AES CORPORATION. City or location Month XX, 20XX. AES Gener Business Review. Felipe Ceron Chief Executive Officer, AES Gener S.A.

Transcription

1 AES CORPORATION AES CORPORATION AES Gener Business Review Felipe Ceron Chief Executive Officer, AES Gener S.A. City or location Month XX, 20XX March 22, 2006

2 AES Gener Strategic Overview Contains Forward Looking Statements AES Goals AES 2008 Target AES Gener Role Financial Goals Revenue Growth Gross Margin Growth Earnings Per Share Growth ROIC Improvement* Cash Flow Growth Subsidiary Distributions* Restructuring Opportunities Growth Goals Platform Expansion Greenfield Investment Privatization/M&A * Non-GAAP financial measure. See Appendix. -- $3.5 Billion 13-19% per Year 11% Above Average Below Average Above Average Average Above Average Increasing Limited Significant Opportunities Significant Opportunities Longer-Term Potential 1

3 Chile Highlights Chile at a Glance Currency Exchange Rate (3/14/06) Per Capita GDP (2004) Inflation Rate (2005) Economic Drivers US$1= Ch$527.1 US$7, % Copper, Agriculture, Forestry, Fishing Capital Santiago Largest City Santiago Population (2005 E) Sovereign Credit Rating Chilean Peso (Ch$) 16.3 million A / Baa1 2

4 Chile Electricity Market Characteristics Generation Transportation Distribution Commercial Base 31 companies 90% private sector 20% AES share (capacity) 27 generators Four self and cogenerating 12,253MW installed capacity 41% hydroelectric 59% thermal Generators free to sell to: Distribution companies at regulated prices Large customers at freely negotiated prices Five transporters 100% private sector Transmission (> 23 kv) Over 15,000 km of lines Open access transmission Tolls set every four years 39 companies 4.6 million customers Distribution companies distribute 54% of the electric consumption of the country Regulated public service Exclusive geographic concessions for regulated customers Responsible for maintenance and investment Tariffs set every four years based on model company More than 100 large users supplied directly by generation companies Above 2MW: Large customers can purchase energy directly from a generator or distribution company Freely negotiated prices and conditions Data from AES Gener. 3

5 Chile Generation Market Profile Capacity Market Share Endesa 42% Other 5% AES Gener 20% Tractebel-Codelco14% Colbun 19% Total Installed Capacity = 12,254MW 4

6 Colombia Generation Profile Capacity Market Share Union Fenosa Other10% 6% Endesa 24% CORELCA 10% AES-Chivor 8% ISAGEN 17% EEPPM 25% Total Installed Capacity = 13,348MW EEPPM: Empresas Públicas de Medellín ISAGEN: ISAGEN S.A. E.S.P. CORELCA: Corporación Eléctrica de la Costa Atlántica 5

7 Chile Grid Overview SING Antofagasta Central Interconnected System (SIC) 2005 Installed Capacity 8,629MW Maximum Demand 5,764MW Gross Production 36,344 GWh Northern Interconnected System (SING) 2005 Santiago SIC Installed Capacity 3,625MW Maximum Demand 1,533MW Gross Production 12,657 GWh Load Factor 76% Load Factor % Hydroelectric 57% % Hydroelectric % Thermal 43% % Thermal % Population 93% % Population 86% 1% 99% 6% 6

8 Chile Electricity Demand Growth 100,000 60,000 80,000 50,000 US$ Million 60,000 40,000 40,000 30,000 20,000 GWh 20,000 10, GDP Energy demand Correlation between energy demand and GDP growth has increased in recent years Energy demand is expected to continue growing by more than 5% per year 7

9 Colombia Electricity Demand Growth 105,000 55, ,000 50,000 US$ Million 95,000 90,000 45,000 40,000 GWh 85,000 35,000 80,000 30, GDP Energy demand High historic correlation between energy demand and GDP growth International interconnections are expected to increase energy demand further in the future 8

10 Chilean Power Market Spot Transactions Transmission and Distribution Customers Transmission Distribution Regulated Genco gas Genco coal Economic Dispatch Center Genco hydro Genco diesel Dispatch based on lowest cost of production (marginal cost) Spot price = marginal cost Includes energy and capacity payments Substation 1 Substation 2 Substation 3 Toll Payment Open access transmission Toll payments for existing installations determined by regulator Bids held for new expansions Concessions granted for distribution and tariffs based on model company structure Distribution Companies Regulated node price + value added cost Contracts awarded in open season bid processes Unregulated Minimum demand requirement > 2 MW Customers with demand between 0.5 and 2MW may select tariff class every four years Unregulated freely negotiated price 9

