argentina).

51

52 Operations and maintenance Electric business in Chile International electric business

53 52 AnnualReport AES Gener 2010 Operations and maintenance Electric business in Chile In 2010, AES Gener s Operations and Maintenance Area focused on improving accident prevention, strengthening environmental conservation, and carrying out activities in a sustainable manner. It worked to safeguard the interests of the communities in which the Company does business; increase the availability and efficiency of its generating units; and adapt the firm and its professionals to the requirements of more modern, sophisticated, and efficient maintenance procedures. Its efforts were also aimed at creating a business culture of operational excellence based on closely monitoring key performance indicators (KPIs). The Operations and Maintenance Area, together with Engineering and Construction, worked hard to bring the Nueva Ventanas plant into commercial operations in February of 2010 and to get the Angamos plant ready for commercial operations, scheduled for AES Gener Thermoelectric Plants AES Gener s thermoelectric plants include the Ventanas plant, with its two units; the two Laguna Verde steam turbines; and the Laguna Verde, Los Vientos, and Santa Lidia gas turbines. Units 1 and 2 of the Ventanas plant were in service on an almost continual basis during 2010, except for regular maintenance periods and during the inspection and repair of the damage caused by the earthquake that affected the south-central area of the country on February 27. Unit 1 went back into operation the day after the quake, although six days of repairs were later needed on its electrostatic precipitators. Unit 2 was out of service for major maintenance when the earthquake struck, and the plant remained off line 12 days longer than expected in order to repair damaged equipment. The two units generated a net 1,937 GWh during the year.

54 Operations and maintenance 53

55 54 AnnualReport AES Gener 2010 The Laguna Verde and Los Vientos gas turbines operated occasionally in their role as back-up units, generating 4 GWh and 49 GWh, respectively. The Santa Lidia plant, in turn, with its 139 MW diesel oil-fired gas unit, generated 49 GWh in 2010, primarily during the months of July and August. An important development in 2010 was the project to convert the Laguna Verde plant by replacing its coal-fired combustion system with modern new diesel oil burners. To date, two of the four burners have been converted, and work is now being done to replace the two remaining. This project will significantly reduce Laguna Verde s particulate emissions. The plant s two steam turbines were out of service as scheduled for most of the year while the conversion took place. Continuing with the Company s commitment to environmental and safety issues, AES Gener began the project to design and implement its integrated management system under the standards ISO 14,001 and OHSAS 18,001. Another highlight in environmental matters is the decrease in emissions from Ventanas Unit 2. During January and February, a modern desulfurization system was incorporated, and new low nitrous oxide emissions burners were installed. A new structure was developed in 2010 for the Costa Business Unit, a unit that groups all of the AES Gener Group s plants located in Chile s Region V. Among other developments, the new departments of Plant Engineering, Operations Control, and Reliability were created. The Operations Control Area manages the KPIs, which has enabled it to take corrective action quickly in order to avoid the occurrence of undesired events as much as possible. Regarding operations and maintenance, a strategic plan was implemented to reduce units forced outage rates, and a complete maintenance schedule was put in place after consulting with renowned international companies. Plant* Location Ventanas Ventanas, Region V Laguna Verde Laguna Verde, Valparaíso, Region V Laguna Verde (TG) Laguna Verde, Valparaíso, Region V Los Vientos Las Vegas, Llay-Llay, Region V Santa Lidia (TG) Cabrero, Region VIII * These facilities are owned by AES Gener. Startup Year Turbine Type Units Installed Capacity (MW) Specific consumption (BTU/kWh) Availability 2009 Availability Coal-steam , % Diesel-steam , % Turbogas-diesel , % Turbogas-diesel , Turbogas-diesel , % 91.4%

56 Operations and maintenance 55 Run-of-River hydroelectric plants The Cordillera Business Unit groups AES Gener s run-of-river hydroelectric plants, which account for 11% of the Company s installed capacity in the SIC, (including subsidiaries and related companies). These plants remained in operation almost constantly throughout The four plants that make up this business unit generated a net 1,440 GWh during the year, 1.9% less than in 2009, largely due to the presence of La Niña weather patterns, which brought low average temperatures and little solid precipitation during the 2010 winter. The Cordillera units performed to high standards in the February 27 earthquake: only four hours after the quake, they were in a position to synchronize the Alfalfal, Queltehues, and Volcán units. At the plant, an outside canal suffered minor damage from rocks falling down the mountainside, and a penstock broke; all the damage was repaired by March 5, and the units were back in service on March 6. This gave the four plants aggregate availability during 2010 of 94.3%, while forced outages were at 0.1%. It is worth noting that the Cordillera Unit continues with the Innova Project, sponsored by Corfo, which involves using robots to apply hard coatings to Pelton runners; Ch$125 million in government financing was received for the project. To date, one runner has been installed at Alfalfal s Unit 1, with three buckets that were coated using robots. Concrete results are expected in March of 2011, which will indicate the next steps to be taken. Positive results should extend the operating time of the runners, with a corresponding increase in generation and income. Plant* Maitenes Queltehues Volcán Alfalfal Location Los Maitenes, Cajón Río Colorado, R.M. Los Queltehues, Cajón Río Maipo, R.M. Cajón Río Maipo, R.M. Cajón Río Colorado, R.M Startup Year Turbine Type Units Installed Capacity (MW) Availability 2009 Availability (1) Francis % 92.3% (1) Rebuilt after the flood of the Colorado River, November 1987, includes auxiliary plant Maitenes. * These facilities are owned by AES Gener Pelton % 96.9% 1949 Pelton % 99.7% 1991 Pelton % 93.8%

57 56 AnnualReport AES Gener 2010 Dispatch center, substations, and transmission lines in the SIC Major progress was made in modernizing and streamlining AES Gener s power transmission system in the SIC in One of the main highlights was finalizing the test phase of the new Supervisory Control and Data Acquisition System (SCADA). It was successfully received for operation in December, and the corresponding maintenance contracts were assigned. Work also continued on the protection systems, with new facilities installed on the SIC, and replacement continued on protection systems around lines and substations in accord with current standards. Also notable is that AES Gener s transmission and transformation facilities withstood the earthquake that struck the southcentral area of Chile on February 27 with only minor damage, which was repaired in less than 48 hours. AES Gener transmission lines and substations Length of 220 kv lines 73.0 km Length of 110 kv lines km Directly-owned substations* Alfalfal, Maitenes, Queltehues, La Laja, Punta de Peuco, Pachacama, San Pedro, Ventanas 110kV, Ventanas 220kV, Autotransformer 220/110kV Ventanas, Torquemada and Laguna Verde Connection at other companies substations Los Almendros, Florida, Cerro Navia 110kV, Las Vegas, La Calera and Miraflores Preventive maintenance was carried out throughout the transmission system and substations owned directly by AES Gener: a circuit conductor was replaced on the 110 kv San Pedro Quillota line, and OPGW fiber optic cables were hung between tower 326 and the Cerro Navia substation, providing needed backup to the Costa system s voice and data communications. It is also noteworthy that the reinforcement of the 110 kv busbars at the Ventanas and San Pedro substations and on the Ventanas San Pedro line has been used at full capacity throughout 2010, with no failures that can be attributed to the reinforcement. Progress was made in all the stages needed to recertify the Environmental Management System under ISO 14,001 in In the area of work safety, the Company continued to emphasize its zero-accident policy for its own and contractors employees, and no accidents involving AES Gener or contractor personnel occurred during this year. * These facilities are owned by AES Gener. Eléctrica Santiago Eléctrica Santiago operates the Nueva Renca combined cycle plant, which has a gross installed capacity of 379 MW. It uses natural gas and diesel interchangeably as the main fuels, and propane for the duct burners. It also operates the Renca plant, which has two diesel-fired steam turbines that together have a gross capacity of 100 MW. One particularly noteworthy development at the Nueva Renca combined cycle plant in 2010 was the fact that it once again operated on natural gas, something that had not occurred since December of Using both natural gas from Quintero s LNG terminal and diesel fuel, the Nueva Renca plant had a net 2010 generation of 1,838 GWh, with 1,968 service hours fired by natural gas and 4,670 service hours running on diesel fuel. The plant s net generation in 2010 was 50.3% higher than that of the previous year. Eléctrica Santiago obtained environmental approval in 2010 to install a Selective Catalytic Reduction (SCR) system, which would reduce Nueva Renca s nitrous oxide emissions by 60% when running on diesel. The SCR began its testing phase in September of 2010, and officially went into operation at the beginning of December. During those months, the SCR successfully fulfilled its mission of reducing these emissions. As for the Renca plant, it operated for hours in 2010, generating 2,374 net MWh. These hours of dispatch occurred in December 2010 to meet local generation requirements at the SIC load center due to restrictions on the grid. Plant* Renca Nueva Renca Location Renca Municipality, Santiago, R.M. Renca Municipality, Santiago, R.M. Startup Year Turbine Type Units Installed Capacity (MW) Specific Consumption (BTU/kWh) Availability 2009 Availability Steam-turbine , % 82.9% 1997 Combined cycle (1) 7, % 87.3 % (1) The Nueva Renca plant has a capacity of 355 MW when operating with diesel and 379 MW when operating with natural gas. * These facilities are owned by Eléctrica Santiago.

58 Operations and maintenance 57

59 58 AnnualReport AES Gener 2010 Eléctrica Ventanas One of the important events that occurred in 2010 was the commercial start up of the Nueva Ventanas plant, a milestone that took place in February The plant consolidated its operations over the rest of the year, and in December reached a monthly generation record of 185 GWh, with 0% forced outages and 100% availability. This achievement was made possible through the good management and teamwork from AES Gener, Eléctrica Ventanas, and all of the companies involved in the construction and startup of the unit. The Nueva Ventanas plant was dispatching through practically all of the year, except during approximately two weeks after the earthquake while damage to the boiler s tubes and anti-seismic devices was being repaired, and for a few days to carry out minor adjustments and maintenance. It generated 1,675 net GWh during the year. Installed Capacity (MW) Specific Consumption (BTU/kWh) Plant* Location Startup Year Turbine Type Units Availability 2009 Availability 2010 Nueva Ventanas Ventanas, 2010 Coal-steam ,726 NA 93.4 Region V * These facilities are owned by Empresa Eléctrica Ventanas S.A.

60 Operations and maintenance 59 Energía Verde Energía Verde generates power through three plants: (i) the 11.1 MW Constitución plant, which runs on forest biomass; (ii) the 12.7 MW Laja plant, also fired by forest biomass, primarily sawdust and bark; and (iii) the San Francisco de Mostazal plant, equipped with a 25 MW diesel oil-fired gas turbine and a biomass-fed low-pressure boiler that generates steam for industrial use. These plants generated a total of 80.7 net GWh in 2010, 99.7% of which was from biomass and the remaining 0.3% was from diesel oil. Steam sales to customers in the forestry industry totaled 475,503 tons, or 51.4% of the total steam generated at the plants. This is an increase of 5.4% over 2009 sales, which is significant in view of the fact that steam demand was seriously affected by the February 27 earthquake, which put customers out of service for anywhere from two weeks to two months. Another highlight of 2010 was the Laja and Constitución plants environmental recertification for ISO 14,001:2004, which must be verified on a yearly basis and was approved in December This continues to consolidate the environmental commitment of these units, which run on non-conventional renewable energy, making it an integral part of their productive processes. Energía Verde is continuing to study the feasibility of supplying its customers with additional renewable energy generated from wood by-products produced in the same area in which it does its business. It is also studying other sources of renewable energy, including wind-generated power. Plant* Location Constitución (1) Constitución, Region VII Laja (1) Cabrero, Region VIII San Fco. San Fco. Mostazal, de Mostazal (2) Region VI San Fco. San Fco. Mostazal, de Mostazal (3) Region VI (1) Electricity-steam (2) Steam (3) Electricity * These facilities are owned by Energía Verde S.A. Startup Year Turbine Type 1995 Biomass cogeneration 1995 Biomass cogeneration 2000 Steam generation with biomass Units Installed Capacity (MW) Specific Consumption (BTU/kWh) Availability 2009 Availability , % 94.9% , % 96.2% , % 98.9% 2002 Turbogas-diesel , % 99.8% Guacolda Guacolda has four coal-fired units totaling 608 MW of gross capacity. Unit 4 s 152 MW of capacity went into operation in 2010, increasing the plant s 2009 installed capacity by 33%. Guacolda s net generation in 2010 was 4,214 GWh, up 41% from the 2009 net of 2,992 GWh. Its average gross capacity was 542 MW, and the plant s availability during the year was 91.8%. Plant* Location Startup Year Guacolda Huasco, Region III * Estas instalaciones son propiedad de Empresa Eléctrica Guacolda S.A. Turbine Type Units Installed Capacity (MW) Specific Consumption (BTU/kWh) Availability 2009 Availability 2010 Coal-steam , % 91.8% Other Guacolda Facilities (*) Multipurpose mechanized port 1,500 tons/hour capacity. Suitable for offloading coal and bulk products in general. Equipped to provide services to third parties. 220 kv lines 223 Km. Own substations Guacolda 220 kv * These facilities are owned by Empresa Eléctrica Guacolda S.A.

61 60 AnnualReport AES Gener 2010 Norgener When BESS (lithium battery banks that replace spinning reserve) went on line in the SING at the end of 2009, Norgener s units faced the challenge of increasing its maximum dispatch capacity in a sustained manner in It was successful in meeting this challenge, since Norgener broke its own previous record high generation during the year, reaching 2,117 GWh. But this was not the only achievement; operational performance was also excellent, reflected in fulfillment of all the KPI goals that had been set throughout the year. Noteworthy among the works carried out at the Norgener plant this year was the annual maintenance on Unit 1, which was completed ahead of schedule and in a shorter time than usual. The time needed to repair broken tubes in the boiler was also substantially reduced; when repair was needed after events early in the year, the units were not out of service for more than three days. Another important event in 2010 was the Mutual de Seguridad s (Mutual Insurance Association) recognition of Norgener for having its plant s personnel complete 1,000,000 man-hours without suffering any lost-time accidents. Also in 2010, the Environmental Management System was recertified under ISO 14,001, as was the Work Health and Safety Management System under OHSAS standard 18,001, version This, along with the Safety Management System s classification as World Class, according to Scorecard results, reaffirms the commitment of all of Norgener s personnel to the Company s top priority, safety. Installed Capacity (MW) Specific Consumption (BTU/kWh) Plant* Location Startup Year Turbine Type Units Availability 2009 Availability 2010 Norgener Tocopilla, Region II Coal-steam , % 96.6% * These facilities are owned by Norgener S.A.

62 Operations and maintenance 61 Dispatch center, substations and transmission lines in the SING Preventive maintenance was carried out this year throughout the transmission system and the substations belonging to Norgener and AES Gener in the SING. Particularly important was the change in conductors in the coastal stretch of the Norgener Crucero line, which ensured a high degree of availability in the electricity transport system, which is crucial to the Norgener plant. Preventive maintenance was also done on certain customers transmission systems under the different supply or transmission asset leasing agreements. Finally, the BESS project underwent its first maintenance associated with its first year of commercial operations, with 12 MW of installed capacity at AES Gener s Andes substation. In 2010, Bureau Veritas performed a follow-up audit and maintained ISO 14,001 and OHSAS 18,001 certification for the entire Transmission Area. Also, the Dispatch Center was successfully moved to the city of Antofagasta in order to merge the Dispatch Area with the Transmission and Protection Areas for the purpose of creating synergy throughout the dispatch, operation, and maintenance staff and optimizing availability of assets and security of personnel. Among the important activities of 2010 was progress in remote monitoring of protection equipment, replacing meters with cutting-edge equipment, and installing new communication links. All of these investments are geared toward fulfilling the requirements of the new technical standards for electricity and the startup of the new Angamos transmission system. In 2010, the Norgener Transmission Department signed an agreement to take over the management, operation, and maintenance of the Angamos transmission assets in order to take advantage of synergies in human capital. The assets covered under this new agreement include the Angamos substation, the Angamos Laberinto double circuit line, and the extensions of the Laberinto and Nueva Zaldivar substations. The zero-accident policy for own and contractors personnel continued, and over eight and a half years have passed without any lost-time accidents. AES Gener, Norgener and Angamos Transmission Lines and Substations Length of 345 kv lines: 140 km (1) Length of 220 kv single circuit lines: 117 km (1) y 85 km (2) Length of 220 kv double circuit lines: 63 km (1) y 72 km (2) Length of 110 kv single circuit lines: 33 km (1) Length of 220 kv double circuit lines: 141 km (3) Length of leased 220 kv single circuit lines: 226 km (1) Directly owned substations: Norgener (1), Oeste (1), Minsal (1), La Cruz (1), Andes (2), Nueva Zaldívar (2), Laberinto (2), Barriles Paño (1), Angamos (3), Ampliación Nueva Zaldívar (3), Ampliación Laberinto (3) Section of or connection to other companies substations: (1) These facilities are owned by Norgener S.A. (2) These facilities are owned by AES Gener S.A. (3) These facilities are owned by Empresa Eléctrica Angamos S.A. 1 section Mantos Blancos (2), 1 section Lomas Bayas (2), 2 section Crucero (1)

63 62 AnnualReport AES Gener 2010 Angamos The Angamos project has two pulverized coal units, each with a gross capacity of 259 MW. It has high-technology equipment for reducing SO2, NOx, and particulate matter, including a semi-dry scrubber, sleeve filters, and a low-nox boiler with tangential burners. Also, it is the first thermoelectric plant in South America with cooling towers, which decreases seawater intake by 90%. The plant s scheduled commercial start-up is April 2011 for Unit 1 and October 2011 for Unit 2. During 2010, the Angamos Operations Area worked together with the Project Area to get ready for the startup. Nueva Ventanas was also involved, sharing pertinent knowledge and experiences. In order to ensure that operations start successfully, the best personnel was selected, in-house and outside training programs took place, a simulator was purchased, and a digital information gathering system was placed on site for the operation inspection tours. Throughout this period, intense work was done to implement an integrated management system for ISO 9001, ISO 14,001, and OHSAS 18,001 certification. Also, maintenance was planned using the KKS code, EPRI criteria, experience from similar plants, and manufacturer s guidelines. One of the highlights of 2010 was the synchronization of Unit 1 to the SING on December 22, 2010; after this, testing of operations could begin, a necessary process prior to commercial operations. Plant* Angamos Location Mejillones, Region II * These facilities are owned by Empresa Eléctrica Angamos S.A. (1) Gross capacity and specific consumption, based on technical specifications, and coal of 6,000 kcal/kg. Expected Startup Year Turbine Type Units Installed Capacity (MW) Specific Consumption (BTU/kWh) Availability 2009 Availability Coal-steam (1) 9, (1) NA NA

64 Operations and maintenance 63 TermoAndes The combined cycle plant operated normally in 2010, with both gas turbines (GT) connected to the SADI and the steam turbine connected to the SING. However, during months when less natural gas was available (mid-june to the end of August), the plant operated with a half combined cycle configuration on the SADI (a single gas turbine, with a single recovery boiler, feeding the steam turbine). In addition, in December 2010, when the Argentine Embalse nuclear plant was off line, the three units entire power generation was transmitted to the SADI. A record high in single-day generation was reached on May 4 with 14,261 MWh, equivalent to an average generation of 594 net MW. A record was also reached in maximum instant capacity this year, with 653 MW. Total 2010 generation was 3,350 GWh, 7.3% less than in 2009 due largely to a decline in the supply of natural gas during the winter months. Among 2010 achievements were: a major inspection of GT11 finished ahead of schedule, a modification of substation structure that now permits the flexibility of connecting any unit to either of the two power grids (SADI and SING), and a reduction in the time needed to switch a unit from one grid to the other. New connections were also made to the SADI to complement the 132 kv system already in existence. This reduces losses in electricity during transmission and leads to higher profits and an increased availability of connection to the grid. The plant had excellent operational performance throughout 2010, demonstrated in the fact that it reached all of its KPI goals. Plant* Location Startup Year Turbine Type Salta Salta, Argentina 1999 Combined cycle * These facilities are owned by TermoAndes S.A.. Units 2 gas turbines, 1 steam turbine Installed Capacity (MW) Specific Consumption (BTU/kWh) Availability 2009 Availability , % 90.3%

65 64 AnnualReport AES Gener 2010 InterAndes InterAndes has a concession for transmitting electricity between the Salta plant in Argentina and the Paso Sico node on the Chilean border. It also has an agreement with TermoAndes to transport electrical power and capacity between the Salta plant and the border node. Progress continued in 2010 on the annual plan for maintenance and improvements to the Wierna and Mojotoro river embankments that protect the towers on the 345 KV line. Also continued was the plan for clearing the easement strip and service roads, as well as for replacing cathodic protectors on the braced towers in the salt flats. Finally, the 345 KV line s public safety checks were completed in InterAndes S.A. Transmission Lines and Substations* Length of 345 kv lines Directly owned substations 280 km Salta * These facilities are owned by InterAndes S.A. International electric business AES Chivor In terms of annual precipitation at the AES Chivor plant, 2010 was the fourth driest of the last 32 years due to El Niño conditions during the first half of the year, and La Niña during the second half. Nevertheless, in terms of meeting goals and carrying out activities, it was a year of operational and technical successes. The annual maintenance plan was carried out, so that technical and commercial needs were met, ensuring the continuity of business. Projects to update technology were also implemented, including modernizing systems to check vibrations in the four units, updating temperature instrumentation, and rewinding the generator in Unit 3, all systems that were incorporated into the SCADA. In addition, AES Chivor was able to significantly reduce operating costs and maximize earnings despite the little rainfall that fell in the basin. Finally, work continued on the operational excellence program, and the company s energy production process earned ISO 9001:2008 quality certification.

66 Operations and maintenance 65 During 2010, the actual net capacity of the plant remained at 1,000 MW and overall generation was 3,306.6 GWh, 15.1% lower than the yearly energy production average from 2000 to The power generated amounted to 5.8% of the country s total energy demand in 2010, which was 56,877 GWh-year. The year s KPI goals were reached satisfactorily. The plant s availability was 93.64%. The 2010 maintenance plan scheduled for Units 2, 4, 6, and 7 was carried out, and the Unit 3 overhaul got underway on October 1, which should be completed at the end of January As part of the operational excellence program, the plant earned recertification under version 2008 of international standard ISO 9001, and the scope of this certification was expanded as well; this standard covers the operation and maintenance of the plant for the generation of electric power, and maintenance and repair ser- vices for hydro-mechanical parts. The plant s operating staff received skills certification under three labor standards for operating hydraulic power plants. Chivor is the first plant in the country to certify all of its workers. The plan for operational excellence was restructured in 2010 to align it with the new context of the Asset Management Framework (AMF). Self-evaluation and diagnosis were carried out and the integrated plan of action was established, all for the local model, which has been in place since Also, root cause analysis (RCA) methodology was implemented to detect problems, and a reliability-centered maintenance (RCM) analysis was done to study and determine the maintenance strategy for the units four basic systems; overall, eight basic systems have been analyzed using this methodology. The work teams were comprised of operations and maintenance personnel. Plant * Location Startup Year Turbine Type Units Installed Capacity (MW) Availability 2009 Availability 2010 AES Chivor Boyacá, Colombia Pelton 8 1, % 93.6% * These facilities are owned by AES Chivor.

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68 Business development Projects under construction Projects under development

69 68 AnnualReport AES Gener 2010 Business development Projects under construction AES Gener continued with its ambitious expansion plan in 2010, a plan it started in 2006 in response to the needs and opportunities found in the Chilean market. In February 2010, the Company s 272 MW Nueva Ventanas plant went into commercial operations, and in March, also 2010, the Guacolda complex s fourth unit, with 152 MW, began its commercial operations. Both plants make an important contribution to the country s main energy grid and help increase the reliability of the system as a whole. In addition, AES Gener continued with its construction of projects on both the SIC and the SING. These projects will be key in contributing to the future of the Chilean power system, which continually needs to increase its generation capacity. The following are the main projects under construction: Angamos (SING-Chile) The Angamos thermoelectric project involves the construction of two coal-fired thermoelectric plants of 259 gross MW each, located north of Antofagasta in the municipality of Mejillones in Region II. The plant is being built by Empresa Eléctrica Angamos S.A., a subsidiary of AES Gener. The plant will use pulverized coal technology and will be fueled by bituminous and subbituminous coal; it is also being built with reduction systems to control SO2, NOx, and particulate emissions. The project has a turnkey contract for the engineering, procurement, and construction of the plant with Posco E&C. Construction works continued on the project in 2010 and were 96% complete at the end of the year, when the process of getting the plant ready for startup began. Among the major developments were the first unit s first synchronization with the grid on December 21, 2010, as well as completion of construction of the 140 km Angamos Laberinto transmission line and the expansion of the Laberinto and Nueva Zaldívar substations, which are necessary for the startup of the plant s transmission

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71 70 AnnualReport AES Gener 2010 system. Finally, construction on the coal offloading port was 99.6% complete as of December 31; completion is expected in January of The first unit s testing for connection to the SING began in December 2010, making it the first large-capacity power plant to inject additional capacity into the SING since Unit I is scheduled to start up in April 2011, and Unit II is expected to do so in October Campiche (SIC-Chile) The Campiche thermoelectric project, being built by AES Gener subsidiary Empresa Eléctrica Campiche S.A., involves the construction of an approximately 270 gross MW coal-fired thermoelectric plant that will be fueled by bituminous and sub-bituminous coal. It will be located next to the existing Ventanas and Nueva Ventanas plants in the municipality of Puchuncaví in Region V. The project includes reduction systems to control SO2, NOx, and particulate emissions. The project has a turnkey contract for the engineering, procurement, and construction of the plant with Posco E&C. Although this plant was scheduled to go into operation in May 2011, on June 22, 2009, the Supreme Court revoked the environmental permit for the plant due to a territorial zoning issue. After the General Urbanism and Construction Ordinance was amended at the end of 2009, thereby resolving the zoning issue in the area where the plant will be located, the Region V Environmental Commission granted a new Environmental Permit Resolution for the plant on February 26, On August 10, 2010, the Municipality of Puchuncaví issued the construction permit for the Campiche plant, but two claims were filed against the construction permit with the Valparaiso Court of Appeals (CAV). The CAV rejected such claims in November The case was appealed before the Supreme Court, which upheld the CSV s ruling in January Construction has resumed on the project and will take two years to complete, with Campiche expected to go into operation during the first quarter of 2013.

72 Business development 71 Projects under development In 2010, AES Gener continued identifying and developing new business opportunities, taking advantage of its presence in and knowledge of the market. The Company has an extensive project portfolio, including coal-fired plants, run-of-river hydroelectric plants, and renewable energy projects such as mini-hydro, wind, solar, and energy storage batteries. Among the projects in the development stage, those that are in the most advanced phases are the ones that have already obtained environmental approval. These more advanced projects include the Alto Maipo hydroelectric project, the Cochrane thermoelectric project, the Guacolda V thermoelectric project, and the Los Robles thermoelectric project in Chile, as well as the Tunjita hydroelectric project in Colombia. Alto Maipo hydroelectric project (SIC-Chile) The Alto Maipo hydroelectric project consists of the construction of two run-of-river plants, called Alfalfal II and Las Lajas, in hydraulic series in the Maipo River basin, with a total installed capacity of 531 MW. The project s design has 90% of its works underground, it does not have a reservoir or involve relocating residents, and the SIC will benefit from savings in power transmission as a result of its proximity to the city of Santiago. Progress continued in 2010 in terms of permits, engineering, water rights, approval of hydraulic works, and other related aspects. The environmental permit for the project was obtained in March 2009, and the environmental permit for the transmission system was obtained in Alto Maipo will be a key energy source for the SIC. It is expected to produce approximately 2,300 GWh per year, which is equivalent to approximately 45% of the energy currently consumed in homes in the Metropolitan Region. Cochrane thermoelectric project (SING-Chile) The Cochrane thermoelectric project involves the construction of two coal-fired thermoelectric plants of up to 280 MW (gross) each located north of Antofagasta in the municipality of Mejillones in Region II. The project obtained environmental approval in September 2009, and the transmission line to evacuate power from the project to the SING was granted environmental approval in April The project will be located next to the Angamos thermoelectric plant currently under construction, taking advantage of synergies in terms of port services, coal stock, and other aspects. Like Angamos, the plant will use pulverized coal technology. It will be fueled by bituminous and sub-bituminous coal, and it will have reduction systems to control SO2, NOx, and particulate emissions. The project will contribute needed electricity to the SING. Guacolda V thermoelectric project (SIC-Chile) The Guacolda V thermoelectric project, owned by related company Guacolda, is the fifth unit in the Guacolda complex located in Huasco, in the north region of the SIC. The new 152 MW capacity unit will be similar to the others already in existence. It will use pulverized coal technology and will be fueled by bituminous and subbituminous coal. The project is designed with reduction systems to control SO2, NOx, and particulate emissions. The project obtained its environmental permit in August The plant will contribute approximately 900 GWh to the SIC yearly. Los Robles thermoelectric project (SIC-Chile) The Los Robles thermoelectric project involves the construction of two coal-fired plants of 375 MW (gross) each with pulverized coal boilers that can be fueled by bituminous and sub-bituminous coal. The property for the project is located 290 km southwest of Santiago, approximately 30 km south of the city of Constitución in Region VII. The project includes the construction, equipping, and operation of a port. Los Robles obtained environmental approval in October 2008, and the plant will have reduction systems to control SO2, NOx, and particulate emissions. The project obtained its port concession in 2010, and has continued with the application process for the other permits needed to construct the project. The project will contribute power to the SIC. BESS Angamos (SING-Chile) The BESS (Battery Storage) Angamos project is an innovative project consisting of a bank of highly efficient, industrial scale rechargeable lithium batteries equivalent to 20 MW of capacity, located on the same site as the Angamos plant. The BESS replaces the spinning reserve all SING plants must have available to inject power into the grid in the event of contingencies that could put the stability of the system s power supply at risk. Therefore, this new technology will allow the Angamos plant to increase it maximum dispatch capacity. The BESS Angamos system is expected to go on line in the SING in November of Tunjita hydroelectric project (SIN-Colombia) The Tunjita hydroelectric project involves the construction of a new generation plant next to AES Chivor s Esmeralda Reservoir, making use of the water capacity generated by diverting the Tunjita River. The project is a run-of-river plant with an installed capacity of 19.8 MW, and will use the tunnel that diverts the water from the Tunjita River into the Garagoa River. In the course of 2010, the plant was designed, land was purchased, and the process of identifying and prequalifying bidders was begun.

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74 Corporate social responsibility Corporate values and business ethics Responsibility to shareholders and investors Responsibility to workers Responsibility to customers Responsibility to suppliers and contractors Responsibility to the community

75 74 AnnualReport AES Gener 2010 Corporate social responsibility As a business management tool, social responsibility in business, or Corporate Social Responsibility (CSR), is much more than simply implementing community programs. Businesses today must act in a dynamic environment, one in which the company is necessarily linked with its different stakeholders. For AES Gener, being socially responsible means fulfilling its business mission to provide a reliable source of power while acting ethically and responsibly toward all interest groups that form part of the Company or interact with it, principally employees, shareholders, investors, customers, suppliers, partners, and the communities in which its facilities are located. In other words, it means being an efficient, reliable company that creates sustainable value for all these groups and is thus mindful of its own sustainability. It is being a company whose business activity, as a whole, makes a positive contribution to society.

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77 76 AnnualReport AES Gener 2010 Corporate values and business ethics AES Gener, like all the companies in the AES group, has established five corporate values as its main guidelines for concrete action on the job and as a framework for its behavior and business decisions. 1. Put safety first: At the top of the list of corporate values, safety is a priority for AES companies. Company members must make work-related safety and risk prevention a prime concern for personnel, contractors, and the communities in which they work. AES Gener periodically holds different activities for members throughout the Company in order to keep this culture of safety vibrant. 2. Act with integrity: Company employees must be honest, trustworthy, and responsible. Integrity must be the essence of individual behavior and of interaction with one other and with third parties on the job. 3. Honor commitments: The individuals who make up the Company must fulfill the commitments the organization has made to all of its stakeholders, particularly customers, employees, communities, shareholders, suppliers, and partners. 4. Strive for excellence: Company members must strive to be the best in all they do and to have world-class levels of performance. 5. Enjoy the job: Members of the organization know that work can be interesting and gratifying. They are called upon to enjoy their work and to value the satisfaction of being part of a team that makes a positive difference. They also know that if this ceases to be the case, they must make changes in their work and how they perform it. The Company has various ways of promoting the concrete application of these values on the job, and develops activities and materials that encourage employees to reflect on them. Ethics and Compliance Program AES Gener s Ethics and Compliance Department is headed up by the Regional Compliance Officer, who oversees the program s three key areas: employee training, line of assistance, and business transaction oversight. AES Gener has a Code of Behavior based on the five corporate values listed above. This Code is given to all company members, contractors, and suppliers, and is also available on the company s web page. The Ethics and Compliance Department has also established programs to prevent and detect criminal behavior; to foster an organizational culture that promotes ethical behavior and a commitment to obeying the law; and to monitor and enforce AES policies on corruption, bribery, money laundering, and association with terrorist groups. The Maitenes Foundation The Maitenes Foundation, whose name will soon be changed to the AES Gener Foundation, is a nonprofit organization created by AES Gener in 1993 to support education and to contribute to individuals ethical training and overall development. Its by-laws were later amended to strengthen its role in formulating and implementing the Company s community programs. This expanded the organization s activities to include designing and executing social, educational, and work training programs; promoting employment; and supporting sports, culture, and the arts. The Foundation is a key player in the Company s ties with the different communities, and in its dealing with stakeholders, it has set itself the goal of helping communities and employees reach their full potential. The Foundation has a General Council consisting of AES Gener executives and professionals who see to it that the Foundation fulfills its objectives and properly manages the funds the Company allots it to accomplish its purpose as an organization. Administration of the AES Gener Foundation is in the hands of a General Director, whose responsibilities are to direct, oversee, and head up the execution of the programs and activities that are scheduled each year. A wide variety of programs have been implemented over the last 15 years, many of which have been held in the Los Maitenes Education Center in the El Colorado valley of the San José de Maipo municipality. Programs have also taken place in other areas of Chile where the Company does business.

