The Company 10. Business and Markets 16. Electric Business Corporate Governance 74. Our People 86

Transcription

1 Annual Report

2 CONTENTS The Company 10 Business and Markets 16 Electric Business Corporate Governance 74 Our People 86 Corporate Social Responsibility and the Environment 94 Additional Information 102 AES Gener S.A. Financial Statements 118

3 KEY COMPANY DATA COMPANY NAME AES Gener S.A. CHILEAN TAXPAYER ID NUMBER TYPE OF COMPANY SECURITIES REGISTRY NUMBER No ADDRESS Open Stock Company Rosario Norte 532, 19th Floor, Las Condes, Santiago, Chile TELEPHONE (56-2) FAX (56-2) P.O. BOX WEB PAGE STOCK EXCHANGE TICKER SYMBOL No. 3514, Santiago AESGENER

4 Conventional thermoelectric, hydroelectric, and combined cycle generation used to produce electricity. SUCCESSFUL CAPITAL INCREASE US$150 MILLION. Angamos bond issue: US$800 MILLION. CHIVOR S MAIN WATER CONCESSION EXTENDED CHILE S LARGEST GENERATION COMPANY IN 2014

5 AES GENER: A SUMMMARY Current generation capacity: MW Capacity under construction: MW Operating on four separate markets: the SIC and the SING in Chile, the SIN in Colombia and the SADI in Argentina Diversified portfolio: Generation sources, clients, and markets Investment grade credit rating: BBB- (Fitch and S&P) and Baa3 (Moody s) Financial Summary at December 31 (in thousands of US$) Gross earnings 589, , ,079 EBITDA 660, , ,215 Earnings attributable to owners of parent 202, , ,651 Total assets 5,831,406 6,591,902 6,836,897 Current liabilities 491, , ,849 Non-current liabilities 2,859,087 3,062,687 3,761,689 Non-controlling interests 3,354 93,610 51,807 Equity attributable to owners of the parent 2,477,667 2,543,356 2,312,552 Total Income ,327,721 2,244,790 2,328,406 EBITDA por Mercado 2014 SIN 262, % SIC 253, % SING 122, % SADI 31, % Total 671,215

6 LETTER FROM THE CHAIRMAN The company s EBITDA was 8% higher this year than in The increase in earnings, US$671 million compared to US$623 million the previous year, is due primarily to increased generation at our plants in both Chile and in Colombia. This highlights the company s solid position in terms of its operational excellence and its portfolio, which is diversified in terms of both technology and markets. 6 AES MEMORIA GENER ANUAL ANNUAL AES REPORT GENER 2014 We remain the company with the most plants under construction, helping the country to diversify its energy supply with projects that provide jobs directly to over 11,000 workers. Although the company s profits declined 9% in 2014, the decrease stems from the amortization of deferred expenses from our subsidiary Eléctrica Angamos debt refinancing, the depreciation of the Argentine peso, and, to a lesser extent, the depreciation of the Chilean and Colombian peso against the U.S. dollar was a milestone year for AES Gener, with its record generation levels, extensive growth with world-class partners Global Infrastructure Partners, Mitsubishi, and Antofagasta Minerals, and innovations to maximize value through leveraging on our existing platforms. Dear shareholders: It is my great pleasure to update you on what AES Gener has accomplished in , a year of innovation and challenges, was one in which our company contributed greatly to all of the markets in which we operate, which fills us with immense satisfaction. We were the power company with the highest generation in Chile in 2014, providing 28% of the country s total generation. We remain the company with the most plants under construction, helping the country to diversify its energy supply with projects that provide jobs directly to over 11,000 workers and that will increase our company s installed capacity in Chile by 1,236 MW by We also reached record generation at the TermoAndes plant in Argentina, we completed tests for exporting energy from Chile to Argentina via Chile s only international transmission line, and, in Colombia, we renewed Chivor s main water concession for another 50 years. The company has five generation projects under construction, which will increase installed capacity by 1,256 MW: Alto Maipo 1 (531 hydroelectric MW on the SIC1), Cochrane 2 (532 coal-fired MW on the SING2), Andes Solar (21 photovoltaic MW out of a total of 220 MW on the SING), Guacolda V (152 coal-fired MW on the SIC), and Tunjita 3 (20 run-ofriver hydroelectric MW on the SIN3).. In terms of innovation, we have not only started using photovoltaic technology for the first time ever, but we have also begun construction on a desalinization plant located alongside the Angamos power plant in Mejillones that will enable us to reduce costs and, in the future, to sell desalinated water to third parties. The company executed several transactions to continue streamlining its capital structure, the most significant of which was the refinancing of the Eléctrica Angamos debt by issuing investment-grade bonds for a total of US$800 million on international markets. The bonds will mature in 2029.