11 Chilean Power Market Organization Ministry of Economy Regulatory Bodies National Energy Commission: Implements policies Superintendence of Electricity & Fuels: Supervises compliance Experts Panel: Resolves conflicts Economic Dispatch Center: Orders dispatch Generation Companies Transmission Companies Unregulated Customers Economic Dispatch Center Members Distribution Companies 10

12 AES Gener History Compaňía Chilena de Electricidad S.A., created in 1921, is nationalized 1981 Chilectra Generation S.A. is formed as one of three State-owned electricity sector companies 1986 Corporación de Fomento de la Producción (CORFO) initiates the privatization process 1988 Privatization process completed 1989 Company name changes to Chilgener S.A Chilgener acquires Chivor generation business in Colombia 1998 Company name changes to Gener S.A AES acquires 99% controlling interest in Gener 2004 Argentina begins to limit natural gas exports to Chile 2005 New sector law enacted in Chile supporting generation model and regulated tariff increases 2005 Gener launches first new capacity investment since

13 AES Gener Business Structure SIC AES Gener S.A. SING Colombia 100% 100% 90% 50% 100% 100% 100% Operating assets 40% hydro 58% coal 2% oil (682MW) EVSA cogeneration (42 MW) ESSA 79% combined cycle 21% oil (479 MW) Guacolda coal (304 MW) Norgener coal (277 MW) TermoAndes combined cycle (643 MW) Chivor hydro (dam based) (1,000 MW) Note: Excludes unconsolidated non-chile generation investments 12

14 AES Gener in Chile: Balanced Portfolio of Coal, Natural Gas & Hydro Guacolda 50% AES Gener-owned 304MW coal AES Gener (Parent) 393MW coal 271MW hydro 19MW oil Norgener 100% AES Gener-owned 277MW coal Antofagasta Santiago TermoAndes (Argentina) 100% AES Gener-owned 643MW natural gas Buenos Aires Eléctrica Santiago 90% AES Gener-owned 379MW natural gas 100MW oil Energía Verde 100% AES Gener-owned 17MW forestry waste 25MW oil Hydroelectric Coal Natural Gas Oil Biomass 13

15 AES in Colombia: Generation Barranquilla Chivor Bogota Chivor 1,000MW hydro plant (8% of Colombia generation capacity) 100% Gener-owned (acquired in 1996) Hydroelectric 14

16 AES Gener SIC Asset Diversity SIC Capacity Dependent on Hydro...Resulting in Volatile Spot Prices Hydro 60% Other 7% Coal 11% Gas 22% US$ / MWh Price (US$/MWh) Marginal Cost Node Price Gener Balanced Portfolio Leads to Hydro 18% Other 11% Coal 46% Lower risk profile than competitors Asset portfolio complementary to the system provides assurance of output Competitive advantage to capture long-term contracts Gas 25% Total: 1,508MW (1) All the upside of high hydrology years with limited downside (1) Includes 100% of Electrica Santiago and Guacolda s capacity. 15

17 AES Gener SING Asset Diversity SING Capacity 100% Thermal...Resulting in Less Volatile Spot Prices Gas 58% Oil / Diesel 9% Coal 33% US$/MWh 60 Prices (US$/MWh) Jun-93 Jun-97 Jun-01 Jun-05 Marginal Cost Gas 70% Gener Balanced Portfolio Coal 30% and Market Presence Diversified thermoelectric fuel supply (gas & coal) Lower gas curtailment risk Long-term contracts with credit-worthy off takers Company-owned transmission system with direct connection to large customers Total: 920MW 16

18 AES Gener Contract Revenue Model Other Contracts 15% Minera Escondida 15% Consolidated Contract Revenue Colombia 12% Chilquinta 21% Chilectra 37% Key Customers Chilectra and Chilquinta represent over 37% and 21% respectively, of AES Gener s consolidated contracted sales in Chile 2004 contract renegotiation with Minera Escondida extended two existing contracts through 2015 (172MW) and the addition of a third contract for up to 80MW 17