78 Corporate social responsibility 77 Responsibility to shareholders and investors Power generation is a capital-intensive industry in which investments are normally evaluated over a 25- or 30-year term. Consequently, AES Gener aims not only for short-term financial results, but seeks to make them sustainable into the future as its primary responsibility toward its shareholders and investors. Likewise, AES Gener considers transparency of relevant Company information, as well as the quality, efficacy, and promptness of its public availability, in accordance with laws governing corporations and securities markets, to be a major part of its responsibility toward shareholders and investors. The limit on transparency of information is set by the aforementioned legal codes, which ensure equitable, simultaneous access to information, as well as by the importance of maintaining the confidentiality of strategic information that, if made available to the competition, could weaken the Company s competitive position. Periodic meetings were held with local analysts during 2010 to present the Company s official results, to discuss development projects, and to answer the questions of those attending the meeting. The Company also participated in various meetings and conferences with local and international investors. Responsibility to workers The Company s responsibility toward its workers has two main facets: industrial safety and human resources management, which includes work benefits and quality of life on the job. Industrial safety The emphasis AES Gener places on risk prevention is consistent with the fact that it considers safety to be its top corporate value. The Company works continually for its businesses to meet the exacting international standards of AES and to comply with both Chilean (Law 16,744) and international (OSHA) safety regulations. The Company is currently seeking OHSAS 18,001:2007 certification for all of its business units. Progress was also made, in close collaboration with AES, on applying a new version of safety standards, the most stringent in the electricity industry. This process is already in operation, with 42 new guidelines in effect. In order to maintain its safety standards, the Company also carries out a complete auditing plan in its different lines of business (generation, transmission, and construction) and power plants, and follows up on the preventive and corrective measures and initiatives that peer committees on health and safety recommend in this area. In addition, those with leadership positions in the Company take periodic safety walks, which are inspection tours that seek to involve the management in promoting and monitoring safety within each business area in the Company. During 2010, the Company worked hard to improve contractors safety standards, providing technical assistance to help them improve their standards and thus attain greater efficiency on the job. All contractors working at AES Gener must meet the same standards as those used by the Company; this has brought about a significant decrease in accidents. A total of six lost-time accidents occurred among all AES Gener Group workers in Chile in 2010, compared to seven accidents in It should be noted that Company personnel increased in 2010 to a total of 2,145,404 man-hours worked this year, significantly higher than the 1,859,733 hours worked in This results in an accident rate* of 0.61% in 2010, down from the 1.23% rate in It is also worthy of note that these figures are significantly lower than the country s average accident rate. There were six contractor accidents involving time lost in 2010, which is identical to the 2009 figure. The base number of contractor Company employees in 2010 was 1,634,901 man-hours worked with an average of 961 workers, compared to the 1,755,934 man-hours worked by an average of 857 workers in This yields a 2010 accident rate of 0.66%, lower than that of 2009, which was 0.70%. These figures are also considerably below the country s average accident rate. Construction projects also use exacting safety standards while in the building process. There were 77 accidents in the course of 2010 among the average of 3,516 contractor employees who worked a total of 7,961,071 hours. In 2009, there were 123 accidents among an average of 2,780 employees, who worked a total of 10,100,043 hours. This yields a 2010 accident rate of 1.71%, lower than the rate of 4.42% in These figures are also significantly lower than the country s average accident rate at construction works. * The accident rate indicates the number of accidents per 100 workers.

79 78 AnnualReport AES Gener 2010 Human resources, work Benefits, and quality of life on the Job With a view toward Company sustainability and benefit to its workers, AES Gener wants the people on its team to develop along with the organization in order to be able to adequately handle present and future challenges. In order to efficiently administer its generating plants and to realize the projects in its portfolio, the Company seeks to stimulate and retain its personnel, while strengthening its team with suitable individuals with development potential to handle new projects and to make up replacement staff. Within this framework, of particular importance are the Company s efforts to develop skills among its production personnel, both among current employees as well as new workers hired to fill positions at the plants under construction once they begin operation. Leadership workshops have also been held since 2008 as part of an ongoing program to promote team-leading skills to help leaders acquire the tools they need for management excellence. During 2010, the AES Gener Group in Chile invested Ch$715,613,943 in training programs, equivalent to 141 courses and 213 activities offered and a total of 39,861 hours contracted; this meant training for 946 workers during the year. The greater emphasis on worker training meant 270% more was invested in training in 2010 than the previous year. Part of this increase involved training employees in the AES Performance Excellence method (APEX) promoted by AES Corp. The purpose of this method is to provide tools for ongoing improvement, analysis, evaluation, and methodology so that all the personnel throughout the different companies can tackle problems and tasks in a common language. The upper management also trained production personnel in ABS, a method that focuses on improving operational excellence. Emphasis continued to be placed on performance management systems as a key tool in fostering or improving individuals performance. This process covers all AES Gener and subsidiary personnel hired under indefinite contracts, and is complemented with a 360 evaluation system for executive positions. The AES Gener performance management process consists of three stages: the first stage establishes clear, measurable objectives to be reached during the year. The second, at mid-year, is a feedback stage, and the final phase involves an evaluation of each objective and skill listed on the form at the end of the year.

80 Corporate social responsibility 79 In general terms, the performance management systems applied in the Company seek to promote an individual s development in a specific position. The systems consider the general skills needed and the annual objectives to be reached, which helps determine the aspects to be developed to maximize an individual s effectiveness in his or her job. to perform operations and maintenance under the direct supervision of the Company. This offsets the employee layoffs due to completion of the Nueva Ventanas project. AES Gener and Subsidiary Personnel as of December 31, 2010 People who work at AES Gener enjoy a number of benefits in addition to salaries, including supplementary health insurance, extra income in addition to government benefits in cases of medical leave, life insurance, a preschool allowance for female workers children up to the age of five, medical benefits through a joint collective plan, and preventive medical exams for workers every two years. Benefits also include legal compensation when workers are laid off, and there are bonuses for special occasions such as births, marriages, vacations, and others. The Company also has educational assistance programs, including scholarships for workers and their children who are studying, as well as university and graduate scholarships for employees who wish to further their careers. In 2010, Ch$190,000,000 was invested in these scholarship programs. AES Gener Employees Executives 37 Professionals 253 Technical and administrative personnel 328 Subtotal 618 Subsidiaries Employees Chivor 85 TermoAndes 61 Norgener 106 Eléctrica Santiago 54 Energía Verde 90 Eléctrica Ventanas 0 Eléctrica Angamos 100 Eléctrica Campiche 10 Subtotal 506 Total AES Gener and Subsidiaries 1,124 Recreational and sports facilities are provided for employees and their families in Valle Alegre, Maitenes, and Renca, and activities are held for workers children during their winter and summer school vacations. In 2010, 160 children of employees participated in these activities. The Quality of Life Program has had such a positive impact on the Company s workers that it has been extended to all work locations, and now includes exercise breaks, express massages, hiking, and nutrition. The Alcohol and Drug Policy was also applied to all work locations; 33% of workers were tested at random under this policy. The number of Company employees rose 3.9% during 2010 compared to the previous year, due primarily to the hiring of work teams for maintenance and operations at Eléctrica Angamos, as well as the hiring of personnel at Eléctrica Santiago Responsibility to customers AES Gener knows that the service it provides is fundamental to individuals quality of life and to the economic development of the countries in which it works, and it understands that the reliability and efficiency of its processes have an impact on the competitiveness of its industrial customers and on the budget of final consumers. In terms of the reliability of supply, AES Gener always seeks to back its contracts with actual generating capacity to ensure that electricity really will be available under critical supply conditions. This is one of the reasons why it is Chile s largest thermoelectric generator. With a view to process efficiency, the Company constantly monitors its operational parameters, seeking to reach world-class standards in its generation practices. Additionally, for each one of its projects, the Company selects the fuel option that is most economically efficient for generating electricity and that meets standards of reliability and safety, all while complying with all applicable regulations and its environmental policy. At the same time, AES Gener stresses the prevention of outages or technical problems that are unlikely but could cause potentially serious impacts, and is constantly seeking to improve its quality of service.

81 80 AnnualReport AES Gener 2010 Responsibility to suppliers and contractors AES Gener considers that its primary responsibility toward suppliers and contractors that regularly or occasionally work at Company facilities is to provide them with proper health and safety conditions. The safety and equipment standards at AES Gener facilities apply to both Company and external employees, and for technical work at its plants, all workers are required on an equal basis to undergo pre-hiring medical examinations in order to reduce the risk of accidents. Another relevant aspect of the Company s responsibility toward its contractors, mainly with those who provide specialized services, is the long-term relationship that the Company seeks to establish with them. This is due to the high degree of specialization and strict safety standards required for maintaining electrical power plants and transmission lines, and it provides an incentive for employers to train and improve personnel as part of a stable relationship of mutual cooperation that demands high quality service at competitive prices.

82 In order to progress in using the best practices to ensure equal access to information for all potential suppliers and to apply objective criteria in selecting suppliers, the Company worked in 2010 to expand the use of the E-Procurement system developed by AES to handle its supply purchases. With the same goal of ensuring transparency and access of information, the Company continued strengthening its work with the REPRO suppliers directory administered by Achilles Chile, a company that specializes in dealings with suppliers. This directory permits supply companies to see and update the information on their products and services directly on the Internet, information that is subsequently validated by Achilles. The system gives suppliers and contractors greater visibility among their clients while also generating economies of scale: since the system is open to all energy sector clients, the companies registered become available for any procuring company that participates in REPRO. The system operates with the industry s highest security and control standards, with easily traceable transactions, so purchases are handled safely and reliably. Responsibility to the community Local community affiliation and relations policy With its Local Community Affiliation and Relations Policy (PVRCL), announced at the end of 2009, AES Gener put forth its guidelines and focus for relating with the communities where its plants are located. The new PVRCL is an important development in that it will allow AES Gener to manage effectively, and sustainably, its relationship with the communities neighboring the Company s facilities, capitalizing on what AES Gener has been doing in its communities in terms of both environmental and social issues. The first phase of employee training in this matter took place in 2010 with four community relations workshops held for AES Gener and subsidiary company workers, in Olmué, Tocopilla, Mejillones, and Ventanas. Thus, progress was made in the cultural change needed to lay the foundation for the Company s community relations strategy, which is oriented toward fomenting ties with the community, a key stakeholder. The environment AES Gener makes taking care of the environment a priority in operating its plants, proof of which is the Environmental Management System that the Company has had implanted in all of its operations since Corporate social responsibility Gener views environmental protection as an area of performance, and includes environmental issues within its managers areas of responsibility. It was within this context that the Environmental Department was created in 2010, within the Engineering and Construction Area. This department provides across-the-board support for all the operations of the companies in the AES Gener Group, and for the construction of their projects. Part of the Environmental Department s mission is to ensure compliance with AES Corp s environmental policy, which requires that all AES companies comply with 11 environmental standards. These standards are based on four basic guidelines stated in AES Corp s environmental policy: - To comply with or exceed the requirements of environmental standards or regulations set by local governments, as well as the environmental standards imposed by the agencies involved in financing the Company s projects; - To comply with or exceed the requirements imposed by AES Corp environmental standards; - To make decisions on additional expenses on the basis of a local, regional, and global environmental assessment, in which the term environment is widely defined as the conditions surrounding the people, including ecological, economic, social, and other factors that determine quality of life or standard of living; - To strive to continually improve environmental performance in each business opportunity. AES Gener s Environmental Management System has a strict, thorough in-house program for auditing environmental affairs at its plants and transmission systems to ensure compliance with these standards and to detect opportunities for ongoing improvement. These audits are part of an effort to increase the efficiency of the environmental management systems implemented, or in the process of being implemented, in all AES Gener companies areas of business, and they have also helped with overall production management. One of the important developments in 2010 was that construction was completed at the Ventanas plant on the country s first desulfurizer that uses seawater. The project, carried out jointly with Alstom, reduces Unit 2 sulfur emissions by 75% and applies the emissions reduction offset program for the Nueva Ventanas and Campiche plants. It reduces overall pollution put out by the generating complex and improves air quality in the area of Puchuncaví, Ventanas. 81

83 82 AnnualReport AES Gener 2010 Help for areas affected by the earthquake On Saturday, February 27, the very day of the earthquake and with the immediate backing of the parent company, AES Corp, member companies of the AES Gener Group set up an Emergency Coordination Committee comprised of Company executives. The Committee determined priority actions to be taken to respond rapidly and effectively in the three areas most important to the Company and its subsidiaries: our people (the workers and their families), our facilities operations, and the damage suffered by communities in the areas near our plants and projects. A total of Ch$270 million was donated to the communities of Puchuncaví, Renca, San José de Maipo, Constitución, Laja, and Concepción. The money was used to help remove rubble and to provide drinking water, fuel, power generators, coats, blankets, diapers, tents, mattresses, clothing, 10 tons of food, medicines, and construction materials. The assistance, channeled through the Maitenes Foundation, also included funds for rebuilding the Santa Clara Children s Home in Talca and for the Julieta Becerra and El Canelo schools in San José de Maipo. EDELAP, the AES subsidiary in Argentina, sent five emergency work crews to help restore power in the area hit by the quake. The Company s employees also donated a total of Ch$15,000,000 out of their wages to help fellow workers whose homes were damaged in the earthquake. Social programs Fifteen years ago, AES Gener took on a commitment to the education of children and young people in the communities near its plants as part of its policy of integration with the community and to help develop the areas in which it works. These programs include the following: Friends of nature This is an environmental education and teamwork development program that has been held yearly since 1996 by AES Gener s Maitenes Foundation. Specifically, it encourages seventh graders from different communities in Chile to work as a team to reach a common goal, and it invites them to appreciate and preserve the environment. Its purpose is for the children to learn about how power is generated and thus develop an appreciation for the need to use electricity more efficiently. During their time in the mountains, the young people work as a team at different athletic, learning, and integration activities. The vast majority of these children come from low-income families, so this is a brand-new experience for them. Some years, the participants have had a chance to see snow for the first time and have been able to take part in high-mountain activities guided by a team of monitors especially trained to work with children and by experienced mountaineers. Children who live outside of the Metropolitan Region are also given a guided tour of the capital, Santiago, a city most of them have never visited before. During these 15 years, some 6,000 young people from Tocopilla, Mejillones, Huasco, Puchuncaví, Laguna Verde, Renca, San José de Maipo, San Francisco de Mostazal, Nacimiento, Cabrero, Yumbel, Constitución, and Laja have been awarded scholarships to this program. They have all participated in a three-day educational and recreational program held at the Los Maitenes Center in the Cajón del Maipo area. Dual education programs at ventanas This is a joint educational program offered since 1999 by AES Gener and the Sargento Aldea Educational Complex of Las Ventanas to train students in their last two years of high school as electrical technicians and mid-level administrative technicians. The program combines theoretical and practical education at the school with hands-on training and apprenticeship experience at the Ventanas thermoelectric plant. Ten students went through their training at the Ventanas plant in 2010; the same number of openings will be available in Assisting micro-entrepreneurs in theflower business This is a project to train and assist some 50 women from the municipality of Puchuncaví, specifically the communities of La Greda, Las Ventanas, La Chocota, Campiche, and Horcón, in their aspiration to become micro-entrepreneurs in the flower business. This program has been offered jointly since 2006 by AES Gener S.A., Puerto Ventanas S.A., and the Agricultural Development Program (PRODESAL) of the Municipality of Puchuncaví, and with the support of the Regional Office of the Farming Development Institute (INDAP).

84 Corporate social responsibility 83

85

86 Financial statements Consolidated financial statements Reasoned analysis of the consolidated financial statements Summarized financial statements from subsidiaries

87

88 Financial statements 87 Report of Independent Auditors Financial Statements review To the Shareholders and the Directors of: AES Gener S.A.: We have audited the accompanying consolidated statements of financial position of AES Gener S.A. and subsidiaries ( the Company ) as of December 31, 2010 and 2009 and the related consolidated statements of comprehensive income, changes in net equity and cash flows for the years ended December 31, 2010 and These financial statements and their accompanying notes are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our auditors. We did not audit the consolidated statement of financial position as of December 31, 2009 and the corresponding consolidated statement of comprehensive income and changes in net equity of the affiliate Empresa Eléctrica Guacolda S. A. and subsidiary, which represents an investment recorded using the equity method. The direct investment of the Company in this equity method investment is 224,978 as of December 31, 2009 and its participation in its net income represents 28,049 for the year then ended. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the valuation of this investment as of December 31, 2009 recorded using the equity method, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted standards in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a tests basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors for the year ended December 31, 2009, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AES Gener S.A. and subsidiaries as of December 31, 2010 and 2009, the results of their operations and their cash flows for the years ended December 31, 2010 and 2009, in conformity with International Financial Reporting Standards. Charles A. Bunce ERNST & YOUNG LTDA. Santiago, Chile March 14, 2011

89 88 AnnualReport AES Gener 2010 Consolidated Statement of Financial Position AES Gener and Subsidiaries Consolidated Statement of Classified Financial Position as of December 31, 2010 and December 31, 2009 (in thousands of United States Dollars) Assets Note Current Assets Cash and cash equivalents 6 294, ,647 Other financial assets, current 7 300, ,210 Other non-financial assets, current 9 11,476 16,439 Trade and other receivables, net, current , ,178 Related party receivables 11 12,437 5,426 Inventory 12 42,078 52,100 Assets for current taxes 13 2,363 1,166 Total Current Assets 1,085,655 1,002,166 Non-Current Assets Other financial assets, non-current 7 68,631 98,115 Other non-financial assets, non-current 9 17,134 28,000 Accounts receivable, non-current 10 8,171 79,293 Investments accounted for using equity method , ,978 Intangible assets (other than goodwill), net 15 12,682 10,139 Goodwill 15 7,309 7,309 Property, plant and equipment, net 16 4,178,072 3,962,339 Deferred tax assets 17 27,448 11,734 Total non-current assets 4,571,498 4,421,907 Total Assets 5,657,153 5,424,073 The accompanying notes form an integral part of these financial statements

90 Financial statements 89 Consolidated Statement of Financial Position AES Gener and Subsidiaries Consolidated Statement of Classified Financial Position as of December 31, 2010 and December 31, 2009 (in thousands of United States Dollars) Net Equity and Liabilities Nota Current Liabilities Other financial liabilities, current 18 97,946 84,565 Trade and other payables, current , ,845 Related party payables 11 26,313 6,474 Provisions, current 20 4,244 6,819 Accounts payable for current taxes 13 31,621 29,149 Post-employment benefit liability, current 21 3,014 2,695 Other non-financial liabilities, current 22 21,982 20,271 Total Current Liabilities 499, ,818 Non-Current Liabilities Other financial liabilities, current 18 2,100,472 1,770,600 Trade and other payables, current 19 50,737 15,422 Related party payables 11 2,376 - Provisions, current 20 31,035 43,082 Accounts payable for current taxes , ,892 Post-employment benefit liability, current 21 29,719 25,706 Other non-financial liabilities, current 22 27,524 33,055 Total Current Liabilities 2,608,748 2,264,757 Total Liabilities 3,108,203 2,821,575 Equity Issued capital 1,907,994 1,907,994 Retained earnings (losses) , ,781 Issuance premiums 43,634 43,634 Other components of equity , ,082 Other comprehensive income 23 (207,455) (168,725) Net Equity Attributable to Net Equity Holders of Parent 2,548,863 2,593,766 Non-controlling interest 87 8,732 Total Net Equity 2,548,950 2,602,498 Total Net Equity and Liabilities 5,657,153 5,424,073 The accompanying notes form an integral part of these financial statements.

91 90 AnnualReport AES Gener 2010 Statement of Comprehensive Income AES Gener and Subsidiaries Consolidated Statement of Comprehensive Income For the periods ended December 31, 2010 and 2009 (in thousands of United States Dollars, except for Basic Earnings (Losses) per Share, which are presented in United State Dollars) Note Statement of Comprehensive Income Operating revenue, total 24 1,802,049 1,653,420 Cost of sales 25 (1,368,878) (1,165,487) Gross Profit 433, ,933 Other operating income, by function 5,881 5,631 Administrative expenses 25 (116,067) (88,288) Other operating expenses 25 (19,125) (8,484) Other income (losses) 26 (88,787) 1,256 Finance income 27 22,452 21,866 Finance expense 27 (99,313) (90,222) Equity in earning of associates 14 42,361 28,049 Foreign currency exchange differences 27 16,451 60,115 Net Income Before Tax 197, ,856 Income tax expense (income) 28 (31,169) (92,262) Net Income Before Tax from Continuing Operations 165, ,594 Income (loss) from discontinued activities - - Net Income 165, ,594 Net Income Attributable to Income (loss) attributable to shareholders of parent 169, ,937 Income (loss) attributable to non-controlling interest (3,917) (2,343) Net Income 165, ,594 Earnings per Share (Presented in US$) Basic Earnings per Share Basic earnings per share of continuing operations Basic earnings per share of discontinued operations - - Net Earnings per Basic Share Earnings per Share Basic earnings per share Basic earnings per share of continuing operations - - Basic Earnings per Share of Discontinued Operations Net income 165, ,594 The accompanying notes form an integral part of these financial statements.

92 Financial statements 91 Statement of Comprehensive Income Components of Other Comprehensive Income, before taxes Foreing Currency Translation Foreing currency translation adjustements 34,356 38,101 Cash Flow Hedge Net movement in cash flow hedges, before taxes (77,864) 100,217 Net gain (loss) from available-for-sale financial investments 3,478 (207) Actuarial loss on defined benefit plan (1,923) - Net gain (loss) from associates cash flow hedge (3,324) 7,003 Other Components of Other Comprehensive Income, before Taxes (45,277) 145,114 Income Tax Related to Other Components of Other Comprehensive Income Income Tax Effect 6,547 (19,433) Other Comprehensive Income (38,730) 125,681 Total Profit from Comprehensive Income and Expenses 127, ,275 Other Comprehensive Income attributable to Profit attributable to shareholders of the parent 131, ,618 Profit attributable to non-controlling interests (3,917) (2,343) Total Profit from Comprehensive Income and Expenses 127, ,275 The accompanying notes form an integral part of these financial statements.

93 92 AnnualReport AES Gener 2010 Statement of Changes in Conolidated Net Equity Issued Capital Issuance Premium Dividend Reserve and share based options Beginning Balance Current Period ,907,994 43, ,082 Changes (Presentation) Net Income (loss) - - Other Comprehensive Income (loss) - - Dividends - Issuance of common shares 128,370 Total Changes in Net Equity ,370 Final Balance Current Period ,907,994 43, ,452 Issued Capital Issuance Premium Dividend Reserve and share based options Beginning Balance Current Period ,662,197 43,852 99,489 Changes (Presentation) Net Income (loss) - - Other Comprehensive Income (loss) - - Issuance of common shares 245,797 (218) - Dividends - - Increases (decreases) for transfers and other changes Total Changes in Net Equity 245,797 (218) 65,593 Final Balance Current Period ,907,994 43, ,082 The accompanying notes form an integral part of these financial statements

94 Financial statements 93 AES Gener and Subsidiaries Consolidated Statement of Changes in Net Equity For the periods ended December 31, 2010 and 2009 (in thousands of United States Dollars) Foreing Currency Translation Reserves Cash Flow Hedging Reserves Defined Benefit Plans Reserve Other Various Reserves Retained Earnings Equity Attributable to Equity Holders of Parent Non-controlling Interests Equity, Total (713) (21,124) - (146,888) 645,781 2,593,766 8,732 2,602, , ,772 (3,917) 165,855 34,356 (74,641) (1,923) 3,478 - (38,730) - (38,730) (233,013) (233,013) - (233,013) (71,302) 57,068 (4,728) 52,340 34,356 (74,641) (1,923) 3,478 (134,543) (44,903) (8,645) (53,548) 33,643 (95,765) (1,923) (143,410) 511,238 2,548, ,548,950 Foreing Currency Translation Reserves Cash Flow Hedging Reserves Defined Benefit Plans Reserve Other Various Reserves Retained Earnings Equity Attributable to Equity Holders of Parent Non-controlling Interests Equity, Total (38,814) (108,911) - (146,681) 518,496 2,029,628 9,425 2,039, , ,937 (2,343) 325,594 38,101 87,787 - (207) - 125, , , , (176,639) (176,639) - (176,639) (24,013) 41,580 1,650 43,230 38,101 87,787 - (207) 127, ,138 (693) 563,445 (713) (21,124) - (146,888) 645,781 2,593,766 8,732 2,602,498

95 94 AnnualReport AES Gener 2010 Indirect Statement of Cash Flows AES Gener and Subsidiaries Consolidated Statement of Cash Flows, Indirect Method For the periods ended December 31, 2010 and 2009 (in thousands of United States Dollars) Net Cash Flows Provided by Operating Activities Profit (loss) 165, ,594 Adjustments to reconcile with operating profit (loss) Income tax expenses adjustments 31,169 92,262 Decrease (increase) in inventories adjustments 9,205 (3,689) Decrease (increase) in trade and other receivables 37, ,999 Decrease (increase) in trade and other receivables from operating activities 8,022 (3,727) Increase (decrease) in trade and other payables (124,783) (116,964) Increase (decrease) in trade and other payables from operating activities 88,229 78,265 Depreciation and amortization adjustments 168, ,249 Provisions for impairment recognized in net income 3,370 - Movements in provisions (4,862) Unrealized foreign exchange losses (gains) adjustments (16,451) (60,115) Fair value losses (gains) adjustments 9,822 6,711 Non-distributed gains from associates adjustments (42,361) (28,049) Other non-cash adjustments 118,933 (52,259) Losses (gains) from sale of non-current assets adjustments (7) 8,502 Other adjustments to reconcile investing and financing flows 14,671 13,439 Adjustments to Reconcile with Operating Profit (Loss), Total 300, ,894 Dividend payments (159,874) (120,011) Dividend received 11,219 1,327 Interest payments (101,015) (88,119) Interest received 4,355 5,178 Income tax refunds (65,182) (12,673) Other inflows (outflows) of cash and cash equivalent 31,081 45,033 Net Cash Flows provided by Operating Activities 187, ,223 Net Cash Flows Used in Investing Activities Equity investments in associates (2,005) (11,500) Proceeds from sales of property, plant and equipment 760 1,176 Additions to property, plant and equipment (510,886) (864,719) Acquisitions of intangible assets (3,666) (1.905) Interest received 100 1,017 VAT recovery related to construction projects 35 - Other inflows (outflows) of cash and cash equivalents 165,572 (263,847) Net Cash Flows Used in Investing Activities (350,090) (1,139,778) Net Cash Flows Provided by Financing Activities Proceeds from share issuance - 245,579 Proceeds from issuing other equity instruments - 188,312 Proceeds from borrowings 335, ,356 Proceeds from Loans, Total 335, ,356 Repayments of loans (27,439) (36,677) Repayments of finance lease liabilities (2,443) (12,388) Other inflows (outflows) of cash and cash equivalents (15,421) 33,141 Net cash flows provided by (used in) financing activities 289, ,323 Net Cash and Cash Equivalents Increase (Decrease) 126,966 93,768 Net foreing exchange differences 4,648 7,338 Cash and cash equivalents at the beginning of period 162,647 61,541 Cash and Cash Equivalent at the End of Period 294, ,647 The accompanying notes form an integral part of these financial statements.

96 Notes to the Consolidated Financial Statements Financial statements 95 NOTE 1 GENERAL INFORMATION AES Gener S.A. ( (hereinafter the Company, AES Gener or Gener ) was formed by public deed on June 19, 1981, signed before Santiago Notary Public Mr. Patricio Zaldívar Mackenna. Its corporate name at that time was Compañía Chilena de Generación Eléctrica S.A. (Chilectra Generación S.A.). Its bylaws were approved by the Superintendency of Securities and Insurance in resolution No. 410-S on July 17, 1981, published in Official Bulletin No. 31,023 on July 23, The Company is registered in the Commercial Registry of the Santiago Real Estate Registrar, on page 13,107, number 7,274 of Gener is a publicly-held corporation dedicated primarily to electricity generation. Its role is to efficiently, safely and sustainably supply electricity, while fulfilling commitments with customers, shareholders, employees, communities, suppliers, regulators and other persons and groups with which it interacts. The Company serves the Central Interconnected System (SIC) through four run-of-the-river hydroelectric power plants, two coal-fired thermoelectric power plants and three diesel-fueled turbogas power plants, all of which belong directly to Gener. It also serves the SIC through a natural gas and/or diesel combined-cycle power plant and a diesel power plant belonging to its subsidiary Sociedad Eléctrica Santiago S.A.; a coal-fired thermoelectric power plant belonging to its subsidiary Empresa Eléctrica Ventanas S.A., a coal-fired thermoelectric power plant belonging to its associate Empresa Eléctrica Guacolda S.A.; and two cogeneration power plants and one gas turbine belonging to its subsidiary Energía Verde S.A. Gener also provides energy to the Great North Interconnected System (SING), through its subsidiaries Norgener S.A. and Termoandes S.A. The former has a coal-fired thermoelectric power plant in the city of Tocopilla, and the latter has one natural gas combined-cycle power plant in Salta, Argentina, connected to the SING by a transmission line owned by its subsidiary Interandes S.A. To address opportunities offered by the Chilean market, Gener is in the process of constructing various new power plants. In the SIC, the Company completed the construction of a coal-fired unit which belongs to its subsidiaries Empresa Eléctrica Ventanas S.A. in December of 2009 and has another unit under construction which belongs to its subsidiaries Empresa Eléctrica Campiche S.A.. In the SING, its subsidiary Empresa Eléctrica Angamos is in the process of building two additional coal-fired units. Gener has also received approval on environmental impact studies for three other projects under development. In addition to its share in the Chilean electricity market, Gener produces electricity in Argentina and Colombia through its subsidiaries Termoandes S.A. and Chivor & Cía. S.C.A. E.S.P. ( Chivor ), respectively. Gener s commercial domicile is located at Mariano Sánchez Fontecilla 310, 3 rd floor, Las Condes, Santiago. The Company is controlled by AES Corporation through its investment subsidiary Cachagua Ltda. with a 70.67% interest as of December 31, These consolidated financial statements were approved by the Board of Directors on March 14, NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section describes the principal accounting policies adopted in preparing the consolidated financial statements of AES Gener and subsidiaries ( the Group ). As required by International Financial Reporting Standards (IFRS), these policies have been designed based on IFRS literature in effect as of December 31, 2010 and applied uniformly to all periods presented in these consolidated financial statements. 2.1 Basis of presentation and accounting periods These consolidated financial statements of AES Gener S.A. and subsidiaries ( the Group ) cover the consolidated statements of financial position as of December 31, 2010 and December 31, 2009, the statements of comprehensive income for the period ended December 31, 2010 and 2009, the statements of changes in net equity and indirect cash flows for the periods ended December 31, 2010 and 2009, and their related notes, which have been prepared and presented in accordance with International Financial Reporting Standards ( IFRS ), considering the respective regulations of the Superintendency of Securities and Insurance of Chile ( SVS ).

97 96 AnnualReport AES Gener 2010 For the convenience of the reader, these notes and their accompanying financial statements have been translated from Spanish to English. The preparation of these consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company s accounting principles. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4. The information contained in these consolidated financial statements is the responsibility of the management of AES Gener. As of the date of these interim consolidated financial statements, the following accounting standards had been issued by the IASB, but as their application were not mandatory, they will be applied as of the dates described below. Standards and amendments Mandatory application for annual New Standards periods beginning IFRS 9 : Financial Instruments: Classification and Measurement Amendments and improvements IFRS 7: Financial instruments: revelations IAS 1: Financial Statements presentation IAS 24: Related Parties IAS 12: Income Tax With respect with the adoption of IFRS 9, the Company s administration is in the process of evaluating the initial effects of its application. The Company s management estimates that adoption of the aforementioned other standards, amendments and interpretations will not have a significant impact on the Company s consolidated financial statements during the period of initial application. 2.2 Basis of consolidation The consolidated financial statements consist of the financial statements of AES Gener S.A. (the Parent Company ) and its subsidiaries as of December 31, 2010 and 2009, respectively. The financial statements of the subsidiaries are prepared as of and for the same periods as the Parent Company, consistently applying the same accounting policies. (a) Subsidiaries Subsidiaries consist of all entities over which AES Gener has the power to direct financial and operating policies and generally over which it holds more than half of the voting rights. Subsidiaries are consolidated from the date control is transferred to AES Gener S.A. and are no longer consolidated from the date control ceases. The purchase method is used to account for acquisitions of subsidiaries. The purchase cost is the fair value of the assets delivered, the equity instruments issued and the liabilities incurred or assumed on the date of exchange. All identifiable assets and liabilities acquired and identifiable contingencies assumed in a business combination are initially valued at fair value as of the acquisition date, irrespective of the extent of any minority interest. The excess of the purchase cost over the fair value of AES Gener s share of the net identifiable assets acquired is recognized as goodwill. If the purchase cost is less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly in the statement of income.

98 Financial statements 97 The Company consolidates the following subsidiaries: Ownership Interest Taxpayer ID Number Company Name Country Currency Direct Indirect Total Total Energía Verde S.A. Chile US$ Norgener S.A. Chile US$ Sociedad Eléctrica Santiago S.A. (*) Chile US$ Empresa Eléctrica Ventanas S.A. Chile US$ Foreign Energy Trade and Finance Corporation Cayman Island US$ Foreign AES Chivor & CIA S.C.A. E.S.P. Colombia COL$ Foreign Gener Blue Water (Islas Caimán) Cayman Island US$ Inversiones Nueva Ventanas S.A. Chile US$ Inversiones Termoenergía de Chile Ltda. Chile US$ Foreign Gener Argentina S.A. Argentina US$ Foreign Termoandes S.A. Argentina US$ Foreign Interandes S.A. Argentina US$ Genergía S.A. Chile US$ , Foreign Genergía Power LTD. (Islas Caimán) Cayman Island US$ K Empresa Eléctrica Angamos S.A. Chile US$ Empresa Eléctrica Campiche S.A. Chile US$ Foreign Energen S.A. Argentina US$ Foreign AES Chivor S.A. Colombia COL$ Empresa Eléctrica Cochrane S.A. Chile US$ (*) On September 15, 2010, C.G.E Generación S.A. sold it participation over Sociedad Eléctrica Santiago S.A. to AES Gener S.A. and Norgener S.A. For the purposes of these consolidated financial statements, intercompany transactions, balances and unrealized gains on related party transactions are eliminated. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. (b) Transactions and minority interest Non-controlling interest represents the share of net income and net assets of subsidiaries not 100% held by the Group. Non-controlling Interests are presented separately in the statement of income, but under equity within the consolidated statement of financial position, separately from the parent company s equity. AES Gener S.A. considers transactions with non-controlling interests to be transactions with third parties outside the Group. Disposal or acquisition of non-controlling interests entails a capital transaction without recognizing gains and/or losses in the statement of income. Any difference between the price paid and the corresponding share of the carrying amount of the subsidiary s net assets is recognized as a capital contribution or distribution. 2.3 Associates Associates consist of all entities over which AES Gener exercises significant influence but not control and in which it generally holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recognized at cost. AES Gener s investments in associates include goodwill identified in the acquisition, net of any accumulated impairment losses.