7 Another achievement was our continuing improvement in the Great Place to Work ranking thanks to our excellent teamwork throughout the company. Additionally, AES Gener received two second place awards in the First National Sustainability Awards (Primer Premio Nacional en Sustentabilidad) organized by the Recyclápolis Foundation and the El Mercurio newspaper. The prizes were awarded in the Air category for the Ventanas plant s industrial gas biorefinery project and in the Water category for the Angamos plant s cooling towers. These awards were given in recognition of AES Gener s commitment to the environment, manifested daily in our implementation of best practices and our installation of the latest technology in our plants. Part of our mission is to work closely with and support the communities where our plants are located and where our projects are being built. The company sponsors a number of initiatives that contribute to these communities through its community relations policy, whose clear objective is to help improve our neighbors quality of life. The town provides goods and services for the construction of the Alto Maipo project, which contributes to the development of the local economy. In addition, over 20% of the project s employees are hired from the surrounding area. Ladies and gentlemen, the results obtained by AES Gener in 2014 are a demonstration of the ongoing efforts put forth by each and every employee on a daily basis to help us hold our position as a leader among South American generation firms, without losing sight of the need to be a great place to work and a driving force for development in all of the countries in which we operate. I thank you for the trust that you have placed in the company, in the Board over which I preside, and in our 1000-plus employees. Thanks to the dedication, effort, and commitment of each one of its people, AES Gener means reliable energy for Chile, Colombia, and Argentina. 7 Part of our responsibility as a company is to create jobs and to promote the use of local goods and services so that we help grow the economy of the communities in which we are present. San José de Maipo is a good example of this. También tuvimos nuestro programa de entrega de becas de estudio de preuniversitario en Puchuncaví, a partir del cual los jóvenes, año tras año, han subido considerablemente su nivel de educación. Another example is our scholarship program for college entrance exam preparation in Puchuncaví through which, year after year, young people have been able to considerably increase their educational level. Part of our responsibility as a company is to create jobs and to promote the use of local goods and services so that we help grow the economy of the communities in which we are present. San José de Maipo is a good example of this. ANDRÉS GLUSKI W. Chairman of the Board (1) Central Interconnected System (2) Greater Northern Interconnected System (3) National Interconnected System

8 Board of Directors and Management as of December 31, regular DIRECTORS ANDRÉS GLUSKI CHAIRMAN Master in Economics, University of Virginia, USA Ph.D. in Economics and International Finance, University of Virginia, USA Passport No.: Citizen of Venezuela ARMINIO BORJAS Attorney-at-Law, Universidad Católica Andrés Bello, Venezuela Passport No.: D Citizen of Venezuela IVÁN DÍAZ-MOLINA Civil Engineering, Universidad Nacional de Córdoba, Argentina Master of Science, Carnegie-Mellon University, USA Chilean ID No.: Citizen of Argentina JOSÉ PABLO ARELLANO Economics, Pontificia Universidad Católica de Chile, Chile Master s in Economics, Harvard University, Ph.D. in Economics, Harvard University Chilean ID No.: Citizen of Chile MARGARET TIGRE (1) Bachelor of Science in Accounting, George Mason University, USA Passport No.: Citizen of the USA RADOVAN RAZMILIC Road, Canal, and Port Engineering, Universidad Politécnica Superior de Madrid, Spain Chilean ID No.: Citizen of Chile TOM O FLYNN MBA in Finance, University of Chicago, USA Passport No.: Citizen of the USA ALTERNATE directors STEPHEN COUGHLIN Bachelor of Science in Commerce, University of Virginia, USA. M.B.A., UC Berkeley, USA Passport No.: Citizen of the USA MARTÍN GENESIO Electronic Engineering, Universidad Nacional de Río Cuarto, Argentina Passport No.: N Citizen of Argentina VARSOVIA VALENZUELA Business Administration, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: Citizen of Chile RAFAEL GONZÁLEZ AMARAL Civil Engineering, Pontificia Universidad Católica de Chile, Chile Chilean ID No Citizen of Chile JOEL WILLIAMS ABRAMSON (2) International Politics and Economics, Middlebury College, USA Passport No.: Citizen of the USA BERNERD DA SANTOS Business Administration, Universidad José María Vargas, Venezuela Master s in Finance and Business Management, Universidad José María Vargas, Venezuela Passport No.: Citizen of Venezuela (1) Margaret Tigre replaced Andrew Vesey as Regular Director; Mr. Vesey resigned as Regular Director of the company, effective November 30, (2) The Board of Directors received the resignation of Joel Williams Abramson from his post as Alternate Director of the company at the board meeting held on February 27, 2015.

9 EXECUTIVES LUIS FELIPE CERÓN CHIEF EXECUTIVE OFFICER Industrial Civil Engineering, Pontificia Universidad Católica de Chile, Chile Master of Science in Accounting and Finance, The London School of Economics, England Chilean ID No.: Citizen of Chile VICENTE JAVIER GIORGIO CHIEF OPERATIONS OFFICER Electronic Engineering, Universidad Tecnológica Nacional, Argentina MBA, Universidad del Cema, Argentina Chilean ID No.: Citizen of Argentina DANIEL STADELMANN (1) CHIEF FINANCIAL OFFICER Business Administration and Finance, University of St. Gallen, Switzerland MBA, IMD, Switzerland Chilean ID No.: Citizen of Chile LUIS KNAAK CHIEF ENGINEERING AND CONSTRUCTION OFFICER Mechanical Engineering, Universidad Santa María, Chile Master s in Industrial Engineering, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: Citizen of Chile VALERIE BARNICH CHIEF DEVELOPMENT OFFICER Civil Industrial Engineering, Université Libre de Bruxelles, Belgium Chilean ID No Citizen of Belgium ALBERTO ZAVALA LEGAL COUNSEL Attorney-at Law, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: Citizen of Chile MARIANA SOTO CHIEF CORPORATE AFFAIRS OFFICER Attorney-at-Law, Universidad de Chile, Chile Chilean ID No.: Citizen of Chile 9 (1) Daniel Stadelmann Rojas left the company on December 31, 2014 and was replaced by Ricardo Manuel Falú on January 2, Mr. Falú is a Certified Public Accountant from Argentina. He earned his undergraduate degree at the Universidad Nacional de Salta in Argentina and received his MBA from the IAE Business School, where he graduated Summa Cum Laude.