19 AES Gener Fuel Sources Coal Natural Gas Fuel Oil Petcoke Biomass Sourced From Colombia, Indonesia, Canada, New Zealand, Australia, Chile Argentina International Market / Processed in Chile USA, Venezuela Chile Transportation Method Ship Pipeline Truck Ship Conveyer Belt / Truck Distance 4,800-9,500 nautical miles 700 km to Santiago 329 km to Salta < 100 km 3,900 nautical miles < 100 km Key Suppliers CMC, Noble, Luscar, Ingesur, Glencore, BHP Consorico Sierra Chata, YPF and Tecpetrol Consortium Copec, Shell, YPF Oxbow, AIMCOR, SSM, Valero, Koch Sawmills & Agricultural Waste Fuel Flexibility (sulfur, BTU) HHV, Sulfur, Ash, Moisture, HGI, Volatile Matter HHV Sulfur, Particulate HHV, Sulfur, Ash (Ni, Va, Ar), HGI Particulate 18

20 AES Gener Generation KPIs Contains Forward Looking Statements Key Performance Indicator (KPI) Safety Excellence OSHA rate Lost time accidents (LTA) Operational Excellence Equivalent availability factor (EAF) Non-fuel O&M (NFOM) cost per megawatt hour Equivalent net plant heat rate Btu/kWh (ENPHR) Thermal plants Equivalent forced outage rate (EFOR) 19

21 AES Gener Performance Scorecard Equivalent Availability Factor Non-Fuel O&M Expense (US$/MWh) 94% 93% Getting Better % 88% period marked by low dispatch conditions and cost cutting efforts focused steady improvements 20

22 KPI - Generation EFOR Improvement EFOR 1.0% 0.5% Top Decile 0.0% Cordillera Hydroelectric Complex YTD % 5.14% Getting Better 0.02% 0.04% YTD EFOR Improvement Cordillera Complex sources of improvement: Implementation of new training program for plant operators Improvement in cooling systems Results: 98.6 % improvement Cordillera Complex 21

23 AES Gener Capital Structure Objectives Contains Forward Looking Statements Capital Structure Elements Financial Debt to Capital Ratio Credit Rating Objectives S&P Fitch Moody s Interest Coverage Fixed to Floating Rate Average Maturity Target 50% to 55% BB+ to Investment Grade BB to Investment Grade Ba3 to Investment Grade > 3.0 x 85% fixed rate/15% floating rate 7 years 22

24 AES Gener Debt Summary US$ Million Amortization Schedule As of September 30, Currency Breakdown September 30, 2005 Chilean UF 4% Colombian Peso 8% Interest Rate Breakdown September 30, 2005 Fixed Rate 79% US Dollar 88% Variable Rate 21% 23

25 Reprofiled Balance Sheet Short Term vs. Long Term Debt (US$ Million) Foreign Currency vs. Local Currency (US$ Million) 1,884 1,512 1,384 1, ,884 1,512 1,384 1, % 100% 5% 2% 2% 2% 10% 8% 3% 4% 66% 71% 50% 92% 93% 93% 88% 50% 95% 98% 98% 98% 87% 88% 34% 29% 8% 7% 7% 12% 0% (1) Short-term Long-term (1) 2005 data as of September 30, % (1) USD Chilean UF Col$ 24

26 Gener Credit Rating Improvement A-/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 September 2005: S&P revised outlook to positive October 2005: Moody s places Gener & Chivor under review for potential upgrade BB+/Ba1 BB/Ba2 BB-/Ba3 B+/B1 B/B2 B-/B3 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Fitch Moody s S&P Target 25

27 AES Gener Portfolio Diversified by Geography Revenue Trend Balanced Revenues (1) US$ Million $636 $609 $475 $ (1) SIC SING Colombia Other Colombia 21% SING 21% Other 7% SIC 51% (1) 2005 data as of September 30,

28 AES Gener Financial Overview (US$ Million) Nine Months Ending September 30, 2005 Revenue $543 $636 $609 Gross Margin $183 $177 $148 Income Before Tax & Minority Interest $88 $65 $102 Distributions to AES Corporation $0 $151 $11 Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated. 27