99 98 AnnualReport AES Gener 2010 The Group s share of post-acquisition losses or gains of its associates is recognized in income and its share of post-acquisition equity movements that do not constitute income are recognized in the corresponding equity reserves (and reflected as appropriate in the statement of other comprehensive income). When the Group s share of an associate s losses is equal to or greater than its share in that company, including any other unsecured receivables, the Group does not recognize further losses unless it has incurred obligations or made payments on behalf of that associate. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associate. Unrealized losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. When necessary, the accounting policies of associates are modified to ensure their uniformity with policies adopted by the Company. 2.4 Operating segment reporting Segment information is presented consistently with interim reports provided to the Company s management, who is responsible for assigning resources to and evaluating the performance of the operating segments. Management identifies its operating segments based on the markets in which it participates (i.e. the SIC and SING markets in Chile and the National Interconnected System (SIN) in Colombia) about which it makes strategic decisions. This financial information is detailed by operative segments in Note Foreign currency transactions (a) Presentation and functional currency The items included in the financial statements of each of the Company s entities are valued using the currency of the principal economic environment in which the entity operates (functional currency). The consolidated financial statements of AES Gener are presented in US dollars, which is the functional and presentation currency of the Company and all subsidiaries, except for its Colombian subsidiary, Chivor, whose functional currency is the Colombian peso. (b) Transactions and balances Transactions in a foreign currency other than the functional currency are converted to the functional currency using the exchange rate in effect as of the date of the transaction. Exchange differences that result from settling these transactions and converting foreign-currencydenominated monetary assets and liabilities to closing exchange rates are recognized in the consolidated statement of income, except when deferred in equity as cash flow and hedges. (c) Basis of conversion Assets and liabilities denominated in a foreign currency and Unidades de Fomento are presented using the following respective exchange rates and closing values per US$1: Chilean pesos (Ch$) Argentine pesos (Ar$) Colombian pesos (Col$) 1, , Unidad de Fomento (UF) The Unidad de Fomento (UF) is an inflation-indexed monetary unit denominated in Chilean pesos. The UF rate is established daily in advance based on the prior month s variation in the Consumer Price Index.

100 Financial statements 99 (d) Basis of Conversion for subsidiaries with different functional currencies The earnings and financial position of all Group entities (none of which uses the currency of a hyperinflationary economy) with a functional currency that differs from the presentation currency are converted to the presentation currency as follows: (i) Assets and liabilities are converted using the year-end exchange rate. (ii) Income and expense accounts are converted using monthly average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the exchange rates existing as of the transaction dates, in which case income and expenses are converted using the exchange rate as of the transaction date); and (iii) All resulting translation differences are recognized as a separate component of net equity, within Foreing Currency Translation Reserves. In consolidation, translation differences that arise in converting a net investment in foreign entities and loans and other instruments in foreign currency designated as hedges for these investments are recorded in the statement of comprehensive income. By the time the investment is sold, these translation differences are recognized in the statement of income as part of the loss or gain from the sale. Goodwill and fair value adjustments that arise in the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and converted using the appropriate year or period-end exchange rate. 2.6 Property, plant and equipment Land belonging to the AES Gener Group is recognized at cost. Plants, buildings, equipment and transmission systems used for electricity generation and other items of property, plant and equipment are recognized at historical cost less any related accumulated depreciation and impairment losses. The cost of an asset includes its acquisition cost, all costs directly related to bringing the asset to the location and condition necessary for it to be capable of operating as intended by management and the initial estimate of costs for dismantling, withdrawing or partially or totally removing the asset, as well as costs for restoring the site where it is located, all of which the Company undertakes to do upon acquiring the asset or as a consequence of using the asset during a given period. Due to IFRS adoption, the Company proceeded to revalue some property, plant and equipment items, according to IFRS 1. The fair value of those assets, determined according to the revaluation made on the transition date, represents their cost under IFRS. Also, the Company chose to use the fair value of certain property, plant and equipment items transferred in a past transaction between some entities of the Group in the year 2004, items that were valued on the date of the transfer using their fair value as their attributable cost, in accordance with the exemption permitted under IFRS 1. Subsequent costs are included in the asset s initial value or recognized as a separate asset only when it is probable that the future economic benefits associated with the property, plant and equipment items will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. Repairs and maintenance are charged to income for the period in which they are incurred. Projects under construction include, among other concepts, the following expenses accrued only during the construction period: (i) Interest expenses related to external financing that are directly attributable to construction, both specific and generic in nature. In terms of generic financing, capitalized interest expenses are obtained by applying the weighted average cost of long-term financing to the average accumulated investment available for capitalization which is not specifically financed. (ii) Directly related personnel and other expenses of an operating nature attributable to the construction.

101 100 AnnualReport AES Gener 2010 Construction in progress are transferred to property, plant and equipment once the testing period is finalized when they are available for use, at which time depreciation begins. Depreciation of property, plant and equipment is calculated using the straight-line method considering their costs less their residual value over their estimated economic useful lives. The estimated useful lives of the most important principal asset classes are detailed in Note 16. The residual value and the useful life of the assets are reviewed, and adjusted if necessary, as of each year-end, so that the remaining useful life is in accordance with usage expectations for the asset. When the value of an asset is greater than its estimated recoverable value, its value is immediately reduced to its recoverable value by recognizing any impairment losses (See Note 2.8). Losses and gains on sales of property, plant and equipment are calculated by comparing the income obtained with the carrying amount and included in the statement of income. 2.7 Intangible assets (a) Goodwill Goodwill represents the excess of the acquisition cost over the fair value of AES Gener s share of the net identifiable assets of an acquired subsidiary / affiliate as of the purchase date. Goodwill related to acquisitions of subsidiaries is included in intangible assets. Goodwill related to acquisitions of affiliates is included in investments in affiliates and subjected to impairment testing together with the total balance of the investment in the affiliate. Goodwill recognized separately is subjected to impairment testing and valued at cost less accumulated impairment losses. Gains and losses on the sale of an entity include the carrying amount of goodwill related to the entity sold. Goodwill is allocated to cash generating units (CGUs) in order to test whether impairment exists in the CGUs. The allocation is made to those CGUs that are expected to benefit from the business combination in which the goodwill arose. (b) Software Licenses for purchased software are capitalized on the basis of the costs incurred to purchase and prepare for the use of each specific program. These costs are amortized over their estimated useful lives. Expenses related to software development or maintenance are expensed as incurred. Costs related directly to the production of unique and identifiable software controlled by the Group, and which will probably generate economic benefits greater than these costs for more than one year, are recognized as intangible assets. Direct costs include expenses for personnel that develop the software and an appropriate percentage of general expenses. Software development costs recognized as assets are amortized over their estimated useful lives. (c) Easements Easement rights are presented at historical cost. The exploitation period of these rights has no limit and therefore they are considered assets with an indefinite useful life, which consequently will not be subject to amortization. However, the determination of indefinite useful life is reviewed during each reporting period to determine whether the status of indefinite useful life still applies. These assets undergo impairment testing on a yearly basis. (d) Water rights Water rights are presented at historical cost. The exploitation period of these rights has no limit and therefore they are considered assets with an indefinite useful life and consequently will not be subject to amortization. However, the determination of indefinite the useful life should be reviewed during each reporting period to determine whether the status of indefinite useful life still applies. These assets undergo impairment testing on a yearly basis.

102 Financial statements Impairment of non-financial assets Assets subject to amortization are tested for impairment whenever any event or change in circumstances indicates that the carrying amount may not be recoverable. An impairment loss is recognized at the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the fair value of an asset less costs to sell or the value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that have suffered an impairment loss are reviewed as of each year-end in case events may have occurred that justify loss reversals. 2.9 Financial assets Presentation and classification AES Gener classifies its financial assets into the following categories: at fair value through profit and loss, loans and receivables, heldto-maturity financial investments and available-for-sale financial investments. The classification depends on the purpose with which the financial assets were acquired. Management determines the classification of its financial assets upon initial recognition. (a) Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss are financial assets held for trading. A financial asset is classified in this category if acquired principally to sell in the short term. Derivatives are also classified as acquired for trading unless they are designated as hedges. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. They are included in current assets, except those with maturities greater than 12 months from year-end, which are classified as noncurrent assets. Loans and receivables are included in Trade and other receivables in the consolidated statements of financial position. (c) Held-to-maturity financial investments Held-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group s management has the positive intention and ability to hold until their maturity. If the Group were to sell more than an insignificant amount of held-to-maturity financial assets, the entire category would be reclassified as a financial assets category available for sale. (d) Available-for-sale financial investments Available-for-sale financial investments are non-derivative financial assets that are designated to this category or are not classified in any other category. They are included in non-current assets unless Management intends to dispose of the investment within 12 months of year-end. Initial recognition and disposal Acquisitions and disposals of financial assets are recognized as of the date of negotiation (i.e. the date on which the Group commits to purchase or sell the asset). Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit and loss. Financial assets at fair value through profit and loss are initially recognized at fair value, and transaction costs are recorded in income. Investments are written off when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

103 102 AnnualReport AES Gener 2010 Subsequent valuation Available-for-sale financial investments and financial assets at fair value through profit and loss are subsequently recorded at fair value. Loans and receivables and held-to-maturity financial assets are accounted for at amortized cost using the effective interest rate method. Losses and gains that arise from changes in the fair value of the category of financial assets at fair value through profit and loss are included in the statement of income within other net gains (losses) in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognized in the consolidated statement of income within Other net gains (losses) when the Group s right to receive payment is established. Variations in the fair value of debt instruments denominated in foreign currency and classified as available for sale are analyzed by separating the differences arising from the amortized cost of the instrument and other changes in the instrument s carrying amount. Exchange differences of monetary instruments are recognized in the statement of income; translation differences of non-monetary instruments are recognized in net equity. Variations in the fair value of monetary and non-monetary instruments classified as available for sale are recognized in other comprehensive income. When instruments classified as available for sale are disposed of or impaired, the accumulated fair value adjustments recognized in net equity are included in the statement of income. Interest from available-for-sale instruments calculated using the effective interest rate method is recognized in the income statement within other net gains (losses). Dividend income from available-for-sale net equity instruments is recognized in the statement of income within other income when the Group s right to receive payment is established. The fair values of quoted investments are based on current acquisition costs. If the market for a financial asset is not active (and for unquoted instruments), the Group establishes the fair value using valuation techniques that include the use of recent transactions between willing and duly informed interested parties, in reference to other substantially similar instruments, a discounted cash flow analysis and options price fixing models, maximizing use of market inputs and relying as little as possible on entity-specific assumptions. Impairment As of each reporting date, the Group assesses whether there is objective evidence that a financial asset or a group of financial assets may be impaired. In the case of equity instruments classified as available for sale, to determine if impairment exists, the Company will consider whether a significant or prolonged decline in the fair value of the instruments below their cost has taken place. If any evidence of this type exists for available-for-sale financial assets, the accumulated loss determined as the difference between the acquisition cost and the current fair value, less any impairment loss in the value of that financial asset that was previously recognized in losses or gains, are eliminated from net equity and recognized in the consolidated statement of income. Impairment losses recognized in the consolidated statement of income for equity instruments are not reversed through the consolidated income statement. Trade and other receivables are recognized initially at fair value and then at amortized cost, in accordance with the method of effective rate less the allowance for impairment losses. The allowance for impairment losses in trade and other receivables is established when evidence exists that the Group will not be able to receive all amounts due according to the original terms. The existence of financial difficulties of the debtor, the probability that the debtor will enter into bankruptcy or financial reorganization and the failure or delay of payments are considered indicators that the account receivable has deteriorated. The amount of the allowance is the difference between the carrying amount of the asset and the present value of the future estimated cash flows discounted at the effective interest rate. The carrying amount of the asset is reduced as the allowance account is used and the loss is recognized on the income statement within Sales Costs. When an account receivable becomes uncollectable, it is offset by the allowance account for receivables. The subsequent recovery of amounts previously written off is recognized as a credit to Costs of Sales.

104 Financial statements Financial liabilities AES Gener classifies its financial liabilities into the following categories: at fair value through profit and loss, trade payables, interestbearing loans or derivatives designated as hedge instruments (See Note 2.11). Management determines the classification of its financial liabilities upon initial recognition. Financial liabilities are derecognized when the obligation is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of the existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognized in the statement of income. Financial liabilities are initially recognized at fair value and, in the case of loans, include costs directly attributable to the transaction. Subsequent measurement of financial liabilities depends on their classification, as described below: (a) Financial liabilities at fair value through profit and loss Financial liabilities are classified in the financial liabilities category at fair value through profit and loss when they are held for trading or designated upon initial recognition as at fair value through profit and loss. Gains and losses from liabilities held for trading are recognized in income. This category includes derivative instruments not designated for hedge accounting. (b) Trade payables Balances payable to suppliers are subsequently measured at their amortized cost using the effective interest rate method. (c) Interest-bearing loans Interest-bearing loans are subsequently measured at their amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any premium or discount on the acquisition and includes transaction costs that are an integral part of the effective interest rate Derivative financial instruments and hedging The Group uses derivative financial instruments such as interest rate swaps, cross currency swaps and currency forwards to hedge its risks associated with interest and exchange rate fluctuations. Derivatives are initially recognized at fair value on the date on which the derivative contract is signed and are subsequently re-measured at their fair value. The method for recognizing the loss or gain resulting from changes in the fair value depends on if the derivative has been designated as a hedging instrument and, if so, of the nature of the hedged item. The Group designates particular derivatives as: (a) fair value hedges; (b) cash flow hedges; and (c) net investment hedges in a foreign operation (net investment hedge). The Group documents the relationship between hedge instruments and the hedged items at the beginning of the transaction, as well as its risk management objectives and strategy for carrying out diverse hedge transactions. The Group also documents its assessment, both at the beginning as well as on a continual basis, of whether the derivatives used in hedge transactions are highly effective at offsetting changes in fair value or in the cash flows of hedged items. The fair values of various derivative instruments used for hedging purposes are shown in Note 10. The total fair value of the hedge derivatives is classified as a non-current asset or liability if the remaining maturity of the hedged item is greater than 12 months from the closure date and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. Derivates that do not qualify for hedge accounting are classified as current assets or liabilities/non current.

105 104 AnnualReport AES Gener 2010 (a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any change in the fair value of the hedged asset or liability that is attributable to the hedged risk. The Group has not used fair value hedges in the current reporting years. (b) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. Any loss or gain related to the ineffective portion is recognized immediately in the statement of income within other net gains (losses). Amounts accumulated in other comprehensive income are recorded in the statement of income in the periods in which the hedged item impacts earnings. In the case of variable interest rate hedges, this means that the amounts recognized in equity are reclassified to the income statement within interest expenses as the associated debts accrue interest. In the case of interest rate and cross currency swaps, the amounts recognized in equity are reclassified to the income statement within finance expense as interest accrues and in exchange rate differences from recording the debts at year-end exchange rates. When a hedge instrument matures or is sold or when it no longer meets hedge accounting requirements, any gain or loss accumulated in other comprehensive income remains in equity and is recognized when the forecasted transaction is finally recognized in the income statement. When the forecasted transaction is not expected to occur, any accumulated gain or loss in equity is recognized immediately in the statement of income within other net gains (losses). (c) Net investment hedge Net investment hedges in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss in the hedge instrument related to the effective portion of the hedge is recognized in net equity. Any loss or gain related to the ineffective portion is recognized immediately in the statement of income within interest expenses. Losses and gains accumulated in net equity are included in the statement of income when the hedged foreign operation is disposed of. The Group has not used net investment hedges in foreign operations for the current reporting periods. (d) Derivatives not designated as hedges Certain derivatives are not designated as hedges and are recognized at fair value through profit and loss. Changes in the fair value of any derivative instrument recorded in this way are recognized immediately in the statement of income within other net gains (losses). (e) Embedded derivatives The Company evaluates the existence of embedded derivatives in financial and non-financial instrument contracts to determine if their characteristics and risks are closely related to the host contract, as long as the host contract is not accounted as an asset or liability at fair value with changes to income. If not closely related, they are bifurcated by accounting for variations in fair value in the consolidated statement of income Inventory Inventory is valued at the lesser of cost and net realizable value. Cost is determined using the average weighted price method (AWPM). The net realizable value is the estimated sales price during the normal course of business, less applicable variable sales costs.

106 Financial statements Cash and cash equivalents Cash and cash equivalents include cash; time deposits in credit institutions; other highly-liquid, short-term investments originally maturing in no more than three months net of bank overdrafts. In the statement of financial position, bank overdrafts are classified as external resources within current liabilities. The classification of cash and cash equivalents does not differ from that used in the cash flow statement Issued capital The Company s share capital is represented by a single class of ordinary shares with one vote per share. Incremental costs directly attributable to the issuance of new shares or options are presented in net equity as a deduction, net of taxes, of the funds obtained by issuing new shares Current and deferred income taxes The Company and its subsidiaries determine their current income taxes based on their net taxable income, which is determined in accordance with tax laws in effect for each year. Deferred taxes arising from temporary differences and other events that generate differences between the book and tax bases of assets and liabilities are recorded in accordance with IAS 12 Income taxes. Income taxes for the period are determined as the sum of the Company s current taxes and those of its subsidiaries, which result from applying taxes to net taxable income for the period, which includes taxable income and deductible expenses, plus variations in deferred tax assets and liabilities and tax credits. Differences between the carrying amount of assets and liabilities and their tax basis generate (with the exception of investments in subsidiaries, affiliates and business participation as indicated ahead) asset and liability balances for deferred tax that are calculated using the tax rate expected to be in effect when the assets and liabilities are realized. A deferred tax liability is recognized for temporary tax differences with subsidiary investments, affiliates or business participations, except when the following conditions are fulfilled: (a) the parent company, investor or participant of a business can control the opportunity to reverse the temporary difference and (b) it is probable that the temporary difference will not be reversed in the future. A deferred tax asset is recognized for all temporary tax differences deductible that originate from subsidiary investments, affiliates or business participations, only to the extent that it is probable that: (a) Temporary differences are reverted in the future (b) There is liquid taxable income against which temporary differences can be used. Current taxes and variations in deferred taxes that do not arise from business combinations are recorded to income or equity, based on where the gains or losses that originated them were recorded. Deferred tax assets and tax credits are recognized only to the extent that it is probable that sufficient future taxable profits exist to recover the deductible temporary differences and make use of the tax credits. Group companies with tax losses recognize a deferred tax asset when use of these losses is likely, for which generation of future taxable profits and the expiration date of the tax losses are considered. In both Chile and Colombia, tax losses do not expire, but in Argentina they expire after five years. Argentine subsidiaries determine minimum expected income taxes by applying the current rate of 1% to all admissible assets as of each period end. This tax is complementary to income tax. The obligation for each period consists of the greater of minimum expected tax or income tax. However, if the minimum expected tax exceeds income tax in any fiscal year, this excess may be applied as payment for any income tax surplus over the minimum expected tax that may arise in any of the following ten fiscal years.

107 106 AnnualReport AES Gener Employee benefits (a) Pension obligations and other post-employment obligations-short term The Company recognizes all liabilities related to voluntary pension plans for retired employees current active employees do not receive this benefit upon retiring) and other post-employment benefits, such as those stipulated in collective agreements, as the Company s normal practices. (b) Defined benefit plans Pension benefits include a complementary pension, which is paid throughout the employee s lifetime, in addition to benefits received through the Chilean social security system. These benefits also include complementary health services and electricity subsidies. Likewise, the Colombian subsidiary Chivor has a pension plan limited to a certain group of employees that consists of a complementary pension for those persons not covered by the provisions of Law N º 100 of This liability has been recorded at the value of the actuarially-determined liability for the projected benefit discounted at an annual nominal rate and includes the probability of such payments or benefits based on mortality (in the case of retired employees) and rotation. In Chile, the discount rate is based on the performance of UF-denominated sovereign bonds from the Chilean Central Bank and average long-term projected inflation, while the rate in Colombia is determined based on the performance of long-term sovereign bonds issued by the Colombian government. Benefits for current retired employees, who are only entitled to medical benefits and electricity subsidies, are recognized based on an estimate of the portion of benefits earned as of the balance sheet date. Liabilities for medical benefits and electricity subsidies have been determined based on trends for future medical and fixed electricity costs for the bonus given to retired. Actuarial losses and gains that arise from experience adjustments and actuarial hypothesis changes that do exceed 10% of the defined benefit plans, are charged or credited in the income statement over the employees remaining expected work lives. Actuarial losses and gains that do not exceed 10% are charged or credited to the net equity recognized in the period they are generated. (c) Share-based compensation AES Corporation, majority shareholder of AES Gener S.A., grants share-based compensation, which consists of a combination of options and restricted stock, to certain employees of its subsidiaries. Rights to these plans generally vest over a term of three years. The fair value of employee services received in exchange for a stock options award is recognized as an expense and a corresponding increase or contribution in the Company s net equity. The cost is measured as of the granting date based on the fair value of the equity instruments or liabilities issued and is recognized as an expense using the straight-line method over the vesting period, net of an estimate for unexercised options (see Note 32). Currently, the Company uses the Black-Scholes model to estimate the fair value of the stock options granted to employees. (d) Staff severance indemnities The Company s obligation for staff severance indemnities agreed upon with its personnel is recognized as provisioned at the present value of the total obligation using the projected benefit cost method, considering a discount rate based on UF-denominated sovereign bonds from the Chilean Central Bank and average long-term projected inflation. Assumptions considered in the calculation include the probability of such payments or benefits based on mortality (in the retired employment cases) and in employment rotation, future costs, level benefits and discount rate. The discount rate is determined in the same way as pension benefits.

108 Financial statements Provisiones Provisions for environmental restoration, site restoration and asset removal, restructuring and litigation expenses are recognized when the Group has a current obligation, whether legal or implicit, as a result of past events; it is likely that an outflow of resources will be needed to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses. These provisions are valued at the present value of the disbursements that are expected to be necessary to settle the obligation using a discount rate that reflects the current market assessments of the time value of money and the specific risks of the obligation. Increases in provisions due to the passage of time are recognized as an interest expense Revenue recognition Operating income includes the fair value of considerations received or to be received for the sale of goods and services in the ordinary course of the Group s activities. Operating income is presented net of value added taxes, returns, rebates and discounts and after eliminating inter-group sales. The Group recognizes revenues when the amount of revenue can be reliably measured, it is probable that the future economic benefits flow to the entity and specific conditions have been met for each of the Group s activities as described below. The amount of revenue is not considered to be reliably measured until all contingencies related to the sale have been resolved. The Group bases its estimates on historical results, taking into account the type of customer, type of transaction and the concrete terms of each agreement. (a) Sales revenues Income from energy and capacity sales is recognized once the energy or capacity has been physically delivered at prices established in the respective contracts or at current electricity market prices in accordance with current regulations. This includes income from energy and capacity supplied but not invoiced, up to year-end, valued at prices defined in contracts or in the respective regulations for each year. These values are accounted for in trade and other receivables within current assets. Before its elimination under the regulatory mechanism, as of December 31, 2009, among its income, the Company accrues income from non-contractual energy sales to distributors at marginal cost in accordance with transitory article 3 of Law Nº 20,018. This standard establishes that generation companies shall receive the current node price for supplies subject to price regulations not covered by contracts, crediting or charging the respective positive or negative differences between the marginal cost and the current node price. In accordance with Exempt Resolution No. 885 dated December 24, 2007, from the National Energy Commission s Toll Office, these differences will be settled by increasing the node price by up to 20%. If a 20% increase were insufficient to cover these differences, the remaining difference, including price-level restatements, would be added to node prices for future periods until the difference has been completely exhausted. In addition, the Company recognizes income from sales of inventory such as coal and natural gas upon transfer of the related risks and rewards to its customers, as well as of engineering, consulting and other services when the service is provided based on the percentage of completion method. (b) Interest income Interest income is recognized using the effective interest rate method. (c) Dividend income Dividend income is recognized when the shareholder s right to receive payment is established. (d) Deferred income The Company has included charges paid in advance for facility use and supply contracts within both current and non-current liabilities. The effect on income of these payments is recognized as operating income over the life of the respective contract.

109 108 AnnualReport AES Gener Leases Leases in which all risks and rewards of ownership are substantially transferred are classified as finance leases. All remaining leases are classified as operating. The Group applies IFRIC 4 to determine if an agreement is, or contains, a lease. (a) Group as a lessee finance lease The Group leases certain property, plant and equipment. Leases of property, plant and equipment in which the Group retains substantially all risks and rewards of ownership are classified as finance leases. Assets subject to finance leases are capitalized at the beginning of the lease at the lesser between the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is distributed between the liability and finance charges to attain a constant interest rate on the outstanding balance of the obligation. The corresponding lease obligations, net of finance charges, are included in other non-current accounts payable. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Items of property, plant and equipment acquired under a finance lease are depreciated over the lesser period between their useful lives and the duration of the respective contract. (b) Group as a lessee - operating lease Leases in which the lessor retains an important part of the risks and rewards of ownership are classified as operating leases. Payments for operating leases (net of any incentive received from the lessor) are charged to the income statement on a straight-line basis over the lease period. (c) Group as a lessor - finance lease When assets are leased under finance leases, the present value of the lease payments is recognized as a financial account receivable. The difference between the gross amount receivable and the present value of the amount is recognized as a financial return on capital. Income from leases is recognized during the lease period using the net investment method, which reflects a constant periodic rate of return. (d) Group as a lessor- Operating lease Assets leased to third parties under operating leases are included in property, plant and equipment within the statement of financial position. Income from operating leases is recognized in the statement of income on a straight-line basis over the lease period Dividend distributions Dividend distributions to the Company s shareholders are recognized as a liability with a corresponding decrease in net equity in the Group s consolidated yearly accounts in the fiscal year in which the dividends are approved by the Company s shareholders. As of each period end, the Company provisions 30% of that period s net income in accordance with Law Nº 18,046 as minimum dividend because this law requires the distribution of at least 30% of financial earnings of the period, unless the Shareholders Board decides unanimously against it Environmental expenditures Expenditures related to environmental protection are charged to the income statement when incurred. Investments in infrastructure works intended to comply with environmental standards are capitalized based on the general accounting criteria for property, plant and equipment, in accordance with IFRS.

110 Financial statements 109 NOTA 3 Financial Risk Management, Objectives and Policies 3.1 Risk Management Policy The Company s risk management strategy is designed to safeguard the stability and sustainability of the Gener Group in relation to all relevant components of financial uncertainty. The Company s risk management is aligned with the general guidelines defined by AES Corporation. Financial risk events refer to situations in which there is exposure to conditions that indicate financial uncertainty, and are classified based on the source of the uncertainty and associated transmission mechanisms. For this reason, management sees the responsible and effective management of all components of financial uncertainty that are identified and evaluated as relevant to its operations as strategic from a standpoint of value creation. The following aspects of financial risk management are important: - Providing transparency, establishing and managing risk tolerances and determining guidelines in order to develop strategies to limit significant exposure to risk - providing a discipline and a formal process for assessing risk and carrying out the commercial aspects of the business Financial risk management involves the identification, determination, analysis, quantification, measurement and control of these events. It is management s responsibility, particularly for financial and commercial management, to constantly assess and manage financial risk. 3.2 Risk Factors Market risk Market risk corresponds to uncertainty associated with variations in variables that affect the Company s assets and liabilities Foreign currency risk The Company s functional currency is the US dollar given that its revenue, expenses and investments in equipment are mainly determined using the dollar. Also, the Company is authorized to declare and pay its taxes in US dollars. Foreign currency risk is associated with any revenue, expenses, investments and debt denominated in any currency other than US dollars. The main items denominated in Chilean pesos are accumulated credit balances from Ministerial Resolution Nº 88, accounts receivable for energy sales and tax credits mainly related to VAT credits. As of December 31, 2010, Gener maintained many currency-hedging mechanisms to cover the exposure to Chilean peso variations. As of December 31, 2010, the impact of a 10% variation in the exchange rate of the Chilean peso with respect to the dollar could generate an impact of approximately 15,000 on AES Gener s results. During the year 2010, approximately 83% of operating revenue and 93% of the Company s expenses were in US dollars. In relation to the foreign subsidiaries, it is worth noting that Chivor s functional currency is the Colombian peso, since the majority of the subsidiary s revenue, particularly contract sales and operating costs are linked to the Colombian peso. As of December 31, 2010, the Colombian peso sales represented a 13% of the consolidated income. Additionally, Chivor dividends are determined in Colombian peso, although financial hedge instruments are used to fix the amount in US dollars. On the other hand, spot prices in the Argentinean market are fixed in Argentinean pesos. The income for these sales represented the 4% of the consolidated incomes, as of December 31, In addition, investments in new plants and maintenance equipment are mainly set in US dollars. The majority of short-term investments for cash management purposes are in US dollars. As of December 31, 2010, 88% of short-term investments were in US dollars, 11% in Chilean pesos and 1% in Colombian pesos.

111 110 AnnualReport AES Gener 2010 With respect to debt denominated in currencies other than the US dollar, Gener has entered into currency swaps to eliminate exchange rate risk. For UF-denominated bonds issued in 2007 for approximately 217,000, AES Gener has a currency forward for the duration of the debt. As of December 31, 2010, 97% of the debt for Gener and its subsidiaries is in US dollars, including the bonds mentioned above. The following table shows the composition of debt by currency as of December 31, 2010 and 2009: Currency December 2010 % December 2009 % US$ UF 2 3 $ - - Col$ Interest rate risk Variations in interest rate affect the value of assets and liabilities that accrue interest at a fixed rate, as well as cash flows from financial assets and liabilities with a variable interest rate. To mitigate interest rate risk for long-term obligations, Gener has entered into interest rate swaps. Currently, the Company has interest rate swaps for an important part of the debt associated with the Nueva Ventanas and Angamos projects. The following table shows the composition of debt by type of interest rate as of December 31, 2010 and 2009: Tasa December 2010 % December 2009 % Fixed rate Variable rate Commodity price risk The fuel used by the Company, mainly coal, diesel and liquated natural gas (GNL), is composed of commodities with international prices set by market factors outside of the Company s control. The diesel and GNL are bought based on the international oil price through bilateral local suppliers agreements. Fuel price risk is related to fluctuations in these prices. The price of fuel is a key factor in plant dispatch and spot prices both in Chile and Colombia. Price variations for fuels such as coal, diesel and natural gas can change the composition of the Company s costs through variations in marginal cost. Since AES Gener is a company with a mainly thermal generation mix, fuel costs represent a significant portion of the cost of sales. With regard to coal purchases, the Company already has coal supply contracts, at a fixed price, for most 2010 coal requirements. Currently the most part of Gener s energy sales contracts incorporate indexation mechanism that adjust the price based on the variations in coal price, according to the indexes and calendars referred in every contract. In addition, the Company created a acquisition coal strategy maintaining a fix and variable part in order to align is generation costs with is energy sales, AES Gener also consider the execution of a hedging mechanism for coal price as to protect its operating margin.

112 Financial statements 111 Currently, diesel purchases are not hedged, and it is estimated that a 10% variation in the cost of this fuel in year 2010 would have meant a positive or negative variation of approximately 11,000 in the Company s gross margin. It is worth to note that Nueva Renca s unit, subsidiary of Sociedad Eléctrica Santiago S.A., can use either diesel or GNL and acquire defined GNL volumes according with short term contracts when GNL price is more competitive than diesel. Termoandes Embedded Derivative: The Argentinean subsidiary Termoandes S.A. maintains a natural gas supply contract with different counterparties. The contract includes a variable that is related with the indexation to the natural gas supply prices, that is considered not closely related with the host contract, therefore it was separated and, the embedded derivative was accounted at its fair value Credit risk Credit risk is related to the credit rating of the parties with which AES Gener and its subsidiaries do business. These risks are primarily reflected in trade receivables, financial assets and derivatives. With respect to trade receivables, AES Gener s counterparties are mainly distribution companies and other generators with high solvency, and over 90% of them have local and/or international investment-grade risk ratings. In Colombia, Chivor do risk evaluations of their counterparties based on an internal credit evaluation, that in certain cases could include guarantees. Regarding financial assets and derivatives, investments made by AES Gener and its subsidiaries are executed with local and foreign financial institutions with national and/or international risk ratings greater than or equal to A in Standard & Poor s scale and A2 in Moody s scale. Similarly, derivatives executed for financial debt are carried out with top-level international entities. The Company has cash, investment and treasury policies to guide its cash management and minimize credit risk. The maximum credit exposure at the date of this report is the accounting value for each kind of financial assets referred in Note 10. The Company do not maintain any guarantee for those financial assets Liquidity risk Liquidity risk relates to the need for funds to meet payment obligations. The Company s objective is to maintain balance between fund continuity and financial flexibility through normal operating cash flows, bank loans, public bonds, short-term investments and both committed and uncommitted credit lines. As of December 31, 2010, AES Gener had a total cash balance of 593,000, that included cash and cash equivalents for 294,000, time deposits and current US dollars mutual funds for a total of 299,000, registered in Other Financial Assets, Current. On the other hand, as of December 31, 2009, total cash balance was 481,000, including cash and cash equivalents for 163,000 and time deposits and current US dollars mutual funds for a total of 318,000. It is important to note that cash and cash equivalents include cash, time deposits, marketable securities, US dollars available for sale mutual funds, rights with repo agreements and fiduciary rights. Additionally, as of December 31, 2010, AES Gener possesses committed and unused credit lines for close to 223,000, in addition to uncommitted and unused credit lines for close to 275,000.

113 112 AnnualReport AES Gener 2010 In relation with debt maturities, Gener has no important maturities until year The graphic below shows the maturity profile, based on actual debt, in million of US dollars: Risk Measurement The Company maintains methods to measure the efficiency and effectiveness of risk strategies, both prospectively and retrospectively. For those analyses, different market methods for risk quantification are used, such as regression methods, risk bearing and maximum risk exposure, to adjust risk strategies and mitigation methods and asses their impact. NOTA 4 SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS Management must make judgments and estimates that have a significant effect on the figures presented in the financial statements. Changes in assumptions and estimates may have a significant impact on the financial statements. The estimates and critical judgments used by the Company s management are detailed below: - Hypotheses used in actuarial calculations of post-employment obligations with employees. - The useful life and residual values of property, plant and equipment and intangible assets. - The assumptions used to calculate the fair value of financial instruments, including credit risk. - The probability of occurrence and the amount of contingent liabilities or liabilities whose amount is uncertain. - Future disbursements for asset dismantling or removal obligations. - Determination of the existence of finance or operating leases based on the transfer of risks and rewards of the leased assets. - Assets valuation and investment impairment to determine the existence of losses. Although these estimates have been made based on the best information available as of the date of issuance of these interim consolidated financial statements, it is possible that developments that could take place in the future may force the Company to modify (increase or decrease) them in upcoming periods, which would be conducted prospectively, recognizing the effects of the change in estimate on the corresponding future consolidated financial statements, as stated by IAS 8. NOTE 5 SEGMENT REPORTING a) Earnings by segment The Company defines and manages its activities based on certain business segments that meet particular and individual economic, regulatory, commercial or operating characteristics.