10 10 THE COMPANY

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12 INTRODUCTIOn MiSsiOn, vision y CORporatEs VALUES 12 AES Gener S.A. (AES Gener or the Company) is an open stock corporation whose mission is to generate electricity in Chile safely, reliably, and sustainably, fulfilling its commitments to customers, shareholders, employees, communities, suppliers, and other individual and group stakeholders. OUR COMPANY We use our electricity platforms and knowledge to provide energy and infrastructure solutions for the markets in which we choose to operate. OUR MisSiOn We use our electricity platforms and knowledge to provide energy and infrastructure solutions for the markets in which we choose to operate.. CORPORATE VALUES AND BUSINESS ETHICS The Company has always been committed to its values, the foundation for its Code of Conduct, which provide guidelines on how to conduct its day-to-day business. The Company has various ways of promoting the concrete application of these values on the job, and it develops activities and materials that encourage employees to reflect on them. The Code of Conduct is distributed to (and accepted by) all of the Company s collaborators. It is also given to contractors, suppliers, and business partners, and is available on the Company s web site. The main aspects of the Code are: Safety First Guaranteeing safe operations at our facilities is the cornerstone of all daily activities and decision-making. Company members must make work-related safety and risk prevention a prime concern for personnel and contractors, and in the communities in which they work. AES Gener periodically holds different activities for all of its workers throughout the Company, including monthly talks at all the facilities, in order to keep this culture of safety alive and well.

13 13 Act with Integrity Company employees must be honest, trustworthy, and responsible. Integrity must be the essence of their individual behavior and of their interactions with one other and with third parties on the job. Honor Commitments The individuals who make up the Company must honor the commitments the organization has made to all of its stakeholders: workers, customers, communities, shareholders, investors, suppliers, contractors, and partners. Strive for Excellence Company members must strive to be the best in all they do and to have world-class levels of performance. Enjoy the Job Members of our 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.

14 Our history The Chilean Electric Tramway and Light Company is founded in Santiago. Its assets are merged in 1921 with those of the Compañía Nacional de Fuerza Eléctrica, created in 1919, to form the private enterprise Compañía Chilena de Electricidad (Chilectra) Chilectra is nationalized and is taken over by the Corporation for the Development of Production (CORFO) The Company is restructured into a parent, Chilectra S.A., and three subsidiaries: Chilectra Metropolitana S.A. (serving the Santiago metropolitan area), Chilectra Quinta Región S.A. (serving Valparaiso and the Aconcagua Valley), and Chilectra Generación S.A. (an electricity generation company and owner of the former Chilectra s transmission assets) The Company s name is changed to Chilgener S.A. upon completion of the privatization process, begun in 1986 and finalized in 1988 when CORFO transfers 100% of Chilectra Generación S.A. s ownership to the private sector. Chilgener S.A. has an installed capacity of 579 MW distributed throughout Chile s Metropolitan and Valparaiso Regions. Once again the Company s name is changed, this time to Gener S.A., to reflect the Company s new international standing as it expands its operations to new markets and businesses both in Chile and abroad. Gener is involved in the electricity generation business in Chile, Argentina, Colombia, and the Dominican Republic. It also expands into other activities such as steam generation; coal extraction and sales; natural gas exploration, extraction, and transportation; oil exploration and production; densified biofuel production and sales; shipping and port services; and engineering services provided primarily to the electricity and sanitation sectors The Company begins the search for a strategic partner or investor that will enable it to continue growing, considering its smaller size and more limited debt capacity as compared to its large international competitors. AES Corp, through its subsidiary Inversiones Cachagua Ltda., launches a tender offer for a controlling percentage of the Company. It also enters into an agreement with the French company TotalFinaElf under which the latter agrees to purchase Gener s electricity assets in Argentina. Inversiones Cachagua Ltda. purchases 61.11% of Gener s capital stock while, in the U.S., Gener s ADRs, representing a 34.56% stake in the Company, are exchanged for AES Corp shares. Inversiones Cachagua Ltda., through a second public offering in Chile, acquires an additional 2.87% of the Company s stock for a total ownership of 98.54%, a stake that will later increase to 98.65% through other purchases on the stock market. The Company changes its name to AES Gener S.A. and begins 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 increases to 98.79% The Company undertakes its first expansion phase involving the construction and commercial startup of 1,696 MW, which represents a significantly larger installed capacity and an investment of roughly US$3 billion. This first expansion phase incorporates generation assets including Eléctrica Ventanas efficient Nueva Ventanas coal-fired plants (272 MW), Eléctrica Angamos two Angamos units (545 MW), Eléctrica Campiche s Ventanas IV (272 MW), and the third and fourth units owned by the related company Guacolda (304 MW). Backup capacity includes two diesel-fired units, Los Vientos (132 MW) and Santa Lidia (139 MW). The expansion phase also includes two battery energy storage

15 15 systems (BESS) in Chile, Norgener BESS (12 MW) and Angamos BESS (20 MW) From 2006 to 2009, Inversiones Cachagua sells part of its 98.79% ownership in AES Gener in several stock market transactions: 2006: 7.59% sold 2007: 0.91% and 10.98% sold 2008: 9.55% sold However, AES Gener also carries out two capital increases on the stock market in which Inversiones Cachagua retains its stake: 2008: US$272 million capital increase 2009: US$246 million capital increase By the end of 2009, Inversiones Cachagua holds a 70.67% stake in AES Gener A second expansion phase gets underway, involving the construction of five power generation projects totaling 1,256 MW and an investment of some US$4 billion. Construction begins on the Tunjita hydroelectric project (20 MW) in Colombia and the fifth Guacolda unit (152 MW) on the Chilean Central Grid, in July and October 2012, respectively. 2013* Construction begins on the Cochrane thermoelectric project (532 MW) on the Chilean Northern Grid at the end of March 2013 with the Mitsubishi Corporation as a minority partner, with 40% ownership in the project. Construction also starts on the Alto Maipo hydroelectric project (531 MW) with Minera Los Pelambres, a subsidiary of Antofagasta Minerals, as a minority partner, also with a 40% interest in the project. the Northern Grid and a desalinization plant adjacent to the Angamos plant in Mejillones. Investment also continues in emissions control equipment, begun in the last quarter of 2012 at the Norgener 1 and 2 and the Ventanas 1 and 2 plants. The Ventanas IV plant starts commercial operations on the Central Grid, completing the first phase of the expansion plan and consolidating the Company as a key market player as it successfully meets Chile s growing energy demands After concluding a stock option period on a US$150 million capital increase and a total subscription of 98.6%, Inversiones Cachagua increases its ownership slightly to 70.71%. Included in this second phase in 2014 is the construction of the first stage of the 21 MW Andes Solar project on *The second expansion phase begun the previous year continued in 2013.