29 AES Gener Scenario Planning Strategic Issues Mitigation of Argentina Gas Restrictions Fuel swaps Additional purchases in Argentine market Alternative use of diesel oil Generation toll agreements Hydrology Risk Optimized commercial policy (reduction in contract levels and indexed prices) Development of back-up peaking plants (current turbine project) Strategic Opportunities Strong Demand Growth Development of new coal and hydro plants supported by long-term PPAs Favorable Regulatory Environment Increase in regulated node prices Public bid processes for distribution demand with long-term fixed price contracts to promote new investment Progressive phase-out of regulated prices 28

30 ESSA Gas Supply Restrictions ESSA Fuel Supply 2004 YTD 2006 Contains Forward Looking Statements 100% 80% 60% 40% Proactive Response Fuel swap agreements Gas purchase agreements Utilization of diesel oil Generation toll agreements 20% 0% 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 Contract Purchases Swaps Gas Restriction Diesel 29

31 Chile Platform Expansion Opportunities Ventanas Plant, Chile 120MW diesel-fired power plant $37 million capital cost Start-up second quarter 2006 Supports peaking, fuel diversification and hydrology risk management strategies Fits existing generation tariff structure Proposed coal-fired power plants MW plants at existing Guacolda and Ventanas sites 2009 Start-Up Contains Forward Looking Statements Combined capital costs $600 million Participating in Chilean RFP process Platform expansion revenue potential $175 million by 2010 (combined basis) Strong subsidiary dividends can continue 30

32 Appendix - Assumptions Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: 1) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; 2 ) businesses continue to operate in a manner consistent with or better than prior operating performance, including achievement of planned productivity improvements including benefits of global sourcing, and in accordance with the provisions of their relevant contracts or concessions; 3) new business opportunities are available to AES in sufficient quantity so that AES can capture its historical market share; 4) no major disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; 5) negative factors do not combine to create highly negative lowprobability business situations; 6) business-specific risks as described in the Company s SEC filings do not occur. In addition, benefits from global sourcing include avoided costs, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. These benefits will not be fully reflected in the Company s consolidated financial results. 3

33 Appendix - Definitions Free Cash Flow - Net cash from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures. Lost Time Accident (LTA) - An incident in which the injured person is kept away from work beyond the day of the incident. Near Miss - An incident that occurred but did not result in any injury. In AES, we have expanded this to include unsafe conditions that have been observed. O&M - Operation and maintenance. Reliability Centered Maintenance (RCM) - An integrated maintenance methodology that optimizes among reactive, interval-based, condition-based, and proactive maintenance practices to take advantage of their respective strengths in order to maximize facility and equipment reliability while minimizing life-cycle costs. Return on invested capital (ROIC) - Defined as net operating profit after tax (NOPAT) divided by average capital. NOPAT is defined as income before tax and minority expense plus interest expense less income taxes less tax benefit on interest expense at effective tax rate. Average capital is defined as the average of beginning and ending total debt plus minority interest plus stockholders equity less debt service reserves and other restricted deposits. System Average Interruption Duration Index (SAIDI) - A measure of the cumulative duration of electric service forced and sustained interruptions experienced by customers each year, excluding force majeure events. SAIDI is calculated as the total number of customer minutes of sustained interruption divided by the number of customers served. System Average Interruption Frequency Index (SAIFI) - A measure of the number of outages per customer per year. SAIFI is calculated by dividing the total number of customer-sustained interruptions by the number of customers served. 4

34 Appendix Reconciliation of Subsidiary Distributions (US$ Millions) Year Ended December 31, Mar. 31, 2005 Quarter Ended Jun. 30, 2005 Sep. 30, 2005 Nine Months Ended Sep. 30, 2005 Subsidiary distributions to parent $1,008 $991 $190 $170 $274 $634 Net distributions to/(from) QHCs Total subsidiary distributions 1,054 1, Returns of capital distributions to parent Net returns of capital distributions to/(from) QHCs Total returns of capital distributions Combined distributions & returns of capital received 1,296 1, Less: combined net distributions & returns of capital to/(from) QHCs (46) (24) (5) (13) -- (18) Total subsidiary distributions & returns of capital to parent $1,250 $1,107 $192 $207 $274 $673 Note: On the regional financial slides included subsequently in this presentation series, subsidiary distributions to parent, which exclude returns of capital and project financing proceeds, have been referred to as Distributions to AES Corporation. 5