114 Financial statements 113 A segment is a component of the Group: - that engages in business activities from which it generates income and incurs costs - whose operating results are regularly monitored by management, in order to make decisions, allocate resources and evaluate performance, and - for which discrete financial information is available Management monitors the operating results of each business segment separately to make decisions related to resource allocation and performance evaluations. A segment s performance is evaluated based on certain operating indicators such as gross profit (i.e. the difference between ordinary income and cost of sales) and Ebitda (i.e. gross profit before depreciation expenses, less administrative expenses and other miscellaneous operating expenses, plus certain operating income that does not form part of gross profit). Financial income and income taxes are analyzed and managed on a consolidated basis and, therefore, are not allocated to operating segments. Earnings and asset balances in segments are measured in accordance with the same accounting policies applied to the financial statements. Transaction and not realized results between segments were eliminated. AES Gener s financial liabilities are centralized and controlled at a corporate level and are not presented by reportable segments. b) Customers by segment The Company segments its business activities based on the interconnected energy markets in which it operates, which are: - The Central Interconnected System ( SIC ) - The Great North Interconnected System ( SING and SADI ): - The Northern Interconnected System ( SIN ), for its operations in Colombia. Throughout all segments, the Company s principal activity consists of electricity generation. Throughout all segments, the Company s principal activity consists of electricity generation. The principal customer s classifications, according with the referred segments, are as follow: Energy Sales by Market (GWh) December 2010 December 2009 SIC 8,491 7,464 Regulated 7,502 5,776 Distco. without contracts - 1,179 CDEC Non-regulated SING 3,003 3,135 Regulated - - CDEC 970 1,120 Non-regulated 2,033 2,015 SIN Colombia 5,542 6,167 Spot and others 2,743 2,876 Distribution companies 2,799 3,291 SADI 2,396 2,268 Customers Sales Spot Sales 2,154 2,222 Total Sales 19,432 19,034

115 114 AnnualReport AES Gener 2010 Assets by Segment as of December 31, 2010 and December 31, 2009 Assets by Segment SIC Market SING Market SIN Market Intercompany Eliminations Total SIC Market SING Market SIN Market Intercompany Eliminations Trade and other receivables (1) 491, ,679 79,188 (236,188) 443, , ,229 53,306 (211,111) 519,897 Property, plant and equipment, net (*) 1,719,154 1,774, ,663 (2,063) 4,178,072 1,724,115 1,582, ,632 (2,145) 3,962,339 Total Investment in Empresa Eléctrica Guacolda S.A. 252, , , ,978 (1) Trade and other receivables, net, includes both current and non-current portions as well as the account Accounts receivable from related companies, current. (*) See note 16 Property, Plant and Equipment. Income, costs and earnings by Segment for the years ended December 31, 2010 and Earnings by Segment SIC Market SING Market SIN Market Intercompany Eliminations Total SIC Market SING Market SIN Market Intercompany Eliminations Total Operating income, total 1,071, , ,460 (71,449) 1,802, , , ,029 (71,442) 1,653,420 Cost of sales 987, , ,346 (71,449) 1,368, , , ,965 (71,442) 1,165,487 Gross profit 83, , , , , , , ,933 EBITDA 82, , , , , , , ,373 Equity in earnings of 42, ,361 28, ,049 Guacolda Investment Equity Investments 84, ,097 3, , , ,846 4, ,770 NOTE 6 CASH AND CASH EQUIVALENTS Balance as of Classes of Cash and Cash Equivalents Cash on hand Cash at banks 46,924 26,565 Short-term deposits 170, ,516 Other cash and cash cquivalents 76,915 33,474 Cash and Cash Equivalents 294, ,647 Short-term deposits mature in less than three months from their date of acquisition and accrue interest at market rates for this type of short-term investments. Other cash and cash equivalents primarily include mutual funds, which are low risk investments in US Dollar that permit immediate availability without restrictions, registered at their fair value as of the closing date of these financial statements, and agreements with repo commitments, which are short-term investments with banks and stock brokerage firms, backed by financial instruments issued by the Chilean Central Bank and private banks with high quality credit.

116 Financial statements 115 Balances of cash and cash equivalents included in the statement of financial position do not differ from those in the cash flow statement. Cash and cash equivalents by type of currency as of December 31, 2010 and December 31, 2009 are detailed as follows: Cash and Cash Equivalents by Currency Currency Balance as of Amount of cash and cash equivalents $ 78,231 40,672 Amount of cash and cash equivalents Ar$ 7,422 3,530 Amount of cash and cash equivalents Col$ 4,312 2,325 Amount of cash and cash equivalents US$ 204, ,120 Total Cash and Cash Equivalents 294, ,647 As of December 31, 2010 and 2009, included in Cash and Cash equivalent, cash amounts with minor restrictions are being held, for operational effects, detailed as follows: Compañía Instrument Balance as of Empresa Eléctrica Angamos S.A. Other-cash with minor restrictions 12, Empresa Eléctrica Ventanas S.A. Other-cash with minor restrictions 28, Total 40,927 1,096 The balance related to Angamos is restricted by the requirement of the credit agreement with ABN AMRO bank and BNP Paribas bank. Reserve amounts related to operational activities of Ventanas are required by the credit agreement with BNP Paribas and Calyon banks. NOTE 7 OTHER FINANCIAL ASSETS As of December 31, 2010 and 2009 other financial assets are detailed as follows: Other Financial Assets Current Balances as of Non-Current Mutual funds - 117, Time deposits 298, , Embedded derivate instrument 488 9, RM 88 Forward instrument Gasoducto Gasandes S.A ,877 9,877 Gasoducto Gasandes S.A (Argentina) - - 2,200 2,200 Account receivable from Gasoducto Gasandes S.A ,215 2,215 CDEC SIC Ltda CDEC SING Ltda Hedging instrument ,075 82,191 Restricted cash Other 1, Total 300, ,210 68,631 98,115

117 116 AnnualReport AES Gener 2010 Mutual funds, that are presented as of December 31, 2009, correspond to US dollar-denominated investments funds, recorded at unit value (fair value), and that were classified in this item considering the instrument type and risks associated to these investments. Time deposits investments were classified here because they have a maturity of more than three months. Their carrying values approximate to their fair value, due to the short term nature of their maturities. Embedded derivative instruments, forwards instruments and hedging assets are registered at their fair value (more detail in Note 8 e) Valuation of Derivative Instruments). The investments in Gasoducto Gasandes S.A. (Argentina) and Gasoducto Gasandes S.A. correspond to a 13% interest that AES Gener S.A. holds in both companies (more detail in Note 8 a) Financial Assets by category). (see Note 26: Other Gain (losses). NOTE 8 FINANCIAL INSTRUMENTS 8.a) Financial assets Financial assets are classified into the categories described in Note 2.9, detailed as follows: Dec Cash and Cash Equivalents Loans and Receivable At Fair Value Through Profit and Loss Cash Flow Hedges Available for Sale Total Cash and cash equivalents 294, ,261 Other financial assets, current , ,500 Trade and other receivables - 317, ,277 Other financial assets, non-current ,075 14,986 68,631 Accounts receivable from related companies - 12, ,109 Total 294, , , , ,106 Dec Cash and Cash Equivalents Loans and Receivable At Fair Value Through Profit and Loss Cash Flow Hedges Available for Sale Total Cash and cash equivalents 162, ,647 Other financial assets, current , ,210 Trade and other receivables - 332, ,761 Other financial assets, non-current ,191 14,986 98,115 Accounts receivable from related companies - 5, ,426 Total 162, ,990 10,520 82, , ,159

118 Financial statements 117 Estimation of fair value of financial instruments: The carrying value is of financial assets such as cash and cash equivalents and current portion of accounts receivable to related companies are approximately equivalent to their fair values, due to the short-term nature of their maturities. Instruments recorded in other financial assets, current and non-current, classified as financial assets at fair value through profit and loss and hedge financial instruments (that includes embedded derivatives, hedge derivative and non-hedge derivatives) are presented at their fair value in the Consolidated Statement of Financial Position. In Note 8.e) the method used for the calculation of their fair value is presented. Financial instruments classified as available-for-sale financial investments registered in Other financial assets, current and non-current, correspond to investment funds which are registered at fair value (coupon value of the funds) and time deposits, that due to the short-term nature of their maturities, their carrying values are approximately equivalent to their fair values. Additionally, investments in CDEC and Gasoducto Gasandes are presented, both at cost due to the insufficient information available necessary to determine their market value (see Note 7 Other financial assets for more information). The carrying values of the current portion of trade receivables and account receivables as of December 31, 2010 are approximately equivalent to their fair values, due to the short-term nature of their maturities. For the non-current debtors as of December 31, 2009, the balance is presented at its discount value, using a 3% rate (free risk base rate plus the market spread). 8.b) Credit risk of financial assets The Company is exposed to credit risk in its commercial activities as well as in its financial activities. Credit risk of AES Gener counterparties and Chilean subsidiaries The credit quality of counterparties of the AES Gener group related to the commercial operations and the group s major local banks focuses primarily on clients with a risk rating of AA- or higher according to the main Chilean rating agencies, such as Feller-Rate and Fitch Chile risk rating, which determine the solvency of the entities from categories AAA to E, with the first category mentioned considered the most solvent and with the highest capacity to pay. With respect to interest derivative financial instruments, the international counterparties are mainly classified with the risk classification A or higher according to Standard & Poors risk rater, which determines the solvency of commercial and financial institutions in different categories, with the category AAA considered to have the highest ability to pay. Credit quality of foreign subsidiaries The Colombian subsidiary, AES Chivor S.A., brings to its financial counterparts (banks) in Colombian pesos a credit classification of AAA, considered to be the highest credit quality classification according to the Colombian risk Duff & Phelps risk rater. With respect to the credit quality of financial counterparts in United States dollars, Chivor has a lower bound rating of A+ (Standard & Poors) or A1 (Moody s), which is considered to be a low credit risk. With respect to credit risk for commercial operations, Chivor is historically very limited, given the short-term nature of client receivables. The Administration considers that the Argentine subsidiary, Termoandes S.A. has no major credit risks because it mainly concentrates its commercial operations with AES Gener and CAMMESA (Administrative Company of the Wholesale Electric Market of Argentina, governmental institution).

119 118 AnnualReport AES Gener c) Financial liabilities Dec At Fair Value, Through Profit and Loss Cash Flow Hedges Other Financial Liabilities Other financial liabilities, current 2,435 38,325 57,186 97,946 Trade and other payable , ,806 Other financial liabilities, non-current - 38,096 2,062,376 2,100,472 Accounts payable to related companies 5,072-23,617 28,689 Total 7,507 76,421 2,370,985 2,454,913 Total Dec At Fair Value, Through Profit and Loss Cash Flow Hedges Other Financial Liabilities Other financial liabilities, current ,425 58,884 84,565 Trade and other payable , ,807 Other financial liabilities, non-current ,235 1,729,988 1,770,600 Accounts payable to related companies - - 6,474 6,474 Total ,660 2,134,153 2,200,446 Total Fair Value Estimate of Financial Liabilities: The carrying value of the current portion of payables to related parties and trade payables approximates their fair values given the shortterm nature of their maturities. Instruments recorded in other current and non-current financial liabilities classified as financial liabilities at fair value through profit and loss (derivatives not designated as hedging instruments and embedded derivatives) and hedge derivatives are presented at fair value in the Statement of Financial Position. Note 8.e) explains the methodology used to calculate these fair values. Interest-bearing loans recorded in other current and non-current financial liabilities present differences between their carrying and fair values due principally to fluctuations in the exchange rate (US dollar and UF) and market interest rates. The calculation methodology consists of discounting future cash flows from the debt to present value using a yield curve. For the purposes of calculating present value, are used assumptions such as the currency of the debt, the credit rating of the instrument and the credit rating of the Company or Group. The following chart details the book and fair values of interest-bearing loans: Balances Interest Bearing Loans Carrying Value Fair Value Carrying Value Fair Value Interest bearing loans 2,119,562 2,330,597 1,788,872 2,000,418 8.d) Derivative instruments Financial derivatives that Gener and its subsidiaries hold correspond primarily to transactions entered into with the intent to hedge interest and exchange rate volatility arising from financing the development of electric projects. The Company, in line with its risk management policy, enters into interest rate and cross currency swaps to reduce the anticipated variability of the underlying item future cash flows (debts).

120 Financial statements 119 The portfolio of derivative instruments as of December 31, 2010 and December 31, 2009, is detailed as follows: 1) Cash flow hedges 1.1. Interest rate swaps Empresa Eléctrica Ventanas S.A. In June 2007, Empresa Eléctrica Ventanas executed four interest rate swap contracts with the banks Standard Chartered, Scotiabank, Calyon New York Branch and BNP Paribas, maturing in 15 years for 315,000, to fix variable interest rates during the construction and operating periods of its facility. These swap contracts partially hedge the loan led by BNP Paribas and Calyon New York Branch, for the Nueva Ventanas Power Plant whose construction finalized in December Empresa Eléctrica Angamos S.A. In December 2008, Empresa Eléctrica Angamos executed seven interest rate swap contracts, with the banks SMBC, the Royal Bank of Scotland Bank, BNP Paribas, Calyon, Fortis, HSBC and ING, maturing in 17 years for 690,000, to fix variable interest rates during the construction and operating periods of its facility. These swap contracts partially hedge the syndicated loan led by ABN AMRO and BNP Paribas that was signed during Detail of Derivative Instruments Counterparty Classification Interest rate swap Varios Cash flow hedge Interest Rate 2.80% % Current As of As of Asset Liability Asset Liability Non-Current Current Non-Current Current Non-Current Current Non-Current - 48,771 31,191 38,096-81,989 25,425 28,396 Total - 48,771 31,191 38,096-81,989 25,425 28, Cross currency swaps In December 2007, AES Gener signed two cross currency swaps with Credit Suisse International to redenominate a new obligation 5.6 million in two series of locally-placed bonds (N and O) from UF to US dollars, equivalent to approximately 217,000 as of the date of issuance, maturing in 2025 and On September 2009, AES Gener S.A. signed a modification to the cross currency swap contract in Series N of the locally-placed bond. The previous contract was terminated. The new contract was subscribed with Credit Suisse and Deutsche Bank. Both swap contracts include provisions that requires that AES Gener grant a guarantee when the swap market value exceeds the contract limit. Detail of Derivative Instruments Counterparty Classification Cross Currency Swap Credit Suisse - Deutsche Bank Cash flow hedge As of As of Asset Liability Asset Liability Current Non-Current Current Non-Current Current Non-Current Current Non-Current 209 4, ,839 Total 209 4, ,839

121 120 AnnualReport AES Gener Foreing currency forwards In August and October 2010, AES Gener S.A signed two currency forwards, related with trade and other payables to regulated customers, with Scotiabank, Deutsche Bank, JP Morgan and HSBC, for a total nominal amount of 173,514 with maturity on May 25, The nominal amount outstanding as of December 31, 2010 is 140,825. Fair values of these instruments are included in the following table: Detail of Derivative Instruments Counterparty Classification As of As of Asset Liability Asset Liability Current Non-Current Current Non-Current Current Non-Current Current Non-Current Currency forward Various Cash flow hedge - - 7, Total - - 7, Other disclosures of cash flow hedge Hedge maturities are included in the following table: Period Maturity (Notional Value) Therafter Total Company Type Counterparty Classification Start End AES Gener S.A. Credit Suisse ,042-47,042 AES Gener S.A. Emp. Eléctrica Angamos S.A. Emp. Eléctrica Ventanas S.A. Cross currency Swap Cross currency Swap Deutsche Bank and Credit Suisse Cash flow hedge Cash flow hedge Interest rate swap Various Cash flow hedge Interest rate swap Various Cash flow hedge , , ,296 30,169 27,195 32, , , ,000 15,000 16,000 18,000 20, , ,000 Total 13,000 32,296 46,169 45,195 99, ,391 1,217,306 For more debt maturities details, see Note 18 Other Financial Liabilities. The Company has not executed cash flow hedge instruments for highly probable transactions that then failed to occur. - Amount recognized in Other Comprehensive Income (OCI) (net of taxes) Amount recognized in equity (74,641) 87,787 As of December 31, 2010 and 2009, 627 and 183 has been reclassified from other comprehensive income to earnings due to Cross Currency Swap amortization of Series N bonds. As of December 31, has been reclassified from other comprehensive income earnings, related to capitalized interest amortization. In the periods ending on December 31, 2010 and 2009, the amounts included in the carrying amounts of hedge items were not reduced by equity amounts. As of December 31, 2010 and 2009, 14,320 and 5,062 has been recognized in earnings due to the infectiveness of the hedge program, respectively.

122 Financial statements 121 2) Derivatives not designated as hedging instruments In November of 2009 and January 2010, AES Gener S.A signed currency forward contracts related to sales to customers without a contract with Banco de Chile, Scotiabank and HSBC, for a total amount of 81,702, maturing on November 28, The nominal amounts as of December 31, 2010 are 38,649. During 2010, AES Chivor signed currency forward contracts, related to dollar drawings with HSBC for a nominal amount of 86,772, maturing on May The nominal amounts as of December 31, 2010 are 6,713. The fair values of these instruments are included in the following tables: As of As of Asset Liability Asset Liability Derivative Instrument Counterpart Bank Classification Currency forward Various Financial asset at fair value through profit and loss Current Non-Current Current Non-Current Current Non-Current Current Non-Current 155-2, Total 155-2, ) Embedded derivatives (through profit and loss) The Argentine subsidiary Termoandes S.A. has a natural gas supply agreement with several counterparties. The agreement contains a variable that is indexed to the natural gas price that is not considered to be closely related to the host contract and, therefore, it has been separated and the embedded derivative has been accounted for at fair value. The fair value as of December 31, 2010 differs from the fair value presented as of December 31, 2009 since the indexation clause of one of the contracts was modified and the remaining contracts will end in January In 2010, the Chilean subsidiary Eléctrica Santiago S.A. entered into agreements to terminate gas transport agreements early. These agreements include variable and fixed payments to be made by ESSA that are not considered to be closely related to the host contract and, therefore, have been separated and accounted for at fair value. In addition, in 2010 AES Gener S.A. entered into a coal purchase agreement with AES Hawaii containing a fuel charge in the purchase price that is not considered to be closely related to the host contract and, therefore, it has been separated and accounted for at fair value. The fair values of these embedded derivatives are included in the following table: Embedded Derivative Embedded derivative Termoandes Embedded derivative ESSA Embedded derivative AES Gener Classification Financial asset at fair value through profit and loss Financial asset at fair value through profit and loss Financial asset at fair value through profit and loss Current As of As of Asset Liability Asset Liability Non-Current Current Non-Current Current Non-Current Current Non-Current , Total ,072-9,

123 122 AnnualReport AES Gener e) Valuation of Derivative Instruments The Company uses three systems to calculate the fair value of derivative financial instruments: (1) the Reval Hedge Rx system is used to calculate the fair value of interest rate and cross currency swaps and (2) the Oracle Crystal Ball Monte Carlo is used to calculate the fair values of embedded derivatives and (3) Income Method. The following principal assumptions are used in valuation models for derivative instruments: a) Market assumptions such as historic and spot prices, price projections, credit risk (own and counterpart) or observable rates. b) Discount rate assumptions such as risk-free rates, local and counterparty spreads (based on risk profiles and data available in the market). c) The model also incorporates variables such as volatilities, correlations, regression formulas and market spreads using observable market data and techniques commonly used by market participants. Valuation Methodology for Derivative Instruments a) Interest Rate Hedges The valuation model for interest rate swaps forecasts cash flows using forward curves for each intermediate and final settlement date, and then discounts the flows using the LIBOR zero-coupon rate. The assumptions used in the model include historical transactions, prices and rates observable in the market, risk-free rates, country and/or counterpart risk, own credit risk, etc. b) Currency Hedges The valuation model for cross currency swaps discounts cash flows using the local curve for the forecasted exchange rate and then converts these flows into US dollars using spot rates. The assumptions used in the model include historic transactions, prices and rates observable in the market, risk-free rates, country and/or counterpart risk, own credit risk, etc. c) Exchange Differences - Forwards The Company uses forward prices observable in the market and other assumptions to calculate the fair value of currency forwards. d) Embedded Derivatives The fair value of embedded derivatives in Termoandes is measured using the Monte Carlo model, which simulates and predicts the behavior of the prices of the embedded derivative identified in the contract. The principal assumptions included in this model are historical transactions, fuel prices and forward curves. e) Hierarchy of Fair Value of Derivative Instruments Derivative instruments recognized at fair value in the statement of financial position are classified using the following hierarchy: Level 1: Quoted prices in active markets for identical assets and liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level3: Inputs are inputs for the asset or liability that are not based on observable market data. The assumption used in the fair value calculation used by the Company for interest rate swaps, cross currency swaps and currency forwards falls within Level 2 in the aforementioned hierarchy. The fair value of implicit derivative instrument and exchange rate swap calculation falls within Level 3 in the aforementioned hierarchy, because market information cannot be observed.

124 Financial statements 123 NOTE 9 OTHER NON-FINANCIAL ASSETS As of December 31, 2010 and December 31, 2009, the other non-financial assets detail is as follow: Balances Current Non-Current Other Non-Financial Assets Prepaid insurance 6,792 8, ,117 Other services associated with the project 4,538 7, Gasandes guarantee (a) ,066 Operation and maintenance contract ,800 Taxes receivable (b) ,672 5,013 Take or pay YPF (c) - - 4,493 - Other ,227 4 Total 11,476 16,439 17,134 28,000 a) Corresponds to letter of credit issued in favor of Gasoducto Gasandes S.A. and Gasoducto Gasandes (Argentina) S.A. by the subsidiary Empresa Eléctrica Santiago S.A (Note 26). b) Corresponds to income tax credits and minimum presumed tax generated by Gener Argentina S.A., Termoandes S.A. and Interandes S.A. and taxes receivable from Parent company related to water rights. c) Corresponds to a payment related to the gas supply contract between Termoandes S.A. and YPF for gas bought but not consumed. NOTE 10 TRADE AND OTHER RECEIVABLES Balances in trade receivables correspond to transactions within the Company s line of business and that of its subsidiaries, which principally consist of sales of energy, capacity and coal. Within the account current trade receivables, the Company and its subsidiary Sociedad Eléctrica Santiago S.A. include non-contractual sales to distributors (Ministerial Resolution Nº 88): see Note 2.18 (a) for 68,501, which represents 16% of the total balance, as of December 31, 2010 and 58,724, or approximately 13% of the total balance, as of December 31, As of December 31, 2010, based on invoicing forecasts prepared by the Company s management and that of its subsidiary Sociedad Eléctrica Santiago S.A.,61,629 has been classified in trade and other receivables, non-current, as this income will be collected in over a year. The balance of non-current trade receivables as of December 31, 2010 includes toll resettlements for the period between the years 2004 and 2008, in accordance with Law Nº 19,940 (Short Law). Balances of other receivables correspond primarily to remaining tax credits resulting from greater generation costs and purchases of construction equipment for generation plant projects.

125 124 AnnualReport AES Gener ) As of December 31, 2010 and December 31, 2009, this account is detailed as follows: Trade and Other Receivables, Gross Balance as of Current Non-Current Current Non-Current Trade receivables, gross 294,702 1, ,327 68,409 Remaining tax credit, gross 110,241 6, ,210 9,840 Other accounts receivable, gross 22, ,279 1,044 Trade and Other Receivables, Gross 427,450 8, ,816 79,293 Trade and Other Receivables, Net Balance as of Current Non-Current Current Non-Current Trade receivables, net 289,792 1, ,689 68, 409 Remaining tax credit, net 110,241 6, ,210 9,840 Other accounts receivable, net 22, ,279 1,044 Trade and Other Receivables, Net 422,540 8, ,178 79,293 2) Financial assets nearing expiration but not impaired are detailed as follows: Trade Receivables Nearing Expiration Balance as of Expiring in less than three months 243, ,858 Expiring in between three and six months 18,643 13,212 Expiring in between six and twelve months 33,027 38,257 Expiring in more than twelve months 1,295 68,409 Total Trade Receivables Nearing Expiration 295, ,736 The fair value of trade and other receivables does not differ significantly from their carrying amount. 3) Impaired trade and other receivables are detailed in the following table: Expired Trade Receivables with Impairment Balances Current Balance as of December 31, ,638 Increase (decrease) for the year (139) Amount affected (589) Balance as of December 31, ,910

126 Financial statements 125 NOTE 11 BALANCES AND TRANSACTIONS WITH RELATED PARTIES Transactions between the Company and its subsidiaries consist of recurring transactions in terms of purpose and conditions. These transactions have been eliminated in consolidation and are not disclosed in this note Balances and transactions with related companies a) The balances of accounts receivable and payable between the Company and its unconsolidated related companies are detailed as follows: Accounts Receivable from Related Companies Balances as of Current Chile Miscellaneous services Associate $ 6, Taxpayer ID Number Company Country Transaction Relationship Currency Empresa Eléctrica Guacolda S.A. 0-E AES Energy Storage Argentina Project consulting Related US$ E AES Corp USA Miscellaneous services Parent US$ 5,299 5,230 company 0-E Compañía de El Salvador Miscellaneous services Related US$ 29 - Alumbrado Eléctrico 0-E AES - 3 MARİTZA EAST 1 LTD. Bulgaria Project consulting Related US$ 9-0-E AES Panamá Limitada Panamá Miscellaneous services Related US$ 7 Total 12,437 5,426 Accounts Payable from Related Companies Taxpayer ID Number Company Country Transaction Relationship Currency E AES Corp USA Miscellaneous services Parent company 0-E AES Servicios América Argentina Information system consulting Current Balances as of Non-Current US$ 7,302 6, Related US$ E AES China Generating Co.Ltd China Miscellaneous services Related US$ E AES Alicurá Argentina Miscellaneous services Related US$ E AES Energy Ltd Argentina Miscellaneous services Related US$ E Compañía de Alumbrado Eléctrico El Salvador Miscellaneous services Related US$ E AES Panamá Limitada Panamá Miscellaneous services Related US$ E AES Jordan PSC Jordania Miscellaneous services Related US$ E Gasoducto Gasandes Argentina S.A. Argentina Gas transportation Contract Investment US$ 11, Gasoducto Gasandes Chile S.A. Chile Gas transportation Investment US$ 1,426 - Contract Empresa Eléctrica Guacolda S.A. Chile Coal unloading Associate US$ 5, Contract Total 26,313 6,474 2,376 -

127 126 AnnualReport AES Gener 2010 b) b) The effects on the income statement of these transactions with unconsolidated related companies during the years ended December 31, 2010 and 2009 are detailed as follows: Transactions Taxpayer ID Number Company Country Relationship Transaction Empresa Eléctrica Guacolda S.A. Chile Associate Sale of energy and capacity Empresa Eléctrica Guacolda S.A. Chile Associate Purchase of energy and capacity Empresa Eléctrica Guacolda S.A. Chile Associate Income from other services Effect on income (Charge/Credit) Effect on income (Charge/Credit) 1,043 1,043 2,317 2,317 21,031 (21,031) 17,804 (17,804) Empresa Eléctrica Guacolda S.A. Chile Associate Other income Empresa Eléctrica Guacolda S.A. Chile Associate Receivable dividends 11, Compañía Transmisora del Norte Chico S.A. Chile Associate Sell of energy and capacity Compañía Transmisora del Norte Chico S.A. Chile Associate Purchase of energy and capacity ,996 (1,996) 2,382 (2,382) Compañía Transmisora del Norte Chico S.A. Chile Associate Transmission costs 174 (174) 33 (33) Compañía Transmisora del Norte Chico S.A. Chile Associate Transmission income Gasoducto Gasandes Chile S.A. Chile Investment Gas transportation contract (*) 18,780 (18,780) Gasoducto Gasandes Chile S.A. Chile Investment Embedded derivative (*) 469 (469) E Gasoducto Gasandes Argentina S.A. Argentina Investment Gas transportation contract (*) 19,535 (19,535) E Gasoducto Gasandes Argentina S.A. Argentina Investment Embedded derivative (*) 4,603 (4,603) E Gasoducto Gasandes Argentina S.A. Argentina Investment Receivable dividends - - 1,327 1,327 0-E AES Corp USA Parent company Miscellaneous services 1,921 (1,824) 2,367 (2,367) 0-E AES Big Sky, LLC USA Related Miscellaneous services 28 (28) 313 (313) 0-E Compañía de Alumbrado Eléctrico El Salvador Related Miscellaneous services 183 (183) 56 (56) 0-E AES Energy Ltd. Argentina Related Consulting services 37 (28) E AES Panamá S.A. Panamá Related Administrative services 23 (23) E AES Servicios América S.R.L. Argentina Related Administrative services (2) 0-E AES Andres BV USA Related Consulting services 18 (18) E AES Carbon Exchange England Related Cost reimbursement E AES Fonseca Energía LIMIT Puerto Rico Related Consulting services 23 (23) E AES NA Central USA Related LTC E AES Hawaii USA Related Fuel derivative cost Total 82,372 (66,412) 27,205 (18,719) (*) On December 2010, ESSA signed termination agreements of its long term gas transport contracts that were under litigation (see Note 30). Transactions with related companies, in general, consist of recurring transactions between the Company and its related parties, conducted in accordance with legal norms and equitable conditions in terms of referenced market terms and conditions. To date, there are no allowances for doubtful accounts.