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18 company Operations As of December 31, 2014, with all of its plants in operation, the Company provides electricity to the Sistema Interconectado Central (SIC, Central Grid) through four run-of-river hydroelectric plants, one coal-fired thermoelectric plant, three diesel-fired thermoelectric plants, and one cogeneration plant, all of which are owned directly by AES Gener. 18 AES Gener supplies electric power to four separate markets: the Central Grid (SIC) and the Northern Grid (SING) in Chile, the National Grid (SIN) in Colombia, and the Argentine Grid (SADI). Through its subsidiaries, it also provides the SIC with electricity from a combined cycle plant that can operate on either natural gas or diesel oil, and from three diesel oil-fired plants, all of which are owned by Sociedad Eléctrica Santiago SpA. (Eléctrica Santiago). Two coal-fired thermoelectric plants, one owned by Empresa Eléctrica Ventanas S.A. (Eléctrica Ventanas) and the other by Empresa Eléctrica Campiche S.A. (Eléctrica Campiche), also provide power to the SIC. AES Gener also supplies the grid with power through its related company Empresa Eléctrica Guacolda S.A. (Guacolda), which operates four coal-fired units on Guacolda Island in Huasco in the Region of Atacama. Additionally, the Company provides electricity to the Sistema Interconectado del Norte Grande (SING, Northern Grid) through a coal-fired thermoelectric plant in the city of Tocopilla, owned by Empresa Eléctrica Angamos S.A. (Eléctrica Angamos), which also has a coal-fired plant in the municipality of Mejillones. This combination of power generation options provides AES Gener with competitive advantages in the Chilean electric market, as the company does not depend exclusively on a particular energy source to produce electricity. In addition to its activities in the Chilean power industry, AES Gener produces electricity in Colombia through its subsidiary AES Chivor, which has a hydroelectric plant at the Boyacá reservoir, and in Argentina through its subsidiary TermoAndes S.A. (TermoAndes), which has a natural-gasfired combined cycle plant in Salta. TermoAndes is also connected to the SING through a transmission line owned by the subsidiary InterAndes and to the Sistema Argentino de Interconexión, or SADI, the Argentine Grid. (1) Some of the plants have more than one generating unit.

19 19 AES Gener is also in the business of transporting natural gas through GasAndes S.A. and GasAndes Argentina S.A. The company is currently in the process of building the Cochrane thermoelectric plant owned by the subsidiary Empresa Eléctrica Cochrane S.A.. (Eléctrica Cochrane) in the Antofagasta Region, the Alto Maipo run-of-river hydroelectric plant owned by the subsidiary Alto Maipo SpA (Alto Maipo) in the Metropolitan Region, the Tunjita run-of-river hydroelectric plant in Colombia owned by AES Chivor, and the fifth unit at the Guacolda complex in Huasco in the Atacama Region, owned by the subsidiary Guacolda. As of December 31, 2014, Inversiones Cachagua SpA owns a 70.71% stake in AES Gener. Inversiones Cachagua SpA is a subsidiary of AES Corp (AES), an international power and infrastructure company that does business in 21 countries. Its main offices are located in Arlington, Virginia, in the U.S.

20 the AES Gener* group of companies 99.99% 94% 92.04% Sociedad Eléctrica Santiago SpA 0.01% Energen S.A. 6% Gener Argentina S.A. 7.96% % Empresa Eléctrica Guacolda S.A 8.82% 91.18% TermoAndes S.A % InterAndes S.A % 47.50% 13% 13% 99.99% 94.82% 99.99% Gasoducto GasAndes S.A. Gasoducto GasAndes Argentina S.A. Empresa Eléctrica Ventanas S.A. Empresa Eléctrica Angamos S.A. Empresa Eléctrica Campiche S.A. 0.01% 5.18% 0.01% *As of December 31, 2014

21 AFFILIATES ASSOCIATES 99.99% Norgener SpA % 99.99% 60% 100% 100% 0.01% AES Chivor S.A. 0.63% 0.63% Inversiones Nueva Ventanas SpA 0.01% Alto Maipo SpA Gener Blue Water Ltda. Genergía Power Ltda. AES Chivor y Cía. SCA E. S. P % 60% 99.99% 99.99% Empresa Eléctrica Cochrane SpA Inversiones Termoenergía de Chile Ltda. Genergía S.A. NOTE: This diagram presents the companies with their full corporate name (e.g. AES Gener S.A. and Sociedad Eléctrica Santiago SpA). This annual report subsequently refers to the companies an abbreviated form (e.g. AES Gener and Eléctrica Santiago), except in the Financial Statements. The AES Gener Group includes AES Gener and its subsidiaries and related companies.