128 Financial statements Board of Directors and senior management AES Gener S.A. is managed by a Board of Directors composed of seven directors and their respective alternates, who are elected for a period of three years by shareholders in the Ordinary General Shareholders Meeting. In conformity with the provisions of Article 50 bis of Law Nº 18,046 on Corporations, AES Gener and its subsidiaries each have an Audit Committee composed of 3 members that have been granted the powers contained in that article. a) Balances and transactions with members of the Board of Directors and senior management There are no pending balances receivable or payable between the Company and its directors and senior management. In the periods covered by these financial statements, no transactions took place between the Company and its directors and senior management. There are no guarantees granted in favor of the Directors There are no guarantees granted by the Society in favor of the Management There are no plans of retribution to the market value of shares. b) Board Compensation AES Gener s by-laws establish that its directors do not receive compensation for serving as directors. During the periods covered by these financial statements, the Company s directors did not receive any compensation, entertainment or travel expenses, royalties, or any other stipend. However, some directors do receive compensation for serving as members of the Audit Committee, as disclosed in the following paragraph. In the Ordinary General Shareholders Meeting held April 29, 2010, shareholders agreed to set compensation for Audit Committee members at 160 Unidades de Fomento for the 2010 period. During the periods covered by these financial statements, the amounts detailed in the following chart were paid to Audit Committee members and directors of subsidiaries. Director Compensation Name Position Board of Directors of AES Gener Board of Directors of Subsidiaries Audit Commitee Andrés Gluski Chairman Andrew Vesey Director Bernerd DaSantos Director Arminio Borjas Director Jorge Rodríguez Grossi Director Axel Juan Christensen Director Iván Díaz-Molina Director Juan Andrés Camus Camus Director Javier Rodolfo Guevara Moreno Subsidiary Director Total

129 128 AnnualReport AES Gener 2010 Director Compensation Name Position Board of Directors of AES Gener Board of Directors of Subsidiaries Audit Commitee Andrés Gluski Presidente Andrew Vesey Director Bernerd DaSantos Director Arminio Borjas Director Jorge Rodríguez Grossi Director Axel Juan Christensen Director Iván Díaz-Molina Director Juan Andrés Camus Camus Director Javier Rodolfo Guevara Moreno Director filial Total c) Overall compensation of executives that are not directors The Company s executives received overall compensation for the six month period ended December 31, 2010 and 2009 of 5,166 and 4,798. This includes fixed monthly compensation; variable bonuses based on performance and corporate results as compared to the prior period and long-term compensation. The Company s executives include its Chief Executive Officer and Managers of the following departments: Operations, Legal and Corporate Matters, Engineering and Construction, Development, Finance. AES Gener s executives take part in an annual bonus plan based on goal achievement and individual contribution to the Company s earnings and performance. These incentives are structured as a minimum and maximum number of gross monthly salaries and are paid once a year. NOTE 12 INVENTORY Inventory, valued in accordance with Note 2.12 is detailed as follows: Balance as of Classes of Inventory Coal 19,522 34,806 Oil 7,228 5,588 Materials 7,136 6,021 Coal in transit 7,780 4,175 Imported materials in transit Other inventory 385 1,464 Total 42,078 52,100 Balance as of Other Disclosures Inventory write-downs (866) (1,981) Reversals of inventory write-downs Cost of inventory expenses during the period (469,243) (341,886)

130 Financial statements 129 Reversals of inventory write-downs are given principally by coal inventory liquidations that are conducted during the period. NOTE 13 CURRENT TAXES RECEIVABLE AND PAYABLE Current taxes receivable as of December 31, 2010 and December 31, 2009, are detailed as follows: Monthly provisional tax payments 16,528 1,021 Sence Credit Credit for donation 48 3 Property, plant and equipment credit Argentine standard credits Other Less: Monthly provisional tax payments (1,925) (17) Rejected expenses provisional tax (26) - First category provisional tax payments (13,308) (143) Other (182) - Total 2,363 1,166 Current taxes payable (that do not imply a net position of the previous frame) are detailed as follows: Monthly provisional tax payments 1,361 1,408 Rejected expenses provisional tax First category provisional tax payments 37,132 45,228 Others Less: Monthly provisional tax recoverable (7,105) (13,132) Monthly provisional tax payments for absorbed profits - (1,027) Foreign income credit - (3,064) Current tax recoverable - (159) Other credits (33) (856) Total 31,621 29,149

131 130 AnnualReport AES Gener 2010 NOTE 14 INVESTMENTS IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD The following table includes detailed information on associates as of December 31, 2010 and December 31, Movements in Investments in Associates Country Functional Currency Ownership Interest Percentage of voting rights Balance as of Share of Profits (Losses) MUS$ Other Increases (Decrease) Balance as of Empresa Eléctrica Guacolda S.A Chile US$ 50.00% 50.00% 224,270 42,361 (15,288) 251,343 Menor Valor Inversión - Guacolda Chile US$ Total Totales 224,978 42,361 (15,288) 252,051 Movements in Investments in Associates Country Functional Currency Ownership Interest Percentage of voting rights Balance as of Share of Profits (Losses) Other Increases (Decrease) Balance as of Empresa Eléctrica Guacolda S.A Chile US$ 50.00% 50.00% 177,361 28,049 18, ,270 Menor Valor Inversión - Guacolda Chile US$ Totales 178,069 28,049 18, ,978 The associate Guacolda can distribute dividends as long as: (i) it is not in breach of one of its credit agreements, (ii) its debt reserve accounts are funded or covered by bank guarantees and, (iii) it complies with the debt coverage ratio that increases inversely to its hired capacity. The following tables contain information as of December 31, 2010 and December 31, 2009 on the financial statements of our associates accounted for using the equity method: Dec Percentage Current Non-currents Current Non-Current Operating Ordinary Net Profit Investments in Associates Ownership Interest Assets Assets Liabilities Liabilities Income Expenses (Loss) Empresa Eléctrica Guacolda S.A 50.00% 239,678 1,069, , , , ,776 84,723 Totales 239,678 1,069, , , , ,776 84,723 Dec Percentage Current Non-currents Current Non-Current Operating Ordinary Net Profit Investments in Associates Ownership Interest Assets Assets Liabilities Liabilities Income Expenses (Loss) Empresa Eléctrica Guacolda S.A 50.00% 156,689 1,079,217 81, , , ,642 56,097 Totales 156,689 1,079,217 81, , , ,642 56,097

132 Financial statements 131 NOTE 15 INTANGIBLE ASSETS Movements in the principal classes of intangible assets, valued as described in Note 2.7, are detailed as follows: Intangible Assets, Net Goodwill 7,309 7,309 Finite-life intangible assets 2,433 1,411 Indefinite-life intangible assets 10,249 8,728 Intangible Assets, Net 19,991 17,448 Software 2,424 1,398 Easements 7,705 6,183 Water rights 2,346 2,351 Other identifiable intangible assets Identifiable Intangible Assets, Net 12,682 10,139 Intangible Assets, Gross Goodwill 7,309 7,309 Finite-life intangible assets 8,183 6,120 Indefinite-life intangible assts 10,249 8,728 Intangible Assets, Gross 25,741 22,157 Software 8,111 6,046 Easements 7,754 6,230 Water rights 2,346 2,351 Other identifiable intangible assets Identifiable Intangible Assets, Gross 18,432 14,848 Accumulated Amortization and Impairment Software (5,687) (4,650) Easements (48) (45) Other identifiable intangible assets (15) (14) Accumulated Amortization and Impairment, Identifiable Intangible Assets (5,750) (4,709) Easements and water rights: these rights do not have defined useful lives, therefore it has been established that they are indefinite and continuously permanent, respectively. These considerations have not suffered any contractual or legal modification as of December 31, Accumulated amortization of easements as of December 31, 2010 and 2009 correspond exclusively to easements in subsidiary Energía Verde s Line Charrúa-Bucalemu, as its useful life relates to the duration of the contract between Planta Laja and its client CMPC Maderas (ex Forestal Mininco S.A). Estimated Useful Lives or Amortization Rates Used Maximum Life or Rate Minimum Life or Rate Life or rate for software 5 2 Easements Indefinite Indefinite Water rights Indefinite Indefinite Life or rate for other identifiable assets 40 2

133 132 AnnualReport AES Gener 2010 Movements in Intangible Assets Software Easements 2010 Water Rights Other Identifiable Intangible Assets Goodwill Intangible Assets, Net Initial Balance as of January 1, ,398 6,183 2, ,309 17,448 Additions 2,326 1, ,850 Reductions (8) - (5) - - (13) Amortization (1,291) (2) (1,293) Increase (decrease) in foreign currency translation (1) (1) Total Changes 1,026 1,522 (5) - - 2,543 Final Balance of Intangible Assets as of December 31, ,424 7,705 2, ,309 19,991 Movements in Intangible Assets Software Easements 2009 Water Rights Other Identifiable Intangible Assets Goodwill Intangible Assets, Net Initial Balance as of January 1, ,720 4,674 2, ,309 16,136 Additions 728 1, ,366 Amortization (1,039) (3) - (1) - (1,043) Increase (decrease) in foreign currency translation (11) (11) Total Changes (322) 1, (1) - 1,312 Final Balance of Intangible Assets as of December 31, ,398 6,183 2, ,309 17,448 Individually Significant Identifiable Intangible Assets as of December 31, 2010 Carrying Amount Remaining Amortization Period ERP SAP Project Chivor 1, months Easement Agricola konavle Ltda. Rep.486/2008 1,808 Indefinite Water Rights Colorado River, Maipo River tributary 1,800 Indefinite Easement L. Ventanas Nogales. Rep.CBR Indefinite Company Purchased Goodwill Initial Balance Other Increases (Decreases) Initial Balance Other Increases (Decreases) Final Balance Eléctrica Santiago 7,309-7,309-7,309 Total 7,309-7,309-7,309

134 Financial statements 133 NOTE 16 PROPERTY, PLANT AND EQUIPMENT The balances of the different categories of property, plant and equipment for the periods ended December 31, 2010 and December 31, 2009, are detailed as follows: Classes of Property, Plant and Equipment, Net Construction in progress 1,237,093 1,458,112 Land 40,629 40,354 Buildings 445, ,294 Plant and equipment 2,423,268 2,121,648 IT equipment 5,754 4,252 Furniture 2,048 2,181 Motor vehicles Other property, plant and equipment 22,660 16,722 Total 4,178,072 3,962,339 Classes of Property, Plant and Equipment, Gross Construction in progress 1,237,093 1,458,112 Land 40,629 40,354 Buildings 524, ,527 Plant and equipment 3,123,601 2,701,320 IT equipment 9,848 7,330 Furniture 5,139 5,163 Motor vehicles 2,220 1,960 Other property, plant and equipment 24,206 17,350 Totales 4,966,851 4,615,116 In January 2010 Nueva Ventanas thermoelectric plant started its operations with a gross capacity of 267 MW. This energy is being injected to the Central Interconnected Grid (SIC) that supplies energy from the III to X Region of Chile. The plant is located in the V region of Valparaiso, in the local area of Ventanas, Puchuncaví. Construction amounts are principally from Angamos and Campiche projects as well as other minor projects. Accumulated Depreciation and Impairment, Plant and Equipment Buildings (78,232) (65,233) Plant and equipment (700,333) (579,672) IT equipment (4,094) (3,078) Furniture (3,091) (2,982) Motor vehicles (1,483) (1,184) Other property, plant and equipment (1,546) (628) Total (788,779) (652,777)

135 134 AnnualReport AES Gener 2010 The useful lives of the Company s most important assets are detailed as follows: Method Used for Depreciation of Property, Plant and Equipment (Life) Explanation of rate Minimum Life Minimum Life Buildings Years Plant and equipment Years 5 45 Plant and equipment (Colombian Dam) Years IT equipment Years 2 5 Furniture Years 2 20 Motor vehicles Years 2 5 Other property, plant and equipment Years 5 25 Additional disclosure for Property, Plant and Equipment Expenditures construction in progress 510, ,719 Commitments for additions 765,810 1,048,864 The following table present movements in property, plant and equipment during the period ended December 31, 2010 and December 31, 2009: Movements Year 2010 Ongoing Construction Land Buildings, Net Plants and Equipment, Net IT Equipment, Net Furniture, Net Motor Vehicles, Net Other Property, Plant and Equipment, Net Property, Plant and Equipment, Net Balance as of January 1, ,458,112 40, ,294 2,121,648 4,252 2, ,722 3,962,339 Changes Additions , ,150 Disposals (9) - (179) - - (10) - (198) Removals (176) (949) (17,242) (1) (36) - (10) (18,414) Depreciation expenses - (14,528) (149,084) (1,527) (499) (389) (908) (166,935) Increase (decrease) in 136 (1,022) 46,286 1,649 (210) 83-47,130 foreign currency translation Other Increases (decreases) , ,889 1, Total Changes (221,019) , ,620 1,502 (133) (39) 5, ,733 Balance as of December 31, ,237,093 40, ,883 2,423,268 5,754 2, ,660 4,178,072 Plants and Equipment, Net IT Equipment, Net Motor Vehicles, Net Other Property, Plant and Equipment, Net Property, Plant and Equipment, Net Movements Year 2009 Ongoing Construction Land Buildings, Net Furniture, Net Balance as of January 1, ,718 36, ,981 2,030, , ,186,789 Changes Additions , , ,770 Disposals (510) - (135) (3) - (28) - (676) Removals - (59) (4,383) (4,442) Depreciation expenses - (11,480) (116,639) (1,130) (471) (360) (126) (130,206) Increase (decrease) in , (4) foreign currency translation Other Increases (decreases) ,130 2, Total Changes 662,394 3,811 (1,687) 91,184 3, ,550 Balance as of December 31, ,458,112 40, ,294 2,121,648 4,252 2, ,962,339

136 Financial statements 135 Capitalized interest costs and the average effective rate of the Company s debt are detailed as follows: Detail Capitalized interest expense 41,739 34, 229 Capitalization rate 5.84% 6.14% The Company and its subsidiaries have insurance contracts for their generation plants, including all-risk policies and business interruption insurance, which cover damages caused by fire, flood and earthquakes, among other costs. - Information about leases Finance leases by asset class, lessee: Property, Plant and Equipment Under Finance Lease, Net Buildings 7,050 7,617 Plant and equipment 9,409 9,398 IT equipment Motor vehicles Total Property, Plant and Equipment Under Finance Lease, Net 16,905 17,902 Minimum finance lease payment reconciliation, lessee Minimum Finance Lease Payment Reconciliation, Lessee Gross Interest Present Value Gross Interest Present Value Less than a year 1, ,018 1, Between 1 and 5 years 4,659 2,226 2,433 4,796 2,246 2,550 More than 5 years 54,851 32,001 22,850 53,609 31,910 21,699 Total 61,388 35,087 26,301 60,279 35,055 25,224

137 136 AnnualReport AES Gener 2010 Information about operational leases, as lessee Present Value Present Value Minimum Future Lease Payment not Payable, Lessee Gross Interest Gross Interest Less than a year 23,200-23,200 3,501-3,501 Between 1 and 5 years 44,637-44,637 6,120-6,120 More than 5 years 16,411-16,411 10,842-10,842 Total 84,248-84,248 20,463-20,463 Minimum capital lease payment reconciliation, lessor Minimum Finance Lease Payment Reconciliation, Lessor Gross Interest Present Value Gross Interest Present Value Less than a year Between 1 and 5 years More than 5 years Total Financial Income not Accumulated (or not Accrued) for Finance Leases Not accumulated financial income (or not accrued) of finance leases Impairment in Asset Value According to what is described in Note 2.8, the recoverable amount of non financial assets is evaluated when there is evidence that the asset could have suffered impairment. On May 31, 2010, Energía Verde S.A. (part of the SIC Market) received a notification from a client, Compañía Papelera del Pacífico S.A., notifying their willingness to put an early finish to the energy and steam contract supplied by a Plant located in San Francisco de Mostazal, signed on August 23,1998. The Company is considering to close the operation of the mentioned Plant, located in lands of the Compañía Papelera del Pacífico S.A., and relocate some of its equipments in other Plants of the Parent Company. For that reason, on December 31, 2010 an impairment loss was recognized for 3,370.

138 Financial statements 137 NOTE 17 DEFERRED TAXES Balances of deferred tax assets as of December 31, 2010 and 2009 are detailed as follow: Deferred Tax Assets Provisions 3,440 4,064 Post-employment benefit obligations 2,394 2,282 Revaluations of financial instruments 13,538 11,206 Tax losses 74,134 29,194 Deferred income 5,547 6,521 Debt (difference between effective and nominal rates) 308 3,007 Lease obligations 4,703 4,378 Finance expenses Others 5,982 3,939 Total 110,818 64,865 Balances of deferred tax liabilities as of December 31, 2010 and December 31, 2009 are detailed in the following table: Deferred Tax Liabilities Depreciation 410, ,704 Provisions Revaluations of financial instruments 16,183 19,345 Debt (difference between effective and nominal rates) 5,814 7,709 Finance expenses 13,065 8,778 Others 4,780 4,274 Total 450, ,023 Deferred Tax Assets and Liabilities' Net Balance (339,437) (365,158) Reconciliation between balance sheet amounts and deferred tax tables Financial Statements Deferred tax assets 27,448 11,734 Deferred tax liabilities 366, ,892 Deferred Taxes Net Position (339,437) (365,158) Note 17- Deferred Taxes Deferred tax assets 111,148 64,865 Deferred tax liabilities 450, ,023 Deferred Taxes Net Position (339,437) (365,158)

139 138 AnnualReport AES Gener 2010 The following movements occurred in deferred tax assets and liabilities during the period ended December 31, 2010 and 2009, were: Movements Deferred Tax Assets Deferred Tax Assets, Initial Balance 64,865 34,526 Increase (decrease) in deferred tax assets 45,756 30,304 Increase (decrease) in foreign currency translation, deferred tax assets - 35 Other increase (decrease), deferred tax assets Total Changes in Deferred Tax Assets 45,953 30,339 Deferred Tax Assets, final Balance 110,818 64,865 Movements Deferred Tax Liabilities Deferred Tax Liabilities, Initial Balance 430, ,365 Increase (decrease) in deferred tax liabilities 14,259 30,196 Increase (decrease) in foreing currency translation 5,973 6,462 Other Increase (Decrease), Deferred Tax Liabilities 20,232 36,658 Deferred Tax Liabilities, Final Balance 450, ,023 NOTE 18 OTHER FINANCIAL LIABILITIES As of December 31, 2010 and December 31, 2009 the other financial liabilities are detailed as follows: Balances Current Non-Current Other Financial Liabilities Interest bearing loans (a) 57,186 58,884 2,062,376 1,729,988 Hedge liabilities (see Note 8) 38,325 25,425 38,096 40,235 Other financial liabilities (see Note 8) 2, Total 97,946 84,565 2,100,472 1,770,600 a) Interest bearing loans Balances Interest Bearing Loans Current Non-Current Current Non-Current Bank loans 37,686 1,005,087 26, ,140 Bonds payable 18,482 1,032,006 31, ,599 Lease obligations 1,018 25, ,249 Total 57,186 2,062,376 58,884 1,729,988

140 Financial statements 139 a.1) Bank Loans The following tables detail bank loans by financial institution, currency, rate and maturity as of December 31, 2010 and December 31, 2009: Current Non-Current Company ID Borrower Company Name Country Lender Name Currency Amortization Effective Rate Nominal Rate Final Maturity Maturity Less Than 90 days Maturity More Than 90 days Total Current as of Maturity Between 1 and 3 years Maturity Between 3 and 5 years Maturity More Than than 5 years Total Non-Current as of K Empresa Eléctrica Angamos S.A. Chile Syndicated Banks - BNP PARIBAS US$ Monthly 1.91% 1.91% ,849 9,800 13,649 71,550 81, , , Empresa Eléctrica Ventanas S.A. Chile Syndicated Banks - BNP PARIBAS US$ Monthly 2.12% 1.46% ,773 24,773 54,685 61, , , Eléctrica Santiago S.A. Chile Other bank loans US$ Semi-annual 7.69% 6.95% ,374 7,374 13, ,587 Foreign AES Chivor S.A. Colombia Bancolombia Col$ Quarterly 6.68% 6.52% ,882 8,645 11, Total 6,731 50,592 57, , , ,200 1,226,537 Current Non-Current Company ID Borrower Company Name Country Lender Name Currency Amortization Effective Rate Nominal Rate Final Maturity Maturity Less Than 90 days Maturity More Than 90 days Total Current as of Maturity Between 1 and 3 years Maturity Between 3 and 5 years Maturity More Than than 5 years Total Non-Current as of K Empresa Eléctrica Angamos S.A. Chile Syndicated Banks - BNP PARIBAS US$ Monthly 1. 88% 1.88% ,771 5,440 7,211 23,852 44, , , Empresa Eléctrica Ventanas S.A. Chile Syndicated Banks - BNP PARIBAS US$ Monthly 1.19% 1.19% ,591 12,964 46,246 53, , , Eléctrica Santiago S.A. Chile Other bank loans US$ Quarterly 7.69% 6.95% ,791 7,791 14,328 9,634-23,962 Foreign AES Chivor S.A. Colombia Bancolombia Col$ Semi-annual 9.20% 7.65% ,102 9,306 12,408 11, ,578 Total 5,246 35,128 40,374 96, , , ,672

141 140 AnnualReport AES Gener 2010 a.2) Bonds payable The following table details bonds payable as of December 31, 2010 and December 31, 2009: Current Non-Current Company ID Company Name Country Instrument Registration Number Serie Currency Effective Rate Nominal Rate Final Maturity Maturity Less Than 90 days Maturity More Than 90 days Total Current as of Maturity Between 1 and 3 years Maturity Between 3 and 5 years Maturity More Than than 5 years Total Non-Current as of AES Gener S.A. Chile O-Series Bond O SERIES U.F. 6.35% 5.50% ,623 2,623 5,254 50,973-56, AES Gener S.A. Chile N-Series Bond N SERIES U.F. 7.92% 7.34% ,820 12,820 25,674 25, , , AES Gener S.A. Chile Rule 144A/REG S Bonds US$ Bonds US$ 8.38% 7.50% ,000 15,000 30,000 60, , , AES Gener S.A. Chile Ordinary Bonds Q SERIES US$ 8.46 % 8.00% ,378 15,378 30,757 30, , , Eléctrica Santiago S.A. Chile 214 B SERIES U.F. 8.04% 7.50% ,251 4,251 8,617 8,722 64,819 82,158 Foreign AES Chivor S.A. Colombia Ordinary Bonds Single US$ 10.76% 9.75% ,575 16,575 33, , ,725 Total 15,000 66,647 81, , , ,334 1,467,452 Current Non-Current Company ID Company Name Country Instrument Registration Number Serie Currency Effective Rate Nominal Rate Final Maturity Maturity Less Than 90 days Maturity More Than 90 days Total Current as of Maturity Between 1 and 3 years Maturity Between 3 and 5 years Maturity More Than than 5 years Total Non-Current as of AES Gener S.A. Chile O-Series Bond O SERIES U.F. 6.35% 5.50% ,623 2,623 5,254 5,246 48,350 58, AES Gener S.A. Chile N-Series Bond N SERIES U.F. 7.92% 7.34% ,819 12,819 25,674 25, , , AES Gener S.A. Chile Rule 144A/REG S Bonds US$ Bonds US$ 8.38% 7.50% ,000 15,000 30,000 60, , , AES Gener S.A. Chile Ordinary Bonds Q SERIES US$ 8.59% 8.00% ,378 15,378 23,068 38, , , Eléctrica Santiago S.A. Chile 214 B SERIES U.F. 8.04% 7.50% ,812 3,812 7,790 7,899 63,526 79,215 Foreign AES Chivor S.A. Colombia Ordinary Bonds Single US$ 10.76% 9.75% ,575 16,575 48, , ,954 Total 15,000 66,207 81, , , ,589 1,533, 559

142 Financial statements 141 NOTE 19 TRADE AND OTHER PAYABLES Trade and other payables as of December 31, 2010 and 2009, are detailed as follows: Balances as of Current Non-Current Trade and Other Payable Trade payables (a) 227, ,136 50,737 15,422 Other accounts payable (b) 86,528 66, Total trade and other payables 314, ,845 50,737 15,422 (a) The non-current portion includes the contract between the subsidiary Termoandes and Siemens Power Generation Inc. and Siemens S.A. for the spare parts and maintenance services provision. As of December 31, 2010, it is also included the closing effect of the Gas Contract between Sociedad Eléctrica Santiago S.A. and TGN, at it fair value (see Note 30). (b) This item includes, principally, the additional dividend provision for year 2010 and the minimum dividend as of December 31, The average payment period for suppliers is 30 days; therefore, carrying amount does not differ significantly from fair value. NOTE 20 PROVISIONS As of December 31, 2010 and 2009, provisions are detailed as follows: Balances Current Non-Current Class of Provisions MUS$ MUS$ MUS$ Legal provision 1,522 5,363 5,036 23,835 Restructuring provision Dismantling, restructuring and rehabilitation costs 1,329-25,622 18,601 Other provisions 1,143 1, Total 4,244 6,819 31,035 43,082 Legal provision Current balances correspond primarily to contingent fines and penalties with the regulatory organism (SEC), mentioned in greater detail in Note 30. Considering the characteristics of these kinds of provisions, it is not possible to determine an exact schedule with payment dates if, in any case, it is necessary to make a disbursement. Non-current balances within the item legal claim provision correspond to a provision for 4,465 that the subsidiary AES Chivor has as part of an equity tax review process that is conducted by the regulatory organism in Colombia.

143 142 AnnualReport AES Gener 2010 Dismantling, restructuring and rehabilitation costs Non-current balances within this provision correspond to the dismantling costs of assets and rehabilitation of lands in which the Company s the different plants are located. The disbursement periods varies between 30 and 45 years, depending on the contract that originates the obligation. Other provisions Within this item are registered principally the provisions for employee participation in Company results and bonds, which are primarily paid within the first subsequent quarter. Class of Provisions For Legal Claims For Dismanting, Restructing and Rehabilitation Costs Other Provisions Total Initial balance as of ,198 18,601 2,102 49,901 Movements in Provisions Dismantling, restructuring and rehabilitation costs - 8,450-8,450 Additional provisions Increase (decrease) in existing provisions 1,357 (100) 5 1,262 Provisions paid out (3,887) - (620) (4,507) Reversal of unpaid provisions (*) (20,096) - - (20,096) Increase (decrease) in foreign currency translation (14) Changes in provisions, total (22,640) 8,600 (582) (14,622) Total Provisions, Final Balance as of ,558 27,201 1,520 35,279 (*) The reversal of the unused provision was realized according to what it is stated in the Official Order N 194 of the SII. Class of Provisions For Legal Claims For Dismanting, Restructing and Rehabilitation Costs Other Provisions Total Initial balance as of ,371 2,096 3,694 34,161 Movements in Provisions Dismantling, restructuring and rehabilitation costs - 16,505-16,505 Additional provisions Increase (decrease) in existing provisions (674) 290 Provisions paid out - - (1,914) (1,914) Reversal of unpaid provisions (2,080) - - (2,080) Increase (decrease) in foreign currency translation 1, ,002 Changes in provisions, total (1,592) 15,740 Total Provisions, Final Balance as of ,198 18,601 2,102 49,901

144 Financial statements 143 NOTE 21 POST-EMPLOYMENT BENEFIT LIABILITY AES Gener and some of its subsidiaries offer different post-employment benefit plans to some of their active or retired workers, which are determined and recorded in the financial statements based on the criteria described in Note 2.16 b) and d). As of December 31, 2010 and 2009, the Company s post-employment benefit liability is detailed as follows: Current Portion 3,014 2,695 Non-Current Portion 29,719 25,706 Total 32,733 28,401 a) The following movements took place in post-employment liabilities for services provided in the periods ended December 31, 2010 and 2009: Present Value of Post-Employment and Similar Obligations Present Value of Defined Benefit Plan Obligations, Initial Balance 28,401 23,860 Current service costs 2,776 2,468 Interest costs 1,328 1,519 Contributions by the participants 97 - Actuarial gains (losses) 2,758 (2,021) Increase (decrease) in foreign currency exchange differences 858 5,427 Contributions paid (4,030) (2,852) Defined benefit plans business obligation combination Present Value of Defined Benefit Plan Obligations, Final Balance 32,733 28,401 b) The following amounts were recorded in consolidated income within cost of sales and administrative expenses in the statement of comprehensive income for the periods ended December 31, 2010 and 2009: Impact on Earnings Income Statement Account Where Recognized Current service costs 2,776 2,468 Cost of Sales - Administrative Expense Interest costs 1,328 1,519 Cost of Sales - Administrative Expense Net actuarial gains (losses) 2,758 (2,021) Cost of Sales - Administrative Expense Effect of Limit Recognized in Statement of Income, Total 6,862 1, 966

145 144 AnnualReport AES Gener 2010 c) Other revelations: c.1) Actuarials assumptions: The following assumptions were used in actuarial calculations of post-employment benefits: Chile Colombia Actuarial Assumptions Nominal discount rate 6.25% 6.35% 8.00% 11.50% Average personnel rotation rate 2.50% 2.50% % % Expected salary increase UF + 1.5% UF + 1.5% 5.00% 6.50% Mortality table c.2) Sensibility analysis: Tables issued in accordance with joint standard of Superintendency of Securities and Insurance and Superintendency of Pension Fund Administrators Tables issued in accordance with US institutions GAM 1971 As of December 31, 2010, the actuarial post-employment liability sensibility over 100 basis points variation in the discount rate and the cost of medical benefits generates the following effects: Medical Expenses Sensibility Increase of 1% Decrease of 1% Effect in the defined benefit obligations 52 (52) Discount Rate Sensibility Increase of 1% Decrease of 1% Effect in the defined benefit obligations (346) 397 NOTE 22 OTHER NON FINANCIAL LIABILITIES As of December 31, 2010 and 2009, balances of non-financial liabilities are detailed as follows: Balances as of Current Non-Current Other Non-Financial Liabilities Deferred income (a) 5,306 7,231 27,325 32,546 Accumulated liabilities (b) 16,676 13, Other liabilities (c) Total 21,982 20,271 27,524 33,055

146 Financial statements 145 a) Deferred income As of December 31, 2010 and 2009, deferred income balances are detailed as follows: Deferred Income Current Balances as of Non-Current Escondida - Connection right 3,826 3,825 15,833 19,660 Chivor customers - 1, BHP Chile Inc Torquemada ,190 7,471 right to use Ventanas - Miraflores Line instalations LNG Quintero ,917 2,397 right to use and connect to transmission line Other deferred income ,385 2,460 Total 5,306 7,231 27,325 32,546 b) Accumulated liabilities Principally are vacations provisions and other employee benefits, accumulated as of December 31, c) Other liabilities As of December 31, 2010 and 2009, respectively, the non-current liabilities balances are as follows: Balances as of Non-Current Other Liabilities Payable deffered taxes argentinian law Contractors payment retentions Total

147 146 AnnualReport AES Gener 2010 NOTE 23 NET EQUITY a) Equity management Net equity includes paid-in capital, retained earnings and other comprehensive income. The main objective of the Company s capital management is to ensure that it maintains a strong credit rating and solid capital ratios in order to sustain business and maximize shareholder value. The Company manages its capital structure and makes adjustments based on changes in economic conditions. To maintain or adjust its capital structure, the Company can adjust dividend payments or capital returns to shareholders or issue new shares. No changes were made to the Company s lines of business, policies or processes during the year ended December 31, 2010 and b) Subscribed and paid-in capital At an Extraordinary General Shareholders Meeting held June 30, 2009, shareholders of AES Gener S.A. agreed to change the currency in which the Company s share capital is expressed, without altering the number of shares into which it is divided, from pesos legal tender in the Republic of Chile to US dollars, using the year-end exchange rate as of December 31, As of December 31, 2010, the Company s share capital consists of 8,069,699,033 subscribed and paid shares. Company shares movement is detailed as follows: Share Movement Authorized Issued Subscribed Paid Balance as of ,227,890,863 8,227,890,863 7,131,577,780 7,131,577,780 Subscription and payment ,121, ,121,253 Balance as of ,227,890,863 8,227,890,863 8,069,699,033 8,069,699,033 Subscription and payment Balance as of ,227,890,863 8,227,890,863 8,069,699,033 8,069,699,033 c) Capital increases In an Extraordinary Shareholders Meeting held November 19, 2008, shareholders of AES Gener S.A. agreed to increase capital by issuing 945,000,000 new single-series shares with no par value, totaling $153,562,500,000. These shares must be issued, subscribed and paid in full within 3 years beginning on the date of the meeting. As of December 31, 2010, $152,444,703,824 (US$245,797,415) has been paid for 938,121,253 shares as part of this capital increase. d) Dividend policy The dividend policy for 2009, informed in an Ordinary General Shareholders Meeting held April 29, 2010, consists of distributing up to 65% of 2010 profits in dividends to shareholders, conditional upon: the Company s actual net profits, the forecasts it prepares periodically and the requirement that it use its own resources to finance investment projects, among other conditions. Likewise, it was recorded that the Company intends to distribute interim dividends in 2010.

148 Financial statements 147 In addition, in that meeting, shareholders agreed to distribute the following dividends, charged to profits for the year ended December 31, 2009: i) The quantity of US$70,279,009, corresponding to 21.43% of 2009 profits, by distributing a minimum mandatory dividend of US$ per share, plus an interim dividend distributed on December 2009 for US$40,025,707, equivalent to 12.21% of 2009 profits; and ii) The quantity of US$89,702,774, equivalent to 27.35% of 2009 profits and corresponding to 2 additional dividend of US per share. The minimum mandatory dividend was paid in cash beginning May 11, 2010, an additional dividend was paid on July 7, 2010 and the remaining dividend was paid beginning October 7, On December 13, 2010, the Ordinary Board of Directors session agreed to distribute an interim dividend of US$ per share for 2010 period profit. The total amount of this dividend was 73,031, and was paid on January 5, e) Retained earnings (losses) The following table details the retained earnings (losses) of the period: Balances as of Retained Earnings (Losses) Initial Balance 645, ,496 Net profit (loss) for the period 169, ,937 Final dividends (159,982) (79,985) Interim dividends (73,031) (40,026) Income distribution to future dividend reserve (127,930) (64,952) Provision minimum dividend - (56,628) Reversal of prior period minimum dividend 56,628 40,939 Total 511, ,781 f) Other components of equity Other equity participations are detailed as follows: Share-based Option Plans Proposed dividends reserve Total Balances as of , , ,082 Share-based option plans proposed dividends - 127, ,930 Balances as of December 31, , , ,452 Share-based Option Plans Proposed dividends reserve Total Balances as of ,618 97,871 99,489 Share-based option plans proposed dividends - 64,952 64,952 Balances as of December 31,2009 2, , ,082

149 148 AnnualReport AES Gener 2010 g) Other comprehensive Other reserves for each period are detailed as follows: Foreign Currency Translation Reserves Cash Flow Hedge Reserve Defined Benefit Plan Reserve Equity Translation Reserves (1) Other Reserves Total Balances as of (713) (21,124) - (136,741) (10,147) ( ) Derivative instruments valuation - (81,188) (81,188) Deferred taxes - 6, ,547 Affiliate conversion difference 34, ,356 Associate investment adjustments ,647 2,647 Other variations - - (1,923) (1,092) Balances as of December 31, ,643 (95,765) (1,923) (136,741) (6,669) (207,455) Foreign Currency Translation Reserves Cash Flow Hedge Reserves Defined Benefit Plan Reserve Equity Translation Reserves (1) Other Reserves Total Balances as of (38,814) (108,911) - (136,741) (9,940) (294,406) Derivative instruments valuation - 107, ,220 Deferred taxes - (19,433) (19,433) Affiliate conversion difference 38, ,101 Other variations (207) (207) Balances as of December 31, 2009 (713) (21,124) - (136,741) (10,147) (168,725) (1) This item corresponds to an adjustment for the difference between paid-in capital at the period-end exchange rate as of December 31, 2008 and its historical value, in accordance with Official Form Letter 456 dated June 20, 2008, issued by the Superintendence of Securities and Insurance. h) Restrictions on dividend distributions from subsidiaries Gener s subsidiaries can distribute dividends as long as they comply with the restrictions, ratios and limits established in their respective loan agreements. NOTE 24 REVENUE Operating revenue for the periods ended December 31, 2010 and 2009 is detailed as follows: Balance Operating Revenues Contracted energy and capacity sales 1,217,247 1,018,478 Spot market energy and capacity sales 455, ,307 Other operating revenues 129,432 88,635 Total 1,802,049 1,653,420

150 Financial statements 149 NOTE 25 EXPENSES a) Expenses by nature The table below details the principal operating and administrative costs and expenses recorded by the Company in the periods ended December 31, 2010 and 2009, within the following accounts in the statement of comprehensive income: cost of sales, administrative expenses and other operating expenses. Expenses by Type Energy and capacity purchases 373, ,469 Fuel consumption 573, ,462 Cost of fuel sales 23,156 12,157 Transmission system use costs 117,763 73,319 Cost of production and other sales 170, ,811 Personnel expenses 76,520 52,792 Depreciation 166, ,206 Amortization 1,293 1,043 Total 1,504,070 1,262,259 b) Personnel expenses Personnel expenses for the periods ended December 31, 2010 and 2009 are presented as follows: Personnel Expenses Salaries and wages 56,956 43,366 Short-term employee benefits 8,475 5,103 Post employment benefit liability expenses 2, Employment termination benefits 4,591 1,491 Share-based payments Other long term benefits 40 - Other personnel expenses 2,903 1,937 Total 76,520 52,792

151 150 AnnualReport AES Gener 2010 NOTE 26 OTHER INCOME/ (LOSSES) Other income (losses) for the periods ended December 31, 2010 and 2009 is detailed as follows: Other Income (Losses) Transportation contract (*) (72,215) - Property, plant and equipment disposals (14,515) (3,327) Property, plant and equipment Impairment (3,370) - Property, plant and equipment sales Dividend received from Gasoducto Gasandes Argentina S.A. - 1,327 Minimum income tax recovery (Argentina) - 3,359 Other inflows/ (outflows) 628 (195) Total (88,787) 1,256 (*) On December 29, 2010, Sociedad Eléctrica Santiago S.A. reached an agreement with Transportadora de Gas del Norte S.A., Gasoducto Gasandes S.A. and Gasoducto Gasandes S.A. (Argentina) early terminate the current gas transport agreements and solve the current litigations and possible future litigations; for that reason recognized 72,215 in relation with this agreement (See Note 30). NOTE 27 FINANCE INCOME AND EXPENSES Finance income for the periods ended December 31, 2010 and 2009 is detailed as follows: Interest Income Income from financial assets 17,274 14,656 Other finance income 5,178 7,210 Total Interest Income 22,452 21,866 Interest on bank loans (21,053) (14,984) Interest on bonds (81,818) (76,596) Gain (loss) for valuation of financial derivatives (29,798) (26,206) Other costs (3,665) (9,805) Capitalized finance expenses 37,021 37,369 Total Interest Costs (99,313) (90,222) Net Foreign Currency Differences, Net 16,451 60,115 Total Finance Income (60,410) (8,241)

152 Financial statements 151 NOTE 28 INCOME TAX EXPENSE The charge to income for income taxes for the periods ended December 31, 2010 and 2009 is detailed as follows: Current and Deferred Income Tax Expense (Income) (Presentation) Current tax expense 79,567 70,159 Adjustments to prior period current tax (19,422) 815 Other current tax expenses Total Current Tax Expense, Net 60,168 70,990 Deferred expenses (income) for taxes related to creation and reversal of temporary differences (27,811) 21,160 Other deferred expenses (1,188) 112 Total Deferred Tax Expense, Net (28,999) 21,272 Income Tax Expense (Income) 31,169 92,262 Income Tax Expense (Income) for Foreign and National Parties (Presentation) Current tax expense, net, foreign 54,795 45,489 Current tax expense, net, national 5,373 25,501 Total Current Tax Expense, Net 60,168 70,990 Deferred tax expense, net, foreign (6,193) 3,432 Deferred tax expense, net, national (22,806) 17,840 Total Deferred Tax Expense, Net (28,999) 21,272 Income tax expense (income) 31,169 92,262 The following table reconciles the income tax charge resulting from application of the legal rate versus the effective rate in 2010 and 2009 income: Reconciliation of Tax Expense Using Legal Rate with Tax Expense Using Effective Rate Tax Expense Using Legal Rate 33,494 71,036 Tax effect of rate in other jurisdictions 21,752 21,689 Tax effect of non-taxable operating income (13,224) (11,257) Tax effect of non-deductible expenses 1,573 1,618 Utilization of previously unrecognized tax losses (20,037) - New assest valuation for unrecognized deferred taxes Tax effect for changes in income taxes (1,535) - Contingencies provision's reversal (532) - Foreign currency exchange rate 6, Other increase (decrease) in charge for legal taxes 2,000 (695) Adjustments to Tax Expense Using Legal Rate, Total (2,325) 21,226 Tax Expense Using Effective Rate 31,169 92,262

153 152 AnnualReport AES Gener 2010 The item Tax effect of rates in other jurisdictions presents the differences that arise between the current rate in Chile (17%) and the other jurisdictions in which foreign subsidiaries are domiciled (Argentina 35% and Colombia 33%). The item Tax effect of untaxable operating income represents the impact on the effective rate of recognizing the financial result in associates Guacolda. Disclosures about Tax related to Items Credit (Charged) to Net Equity (Presentation) Net movements in cash flow hedges 6,547 (19,433) Disclosures about Tax related to Items Credit (Charged) to Net Equity, Total 6,547 (9,433) Deferred taxes credited (charged) to equity are related to other comprehensive income (OCI) for interest rate and currency derivatives. NOTE 29 EARNINGS PER SHARE Basic earnings per share are calculated by dividing the profit attributable to the Company s net equity holders by the weighted average number of shares in circulation in a year, excluding, should any exist, common shares acquired by the Company and maintained as treasury shares. (Amounts in thousands of US dollars are expressed in thousands, except for unit values.) Basic Earnings per Share Profit attributable to net shareholders of parent 169, ,937 Result Available for Common Shareholders, Basic 169, ,937 Weighted average number of shares, basic 8,069,699,033 8,051,066,355 Basic Earnings per Share There are no transactions or concepts that create a dilutive effect. NOTE 30 CONTINGENCIES, LAWSUITS AND OTHER Contingencies and Restrictions 1) Guarantees Granted Gener has the following commitments, guarantees and contingent liabilities: a) Commitments with financial and other institutions Both the loan covenants entered into by Gener with various financial institutions and the issuance contracts that govern the Company s bonds impose certain financial obligations over the duration of the loans and bonds. These obligations are standard to this type of transaction. In accordance with the conditions established in the agreements currently in effect, neither Gener nor any of its significant or restricted subsidiaries, based on the respective definition, may issue, assume or co-sign debt with guarantees over the Company s goods or assets, unless proportional and/or equivalent guarantees are granted to financiers. As of December 31, 2010, Gener is in

154 Financial statements 153 compliance with all of its debt commitments and financial restrictions in accordance with the terms and conditions of each covenant and contract. b) Guarantees to third parties (i) On December 19, 2007, Gener signed a cross currency swap contract with Credit Suisse International to hedge the risk of foreign exchange variations between the UF and US dollar for the UF bonds issued in December On September 16, 2009, this swap contract was modified and one part was assigned to Deutsche Bank Securities. Both swap contracts, including its modifications, requires Gener to grant a guarantee when the market value of the swap exceeds the limit established in the contract. As of December 31, 2010, it was not necessary to grant any guarantee based on the market value of the swap. c) Guarantees on behalf of subsidiaries (i) The gas transport agreement entered into between Termoandes S.A. ( Termoandes ) and Transportadora de Gas del Norte S.A. ( TGN ) does not currently require any guarantee from Gener. In accordance with the agreement, no guarantee is necessary as long as Termoandes or its shareholders maintain an investment-grade risk rating, defined in the agreement as BBB- (in Argentina) or greater. If Termoandes does not maintain an investment-grade rating while one of its direct or indirect controlling shareholders does maintain such a rating, that shareholder must grant a corporate guarantee to TGN. In the event that neither Termoandes nor any of its shareholders maintains an investment-grade rating, it shall provide a bank guarantee equal to the transport service payment due for one year. Termoandes currently has a rating of A (in Argentina), issued by Fitch Ratings, with a stable outlook. (ii) On October 4, 2006, Gener entered into a surety bond and joint assumption of debt agreement to guarantee the obligations of its subsidiary Empresa Eléctrica Santiago S.A. ( ESSA ) contained in the loan agreement signed with a syndicate of local banks, led by Banco de Crédito e Inversiones for a total of 30,000. As of December 31, 2010, such amount reached a total of 21,000. This contract was modified on May 29, 2009 (See section 3 d)). (iii) On December 31, 2010 ESSA reached and agreement with the transport companies Transportadora de Gas del Norte S.A. ( TGN ), Gasoducto Gasandes S.A. and Gasoducto Gasandes (Argentina) S.A.., finalizing all pending litigations. Gener became co-debtor in ESSA future payments. (See Note 4.b.2). For additional and complementary information, see Note 31: Guarantees Obtained from third parties. 2) Litigation and Disputes a) Judicial proceedings a.1 Fines imposed by the Superintendency of Electricity and Fuels (hereinafter SEF ) On February 21, 2003, the SEF filed charges against Gener and other members of the CDEC-SIC, related to the power failure that occurred on January 13, 2003 in the Central Interconnected System (hereinafter SIC ). On January 24, 2003, Gener answered the claims and rejected their validity in a presentation made to the SEF. On April 27, 2004, the SEF fined all of the members of the CDEC-SIC as a result of the power failure, alleging they were justifiably responsible as members of the CDEC-SIC. Gener and ESSA were fined 560 Annual Tax Units or UTA (equivalent to approximately 540). The Companies filed motions to vacate before the SEF on May 7, 2004, which were rejected on November 3, 2005; however the fine to ESSA was reduced to 350 UTA (337). On November 18, 2005, the Companies filed illegality claims before the Court of Appeals of Santiago, which are pending ruling. In accordance with applicable standards, a deposit for 25% of the fine has been made with the court. Those claims are still pending of decision. Gener and ESSA collectively established a provision for these contingent liabilities for M$410,647 (877).

155 154 AnnualReport AES Gener 2010 a.2 Insurance Companies versus Gener and ESSA On November 2004, Gener and ESSA were notified of a civil claim for damages brought against them by three insurance companies: Liberty Compañía de Seguros Generales S.A., Compañía de Seguros Generales Cruz del Sur S.A. and Compañía de Seguros Penta Security S.A. (the Insurance Companies ) for damages for loss of production due to the failure of a transmission line belonging to Codelco-Andina in June 2000 that prevented energy from being received from ESSA, for an amount of 6,616, plus interests and legal costs On December 31, 2007, the court rejected the suit against Gener, but condemned ESSA to pay 1,438 plus expenses and interest. On January 14, 2008, ESSA appealed this ruling and the plaintiffs presented a motion for cessation and appeal against the first instance ruling. On March 15, 2010, the Santiago Court of Appeals rejected both parties motions, confirming the first instance ruling. On April 1, 2010, the plaintiffs filed a remedy of cassation on grounds of form and substance before the Supreme Court. On April 22, 2010, the Santiago Court of Appeals accepted the motions to be heard and ruled on by the Supreme Court. On June 15, 2010, ESSA paid the amount determined by the court of 1,438. At the date is still in discussion the interest expenses calculation. ESSA has established a provision for 610 for pending interest. 3) Financial Commitments a) Gener, as the issuer of Senior Bonds at 7.5% for 400,000 maturing in March 2014, must comply with certain limitations on indebtedness and restricted payments (including dividends), if the bonds are not rated Investment Grade by two rating agencies. Currently, Gener has three international investment-grade ratings and, therefore, these restrictions have been suspended. b) In December 2007, Gener placed UF 5,600,000 (256,728) in bonds, issued in two series, registered in Chile s Securities Registry under numbers 516 and 517 on November 9, This issuance includes N series bonds for UF 4,400,000 at 4.3% maturing in 2028 and O series bonds for UF 1,200,000 at 3.10% maturing in On April 8, 2009, Gener carried out a second bond issuance against the line of bonds registered in the Securities Registry under number 517 on November 9, This issuance consisted of Q series bonds for US$196 million at 8.0% maturing in In accordance with the obligations established in its bond agreements, the Company must comply with the following financial ratios on a quarterly basis, calculated using the consolidated financial statements. Consolidated indebtedness level no greater than 1.20; Financial expense coverage ratio no less than 2.50; and Minimum equity no less than UF 40 million. Maintain essential assets equivalent to at least 70% of total consolidated operating income in investments related to generating, transmitting, retailing, distributing and/or supplying electricity or fuels. As of December 31, 2010, Gener was in compliance with the aforementioned ratios. c) In accordance with the loan agreement signed with Banco del Estado in February 2008 for UF 930,000 ( 42,635), Gener must comply with certain limitations on indebtedness and restricted payments (including dividends) if Gener is not rated Investment Grade (BBB- or greater). Currently, Gener has three international and two local investment-grade ratings and, therefore, these restrictions have been suspended. As of December 31, 2010, this line has not been drawn down. d) The loan agreement entered into by ESSA and a syndicate of local banks led by Banco de Crédito e Inversiones for a total of 30,000 was amended on May 29, 2009, primarily to replace the financial ratios applicable to ESSA with financial ratios applicable

156 Financial statements 155 to Gener as joint debtor. In accordance with the obligations undertaken in this amendment, the Company must comply with the following financial ratios on a quarterly basis, calculated using the consolidated financial statements. As of the date of approval of these financial statements, such amount reaches 21,000. Consolidated indebtedness level no greater than 1.20; Interest expense coverage ratio no less than 2.50; Minimum equity no less than UF 40 million. As of December 31, 2010, Gener was in compliance with the aforementioned ratios. e) Every six months, Gener must comply with the following financial ratios, calculated based on its consolidated financial statements, that are established in the loan agreement signed with a bank syndicate in October 2009 for UF 3,940,000 (180,626). Indebtedness level no greater than 1.20; Financial expense coverage ratio no less than 2.50; Minimum equity no less than US$1,574,621,634 Maintain essential assets equivalent to at least 70% of total consolidated operating income in investments related to generating, transmitting, retailing, distributing and/or supplying electricity or fuels. As of December 31, 2010, this credit line has not been drawn down and Gener was in compliance with the aforementioned ratios. 4) Other Contingent Liabilities a) Contingent liabilities associated with Chivor. a.1 Bond issuance and Colombian Loan Agreement On November 30, 2004, Chivor completed refinancing of 253,000 in debt. As part of this process, Chivor issued guaranteed senior bonds at 9.75% for 170,000, maturing in Likewise, Chivor took out a line of credit with a local bank originally in Colombian pesos for the equivalent of 83,000, expiring in 7 years. On December 12, 2005, Chivor renegotiated the local bank loan in Colombian pesos, improving the interest rate and other conditions. As of December 31, 2010 this amount reached ThCol$23,668,309 (12,407). Both the guaranteed senior bonds and the local syndicated loan are guaranteed by: (a) an onshore fiduciary agreement by which Chivor s income from generating and retailing electricity are administered and maintained in a trust to guarantee payment of its obligations under the local syndicated loan, (b) a pledge on all of Chivor s shares owned by Energy Trade and Finance Corporation and (c) a pledge on all shares of AES Chivor S.A., Chivor s managing partner. a.1.1. Bonds In addition to the guarantees detailed in the previous paragraph, Chivor maintains a reserve account that was established at the close of the senior notes. This reserve should be equal, at all times, to the next interest payment; the account can be financed in cash or with one or more letters of credit. For this purpose, on June 27, 2009, Chivor financed the account in cash, depositing 8,287. Among its principal financial commitments, Chivor must comply with the following financial ratios in order to make restricted payments, including dividends: Interest expense coverage ratio no less than 2.25; and Total debt-to-ebitda ratio no greater than 3.80.

157 156 AnnualReport AES Gener 2010 a.1.2. Colombian Loan Agreement The Colombian Loan Agreement imposes the following operating and financial commitments on Chivor: Debt to free cash flow ratio no greater than 5.25; Debt-to-EBITDA ratio no greater than 4.25; Ratio of EBITDA (as established in the Colombian Loan Agreement) to debt service coverage of 1.20 or greater; and Ratio of debt service coverage, defined as free cash flows plus cash available at the respective period-end, less dividends authorized but not paid, to debt service of 1.10 or greater. As of December 31, 2010, all restrictions and obligations related to obligations with financial institutions and bonds have been met. a.2 Judicial and administrative proceedings a.2.1. Revindication processes In December 2005, Chivor initiated a special plan to recover possession of the lands located within the reservoir s 8 meter security parameter. As a part of this process, the Company has filed 22 revindication lawsuits on illegally occupied properties. Chivor has established a provision of ThCol$1,090,615 (572). a.2.2 Equity tax 2005 and 2006 On July 31, 2008 and August 11, 2008, the Colombian National Tax and Customs Service ( DIAN ) issued special notifications with respect to the Company s private equity tax returns for 2005 and 2006, respectively, proposing modifications to the returns filed by Chivor. Chivore responded to those requirements but thereafter the DIAN issued official liquidations, which were appealed by Chivor in June, The DIAN rejected Chivor s arguments in June On October 2010 Chivor began judicial proceedings and restitution o rights. Chivor has provisioned ThCol$8,517,187 (4,465) for both proceedings. a.2.3 On August 6, 2009, the Cundinamarca Administrative Court issued the ruling against Chivor s claims in the process of Annulment and Reestablishment of Rights initiated by Chivor against DIAN, which rejected the deduction of costs and expenses from the 2002 income tax declaration. Chivor filed an appeal on August 13, 2009 and DIAN did the same on August 24, If for some reason, AES Chivor s arguments are rejected, the costs and expenses previously mentioned, of approximately MCol$1,414,190 (741), will be treated as net income in the taxable year in which a final ruling is issued, and would not generate a fine or penalty interest since in 2002 Chivor had a tax loss, which was offset, according to what is established in Article 199 of the Tax Statutes. No provision has been recorded to date. b) Contingent liabilities and commitments involving ESSA b.1 Financial commitments On a quarterly basis, ESSA must comply with the following financial ratios established in its bond issuance contract (standing capital amount UF 1,034,415 (47,422), for bonds registered in Chile s Securities Registry under Nº 214, calculated based on its unconsolidated financial statements: Unencumbered assets should be equal to at least 125% of unsecured current liabilities; Indebtedness level no greater than 1.75; Minimum equity no less than UF 2 million (91,688); and Prohibition to sell essential assets, which represent more than 40% of total assets, without prior authorization from the Bondholders Council. As of December 31, 2010, ESSA was in compliance with the aforementioned obligations.

158 Financial statements 157 b.2 Arbitration proceedings related to transport agreements In February 2008, ESSA filed two arbitration claims against GasAndes and GasAndes Argentina, after termination of the gas supply agreement between ESSA and the producers of the Sierra Chata Consortium (Argentina). Contract termination was ordered in an arbitral award on November 30, 2007, as part of proceedings conducted in accordance with the standards of the International Chamber of Commerce. ESSA filed claims against GasAndes and GasAndes Argentina on December 22, 2008, before two separate courts of arbitration. In both cases, the courts were requested to clarify the effects of the administrative restrictions imposed by the Argentine government on gas exports to Chile; and to rule on the subsequent termination, modification or suspension of the gas supply agreements entered into with GasAndes and GasAndes Argentina. On February 26, 2008, GasAndes and GasAndes Argentina redeemed 6 bank guarantees totaling 16,614 that had been given to guarantee the transport agreements. In the arbitration claims, ESSA demanded restitution of this amount. As a result, ESSA notified TGN on December 19, 2007 that it was terminating a gas transport agreement between the parties. Subsequently, on February 21, 2008, ESSA filed a request with the Argentine National Gas Regulatory Entity ( ENARGAS ), asking it to rule that the agreement had been terminated with just cause. On October 31, 2008, ENARGAS declared itself incompetent to rule on this case. ESSA appealed that decision before the Federal Administrative Court. On December 2, 2009, ESSA was notified that the Federal Administrative Court had upheld ENARGAS s decision and archived the case. Simultaneously, after ENARGAS declared itself incompetent, TGN filed two lawsuits before a federal civil and commercial court seeking contract fulfillment and invoice payments and Gener filed a countersuit against the first suit. On December 29, 2010, ESSA reached an agreement with GasAndes Argentina, GasAndes Chile and TGN to terminate the respective gas transport agreements and settle all current and potential litigation. ESSA recorded 72,215 related to these agreements as other expenses for the quarter ended December 31, b.3 Fiduciary Charges On May 7, 2008, ESSA presented a specific claim for ENARGAS to review the orders issued prior to that date and exclude ESSA from paying fiduciary charges. ESSA considers these charges to be illegitimate; In addition, it is no longer a firm loader, which is an essential condition for purposes of applying these charges. On July 17, 2008, ENARGAS rejected the claim and on July 24, 2009, it rejected the motion to reconsider filed subsequently. On August 6, 2009, ESSA filed an appeal before the Argentine Energy Secretary, which is pending judgment. b.4 Fines imposed by the Superintendency of Electricity and Fuel (hereinafter SEC ) On April 12, 2004, the SEC brought charges against ESSA and the remaining members of the CDEC-SIC as a result of the power failure that occurred in the SIC on November 7, 2003, alleging they were responsible based on the fact that they are members of the CDEC-SIC. ESSA responded to the charges on May 3, On June 30, 2005, the SEC fined all members of the CDEC-SIC as a result of the power failure for not acting in a coordinated manner to preserve the service reliability of the electricity system, alleging they were justifiably responsible solely because they were members of the CDEC-SIC. ESSA was fined 350 UTA (equivalent to approximately 337). On July 11, 2005, ESSA filed a motion to vacate before the SEC. On September 4, 2009, the motion to vacate filed by ESSA was rejected by the SEC. On November 18, 2005, ESSA filed a motion to overturn before the Santiago Court of Appeals, depositing 25% of the fine with the court, in accordance with applicable standards. This motion is pending ruling. ESSA has established a provision for this contingent liability of 350 UTA (337). c) Contingent liabilities and commitments involving Empresa Eléctrica Ventanas S.A. ( EEVSA ) On June 13, 2007, EEVSA secured financing for up to 415,000 to construct the Ventanas thermoelectric power plant and also provided a letter of credit for up to 25,000 to guarantee six months of debt service. The loan is for a 15-year period, including a 3-year construction period, and is guaranteed by assets, shares and project cash flows.

159 158 AnnualReport AES Gener 2010 d) Contingent liabilities and commitments involving Empresa Eléctrica Angamos S.A. ( EEA ) On October 22, 2008, EEA secured financing for up to 908,500 to construct the Angamos thermoelectric power plant as well as letters of credit for up to 80,000 to guarantee various of EEA s obligations and six months of debt service. The loan is for a 17-year period, including a 3-year construction period, and is guaranteed by assets, shares and project cash flows. e) Contingent liabilities and commitments involving Inversiones Nueva Ventanas S.A. ( Inversiones Nueva Ventanas ) On June 8, 2007, Inversiones Nueva Ventanas and Gener constituted a commercial pledge on shares issued by EEVSA in favor of its creditors to guarantee its obligations related to the financing for the Nueva Ventanas power plant. On October 22, 2008, Inversiones Nueva Ventanas and Gener constituted a commercial pledge on shares issued by EEA in favor of its creditors to guarantee its obligations related to financing for the Angamos power plant. f) Contingent liabilities and commitments involving Empresa Eléctrica Campiche S.A ( EEC ). In June 2008, an individual representing both himself and two environmental groups filed a motion before the Court of Appeals of Valparaíso ( CAV ) against the Regional Environmental Commission (COREMA) of the 5th Region and other entities that took part in the environmental assessment of the Campiche thermoelectric power plant ( the Power Plant ) in order to revoke the Power Plant s environmental permit. The subsidiary Empresa Eléctrica Campiche S.A. ( EEC ) became party to this claim. On January 8, 2009, the CAV ruled that the permit had not been correctly granted and, therefore, is illegal. On June 22, 2009, the Supreme Court upheld the CAV s decision, based on the understanding that applicable soil regulations do not permit the Power Plant to be constructed. Construction has been halted as a result of the Supreme Court s decision. On the other hand, Decree N 68 of the Ministry of Housing and Urban Development that was published in an Official Paper on December 31, 2009, modifies the General Urbanism and Construction Regulation. EEC and Gener appealed to this new decree in order to solve the territorial planning problem, which was ratified by the fifth region governmental authority (SEREMI Minvu). On February 22, 2010, COREMA of fifth Region approved the new RCA of the Power Plant. The Company was notified on March 16, 2010 about the Exempt Resolution that gives effect to that agreement. On March 24, 2010, the mayor of Puchuncaví and another party each filed motions for injunctive relief against the Environmental Certification Resolution (RCA in Spanish) before the Valparaiso Court of Appeals. On July 26, 2010, EEC, Gener and the Municipality of Puchuncaví reached an agreement by which, among other obligations assumed by the parties, the mayor of Puchuncaví undertakes to fully withdraw the motion for injunctive relief. On the same date, the mayor of Puchuncaví and the other party filed withdrawal briefs before the Valparaiso Court of Appeals, thus upholding the RCA. On April 1, 2010, EEC requested a building permit for the power plant from the Office of Municipal Works of Puchuncaví. The mayor of Puchuncaví petitioned for a temporary restraining order on April 12, 2010, to halt processing of the building construct permits. The court granted this order on April 13. On April 20, EEC and AES Gener filed motions to reconsider against this ruling. On April 22, the court reconsidered this ruling and upheld the temporary restraining order but limited its effects to the final acceptance of the buildings and ordered the Director of Municipal Works of Puchuncaví (DOM) to process the building permits requested by EEC. On August 10, 2010, the DOM granted the building permit for the power plant and notified the Company on August 16. On September 9, 2010, two new constitutional protection actions were presented against the construction permit granted on August 10, 2010 with the Valparaiso Court of Appeals. These actions were filed against the Director of Public Works and the Municipality of Puchuncavi. On November 2010, the CAV rejected those protection actions. This resolutions was appealed before the Supreme Court, which on January 26, 2011, finally confirmed the rejection of the actions filed by the CAV. EEC restarted the construction of the plant.

160 Financial statements 159 NOTE 31 GUARANTEES Guarantees Granted from Third Parties Beneficiary Guarantee Description From To Minera La Escondida Energy supply contract ,400 Minera Spence Energy supply contract ,600 Terminal Graneles del Norte S.A. Conditional right and obligation transfer ,000 Corporación Nacional del Cobre Guarantee the validity of the energy supply public offer Ilustre Municipalidad de Mejillones Guarantees the obligations for the land lease Secretaría Regional Ministerial de Bienes Guarantees the lease conditions of the fiscal property Nacionales de Antofagasta Director General de Territorio Marítimo Guarantees the veracity of fiscal leases y Marina Mercante Innova Chile Contract obligations Ebara International Corp. Guarantees the purchase of the condenser bomb Otros Minor guarantees 2,225 Total 62,717 Date Guarantees obtained from Third Parties Date Grantor of Guarantee Guarantee Description From To Posco Engeneering and Construction Co. Ltd. Engineering, construction, assembly and commissioning of Angamos Thermoelectric ,198 Power Plant Ingeniería y Construcción, Sigdo Koppers S.A. Engineering, construction, assembly and commissioning of Angamos T-Line ,860 Compañía Portuaria de Mejillones S.A. Bulk contract transference ,000 Alstom Norway AS, Alstom Brasil Energía e Transporte Engineering, construction and contract realization ,454 Ltda., Alstom Chile S.A. Vogt Power International Inc. Stand By Letter of Credit Skanska CHILE S.A. Guarantees compliance of contract SL-C0502, Engineering, construction supply, assembly and commissioning of Central Santa Lidia Ingeniería Eléctrica Transbosch Guarantees the contract for maintenance services of lines and substations Empresa de Montajes Industriales SALFA S.A. Guarantees construction of contention screens for coal dust emissions Invensys Chile S.A. Contract period guarantee Instrumentación Menchaca, Contract obligations Amadori Industrial Ltda. Aguas del Altiplano S.A. Contract obligations Doosan Heavy Industries and Construction Co. Ltda. Guarantee payment Sistemas de Protección contra Riesgos Ltda. Guarantees the engineering, construction and assembly of the turbines fire protections Leal y Faúdez Ltda. Guarantees construction of Angamos truck scales Flota Vershae S.A. Contract obligations Transformadores TUSAN S.A. Contract period guarantee Empresa Constructora Agua Santa S.A. Guarantees construction of civil works and ash disposal site of Angamos ,020 Varios Other minor guarantees 626 Total 263,587

161 160 AnnualReport AES Gener 2010 NOTE 32 SHARE-BASED PAYMENTS Stock Options AES Corporation grants options to purchase common stock under stock option plans. Under the terms of the plans, AES Corporation may issue options to purchase shares of common stock of AES Corporation at a price equal to 100% of the market price at the date the option is granted. Stock options are generally granted based upon a percentage of an employee s base salary. Stock options issued under these plans in 2010 and 2009 have a three-year vesting schedule and vest in one-third increments over the three-year period. The stock options have a contractual term of ten years. The weighted average fair value of each option grant has been estimated, as of the grant date, using the Black-Scholes option-pricing model with the following weighted average assumptions: Expected volatility 38% 66% Expected annual dividend yield - - Expected option term (years) 6 6 Risk-free interest rate 2.86% 2.01% The Company exclusively relies on implied volatility as the expected volatility to determine the fair value using the Black-Scholes optionpricing model. The implied volatility may be exclusively relied on due to the following factors: - The Company utilizes a valuation model that is based on a constant volatility assumption to value its employee share options; - The implied volatility is derived from options to purchase common stock of AES Corporation that are actively traded; - The market prices of both the traded options and the underlying shares are measured at a similar point in time to each other and on a date reasonably close to the grant date of the employee share options; - The traded options have exercise prices that are both near-the-money and close to the exercise price of the employee share options; and - The remaining maturities of the traded options on which the estimate is based are at least one year. The Company used a simplified method to determine the expected term based on the average of the original contractual term and the pro rata vesting term. This simplified method was used from the year ended December 31, 2010 and 2009.This is appropriate given a lack of relevant stock option exercise data. This simplified method may be used, as the stock options of AES Corporation have the following characteristics: - The stock options are granted at-the-money; - Exercisability is conditional only on performing service through the vesting date; - If an employee terminates service prior to vesting, the employee forfeits the stock options; - If an employee terminates service after vesting, the employee has a limited time to exercise the stock option; and - The stock option is non-hedgeable and not transferable. The Company does not discount the grant date fair values determined to estimate post-vesting restrictions. Post-vesting restrictions include black-out periods when the employee is not able to exercise stock options based on their potential knowledge of information prior to the release of that information to the public. The assumptions that the Company has made in determining the grant date fair value of its stock options and the estimated forfeiture rates represent its best estimate.

162 Financial statements 161 Using the above assumptions, the weighted average fair value of each stock option granted was US$5.08 and US$4.08 for the periods ended December 31, 2010 and 2009, respectively. The following table summarizes the components of stock-based compensation related to employee stock options recognized in the Company s financial statements: Pre-tax compensation expense - - Total intrinsic value of options exercised 1 14 Total grant date fair value of options vested Cash received from the exercise of stock options 4 42 As of December 31, 2010, the Company expects to recognize 79 in total unrecognized compensation cost related to stock options over a weighted average period of approximately 1.5 years. There were no modifications to stock option awards during the period ended December 31, The following table summarizes option activity for the period ended December 31, 2010: Options Weighted Average Exercise Price US$ Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding as of December 31, , Exercised during the period (434) Forfeited and and expired during the period (21,952) Granted during the period 16, Transfer to Gener during the period 62, Outstanding as of June 30, , Vested and expected to vest as of December 31, , Eligible for exercise as of December 31, , The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price of AES Corp on the last trading day of the 2nd quarter 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by options holders had all options holders exercised their options on December 31, The amount of the aggregate intrinsic value will change based on the fair market value of AES Corp s stock. The Company initially recognizes compensation cost based on the estimated number of instruments for which the requisite service is expected to be rendered. Based on actual experience, the forfeiture rates used for options granted during 3rd quarter 2010 was 12.09%. This estimate will be revised if subsequent information indicates that the actual number of instruments forfeited is likely to differ from the previous estimate.

163 162 AnnualReport AES Gener 2010 Restricted Stock AES Corporation also issues restricted stock units ( RSUs ) under its long-term compensation plan. The RSUs are generally granted based upon a percentage of the participant s base salary. The units have a three-year vesting schedule and vest in one-third increments over the three-year period. The units are then required to be held for an additional two years before they can be redeemed for shares, and thus become transferable. For the periods ended December 31, 2010 and 2009, RSUs issued had a grant date fair value equal to the closing price of AES Corp s stock on the grant date. The Company does not discount the grant date fair values to reflect any post-vesting restrictions. The RSUs granted to employees during the periods ended December 31, 2010 and 2009 had grant date fair values per RSU of US$12.18 and US$6.71, respectively. The following table summarizes the components of stock-based compensation related to employee RSUs recognized in the Company s financial statements: RSU expense before income taxes - - Total intrinsic value of RSUs converted (1) Total intrinsic value of RSUs vested (1) Amount represents the fair value on the conversion date. There was no cash used to settle RSUs or compensation cost capitalized as part of the cost of an asset for the periods ended December 31, 2010 and As of December 31, 2010, the Company expects to recognize 459 in total unrecognized compensation cost related to RSUs over a weighted average period of approximately 1.8 years. There were no modifications to RSU awards during the period ended December 31, The following table summarizes RSU activity for the period ended December 31, 2010: RSU Weighted Average Grant Date Fair Value Weighted Average Remaining Vesting Term Non-vested as of December 31, , Vested during the period (23,399) Forfeited and and expired during the year (35,657) Granted during the year 58, Stock transfer 23, Non-vested as of December 31, , Vested as of December 31, , Vested and expected to vest as of December 31, ,

164 Financial statements 163 NOTE 33 ENVIRONMENTAL EXPENDITURES The Group has a long-term sustainable development policy that governs its activities, in harmony with the environment. In this context, investments made in facilities, equipment and industrial plants include state-of-the-art technology with the latest advances available. The principal environmental expenses for the periods ended December 31, 2010 and 2009 are presented as follows: Detail Balance as of Air quality monitoring station Electrostatic precipitator - 45 Waste water system Ash deposit 1, Marine monitoring (oceanographic monitoring and liquid industrial waste control) Smokestack monitoring Noise monitoring 53 - Miscellaneous expenses for Law Nº 99 environmental commission-colombia 6,305 5,322 Other Total 9,331 7,072 The following table details the principal disbursements during the period by subsidiary and project: Accounting Recognition Company Project Property, plant and equipment Accum. Dec. 10 Accum. Dec. 09 Committed Amount Description AES Gener S.A. FGD 49, Desulfurization system for combustion gases, Unit 2 Ventanas Power Plant Capex AES Gener S.A. Low Nox 4,373 4, Replacement of Ventanas plant s burnings to reduce NOx emissions Capex AES Gener S.A. Laguna Verde 164 3,849 - Fuel modification from coal to Diesel 2B of Laguna Verde Plant Expense AES Gener S.A. Salida Nudo Vial Street Node Exit improvement of Nueva Ventanas Port access The projects included here are intended to optimize plant performance in order to guarantee compliance with applicable standards. All projects detailed here are currently under development as of the date of these financial statements. AES Gener also has other projects to develop new applied technologies to reduce environmental impact.