22 Main assets owned by aes gener (Map showing the company s presence in South America) 22 AES GENER SING 277 MW ELÉCTRICA ANGAMOS 545 MW ELÉCTRICA COCHRANE 532 MW in construction AES GENER SING 21 MW in construction CHILE AES GENER SIC 340 MW ELÉCTRICA VENTANAS 272 MW ELÉCTRICA CAMPICHE 272 MW GUACOLDA 608 MW 152 MW in construction AES GENER SIC 15 MW ELÉCTRICA SANTIAGO 379 MW ELÉCTRICA SANTIAGO 371 MW AES GENER SIC 90 MW AES GENER SIC 271 MW ALTO MAIPO 531 MW in construction

23 AES CHIVOR MW TUNJITA 20 MW in construction COLOMBIA 23 TERMOANDES 643 MW ARGENTINA Hydro Coal Natural Gas Diesel Biomass Solar

24 areas of business chilean electrical system 24 an overview 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 a 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. Within this framework, the Comisión Nacional de Energía (the National Energy Commission or CNE) is the agency that establishes, regulates, and coordinates energy policy. It also publishes the semi-annual indicative investment plan for generation and transmission activities, whose reports provide important data which the industry s companies use in their decision making. Other agencies include the Superintendencia de Electricidad y Combustibles (Electricity and Fuels Commission or SEC), the agency that oversees and supervises compliance with regulations governing the quality and reliability of service provided to people and/or assets; the Servicio de Evaluación de Impacto Ambiental (Environmental Impact Assessment Service), which carries out environmental assessments of investment projects prior to their execution to ensure that the projects meet applicable environmental standards and that they handle properly any environmental impacts; and the Superintendencia del Medio Ambiente (the Environmental Commission), which oversees and supervises compliance with the commitments made under the Environmental Qualification Resolutions issued by the Environmental Ministry. Lastly, the Environmental Courts are special jurisdictional bodies that resolve any conflicts that may arise. The Dirección General de Aguas (General Water Authority, DGA), an agency in the Ministry of Public Works, issues and regulates the water-use rights for hydroelectric generation, while the Ministry of Energy grants the concessions for generating, transmitting, and distributing electricity for public use. The construction and commissioning of generation plants, whether hydroelectric or thermoelectric, require environmental permits regulated by Chilean law, and legislation requires that thermoelectric plants be granted a construction permit as well. While the Chilean electric system is subject to the ordinary courts of law, it also has a Panel of Experts, an independent technical agency whose role is to study and promptly resolve most controversies that may arise among companies within the electricity sector, or between one or more of these companies and the energy authorities. The electricity sector s different activities are regulated by the General Electricity Services Law, DFL 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 4/2007 of the Economy, Development, and Reconstruction Ministry. The sector s activities are also governed by the

25 25 corresponding technical regulations and standards. The industry s activity 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 a connected capacity of between 500 kw and 2 MW who have opted for a period of at least four years for the unregulated pricing mechanism. These customers are not subject to price regulation and are therefore free to negotiate the prices and conditions for supplying electricity with the generation companies. Regulated customers, in contrast, 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 the regulated pricing system, also for a four-year period. These customers receive electricity from distribution companies, which must hold public bids to award electricity supply contracts to meet their consumption needs. New supply contracts assigned by distribution companies for their customers consumption must be awarded to generation companies offering the lowest supply price in regulated public bid processes. These prices, termed longterm node prices, include indexation formulas and are valid for the entire term of the respective contract. More precisely, the long-term node price for energy under a particular contract is the lowest energy price offered by the generation companies participating in the respective public bid, while the long-term node price for capacity is that set in the node price decree in effect at the time of the bid process.

26 Areas of Business / Chilean Electrical System 26 Through an adjustment process, each distributor transfers an average node price to its customers that is different from the price that it pays when purchasing from its supplier; this price may not vary more than 5% from the average node price throughout the system. This 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 that is published in the Official Gazette (Diario Oficial). 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 grids of Aysén and Punta Arenas, electricity is generated by two major systems. The first is the Central Interconnected Grid (known as the SIC), which covers the country from the southern area of the Region of Antofagasta (the Paposo roadstead) to the Region of Los Lagos (the town of Quellón) and supplies electricity to approximately 92% of the country s population. The second system is the Northern Interconnected Grid (the SING), which covers the Regions of Tarapacá, Antofagasta, and Arica-Parinacota and whose primary customers are mining and industrial companies. In each of these large grids, electricity generation is coordinated by the respective independent Economic Load Dispatch Center, or CDEC, to minimize operational costs and to ensure that the system remains highly efficient while meeting all service quality and reliability requirements established by law. Specifically, in order to satisfy demand at all times and at the lowest possible cost, 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 is to the marginal cost of capacity, which currently corresponds to the short-term peak capacity node price. The law permits generation companies and regulated customers to agree voluntarily to temporary reductions 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 20,257 enacted in 2008 promotes nonconventional renewable energy (NCRE) sources such as solar, wind, mini-hydro, and biomass power. Specifically, this law requires that a certain percentage of generation companies 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