165 164 AnnualReport AES Gener 2010 NOTE 34 ASSETS AND LIABILITIES IN FOREIGN CURRENCIES a) Current assets and liabilities Assets Less Than 90 days From 91 days to 1 year Less Than 90 days From 91 days to 1 year Current Assets Foreign Currency Functional Currency Cash and cash equivalents Chilean peso US$ 77,944-40,672 - UF US$ Other currencies US$ 11,736-5,855 - Other financial assets, current Chilean peso US$ UF US$ Other currencies US$ 1, Other non-financial assets, current Chilean peso US$ UF US$ Other currencies US$ 862-1,213 - Trade and other receivables, current Chilean peso US$ 187,693 2, ,151 4,903 UF US$ 20, ,382 15, ,662 Other currencies US$ 62,588-73,947 - Total Current Assets 364, , , ,460

166 Financial statements 165 Net Equity and Liabilities Less Than 90 days From 91 days to 1 year Less Than 90 days From 91 days to 1 year Current Liabilities Foreign Currency Functional Currency Other financial liabilities, current Chilean peso US$ UF US$ 188 2, ,236 Other currencies US$ ,352 - Trade and other payables, current Chilean peso US$ 101,041 3,291 85,479 18,337 UF US$ 5, ,817 - Other currencies US$ 8,612-20,022 1,928 Other provisions, current Chilean peso US$ ,251 1,152 UF US$ Other currencies US$ Accounts payable for current taxes Chilean peso US$ UF US$ Other currencies US$ , ,120 Post-employment benefit liability, current Chilean peso US$ 398 1, ,474 UF US$ Other currencies US$ Other non-financial liabilities, current Chilean peso US$ 8,235 5,935 7,521 2,930 UF US$ Other currencies US$ 2,279-1,418 1,363 Total Current Liabilities 128,498 43, ,412 51,999

167 166 AnnualReport AES Gener 2010 b) Non-Current assets and liabilities Assets Between 1 to 3 years Between 3 to 5 years More than 5 years Between 1 to 3 years Between 3 to 5 years More than 5 years Non-Current Assets Foreign Currency Functional Currency Other financial assets, non-current Chilean peso US$ UF US$ Other currencies US$ Other non-financial assets, non-current Chilean peso US$ 592-7, ,357 UF US$ Other currencies US$ 3, Accounts receivable, non-current Chilean peso US$ , UF US$ 31, , Other currencies US$ 7, , Intangible assets (other than goodwill), Net Chilean peso US$ UF US$ Other currencies US$ 1, Property, plant and equipment, net Chilean peso US$ UF US$ Other currencies US$ , ,632 Deferred tax assets Chilean peso US$ UF US$ Other currencies US$ ,482 Total Non-Current Assets 44, ,824 80, ,495

168 Financial statements 167 Net Equity and Liabilities Between 1 to 3 years Between 3 to 5 years More than 5 years Between 1 to 3 years Between 3 to 5 years More than 5 years Non Current Liabilities Foreign Currency Functional Currency Other financial liabilities, non-current Chilean peso US$ UF US$ 2,882 3,359 45,738 1,183 1,020 5,829 Other currencies US$ ,937 9,134-12,955 Other provisions, non-current Chilean peso US$ UF US$ Other currencies US$ 5, , Deferred tax liabilities Chilean peso US$ UF US$ Other currencies US$ 54,393-87,706 60,702-82,185 Chilean peso US$ 2,003 2,158 18,796 1,551 1,714 16,473 Post-employment benefit liability, non-current Other non-financial liabilities, non-current UF US$ Other currencies US$ 5, Chilean peso US$ UF US$ Other currencies US$ Total Non-Current Liabilities 69,748 5, ,177 76,485 2, ,442 NOTE 35 SUBSEQUENT EVENTS As of the date of issuance of the Financial Statements, no other subsequent events were registered that could affect their presentation.

169 168 AnnualReport AES Gener 2010 Management analysis of the consolidated financial statements AES Gener S.A. results as of December 31, Summary In the twelve month period ended December 31, 2010, AES Gener S.A. (AES Gener or the Company) registered net income of US$170 million, US$158 million less than the earnings of US$328 million recorded in the same period in EBITDA totaled US$474 million, 10% lower than in 2009, principally the result of the lower gross margin registered in the period ended December 31, In the full year ended December 31, 2010, gross margin totaled US$433 million, representing a reduction of 11% between 2009 and This decrease is explained by a 17% in the cost of sales which was only partially compensated by the 9% increase in revenue. The higher costs of sales principally relates to higher fuel costs associated with the increase in thermoelectric generation by AES Gener and its subsidiaries. The higher thermoelectric generation corresponds to the increase in efficient coal-fired generation as a result of the start-up of commercial operation of the Nueva Ventanas plant in the SIC in 2010 and the installation of rechargeable lithium battery banks by subsidiary Norgener S.A. (Norgener) in the SING at the end of 2009, allowing the plant to increase its generation. Additionally, during the last quarter of 2010 a significant increase in generation, principally utilizing liquefied natural gas (LNG), was recorded by the Nueva Renca back-up facility due to the drier hydrology in the SIC experienced during The higher revenue is product of an increase in energy sales in Colombia and additional energy sales to distribution companies in the SIC due to the initiation of new long-term contracts in With regard to financial results, the most significant variation comes from the extraordinary loss of approximately US$72 million related to the definitive termination settlements of the contracts between subsidiary Sociedad Eléctrica Santiago S.A. (Eléctrica Santiago) and three gas transportation companies executed in December 2010, resolving all litigation between the parties. The termination of these contracts significantly reduces Eléctrica Santiago s future fixed costs. In addition, other negative variations were registered in foreign exchange differentials and net financial costs. These effects were partially compensated by an increase in equity earnings from related companies as a result of a higher contribution from 50%-owned affiliate Empresa Eléctrica Guacolda S.A. (Guacolda). The highlights during 2010 were: - In January, AES Gener initiated supply of five new long-term supply contracts with Chilectra, Chilquinta and Emel which were awarded in bid processes held in 2006, 2007 and In February, Nueva Ventanas, a 272 MW coal plant owned by Empresa Eléctrica Ventanas S.A. (Eléctrica Ventanas) initiated commercial operations, serving the SIC. - In March, Guacolda IV, a 272 MW coal plant owned by Guacolda initiated commercial operations, serving the SIC. - In December 2010, subsidiary Eléctrica Santiago executed a settlement with three gas transportation companies, definitively resolving all litigation between the parties. As a result of the settlement, Eléctrica Santiago registered an extraordinary loss of US$72 million during the period. Termination of these contracts significantly reduces the company s future fixed costs. - In December 2010, the 270 MW Campiche coal-fired project resumed construction. Commercial operation of this plant is expected in the first quarter of 2013.

170 Financial statements Income Statement Analysis Income Statement December 2010 December 2009 Ordinary Revenue Energy and capacity sales 1,672,616 1,564,746 Other revenue 129,434 88,674 Total Ordinary Revenue 1,802,049 1,653,420 Cost of Sales Fuel costs (573,904) (443,462) Cost of fuel sales (23,156) (12,157) Energy and capacity purchases (373,766) (424,469) Use of transmission system (98,332) (66,302) Productive cost of sales and others (131,491) (87,848) Depreciation and amortization (168,228) (131,249) Total Cost of Sales (1,368,878) (1,165,487) Gross Margin 433, ,933 Other operating revenue 5,881 5,631 Administrative expenses (116,067) (88,288) Other operating expenses (19,125) (8,484) Other income (loss) (88,787) 1,256 Finance income 22,452 21,866 Finance expense (99,313) (90,222) Equity in earnings of associates 42,361 28,049 Foreign currency difference 16,451 60,115 Net Income (Loss) before Tax 197, ,856 Income tax (31,169) (92,262) Net Income (Loss) After Tax 165, ,594 Income (loss) from discontinued operations, net of tax - - Net Income 165, ,594 Income (Loss) Attributable to Net Equity Holders of Parent 169, ,937 Income (loss) attributable to minority interests (3,917) (2,343) Net Income 165, ,594

171 170 AnnualReport AES Gener EBITDA In the year ended December 31, 2010, EBITDA totaled US$474 million, compared with EBITDA of US$528 million in This decrease is primarily related to lower gross margin in the SIC and SING in 2010, partially offset by higher results in Colombia. In the year ended December 31, 2010, the contribution to EBITDA from the three major markets in which AES Gener operates was: SIC 17%, SING and SADI 40%, and Colombia 43%. EBITDA () December 2010 December 2009 Gross Margin 433, ,933 Depreciation (-) 168, ,249 Other operating revenues 5,881 5,631 Administration expenses (116,067) (88,288) Other operating expenses (19,125) (8,484) Other costs not included in EBITDA 1, EBITDA 473, , Operating Revenue Between 2009 and 2010, operating revenue increased by US$149 million, mainly explained by higher revenue of US$111 million and US$45 million in the SIC and Colombia, respectively. This increase was partially offset by lower revenue of US$8 million in the SING. The consolidation adjustment represents intercompany coal sales from AES Gener to subsidiary Norgener in the SING. Operating Revenue () December 2010 December 2009 SIC SING and SADI Colombia Consolidation adjustments (71.449) (71.442) Total sales

172 Financial statements 171 Physical energy sales in GWh were as follows as in the year ended December 31, 2010 and 2009: Physical Sales (GWh) December 2010 December 2009 SIC Distribution companies Distribution companies without contracts Spot (CDEC) Other customers SING Distribution companies - - Spot (CDEC) Other customers SIN-Colombia Spot and other Distribution companies SADI Customers Spot Total Sales Central Interconnected Grid (SIC) In the SIC, revenue increased by US$111 million, comparing 2009 and 2010, principally associated with higher contract energy sales to distribution companies, higher spot sales and additional transmission tolls. This increase was partially offset by the reduction in sales to distribution companies without contracts. Sales to distribution companies increased by US$147 million as a result of an increase in physical sales which rose from 5,776 GWh in 2009 to 7,502 GWh in the period ended December 31, This increase is the result of the start-up of the five new long-term supply contracts with distribution companies awarded in the bid processes held in 2006, 2007 and Spot sales increased by US$78 million due to the increase in physical sales from 175 GWh in 2009 to 745 GWh in 2010, partially as a result of the suspension of the supply contract between Eléctrica Santiago and AES Gener in the last two months of Additionally, as a result of drier hydrological conditions, dispatch of Eléctrica Santiago s Nueva Renca back-up plant, principally utilizing LNG, increased and higher spot prices were recorded, rising from an annual average of 105 US$/MWh in 2009 to 135 US$/MWh in Transmission revenue increased by US$33 million principally due to a reclassification from energy and capacity revenue to transmission toll revenue, related to the sub-transmission law enacted in Additional transmission revenues associated with the new contracts with distribution companies were also recorded. Sales to distribution companies without contracts decreased by US$147 million, given that during the 2010 no sales were registered in this line item. It should be noted that with the initiation of the new distribution supply contracts in January 2010, sales to distribution companies without contracts no longer exist. During the year ended December 31, 2009, physical sales to distribution companies without contracts totaled 1,179 GWh and the sales price, equal to the average marginal cost for the period was 105 US$/MWh.

173 172 AnnualReport AES Gener 2010 Greater Northern Interconnected Grid (SING) and Interconnected Argentine System (SADI) In the SING and SADI, revenue decreased by US$8 million between 2009 and 2010, principally as a result of a decrease in sales to unregulated customers and spot energy sales. This negative effect was partially compensated by an increase in spot energy sales. Sales to unregulated customers in the SING and SADI decreased by US$12 million principally related to lower contract prices. This reduction was partially offset by higher physical sales in the SING, which increased from 2,015 GWh in 2009 to 2,033 GWh in 2010 and higher contract sales in the SADI, which totaled 242 GWh in 2010 compared to sales of 46 GWh lasting the previous year. Additionally, capacity sales decreased by US$18 million between 2009 and 2010, specifically related to reconciliation payments in both periods. In the year ended December 31, 2009, reconciliation payments registered were US$8 million higher than those recorded as of December 31, Spot energy sales increased by US$6 million. This effect is primarily explained by the increase in average marginal cost in the SING from 111 US$/MWh during 2009 to 122 US$/MWh in The increase was partially offset by lower physical sales, which decreased from 1,120 GWh 2009 to 970 GWh in 2010, as a result of natural gas restrictions which affected TermoAndes from mid-june until the end of August 2010 and lower injections to the SING in December 2010 caused by full redirecting of the plant to the SADI due to maintenance of the Embalse nuclear plant in Argentina. Additionally, lower physical sales were registered in the SADI, decreasing from 2,222 GWh in 2009 to 2,154 in Colombian National Grid (SIN) In Colombia, revenue increased by US$45 million between the periods ended December 31, 2009 and 2010, principally associated with higher contract sales to distribution companies, partially compensated by lower spot sales. Contract sales to distribution companies increased by US$57 million due to higher prices. This increase was partially offset by lower physical sales, which decreased from 3,291 GWh in 2009 to 2,799 GWh in Spot energy and ancillary service sales decreased by US$11 million. This reduction is primarily explained by lower physical sales, which decreased from 2,876 GWh in 2009 to 2,743 GWh in The spot price also decreased slightly from an annual average of 69 US$/MWh in the year ended December 31, 2009 to 68 US$/MWh in the same period in Cost of sales Cost of sales increased by US$203 million, primarily explained by higher fuel consumption of US$130 million associated with higher thermoelectric generation by AES Gener and its subsidiaries in the SIC and higher diesel prices, higher transmission costs of US$32 million and higher depreciation of US$37 million. The consolidation adjustment represents intercompany coal purchases by AES Gener to subsidiary Norgener. Cost of Sales () December 2010 December 2009 Cost of sales SIC 987, ,173 Cost of sales SING and SADI 265, ,792 Cost of sales Colombia 187, ,965 Consolidation adjustments (71,449) (71,442) Total Costs of Sales 1,368,878 1,165,487

174 Financial statements 173 Central Interconnected Grid (SIC) In the SIC, cost of sales increased by US$197 million between 2009 and 2010, mainly associated with higher fuel costs, additional transmission tolls and higher depreciation principally associated with the Nueva Ventanas plant. Fuel costs increased as a result of higher thermal generation by AES Gener and its subsidiaries and higher diesel prices. Thermoelectric production rose from 3,916 GWh in year ended December 31, 2009 to 5,788 GWh in the same period in 2010 as a result of higher coal generation of 1,343 GWh associated with the initiation of commercial operations of the Nueva Ventanas plant in February 2010 and higher generation by the Nueva Renca back-up plant of 519 GWh, principally with LNG in November and December of Additionally, higher transmission tolls were recorded primarily as a result of the sub-transmission law enacted in It should be noted that the increase in transmission costs was offset by a corresponding increase in transmission revenue. Spot market purchases decreased by 784 GWh between 2009 and This effect was offset by the increase in average marginal cost from 105 US$/MWh in 2009 to 135 US$/MWh in Greater Northern Interconnected Grid (SING) and Interconnected Argentine System (SADI) In the SING and SADI, cost of sales increased by 10% from US$242 million in 2009 to US$265 million in The principal variations include higher depreciation related to the acceleration of the useful life of certain assets in TermoAndes, higher production costs at TermoAndes and higher fuel costs at Norgener due to the increase in generation of 283 GWh. The increase in generation by Norgener is attributable to the installation of rechargeable lithium battery banks by the company at the end of 2009 in order to replace a portion of the plant s spinning reserve. These negative effects were partially offset by lower energy and capacity purchases. Colombian National Grid (SIN) In Colombia, cost of sales decreased by US$18 million primarily associated with lower energy purchase costs explained by lower physical purchases of 637 GWh, while the price in US dollars remained practically unchanged. It should be noted that in Colombian pesos, spot prices decreased from an average of 144 Col$/kWh in the year ended December 31, 2009 to 129 Col$/kWh in the same period in 2010, equivalent to a decrease of 11%. In US dollars, the spot price decreased by 1% from an average of 69 US$/MWh during 2009 to 68 US$/MWh in Sales and administrative expenses Sales and administrative expenses increased by 31%, from US$88 million as of December 31, 2009 to US$116 million in year ended December 31, 2010, principally related to an increase in third party services and compensation and social benefits, all related to the expansion projects in process and the new plants which recently initiated operations.

175 174 AnnualReport AES Gener Financial results The non-ebitda variables which experienced the most significant changes between 2009 and 2010 include higher other losses of US$90 million, lower earnings from foreign exchange differentials of US$44 million and higher financial costs of US$9 million. These effects were partially compensated by an increase in the share of income (loss) from associates of US$14 million. The table below shows the variations above mentioned: Financial Results () December 2010 December 2009 Other income (loss) (88,787) 1,256 Foreign exchange differences 16,451 60,115 Finance expenses (99,313) (90,222) Equity in earnings of associates 42,361 28,049 In the year ended December 31, 2010, higher other losses were recorded as compared to the same period in 2009, fundamentally as a result of US$72 million extraordinary loss registered in December 2010 related to the definitive termination settlement reached between Eléctrica Santiago and gas transportation companies Transportadora de Gas del Norte S.A. (TGN), Gasoducto GasAndes S.A. and Gasoducto GasAndes (Argentina) S.A. Additionally, higher other losses were also registered as of December 31, 2010 associated with the removal of fixed assets at Norgener and TermoAndes as a result of modernization and replacement of equipment and the retirement of fixed assets at subsidiary Energía Verde S.A. (Energía Verde). Earnings from foreign exchange differences relate to the Company s net asset position denominated in Chilean between December 2009 and December The principal effects include the effect of exchange rate differentials on accounts receivable in Chilean pesos, mainly accounts receivable from distribution companies without contracts, accounts receivable for electricity sales and valueadded taxes (VAT) and on the foreign exchange swaps related to financial debt. It should be noted that between December 31, 2009 and December 31, 2010 the Chilean dolar observado exchange rate appreciated by 8% from $507.1 to $468.0, while it appreciated by 20% from $636.5 to $507.1 between December 31, 2008 and December 31, The net finance expenses cost increased by US$9 million between 2009 and 2010, primarily associated with higher interest associated with Empresa Eléctrica Ventanas S.A. (Eléctrica Ventanas) credit agreement due to the commissioning of the plant in The higher earnings in the Company s share of income (loss) from associates in the period are due to higher net income from affiliate Guacolda Income tax Income tax expense decreased by US$61 million, from a loss of US$92 million during the period ended December 31, 2009 to a loss of US$32 million during the same period in The decrease in taxes is explained by lower net income before tax as of December 31, 2010 compared to the same period in 2009, in addition to the reversal of a US$20 million provision related to a tax contingency.

176 Financial statements Balance Sheet analysis As of December 31, 2010, total assets registered were US$5,657 million, 4% higher than US$5.424 million registered at the end of December of This variation is explained by an increase in non-current assets of US$150 million and higher current assets of US$83 million. Total net equity and liabilities registered an increase of US$233 million, explained by higher non- current liabilities of US$344 million, partially compensated by a decrease in current liabilities of US$57 million and lower net equity of US$54 million. Balance Sheet () December 2010 December 2009 Variation Current assets 1,085,655 1,002,166 83,489 Non-current assets 4,571,498 4,421, ,591 Total Assets 5,657,153 5,424, ,080 Current liabilities 499, ,818 (57,363) Nos-current liabilities 2,608,748 2,264, ,991 Net equity 2,548,950 2,602,498 (53,548) Total Net Equity and Liabilities 5,657,153 5,424, ,080 The most important variations in current assets are the increase in cash and cash equivalent of US$132 million mainly associated with mutual funds related to investments in dollars of low risk and immediate availability and repurchase agreements with maturity under three months, partially compensated by a negative variation in other current financial assets of US$29 million explained by lower investments in mutual funds of immediate availability in dollars, partially offset by higher investments in time deposits. Non-current assets increased by 3% mainly due to the increase in property plant and equipment of US$216 million related to the 272 MW Nueva Ventanas plant, owned by Eléctrica Ventanas, which construction ended in December 2009 and the 518 MW Angamos project, owned by affiliate Empresa Eléctrica Angamos S.A. (Eléctrica Angamos), currently under construction. Additionally, a US$27 million increase was registered in investments associated with the affiliate Guacolda and the increase in its equity between 2010 and These effects were partially compensated by lower non-current rights receivable of US$71 million mainly related to a decrease in long term account receivable from distribution companies without contracts and lower other non-current financial assets of US$29 million associated with hedging assets. Current liabilities decreased by 10% compared to the period ended December 31, The principal variations include lower accounts payable of US$93 million mainly due to lower material purchases in the projects under construction and lower electricity accounts payable related to lower spot purchases. This effect was partially offset by higher accounts payable to related companies of US$20 million and higher other current financial liabilities of US$13 million principally associated with the increase in hedging liabilities. Non-current liabilities increased by US$344 million mainly due to the increase of US$330 million in other non-current financial liabilities, fundamentally related to disbursements of the Angamos project loan. Additionally, an increase in other non-current liabilities of US$35 million was registered. These effects were partially compensated by a decrease in other non-current provisions of US$12 million, mainly associated with a US$20 million reversal of a provision related to a tax contingency and lower deferred tax liabilities of US$10 million. Between the periods ended December 31, 2009 and December 31, 2010 net equity decreased by US$54 million. The variations in net equity includes lower retained earnings and a decrease in other reserves, partially compensated by the increase in other equity participations mainly associated with the transfer made in 2010 of 2009 results for future dividends reserve.

177 176 AnnualReport AES Gener Financial indicators Liquidity indicators were improved given higher current assets, principally higher cash and cash equivalent. Liabilities increased mainly due to higher interest bearing loans, related to higher disbursements of Angamos loan. Interest coverage decreased due to lower income before tax registered as of December 31, 2010 compared to the same period in Return on assets and equity as of December 31, 2010 was lower than in the period ended December 31, 2009 due to lower net income registered in December 2010 December 2009 Liquidity Current assets / Current liabilities (times) Cash and cash equivalent / Current liabilities (times) (Current assets- inventory) / Current liabilities (times) Indebtness Liabilities / Net equity (times) Current liabilities / liabilities (times) Non-current liabilities / liabilities (times) Liabilities (million of dollars) 3, Interest coverage (times) Activity Net equity (million of dollars) 2,549 2,602 Property, plant and equipment, net (million of dollars) 4,178 3,962 Total assets (million of dollars) 5,657 5,424 Profitability Return on assets (1) (%) Return on net equity (1) (%) Return on operating assets (2) (%) Net income / shares (3) (dollars) Dividend return (4) (%) (1) Return on assets and net equity in calculated considering 12-month net income as of the end of each period and assets and net equity registered as of the closing date of each period. (2) Operating assets are registered as Property, Plant and Equipment, Net. (3) Net Income over shares considers number of shares paid at the end of each period. (4) Considers dividends paid in the last 12 months divided by share market price at the end of each period.

178 Financial statements Cash Flow Total net cash in the year ended December 31, 2010 was a positive US$127 million, which is higher than the positive net cash position of US$94 million registered in This increase is due to the positive variation in investing activities, partially offset by a negative variation in operating and financing activities. Cash Flow () December 2010 December 2009 Variation Net cash from operating activities 187, ,223 (197,053) Net cash from investing activities (350,090) (1,139,778) 789,688 Net cash from financing activities 289, ,323 (559,437) Total Net Cash for the Period 126,966 93,768 33,198 Total Cash at the End of the Period 294, , ,614 Net cash from operating activities registered a negative variation of US$197 million in the year ended December 31, 2010, compared to the same period in This decrease is principally the result of lower net income in the period of US$160 million, lower recovery of commercial accounts receivables of US$118 million, lower tax expense adjustments of US$61 million, higher taxes paid of US$53 million and higher dividend payments of US$40 million. This reduction was partially offset by an increase in other non-cash adjustments of US$171 million related to prepaid expenses, impairment of assets, deferral of financial expenses and the settlements executed by Eléctrica Santiago with the gas transportation companies. Additionally, a positive adjustment was registered related to non-realized foreign currency losses of US$44 million and a higher depreciation adjustment of US$37 million. Net cash from investment activities registered a positive variation of $790 million between 2009 and The principal variations in investment cash flow activities include higher other cash inflows of US$429 million related to higher redemptions of financial investments (time deposits and repurchase agreements) and higher VAT recovery related to fixed asset purchases. In addition, acquisition of property, plant and equipment decreased by US$354 million principally due to the completion of construction of the Nueva Ventanas plant in late Net cash from financing activities registered a negative variation of $559 million in the year ended December 31, 2010, when compared to the same period in the previous year. The principal variations in financing activities include lower proceeds from the issuance of net equity instruments in the amount of US$246 million, related to the capital increase completed in February 2009, and lower proceeds from the issuance of other equity instruments of US$188 million due to the local bond issued in April Additionally, long term debt decreased by US$96 million due to the end of construction of the Nueva Ventanas plant and a negative variation in other cash outflows of US$49 million was recorded associated with the release of restricted cash.

179 178 AnnualReport AES Gener Energy Generation, Purchases & Sales The following table shows Energy Generation, Purchases and Sales from the operating affiliates in each markets in which AES Gener participates. SIC SING SADI SIN Energy (GWh) AES Gener Eléctrica Santiago Energía Verde Norgener TermoAndes TermoAndes Chivor Total Hydro generation 1, ,305 4,446 Thermo generation 3,868 1, , ,396-11,247 Total Generation 5,309 1, , ,396 3,305 15,993 Energy purchases - Spot 1, ,309 2,623 Energy purchases - Others Energy purchases - Interco 1, ,500 Total Purchases 2, ,211 5,067 Losses (62) (0) (3) (38) (51) - 26 (128) Energy sales - Distcos. 7, ,799 10,301 Energy sales - Other costumers , ,518 Energy sales - Spot ,154 2,743 6,612 Energy sales - Interco 39 1, ,500 Total Ventas 7,847 2, , ,396 5,542 20, Market Information In Chile, AES Gener does business principally in two large interconnected electric systems: the Central Interconnected System or SIC, that runs from the southern part of Region II to Region X, and the Greater Northern Interconnected System or SING, that encompasses Region I and Region XV, as well as part of Region II. AES Gener s Colombian subsidiary, Chivor, is one of the principal electric generators in the Colombian National Interconnected System or SIN. It should be noted that TermoAndes also sells to the Argentine market. SIC The average marginal cost increased by 29% between 2009 and 2010, principally explained by drier hydrology and an increase in the price of diesel. In the period ended December 31, 2010, the AES Gener group companies, including Guacolda, accounted for 28% of the net generation in the SIC. The table below shows certain principal variables in the SIC for the periods ended December 31, 2010 and SIC December 2010 December 2009 Demand growth (%) 5.8 (0.5) Average monthly consumption (GWh) 3, Average annual marginal cost (Quillota 220 kv) US$/MWh

180 Financial statements 179 SING & SADI The increase in the marginal cost in the SING of 11% is explained by the higher price of diesel in 2010, as compared to the previous year. In the year ended December 31, 2010, the AES Gener group companies contributed 22% of the net generation in the SING. In the SADI, TermoAndes contribution in 2010 corresponds to approximately 2.4% of total system generation. The table below shows some of the principal variables in the SING and SADI for the years ended December 31, 2010 and SING and SADI December 2010 December 2009 SING demand growth (%) SING average monthly consumption (GWh) 1,149 1,138 SING average annual marginal cost (Crucero 220 kv) US$/MWh SADI average annual marginal cost US$/MWh Colombia In Colombia, spot prices in dollars decreased by 1% between 2009 and 2010 given the presence of the La Niña weather phenomenon during the second half of 2010 resulting in recovery of Colombian reservoirs. However, due to the appreciation of the Colombian peso, spot prices in Colombian pesos decreased by 11%. In the period ended December 31, 2010, Chivor s generation represented 6% of total generation in Colombia. The table below shows some of the principal variables in Colombia for the periods ended December 31, 2010 and Colombia December 2010 December 2009 Demand growth (%) Average monthly consumption (GWh) 4,679 4,557 Average annual marginal cost US$/MWh Risk analysis 8.1. Market risks Market risks relate to those uncertainties associated with variations in variables that affect the assets and liabilities of the Company Exchange rate risk The Company s functional currency is the U.S. dollar, given that its revenue, costs and investments in equipment are principally determined in dollars. Additionally, the Company has been authorized to file and pay its taxes in U.S. dollars. Exchange rate risk is associated with revenue, costs, investments and debt denominated in currencies other than the U.S. dollar. The principal components denominated in Chilean pesos include the accumulated credit balances from distribution companies without contracts related to Ministerial Resolution N 88, accounts receivable from electricity sales and tax credits, primarily VAT. As of December 31, 2010, AES Gener maintained several foreign exchange forward contracts with banks in order to reduce its exposure to the Chilean peso. As of December 31, 2010, the impact of a variation of 10% in the Chilean peso to US dollar exchange rate would have resulted in a variation of approximately US$15 million in AES Gener s net income. During 2010, approximately 83% of the Company s revenue and 93% of its costs were denominated in U.S. dollars. With regard to its foreign subsidiaries, it should be noted that the functional currency for Chivor is the Colombian peso since most of its revenue, specifically contract sales, and its operating costs are linked primarily to the Colombian peso. As of December 31, 2010, sales in Colombian pesos represented 13% of consolidated revenue. Additionally, Chivor s dividends are determined in Colombian pesos,

181 180 AnnualReport AES Gener 2010 although financial coverage mechanisms are utilized to fix the amounts in US dollars. It should also be noted that spot prices in the Argentine market are set in Argentine pesos and these sales represented 4% of consolidated revenue in Additionally, investments in new plants and maintenance equipment are principally set in U.S. dollars. Short-term investments are also mostly held in U.S. dollars. As of December 31, 2010, 88% of AES Gener s short-term investments were denominated in U.S. dollars, 11% in Chilean pesos and 1% in Colombian pesos. With regard to debt denominated in currencies other than the U.S. dollar, AES Gener has executed coverage in the form of cross currency swaps to eliminate exchange rate risk. AES Gener executed a cross currency swap for the UF-denominated bonds issued in 2007 for approximately US$217 million and the swaps extend throughout the duration of the debt. At the close of December 2010, 97% of AES Gener and its subsidiaries debt was denominated in U.S. dollars, including the local bonds mentioned above. The following table details the debt composition by currency for the periods ended December 31, 2009 and 2010: Currency December 2010 December 2009 US$ UF 2 3 $ - - Col$ Interest rate risk Interest rate fluctuations affect the value of assets and liabilities. In order to mitigate interest rate risk fluctuations associated with its longterm obligations, AES Gener has executed coverage in the form of interest rate swaps. At present, interest rate swaps have been executed for part of the debt associated with the Nueva Ventanas and Angamos projects. The following table details the debt composition by interest rate type for the periods ended December 31, 2009 and 2010: Rate December 2010 December 2009 Fixed Variable Fuel price risk The fuels used by the Company, primarily coal, diesel and LNG, are commodities with international prices set by external market factors. Diesel and LNG are purchased from local suppliers under bilateral agreements, based on the international price of diesel. Fuel price risk is associated with fluctuations in these prices. The price of fuel is a key factor for dispatch and spot prices in both Chile and Colombia. The change in the price of fuels, such as coal, diesel and natural gas, can modify the Company s cost composition through changes in the marginal cost. Since AES Gener is a company with primarily a thermoelectric generation mix, fuel costs represent an important part of operating costs. With regard to coal purchases, the Company maintained fixed price supply contracts for the majority of the coal required in Currently, the majority of the Company s power purchase agreements include indexation mechanisms that adjust prices based on the

182 Financial statements 181 increase and decrease in the price of coal in accordance with the indices and adjustment periods specified under each contract, in order to align AES Gener s generation costs with energy sales contract revenue. It should be noted that the Company considers hedging mechanisms for the price of coal so as to protect its operating margins by aligning production costs with energy sales. At present, diesel purchases do not have associated hedges. The Company estimates that a 10% variation in the cost of diesel in the year ended December 31, 2010 would have resulted in variation of approximately US$11 million in gross margin. It should be noted that Eléctrica Santiago s Nueva Renca plant is able to utilize alternatively diesel and LNG and that it acquires specified supply volume of LNG under short-term contracts when the price is more competitive than diesel. TermoAndes Embedded Derivative: The Argentinean subsidiary TermoAandes S.A. maintains a natural gas supply contract with several counterparties. This contract includes a variable related to the indexation of the price of natural gas supply which is considered to not be closely related to the host contract. As a result, this variable has been separated and the embedded derivative has been registered at market value. The Company performed a sensitivity analysis assuming a 10% variation in the average natural gas price in Argentina, which was considered as an acceptable range of fluctuation given current market conditions. In this case, holding all other variables constant, a 10% variation in the average natural gas price in Argentina would have resulted in an EBITDA variation of approximately 155 in the year ended December 31, 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, financial assets and derivatives. With regard to accounts receivable, AES Gener s counterparties in Chile are principally distribution companies and other generators of elevated solvency and over 90% of these customers have local and/or international investment grade credit ratings. In Colombia, Chivor performs risk assessments of its counterparties based on an internal credit quality evaluation, which in some cases may include guarantees. With regard to financial assets and derivatives, investments by AES Gener and its subsidiaries 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 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 December 31, 2010, AES Gener s total consolidated cash balance totaled US$593 million which includes cash and cash equivalents equal to US$294 million and term deposits and immediate liquidity funds in U.S. dollars for a total of US$299 million, which are registered in other current assets. At the close of December 2009, the total cash balance equaled US$481 million, including cash and cash equivalents of US$163 million and term deposits and immediate liquidity funds in US dollars for a total of US$318 million. It should be noted that the balance of cash and cash equivalents includes cash, term deposits with expiration of less than 90 days, securities, low risk immediately available mutual funds in US dollars and re-sale agreements.

183 182 AnnualReport AES Gener 2010 In addition, as of December 31, 2010, AES Gener has in place unused committed credit facilities for approximately US$223 million, in addition to unused uncommitted lines of credit for approximately US$275 million. The following graph details AES Gener s consolidated amortization schedule for the outstanding principal of US$2,133 million as of December 31, 2010, excluding issuance costs and including non-recourse project finance debt. Total Consolidated Debt (US$ Million) 8.2. Electric Business risks Electricity business risks relate to those risks specific to the industry in which the Company participates 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 in both systems. The Company uses its own statistical models to evaluate the risks associated with its contractual commitments. In general terms, AES Gener s commercial strategy is to execute long-term contracts for its efficient generation plants, reserving other more expensive units for sales in the spot market Natural gas supply As a result of the restrictions in the supply of natural gas, the combined cycle plants in Chile, including Eléctrica Santiago s plant, currently operate alternatively with diesel or LNG. TermoAndes, following requirements of the Argentine authorities and seeking to maximize energy exports to the SING, connected its two gas turbines to the Argentine electricity market or SADI in 2008, maintaining its steam turbine connected to the SING. As a result, the gas consumed by the gas turbines is considered domestic gas and the steam turbine continues to export electricity. During the third quarter of 2010, specifically from mid-june until the end of August, TermoAndes was affected by gas restrictions which prevented the plant from delivering energy to the Chilean market during this period. In the present scenario, the proportion of the generation that will be delivered by TermoAndes to the Argentine and Chilean market in the short, medium and long term will depend on many factors among which principally include the availability of gas in the Northwest basin and expansions in the transport capacity of the electricity network in Argentina currently in progress Regulatory framework As electric 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 AES Gener is also subject to environmental regulations, which, among others, require that it perform environmental

184 Financial statements 183 impact studies for its future projects and obtain regulatory permits. 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 which could adversely affect the Company or that governmental authorities will effectively grant any environmental approval requested. AES Gener actively participates in the development of the regulatory framework, submitting comments and proposals to the proposed regulations presented by authorities. In January 2010, the President of Chile signed an Emissions Regulation for Thermoelectric Power Plants, currently pending approval by the National Controller, which establishes new emission limits for particulate matter and gases produced by thermoelectric generation. In order to comply with the regulation, AES Gener will make certain investments at certain older coal plants from 2011 to 2015 to install emission reduction equipment. The total cost and investment periods are being evaluated, however, they are estimated to be significant Investments projects The execution of the investment projects being developed by the Company depends on numerous factors, including fuel availability, the cost and availability of construction equipment and financing, and the effect of delays or difficulties in the regulatory authorization and permitting process. The construction of new facilities could be adversely affected by factors typically associated with such projects.

185 184 AnnualReport AES Gener 2010

186 Financial statements Financial statements Summarized financial statements from subsidiaries 185

187 186 AnnualReport AES Gener 2010 Chilean Subsidiaries Empresa Eléctrica Angamos S.A. Assets Current assets 60, ,058 Non-current assets 1,009, ,544 Total Assets 1,069, ,602 Net Equity and Liabilities Current liabilities 60, ,416 Non-current liabilities 648, ,600 Net equity 360, ,586 Total Net Equity and Liabilities 1,069, ,602 Statement of Comprehensive Income Gross profit (1,439) (213) Profit (loss) before tax (2,375) 2,550 Income tax expense (income) (399) 436 Profit (loss) (1,976) 2, Statement of Comprehensive Income Profit (loss) (1,976) 2,114 Total Other Income and Expenses with Charge or Credit to Net Equity (41,220) 55,682 Total Results from Comprehensive Income and Expenses (43,196) 57,796

188 Financial statements Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,796 60,805 4, ,586 Changes in net equity 103,256 (41,206) (1,976) - 60,074 Final Balance Current Period ,052 19,599 3, , Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,150 5,123 2, ,144 Changes in net equity 68,646 55,682 2, ,442 Final Balance Current Period ,796 60,805 4, ,586 Statement of Cash Flows Net cash flows from operating activities (37,981) 9,942 Net cash flows used in investing activities (257,809) (519,155) Net cash flows from financing activities 308, ,168 Increase (decrease) in net cash and cash equivalent 12, Effects of foreign exchange variations on cash and cash equivalent (1,023) (213) Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance Cash and cash equivalent, statement of cash flows, final balance 12,

189 188 AnnualReport AES Gener 2010 Chilean Subsidiaries Energía Verde S.A. Assets Current assets 12,830 9,633 Non-current assets 31,809 37,160 Total Assets 44,639 46,793 Net Equity and Liabilities Current liabilities 5,421 2,609 Non-current liabilities 5,272 5,075 Net equity 33,946 39,109 Total Net Equity and Liabilities 44,639 46,793 Statement of Comprehensive Income Gross profit (559) 832 Profit (loss) before tax (5,784) 987 Income tax expense (income) 982 (168) Profit (loss) (4,802) Statement of Comprehensive Income Profit (loss) (4,802) 819 Total Other Income and Expenses with Charge or Credit to Net Equity (363) 1 Total Results from Comprehensive Income and Expenses (5,164) 820

190 Financial statements Statement of Changes in Net Equity Issued Capital Other Participations in Net Equity Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period , ,282-39,109 Changes in net equity - 1 (363) (4,802) - (5,163) Final Balance Current Period , (363) 7,480-33, Statement of Changes in Net Equity Issued Capital Other Participations in Net Equity Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period , ,463-38,289 Changes in net equity Final Balance Current Period , ,282-39,109 Statement of Cash Flows Net cash flows from operating activities 974 3,735 Net cash flows used in investing activities (34) (1,084) Net cash flows from financing activities - - Increase (decrease) in net cash and cash equivalent 940 2,651 Effects of foreign exchange variations on cash and cash equivalent 672 1,380 Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance 6,122 2,091 Cash and cash equivalent, statement of cash flows, final balance 7,734 6,122

191 190 AnnualReport AES Gener 2010 Chilean Subsidiaries Norgener S.A. y Filiales Assets Current assets 149, ,288 Non-current assets 2,112,227 1,929,338 Total Assets 2,261,567 2,094,626 Net Equity and Liabilities Current liabilities 125, ,081 Non-current liabilities 1,526,604 1,231,819 Net equity 609, ,726 Total Net Equity and Liabilities 2,261,567 2,094,626 Statement of Comprehensive Income Gross profit 72,773 32,163 Profit (loss) before tax 13,925 25,629 Income tax expense (income) 2,739 4,476 Profit (loss) 11,186 21, Statement of Comprehensive Income Profit (loss) 11,186 21,153 Total Other Income and Expenses with Charge or Credit to Net Equity (50,188) 63,922 Total Results from Comprehensive Income and Expenses (39,002) 85,075

192 Financial statements Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period , , , ,726 Changes in net equity - (29,002) (9,967) 1 (38,968) Final Balance Current Period , , , , Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,538 82, , ,615 Changes in net equity - 75,299 9, ,111 Final Balance Current Period , , , ,726 Statement of Cash Flows Net cash flows from operating activities 103,821 26,483 Net cash flows used in investing activities (428,843) (730,043) Net cash flows from financing activities 310, ,644 Increase (decrease) in net cash and cash equivalent 39,649 1,228 Effects of foreign exchange variations on cash and cash equivalent (1,185) (167) Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance 1, Cash and cash equivalent, statement of cash flows, final balance 40,991 1,342

193 192 AnnualReport AES Gener 2010 Chilean Subsidiaries Empresa Eléctrica Ventanas S.A. Assets Current assets 37,406 14,867 Non-current assets 425, ,081 Total Assets 462, ,948 Net Equity and Liabilities Current liabilities 38,336 33,771 Non-current liabilities 404, ,696 Net equity 19,454 35,481 Total Net Equity and Liabilities 462, ,948 Statement of Comprehensive Income Gross profit 26,800 (1,666) Profit (loss) before tax 521 2,523 Income tax expense (income) (90) 435 Profit (loss) 431 2, Statement of Comprehensive Income Profit (loss) 431 2,088 Total Other Income and Expenses with Charge or Credit to Net Equity (8,966) 8,273 Total Results from Comprehensive Income and Expenses (8,535) 10,361

194 Financial statements Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,568 (17,939) (31,148) - 35,481 Changes in net equity (7,500) (8,958) (16,027) Final Balance Current Period ,068 (26,897) (30,717) - 19, Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,568 (26,212) (33,236) - 25,120 Changes in net equity - 8,273 2,088-10,361 Final Balance Current Period ,568 (17,939) (31,148) - 35,481 Statement of Cash Flows Net cash flows from operating activities 27,822 16,118 Net cash flows used in investing activities (13,511) (77,368) Net cash flows from financing activities 14,040 61,646 Increase (decrease) in net cash and cash equivalent 28, Effects of foreign exchange variations on cash and cash equivalent (364) (42) Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance Cash and cash equivalent, statement of cash flows, final balance 28,

195 194 AnnualReport AES Gener 2010 Foreign Subsidiaries Energen S.A. Assets Current assets Non-current assets - - Total Assets Net Equity and Liabilities Current liabilities 2 3 Non-current liabilities - - Net equity Total Net Equity and Liabilities Statement of Comprehensive Income Gross profit - - Profit (loss) before tax (17) (32) Income tax expense (income) - - Profit (loss) (17) (32) Statement of Comprehensive Income Profit (loss) (17) (32) Total Other Income and Expenses with Charge or Credit to Net Equity - - Total Results from Comprehensive Income and Expenses (17) (32)

196 Financial statements Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period (81) Changes in net equity (81) (17) Final Balance Current Period (81) Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period (316) Changes in net equity (267) (32) Final Balance Current Period (81) Statement of Cash Flows Net cash flows from operating activities (17) (22) Net cash flows used in investing activities - - Net cash flows from financing activities - - Increase (decrease) in net cash and cash equivalent (17) (22) Effects of foreign exchange variations on cash and cash equivalent (2) (7) Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance Cash and cash equivalent, statement of cash flows, final balance 17 36

197 196 AnnualReport AES Gener 2010 Foreign Subsidiaries Energy Trade & Finance Co. Assets Current assets 95, ,442 Non-current assets 690, ,278 Total Assets 786, ,720 Net Equity and Liabilities Current liabilities 51,129 62,614 Non-current liabilities 274, ,150 Net equity 461, ,956 Total Net Equity and Liabilities 786, ,720 Statement of Comprehensive Income Gross profit 205, ,064 Profit (loss) before tax 170, ,438 Income tax expense (income) 56,504 39,433 Profit (loss) 113,530 80, Statement of Comprehensive Income Profit (loss) 113,530 80,005 Total Other Income and Expenses with Charge or Credit to Net Equity 34,356 38,143 Total Results from Comprehensive Income and Expenses 147, ,148

198 Financial statements Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,151 16, , ,956 Changes in net equity (181,552) 53,836 93,862 (15) (33,869) Final Balance Current Period ,599 69, , , Statement of Changes in Net Equity Issued Capital Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period ,401 (38,814) 194, ,073 Changes in net equity (37,250) 54,835 63, ,883 Final Balance Current Period ,151 16, , ,956 Statement of Cash Flows Net cash flows from operating activities 152, ,916 Net cash flows used in investing activities - (42,366) Net cash flows used in financing activities (216,973) (64,728) Increase (decrease) in net cash and cash equivalent (68,701) 35,822 Effects of foreign exchange variations on cash and cash equivalent - - Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance 74,170 38,348 Cash and cash equivalent, statement of cash flows, final balance 5,468 74,170

199 198 AnnualReport AES Gener 2010 Foreign Subsidiaries Gener Argentina Assets Current assets 63,858 60,356 Non-current assets 272, ,697 Total Assets 336, ,053 Net Equity and Liabilities Current liabilities 35,733 21,793 Non-current liabilities 66,981 67,223 Net equity 233, ,037 Total Net Equity and Liabilities 336, ,053 Statement of Comprehensive Income Gross profit (12,762) 21,328 Profit (loss) before tax (30,282) 14,359 Income tax expense (income) 7,902 (9,488) Profit (loss) (22,381) 4, Statement of Comprehensive Income Profit (loss) (22,381) 4,871 Total Other Income and Expenses with Charge or Credit to Net Equity - 29 Total Results from Comprehensive Income and Expenses (22,381) 4,900

200 Financial statements Statement of Changes in Net Equity Issued Capital Other Participations in Net Equity Other Comprehensive Income Retained Earnings Non-controlling Interests Net Equity Total Beginning balance current period , (46,077) 77, ,037 Changes in net equity (15,323) (7,044) (22,342) Final Balance Current Period , (61,400) 70, , Other Participations in Net Equity Other Comprehensive Income Non-controlling Interests Statement of Changes in Net Equity Issued Capital Retained Earnings Net Equity Total Beginning balance current period , (49,074) 75, ,122 Changes in net equity ,997 1,889 4,915 Final Balance Current Period , (46,077) 77, ,037 Statement of Cash Flows Net cash flows from operating activities 30,129 24,209 Net cash flows used in investing activities (17,909) (18,716) Net cash flows from financing activities - - Increase (decrease) in net cash and cash equivalent 12,220 5,493 Effects of foreign exchange variations on cash and cash equivalent (148) 32 Effect of changes to scope of consolidation on cash and cash equivalent - - Cash and cash equivalent, statement of cash flows, initial balance 8,299 2,774 Cash and cash equivalent, statement of cash flows, final balance 20,371 8,299

201

202 Additional information Relevant Events Information on related companies Addresses and telephone numbers of generating plants Signing and statement of responsibility

203 202 AnnualReport AES Gener 2010 Additional information Relevant Events reported to the SVS (Chilean Insurance and Securities Authority) in 2010 January 22 Material event As required under Law Nº 20,382 and Official SVS Circular 560, the Company reported as a material event that the Board of Directors, at its January 21, 2010 meeting, officially received a sworn statement of independence from Director Iván Díaz-Molina under the terms stipulated in Article 50 bis of Law Nº 18,046. It also reported that Iván Díaz-Molina, as sole independent director, designated Directors Juan Andrés Camus Camus and Jorge Rodríguez Grossi as members of the Company s Board Committee. On the same date, the Company reported that the Board of Directors, at its January 21, 2010 meeting, agreed to accept the resignation of Alternate Director Jorge Errázuriz Grez. March 4 In response to Official SVS Circular Nº 574 of March 1, 2010, the Company reported the effects and impacts it sustained during the earthquake that struck the southcentral area of the country on February 27. It reported that, while the earthquake did not significantly affect generation in the SIC (Central Grid) as a whole, it did cause damage to some of our facilities, the effects and magnitude of which were still being evaluated. Regarding the power plants owned by AES Gener and its subsidiaries and related companies in Chile, the Company reported that 17% of its total capacity of approximately 3,130 MW, or 545 MW, was being checked for earthquake damage and was therefore unavailable to the SIC s Economic Load Dispatch Center at that time. The remaining 83% was in operation, available for operation, or unavailable due to maintenance scheduled prior to the earthquake.

204 Additional information 203

205 204 AnnualReport AES Gener 2010 March 31 The SVS was informed of the call for the Ordinary Shareholders Meeting and the dividend proposal for April 29, 2010, to discuss the following issues: Ordinary Shareholders Meeting: 1. Approval of the Financial Statements and the Annual Report for the fiscal year ending December 31, 2009, including the external auditors report; 2. Distribution of earnings and the following dividends: one minimum obligatory dividend of US$ per share and two additional dividends of US$ per share; 3. Setting of the remunerations for the members of the Audt Committee, approval of the budget for the Committee and its consultants for 2010, and the report on the Committee s expenses and activities during 2009; 4. Designation of external auditors for the 2010 fiscal year; 5. Dividend policy; 6. Information on the operations subject to Article 44 of Law Nº 18,046 governing corporations; and 7. Other matters pertinent to this type of meeting.

206 Additional information 205 May 4 The Company reported that the Board of Directors agreed to appoint Alberto Zavala Cavada as the Company s general counsel. May 5 The Company reported the distribution of dividends against the earnings of the fiscal year ending December 31, 2009: i) One minimum obligatory dividend of US$ per share, to be paid as of May 11, 2010; ii) Two additional dividends of US$ per share each, to be paid as of July 7 and October 7, 2010, respectively. June 1 The Company reported as information of interest that on April 30, it filed Solicitations of Consent processes in international markets to obtain the approval from holders of the bonds placed by AES Gener in the international market in 2004 under the March 22, 2004, Bond Indenture, for certain amendments that will provide the Company with greater flexibility in managing its subsidiaries, especially those building projects financed under the project finance system. respective restrictions to the bondholders agent on a quarterly basis, including the corresponding calculations. July 30 Information was sent on the amendments made to the bond issuances registered with the Securities Registry under Nº 516 and 517 in order to adapt their stipulations to the new accounting principles applicable in Chile as a result of the implementation of IFRS. August 16 Material event The Company reported as a material event that, once the observations duly made had been resolved, the Puchuncaví Office of Municipal Works granted the construction permit for the Campiche thermoelectric plant owned by subsidiary company Empresa Eléctrica Campiche S.A., on August 10, December 15 The Company reported the Board of Directors decision to distribute US$73,030,776 in 2010 fiscal year earnings by distributing an interim dividend of US$ per share, to be paid as of January 5, transport service contracts that it had entered into with these three companies. Consequently, the respective transport contracts have been rescinded and the civil, commercial, and arbitration suits filed among the parties have been terminated; and the parties have waived any further claims regarding these controversies or any of the demands, pleas, and other claims presented or filed in these lawsuits and arbitration processes. Furthermore, the Company reported that while the aforementioned obligations will have a one-time, exceptional negative impact on the earnings of the subsidiary Sociedad Eléctrica Santiago S.A. as of December 31, 2010, which will also be reflected in the earnings of AES Gener S.A., as of this date the amount of that impact is still being evaluated. Nonetheless, the rescission of the aforementioned firm natural gas transport agreements significantly decreases the fixed expenses of Sociedad Eléctrica Santiago S.A., which will have a positive impact on the Company s cash flows expected in the future. July 9 Response was given to Official Letter of July 2, 2010, in which the SVS requested information on adapting the covenants governing AES Gener s bonds issued in order to be in line with IFRS standards that were coming into effect. The response stated that these amendments to the bond contracts had been agreed upon previously with the bondholders agent in compliance with the respective contracts, and that the Company provides certification of compliance with the December 30 Material Event The Company reported as a material event that on December 29, 2010, Sociedad Eléctrica Santiago S.A., a subsidiary company of AES Gener S.A., reached a settlement of each and every controversy held with Transportadora de Gas del Norte S.A., Gasoducto GasAndes S.A., and Gasoducto GasAndes S.A. (Argentina) regarding the validity and termination of the respective long-term firm natural gas

207 206 AnnualReport AES Gener 2010 Information on related companies as of December 31, 2010 AES Chivor & Cia Sca ESP Identification Type of company Foreign partnership limited by shares Address Av. Calle 100 N 19-54, 9 th Floor, Bogotá, Colombia Telephone (57 1) Fax (57 1) Corporate purpose Generation and sale of electricity. Capital and stock Paid-in capital US$10,553,063 (Col$233,736,958,964) Subscribed shares 222,818,836 Paid shares 222,818,836 Ownership 99.98% indirectly Directors Regular Daniel Stadelmann (1) Luis Carlos Valenzuela Roberto Junguito Felipe Cerón (2) Francisco Morandi Alternate Federico Echavarría Arminio Borjas (3) Bernerd Da Santos (3) Javier Giorgio (4) Jaime Tupper (5) CEO Federico Echavarría Personnel* Technical and administrative staff: 28 Professionals: 50 Executives: 7 AES Chivor S.A. (Managing partner of AES Chivor & Cia SCA E.S.P.) Identification Type of company Foreign corporation Address Av. Calle 100 N 19-54, 9 th Floor, Bogotá, Colombia Telephone (57 1) Fax (57 1) Corporate purpose To subscribe, acquire, sell, or invest in securities, shares, bonds convertible to shares, and all types of fixed-income financial instruments; to invest in other companies; to invest in all types of assets to fulfill the purpose; to act as partner in other companies, or contribute capital, acquire or hold shares and bonds of other companies. The company does not guarantee the obligations of third parties or if its own shareholders. Capital and stock Paid-in capital US$57,554 (Col$120,000,000) Subscribed shares 120,000 Paid shares 120,000 Ownership 98.75% indirectly Investment / Total assets % Directors Regular Felipe Cerón (2) Jaime A. Tupper (5) Juan Carlos Olmedo Alternate Federico Echavarría María Angélica Miranda Patricia Aparicio CEO Federico Echavarría

208 Additional information 207 Empresa Eléctrica Angamos S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o K Address Address: Mariano Sánchez Fontecilla N 310, 3 rd Floor, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose Generation, transmission, purchase, sale, and distribution of electricity or any other type of energy in any area of the country or abroad. Capital and stock Capital US$396,793,371 Paid-in capital US$336,927,179 Shares issued and paid 21,002,628,303 Ownership 100% directly and indirectly Empresa Eléctrica Campiche S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Alonso de Córdova N 5151, Office 902, Santiago, Chile Telephone (56 2) Corporate purpose Generation, transmission, sale, and distribution of electricity; extraction, distribution, and exploitation of fuels. Capital and stock Capital US$8,669,066 Paid-in capital US$8,669,066 Shares issued and paid 522,974,841 Ownership 100% directly and indirectly President Derek Martin (7) Empresa Eléctrica Cochrane S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Alonso de Córdova N 5151, Office 902, Santiago, Chile Telephone (56 2) Corporate purpose Generation, transmission, sale, and distribution of electricity; extraction, distribution, and exploitation of fuels. Capital and stock Capital US$1,000 Paid-in capital US$1,000 Shares issued and paid 5,000 Ownership 100% directly and indirectly President Derek Martin (7) President Daniel Stadelmann Rojas (1) Directors Daniel Stadelmann (1) Osvaldo Ledezma (6) Iván Jara (8) Directors Derek Martin (7) Daniel Stadelmann (1) Javier Giorgio (4) CEO Iván Jara (8) Directors Derek Martin (7) Daniel Stadelmann (1) Laurie Kelly (14) CEO Javier Giorgio (4) CEO Javier Giorgio (4) Personnel* Technical and administrative staff: 55 Professionals: 40 Executives: 5 Personnel* Technical and administrative staff: 1 Professionals: 8 Executives: 1

209 208 AnnualReport AES Gener 2010 Empresa Eléctrica Guacolda S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Miraflores 222, 16 th floor, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose Exploitation, generation, transmission, purchase, distribution, and sale of electricity; port and dock services; engineering services; others. Capital and stock Capital MUS$343,160,031 Paid-in capital MUS$343,160,031 Shares issued and paid 217,691,224 Ownership 50% President José Florencio Guzmán Directors Regular José Florencio Guzmán Felipe Cerón (2) Osvaldo Ledezma (6) Daniel Stadelmann (1) Javier Giorgio (4) Sven Von Appen Marcos Büchi Eduardo Navarro Jorge Ferrando Alternate Eduardo Rodríguez del Río Carlos Aguirre (10) Laurie Kelly (14) Juan Ricardo Inostroza (11) Iván Jara (8) Dag Von Appen Wolf Von Appen Rodrigo Huidobro Franco Gorziglia Empresa Eléctrica Ventanas S.A. Identificación Type of company Sociedad Anónima Cerrada Chilean taxpayer ID n o Address Alonso de Córdova N 5151, Office 902, Las Condes, Santiago, Chile Telephone (56 2) Corporate purpose Generation, transmission, purchase, distribution, and sale of electricity; or any other type of energy, in any area of the country or abroad, extraction, distribution, commercialization and operation of any form of solid, liquid and gas fuel, the sale and delivery of engineering services maintenance and petty, leasing, construction or acquisition of docks or ports and their exploitation in any form, and the performing of any other ancillary or complementary productive and commercial activities to the above mentioned activities. Capital and stock Capital US$ 77,068,470 Paid-in capital US$77,068, Shares issued and paid 39,719,916,310 Ownership 100% directly and indirectly President Derek Martin (7) Directors Regular Derek Martin (7) Daniel Stadelmann (1) Héctor Rojas Brito Alternate Tomás Jopia (12) Cristián Antúnez Jimena Alvarado (17) CEO Javier Giorgio (4) Energía Verde S.A. Identificación Type of company Sociedad Anónima Cerrada Chilean taxpayer ID n o Address O Higgins 940, Office 901 Concepción, Chile Telephone (56 41) Fax (56 41) Corporate purpose Generation and sale of electricity and process steam for industry; development of new generation projects with nontraditional, environmentally friendly energy resources. Capital and stock Capital US$37,626,234 Paid-in capital US$37,626,234 Issued shares 15,271,250 Paid shares 15,271,250 Ownership 99,99% directly President Daniel Stadelmann (1) Directors Derek Martin (7) Daniel Stadelmann (1) Javier Giorgio (4) CEO Jaime Zuazagoitía Personnel* Technical and administrative staff: 68 Proffesionals: 20 Executives: 2 CEO Sergio del Campo

210 Additional information 209 Energen S.A. Identification Type of company Foreign corporation Address Olga Cossettini 771,1º B, Capital Federal CP1107, República Argentina Telephone (54 387) Fax (54 387) Corporate purpose The wholesale purchase and sale of electricity produced by third parties; the importation, exportation, consignment, intermediation, and sale of electricity; any type of dealings and/or activity connected with the generation, transport, and distribution of electricity. Capital and stock Paid-in capital US$38,533 (AR$146,710) Issued shares 146,710 Paid shares 146,710 Ownership 100% directly and indirectly President Edgardo Campelo (5) Directors Edgardo Campelo (5) Osvaldo Ledezma (6) CEO Martín Genesio Energy Trade and Finance Corporation Identification Type of company Foreign corporation Address P.O. Box 309 Ugland House, South Church Street,Grand Cayman, Islas Caymán Telephone (1 809) Fax (1 809) Corporate purpose Investments in all types of tangible and intangible assets; the purchase, sale, and manufacture of all types of tangible and intangible goods. Capital and stock Capital US$23,596,735 Paid-in capital US$23,596,735 Issued shares 23,596,736 Paid shares 23,596,736 Ownership 100% direcly and indirectly Directors Daniel Stadelmann (1) Laurie Kelly (14) Javier Giorgio (4) Gasoducto Gasandes S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Chena 11650, Parque Industrial Puerta Sur San Bernardo, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose The transportation of natural gas through pipeline; the sale, storage, and processing of natural gas. Capital and stock Paid-in capital pagado M$44,083,128 Issued shares 172,800 Paid shares 172,800 Owneship 13% President Alain Petitjean Directors Alain Petitjean Ruben Nastar Raúl Montalvan María Inés Canalis Bruno Seilhan Osvaldo Ledezma (6) Diego Garzón Matías Pérez Eduardo Ojea

211 210 AnnualReport AES Gener 2010 Gasoducto Gasandes Argentina S.A. Identification Type of company Foreign corporation Address Moreno 877, Piso 11, Capital Federal, República Argentina Telephone (54 11) Fax (54 11) Corporate purpose To transport natural gas. Capital and stock Paid-in capital M$15,398,826,830 (AR$83,467,000) Issued shares 83,467,000 Paid shares 83,467,000 Ownership 13% President Alain Petitjean Directors Raúl Montalva Alain Petitjean Ruben Nasta María Ines Canalis Eduardo Ojea Quintana Bruno SeilhanMatías Pérez Osvaldo Ledezma (6) Gener Argentina S.A. Identification Type of company Foreign corporation Address Olga Cossettini 771 1º B, Capital Federal, República Argentina Telephone (54 11) Fax (54 11) Corporate purpose To carry out its own financial and investment operations or those of third parties, except those subject to the laws and regulations governing financial institutions, including the granting and taking out of loans; contributions of capital; the issuance, purchase, and sale of stock and all types of bearer and credit instruments; taking or holding ownership interest directly or through other corporations controlled or connected with: bidding(s) on stock packages in companies that hold as assets hydraulic or thermal power plants not yet privatized by the Argentine government; and the development of other projects in the Argentine electricity industry. Capital and stock Paid-in capital US$224,928,640 (AR$544,443,672) Issued shares 544,443,672 Paid shares 544,443,672 Ownership 92.05% directly and 7.95% indirectly Gener Blue Water Limited Identification Type of company Foreign corporation Address P.O. Box 309 Ugland House, South Church Street, Grand Cayman, Islas Caymán Telephone (1 809) Fax (1 809) Corporate purpose Unrestricted; to effect all types of business dealings and investments. Capital Paid-in capital US$24,165, 944 Ownership 100% indirectly Directors Daniel Stadelmann (1) Laurie Kelly (14) Javier Giorgio (4) President Edgardo Campelo (5) Directors Martín Genesio Edgardo Campelo (5) Osvaldo Ledezma (6) CEO Martín Genesio

212 Additional information 211 Genergia Power LTD. Identification Type of company Foreign corporation Address P.O. Box 309 Ugland House, South Church Street, Grand Cayman, Islas Caymán Telephone (1 809) Fax (1 809) Corporate purpose Investments in South America. Capital and stock Paid-in capital US$22,448,117 Ownership 100% indirectamente Directors Daniel Stadelmann (1) Laurie Kelly (14) Alberto Zavala (9) Genergía S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Mariano Sánchez Fontecilla 310, 3 rd floor, Las Condes, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose Investments, engineering consultation services. Capital and stock Paid-in capital US$22,448,117 Issued shares 2,488,637 Paid shares 2,488,637 Ownership 99.99% indirectly President Tomás Jopia (12) Directors Regular Tomás Jopia (12) Daniel Stadelmann (1) Laurie Kelly (14) Interandes S.A. Identification Type of company Foreign corporation Address Olga Cossettini 771, 1º B, Capital Federal CP1107, República Argentina Telephone (54 387) Fax (54 387) Corporate purpose Transmission of electricity. Capital and stock Paid-in capital US$55,876,946 (AR$135,365,996) Issued shares 135,365,996 Paid shares 135,365,996 Ownership 13% directly and 87% indirectly President Edgardo Campelo (5) Directors Edgardo Campelo (5) Martín Genesio Osvaldo Ledezma (6) CEO Martín Genesio Alternate Armando Lolas (18) Luciano Aparicio (13) Jimena Alvarado (17) CEO Cristián Antúnez

213 212 AnnualReport AES Gener 2010 Inversiones Nueva Ventanas S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Mariano Sánchez Fontecilla 310, 3 rd floor, Las Condes, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose Investment in all types of movable and immovable assets, both tangible and intangible; ownership interest in companies. Capital and stock Capital US$488,397, Paid-in capital US$428,529, Shares issued and paid 244,434,219,720 Ownership 100% directly and indirectly Inversiones Termoenergia de Chile Limitada Identification Type of company Limited liability corporation Chilean taxpayer ID n o Address Mariano Sánchez Fontecilla 310, 3 rd floor, Las Condes, Santiago, Chile Telephone (56 2) Fax (56 2) Corporate purpose Participation in all types of energy projects; generation, transportation, commercialization, purchase, and sale of electricity, natural gas, and all types of energy for itself or for third parties. Capital y acciones Capital Paid-in capital US$24,165,944 Ownership 99.99% indirectly Norgener S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Jorge Hirmas 2960, Renca, Santiago de Chile Telephone (56 2) Fax (56 2) Corporate purpose Generation, transport, and sale of electricity. Capital and stock Paid-in capital US$261,537,627 Issued shares 1,932,764,432 Paid shares 1,932,764,432 Ownership 99.99% directly President Daniel Stadelmann (1) President Daniel Stadelmann (1) Directors Daniel Stadelmann (1) Laurie Kelly (14) Luciano Aparicio (13) Directors Daniel Stadelmann (1) Juan Ricardo Inostroza (11) Enio Belmonte (16) CEO Javier Giorgio (4) CEO Iván Jara (8) Personnel* Technical and administrative staff: 56 Proffessionals: 19 Executives: 3

214 Additional information 213 Sociedad Eléctrica Santiago S.A. Identification Type of company Closely held corporation Chilean taxpayer ID n o Address Jorge Hirmas 2964, Renca, Santiago de Chile Telephone (56 2) Fax (56 2) Corporate purpose The exploitation, generation, transmission, purchase, distribution, and sale of electricity or any other kind of energy; sale of fuels; engineering consultation services. Capital and stock Capital US$ Paid-in capital US$247,765,685 Issued shares 125,308,749 Paid shares 125,308,749 Ownership 100% directly President Javier Giorgio (4) Directors Javier Giorgio (4) Daniel Stadelmann (1) Gil Posada (15) Termoandes S.A. Identification Type of company Foreign corporation Address Olga Cossettini 771 1º B, Capital Federal CP1107, República Argentina Telephone (54 38) Fax (54 38) Corporate purpose Generation, importation, exportation, and sale of electricity. Capital and stock Paid-in capital US$299,833,447 (AR$791,869,516) Issued shares 791,869,516 Paid shares 791,869,516 Ownership % directly y 66.99% indirectly President Edgardo Campelo (5) Directors Edgardo Campelo (5) Martín Genesio Osvaldo Ledezma (6) CEO Martín Genesio Personnel* Technical and administrative staff: 32 Proffessionals: 22 Executives: 2 AES Gener S.A. s business relationships with its related companies are regulated by contracts currently in force, whose effects are presented in the Financial Statements. AES Gener S.A. executives do not receive remuneration for their duties as directors of related companies. For subsidiaries whose capital stock is expressed in foreign currency, other than United States dollars, the information in this section is presented in United States dollars using the exchange rate in effect on December 31, * Personnel from related companies that consolidate their results with those of AES Gener and that have hired staff. (1) Chief Financial Officer of AES Gener S.A. (2) Chief Executive Officer of AES Gener S.A. (3) Director of AES Gener S.A. (4) Chief Operations Officer of AES Gener S.A. (5) Alternate Director of AES Gener S.A. (6) Operational Performance Manager of AES Gener S.A. (7) Chief Development Officer of AES Gener S.A. (8) Chief Engineering and Construction Officer of AES Gener S.A. (9) Attorney-at-Law of AES Gener S.A. (10) Transmission and Margin Analysis Manager of AES Gener S.A. (11) Market Manager de AES Gener S.A. (12) Strategy and Reports Manager of AES Gener S.A. (13) Accounting Manager of AES Gener S.A. (14) Financial Manager of AES Gener S.A. (15) Human Resources Manager of AES Gener S.A. (16) Technical Manager of AES Gener S.A. (17) Local GAAP Chief of AES Gener S.A. (18) Engineering Manager of AES Gener S.A. CEO Rodrigo Osorio Personnel* Technical and administrative staff: 32 Professionals: 19 Executives: 3

215 214 AnnualReport AES Gener 2010 Addresses and telephone numbers of generating plants Angamos Plant 7ª Industrial N 1100 esquina Avda. Longitudinal Barrio Industrial Portuario de Mejillones Antofagasta Region, Chile Telephone: (56 2) Alfalfal Plant Ruta G-345 Km. 23, San José de Maipo, Metropolitan Region, Chile Telephone: (56 2) Fax: (56 2) Chivor Plant Hydroelectric plant Chivor, Santa María, Boyacá, Colombia Telephone: (57 1) Fax: (57 8) Constitucion Plant Camino a Chanco Km. 1.5, Constitución, Chile Telephone: (56 71) Fax: (56 71) Guacolda Plant Isla Guacolda s/n, Huasco, Chile Telephone: (56 51) Fax: (56 51) Laguna Verde Plant Camino Principal s/n, Laguna Verde, Valparaíso, Chile Telephone: (56 32) Laja Plant Camino a Laja Km. 1.5, Cabrero, Chile Telephone: (56 43) Fax: (56 43) Los Vientos Plant Ruta 5 Norte, Km. 91 Llay Llay, Region V, Chile Telephone: (56 32) Maitenes Plant Ruta G-345 Km. 14, San José de Maipo, Metropolitan Region, Chile Telephone: (56 2) Fax: (56 2) San Francisco de Mostazal Plant Longitudinal Sur Km. 63, San Francisco de Mostazal, Chile Telephone: (56 72) Fax: (56 72) Norgener Plant Balmaceda s/n, Tocopilla, Chile Telephone: (56 55) Fax: (56 552) Nueva Ventanas Plant Camino Costero s/n, Puchuncaví, Chile Telephone: (56 32) Queltehues Plant Ruta G-465, Km. 3, San José de Maipo, Metropolitan Region, Chile Telephone: (56 2) Fax: (56 2) Renca y Nueva Renca Plant Jorge Hirmas 2964, Renca, Santiago, Chile Telephone: (56 2) Fax: (56 2) Santa Lidia Plant Camino a Yungay s/n Km. 7 Cabrero, Region VIII, Chile Telephone: (56 43) Termoandes Plant Ruta Nacional N 9 - Km (4432) Cobos- Salta, Argentina Telephone: (54-387) Fax: (54-387) Ventanas Plant Camino Costero s/n, Puchuncaví, Chile Telephone: (56 32) Volcan Plant Ruta G-465, Km. 3, San José de Maipo, Metropolitan Region, Chile Telephone: (56 2) Fax: (56 2)

216 Additional information 215

217 216 AnnualReport AES Gener 2010