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28 Areas of Business / Chilean Electrical System 28 to 2015 and gradually increases to a maximum of 10% in The Law to Promote Non-conventional Renewable Energy (Law 20/25), passed in October 2013, increases NCRE requirements by doubling the target established in Law 20,257 and stipulates that, by 2025, 20% of power sold under contracts signed after July 1, 2013, must come from renewable sources. Another law passed in October of 2013 to promote investment and competition in the power market is the Electricity Concessions Law (Ley de Concesiones Eléctricas), which streamlines the process and time frames for obtaining electricity concessions. This law simplifies the process for temporary concessions and improves the procedure for obtaining permanent concessions by reducing processing times from 700 to 150 days, identifying potential observations and opposition, modifying the notification process, updating the property appraisal procedure, and resolving conflicts among different types of concessions. It thus provides greater certainty for the players involved and allows for a more diversified energy system by facilitating the incorporation of NCRE. A noteworthy development in environmental regulations was the Environmental Ministry s Executive Decree No. 13/2011, which went into effect on June 23, 2011 and set an emissions standard for thermoelectric plants. This standard sets limits for atmospheric emissions of particulate matter (PM), sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg), with different emissions limits for new and existing plants and for different types of fuel (solid, liquid, and gas). The standard also set deadlines for existing facilities compliance; for PM, the compliance deadline is 36 months after the standard was enacted, or December of 2013, and the deadline for NOx and SO2 compliance is four years after enactment for plants located in areas declared as latent or saturated (in terms of pollution) and five years for the rest of the country. in 2017 and imposes a US$5-per-ton penalty on carbon dioxide emissions. 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 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.. Tax reforms were enacted in 2014 imposing a new tax on emissions, referred to as the green tax, levied on particulate matter (PM), sulfur dioxide (SO2), nitrogen oxides (NOx), and carbon dioxide (CO2) emitted into the atmosphere by plants of 50 MW or higher. The new tax goes into effect

29 overall share on the sinc 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 20,076 MW at the close of Of this 2014 capacity, 31.9% was hydroelectric generation, 63.3% was thermoelectric, and 4.8% was wind and solar power. The AES Gener Group contributed 4,082 MW, or 20.3%, to this total, including 3,811 MW of thermoelectric and 271 MW of hydroelectric capacity. During the year, the AES Gener Group became the country s largest generation company overall, as well as its largest thermoelectric generator. The Central Grid (Sistema Interconectado Central, SIC) The year 2014 began with 27.5% more hydroelectric energy available in reservoirs than in the previous year, with 2,153.8 GWh available on January 1, By the end of the year, the system had sufficient water in reservoirs to generate some 3,035.6 GWh, 40.4% more than on December 31, Of the total demand for power in 2014, 44.9% was supplied by hydroelectric plants, 52.1% by thermoelectric generation, and the remaining 3.0% was supplied by wind and solar power. Total electric power production in the SIC in 2014 was 52,263 GWh, 2.6% higher than in The entry of new efficient plants onto the grid in 2014, combined with more precipitation than in 2013, helped offset increases in the grid s marginal costs. The overall result was an average marginal cost of US$134.80/MWh in 2014, compared to the 2013 average of US$153.70/MWh (at the Alto Jahuel node). 29 Total installed capacity in the SIC, including the plants owned by all the CDEC members, amounted to 15,181 MW at the close of 2014, which accounts for 76.3% of all installed capacity in the SIC and SING grids in Chile. Of the total, 41.9% is hydroelectric, 52.5% is thermoelectric, and 5.6% is wind and solar power. 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 grid s hydroelectric and thermoelectric plants.

30 Areas of Business / Chilean Electrical System SIC: MARGINAL COST OF POWER AT ALTO JAHUEL 220 KV jan-09 jul-09 jan-10 jul-10 jan-11 jul-11 jan-12 jul-12 jan-13 jul-13 jan-14 jul-14 dec-14 MARGINAL COST OF POWER AT ALTO JAHUEL 220 KV [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] January Febrary March April May Jun July August September October November December Promedio

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32 Areas of Business / Chilean Electrical System DEVELOPMENTS ON THE SIC In Increased Capacity The grid s installed capacity grew by 1,019 MW in 2014 due to the completion of other generating companies projects. Of the total capacity added to the SIC, 405 MW is hydroelectric generation, 77 MW is thermal generation, 349 MW is wind-generated capacity, and 189 MW is solar power. The largest projects are Colbún s Angostura plant (324 MW reservoir hydroelectric power), Antofagasta Minerals El Arrayán wind farm (115 MW of wind-generated power), EPM s Los Cururos wind farm (110 MW), and SunEdison s Llano Llampos solar farm (101 MW of photovoltaic power). the northem grid (sistema interconectado del norte grande, sing) Water resources are too scarce on the SING for hydroelectric power generation. Therefore, 97.2% of the system s total installed capacity, which was 4,724 MW at the close of 2014, comes from thermoelectric generation. Of this, 45.2% comes from natural gas plants, 45.7% from coal plants, 8.8% from diesel-fired plants, and 0.4% from cogeneration plants. The remaining 2.8% is generated by hydroelectric, solar, and wind power. The consumption areas, primarily mining companies, are far apart, and some have demand levels that account for a relatively high proportion of the grid s total consumption. A total of 17,702 GWh was generated in the SING in 2014, 2.7% higher than in Coal generated 79.6% of the SING s energy demand for the year, while 11.1% was generated by natural gas and 6.4% by diesel or fuel oil; the remaining 2.9% was generated using Non-conventional Renewable Energy (NCRE). The grid s average marginal cost declined from US$80.30 per MWh in 2013 to US$75.60 per MWh in 2014 primarily as a result of lower fuel costs during the year. MARGINAL COST OF POWER AT CRUCERO 220 KV [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] January Febrary March April May Jun July August September October November December Promedio

33 SING: MARGINAL COST OF POWER AT CRUCERO 220 KV jan-09 jul-09 jan-10 jul-10 jan-11 jul-11 jan-12 jul-12 jan-13 jul-13 jan-14 jul-14 dec-14 DEVELOPMENTS ON THE SING IN 2014 Increased Capacity Construction began in 2014 on AES Gener s first solar power plant, the 21-MW-capacity Andes Solar, which will inject its power production onto the SING at the Andes substation. The plant, slated for commissioning in 2015, has a PPA with Quebrada Blanca, which will purchase all of the energy produced at Andes Solar. During 2014, the system s installed capacity increased by 117 MW due to the projects completed by other generating companies. Of the total capacity added to the SING, 90 MW is from wind, 24 MW is solar, and 3 MW is diesel generation. The largest addition is the Valle de los Vientos wind farm (90 MW of wind power) owned by Enel Green Power.

34 business areas colombian electrical system an overview 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. distribution, or sales companies. Regulated customers consumption may be supplied by either energy sellers or distributors, and it must be purchased through public bids that establish two-party agreements that normally last from one to six years. overall share on the sin 34 The different activities of the electricity sector are governed by the Public Service Code, Law 142 of 1994; and the Electricity Code, Law 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 1995, 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. There are two types of customers in the market, unregulated and regulated. Unregulated customers, who must have a minimum monthly consumption of 100 kw or 55,000 kwh per month, can negotiate freely with power generation, EThe Colombian electricity system is structured around a single National Interconnected Grid (SIN), which had actual installed capacity of 15,528 MW as of December 31, Of this total, 69.3% is hydroelectric capacity, 29.8% is thermoelectric, and 0.9% is from alternative resources. Energy demand during 2014 reached 64,327 GWh, a growth of 4.4% compared to 2013 demand. International energy transactions, or TIES, with Ecuador and exports to Venezuela meant that Colombia continued to be a net energy exporter, with approximately 850 GWh exported. This accounted for 1.3% of the demand served by the Colombian generating system. Energy prices Colombian Market jan-09 jul-09 jan-10 jul-10 jan-11 jul-11 jan-12 jul-12 jan-13 jul-13 jan-14 jul-14 dec-14 Contract Price Spot Price

35 35 AES Gener, through its subsidiary AES Chivor, has a reservoir with an installed capacity of 1,000 MW which, as of December 2014, represented 6% of the total installed capacity on the SIN. of the historical average, while flows were at 88.5% of the historical average for the country as a whole. DEVELOPMENT ON THE SIN IN 2014 Hydrology in Colombia During the Year The year 2014 was a dry one overall. Water supplies were down 94.5% in the first half of the year on the Colombian grid (the SIN) compared to the historical average. During this period, AES Chivor contributed only 81.7% of its historical average, with particularly low levels of power supplied until the last week in May. Then, in the second half of the year, water flow in the AES Chivor basin was up to 95.7%

36 business area argentine electrical system 36 an overview The Regulatory Framework for Argentina s power industry was established in Law No. 15,336 of 1960 and Law No. 24,065 of 1992, which together make up the Argentine Electricity Code and divide the industry s activities into three segments: generation, transmission, and distribution. Under the Argentine Electricity Code, the federal government created the Wholesale Electricity Market (Mercado Eléctrico Mayorista, or MEM) with four types of participants: generating companies, transmission companies, distribution companies, and large customers; the latter may both by and sell electricity. In Argentina, the mixed public/private company CAMMESA is responsible for coordinating dispatch, managing transactions on the MEM, and calculating spot prices. The market participants are CAMMESA shareholders, who own 80% of the company s equity, while the Energy Department (Secretaría de Energía) owns the remaining 20%. CAMMESA s main objective is to ensure that the demand for power is supplied at minimum cost. Under recent changes in regulations, CAMMESA supplies fuels to generation companies and unit dispatch is determined considering caloric consumption, price, and fuel availability for each generator. The President of CAMMESA is appointed by the Ministry of Federal Planning, Investments, and Public Services. The National Electricity Regulatory Agency (Ente Nacional Regulador de la Electricidad, ENRE) oversees public service activities in the power industry and enforces jurisdictional rulings. The Ministry of Federal Planning, Investments, and Public Services is primarily responsible for implementing the Argentine Electricity Code through the Energy Department. This Department s main tasks are to regulate dispatch and grid activities in the MEM and to grant concessions or permits for each activity in the power industry. The Energy Department is also responsible for establishing policies for the natural gas and oil industry, which have a direct impact on thermoelectric generators and the power industry in general. In Argentina, generation, distribution, and other general electricity activities are carried out on the Argentine grid or SADI (Sistema Argentino de Interconexción), the country s main electric power transport system that covers the entire country. The generation sector is organized on a competitive basis in which independent generators sell power on the spot market. The power supply is highly dependent on fossil fuels, chiefly natural gas. The availability of fuel has become an important issue for the SADI since 2004 due to the decline in natural gas production in the country. To replace this natural gas production, the Argentine government has increased the volume of LNG, gasoil, and fuel oil imports, primarily during the winter season (May through August). Regulated and industrial customers on the SADI are defined as Large Users on the Power Market and are divided into three clearly defined categories depending on their consumption level: Major Large Users (GUMA, Grandes Usuarios Mayores), with a capacity greater than 1 MW and power consumption of over 4,380 MWh per year; Smaller Large Users (GUME, Grandes Usarios Menores), with capacity from 30 KW to 2 MW; and Large Private Users (GUPA, Grandes Usarios Particulares), with capacity from 30 KW to 100 KW. Contract prices are directly negotiated with industrial customers in bilateral agreements. They are denominated in U.S. dollars and include payments for power and capacity. At the end of 2006, Resolution SE 1281/06 was published creating the Energía Plus (Energy Plus) program. This program established a new supply service that can receive power from generators, cogenerators, or own generation from companies that were not members of the MEM on the resolution s publication date or whose capacity or generation units were not connected to the grid at that time. The purpose of the program was to meet the increasing demand of large customers who consume upwards of 300 kw. The execution of the Energy Plus program requires a supply contract between the parties, and the price agreement must cover the costs involved and include a profit margin. These contracts and the costs involved must be approved by the Ministry of Federal Planning, Investments, and

37 Public Services, and the profit margin is set by the Energy Department. Energy Plus contracts are short term, normally expiring within 18 months. As these contracts cover industrial customers excess demand, their use of installed capacity is usually low. In addition, these contracts are supplied through backup agreements signed with other generators to sell power that has been contracted but not used, resulting in a greater load factor. Power generated by plants participating in the Energy Plus market is not sold through contracts, but rather on the spot market at market prices, which have had a ceiling of AR$120 MWh since Resolution SE 406 of However, since the variable production cost is actually higher than AR$120 MWh, new variables have been included in energy payments in order to reflect actual variable costs and guarantee a minimum profit margin of AR$5 MWh. Power transmission is a public service supplied by various companies that have been granted concessions by the federal government. Currently, one concessionaire operates and maintains high-voltage facilities, and eight concessionaires maintain and operate high- and medium-voltage facilities to which generation units, distribution systems, and large customers are connected. Transmission systems with international connections also require concessions that are granted by the Energy Department. The transmission companies are authorized to charge tolls for their services. Distribution is also a public service granted to companies through concessions. Distribution companies are required to make power available to the end users within a concession area regardless of cases where the customer has an agreement with the distributor or directly with a generator. Therefore, these companies rates are regulated and they are subject to service quality specifications. 37 The Energy Department issued Resolution 95/2013 in March of 2013, which affects payments to generators that sell their power on the spot market. This resolution turned the Argentine power market into an average cost compensation scheme, increasing the sales of generators that were not selling their production under the Energy Plus program or through power supply agreements with CAMMESA (these generators are not covered by Resolution 95). In May of 2014, the Energy Department issued Resolution 529/2014 to update the prices established under Resolution 95/2013 to reflect increased costs. The resolution also adds adjustments for certain costs, such as a new charge to finance major maintenance work and a charge to cover the difference when using biodiesel as fuel. Distribution companies obtain power from the MEM on the spot market at prices that vary depending on the season. These seasonal prices, set by the Energy Department, are the maximum costs of the power acquired by the distributors and are transferred to regulated customers. The regulations state that when generation is insufficient to meet customer demand, the generation companies participating on the Energy Plus market must buy power at marginal cost, which is much higher than contract prices. This risk is mitigated by backup contracts among generators with sales prices that are lower than the marginal cost but higher than spot market prices.

38 38 overall share on the SADI Total installed capacity for power supply in Argentina, including the plants of all of the SADI-member companies, was 31,405 MW at the end of Of total energy demand, 63.4% was supplied by conventional thermoelectric generation, 31.0% by hydroelectric plants, 4.0% by nuclear plants, and the remaining 1.6% by imports or other types of power generation. A total of 131,138 GWh of power was generated on the SADI in 2014, 1.0% higher than in No power was imported from Brazil in 2014 due to the dry hydrological conditions that affected Brazil s southern region. During 2014, the Salta plant generated power exclusively for the SADI, selling 4,455 GWh on that grid. All of the power was generated with natural gas, of which 1,285 GWh was sold to customers and 3,170 GWh was sold on the spot market. developments on the SADI in 2014 There were no new plants commissioned on the Energía Plus market in The MW Salta plant, owned by the subsidiary TermoAndes, is located in the Argentine province of Salta and is connected to both the SADI grid in Argentina and the SING grid in Chile. Before hooking up to the SADI, the plant supplied only the SING through a transmission line owned by the subsidiary InterAndes S.A. (InterAndes). In September of 2007, following the directives of the Argentine authorities, its TermoAndes steam turbine was connected to the SADI and then, to maximize its power exports to the SING, it connected its two natural gas-fired turbines to the SADI in 2008 and used the steam turbine to supply power for the Chilean market. However, from mid-december 2011 to the present, 100% of TermoAndes generation has been sold to the SADI. In 2014, TermoAndes was able to remain the market leader with a 32% share, with 277 contracts and 1,285 GWh in sales.

39 main customers and suppliers main supply contracts held by aes gener and its subsidiaries in 2014 Main Energy and Capacity Sales Contracts Energy Main Energy and Capacity Sales Contracts Energy [GWh] Regulated Customers Chilectra S.A. 2,806.5 Chilquinta Energía S.A. 1,091.4 Empresa Eléctrica Melipilla Colchagua y Maule S.A Empresa Eléctrica Atacama S.A Compañía General de Electricidad Distribución S.A Empresa Eléctrica de Talca S.A Empresa Eléctrica Puente Alto Ltda LuzLinares S.A Compañía Eléctrica del Litoral S.A LuzParral S.A Energía de Casablanca S.A Empresa Eléctrica de Antofagasta S.A Empresa Eléctrica de Casablanca S.A. 9.9 Unregulated Customers Minera Escondida Ltda. (1) 4,216.4 Anglo American Sur S.A Compañía Contractual Minera Candelaria Minera Spence (1) Corporación Nacional del Cobre Sociedad Química y Minera de Chile (SQM) Minera Sierra Gorda SCM Papeles Bio Bio Ltda Cemento Polpaico S.A Cristalerías Chile S.A Mantos de la Luna S.A Minera Quebrada Blanca 74.9 Compañía Contractual Minera Ojos del Salado 63.0 Proacer Ltda CMPC Maderas S.A CCU 32.4 Fundición Talleres Ltda Puerto Ventanas S.A. 7.4 Chilquinta Energía S.A. 3.6 Minera Río Colorado S.A. 0.7 Minera Lo Valdés Ltda. 0.4 Minera Los Pelambres (AMSA) 0.0 [GWh] Empresa Eléctrica Ventanas S.A. (2) 1,956.9 Empresa Eléctrica Campiche S.A. (2) 1,938.5 Empresa Eléctrica Guacolda S.A KDM Energía S.A Energía Coyanco S.A Masisa Ecoenergía S.A Eléctrica San Miguel 3.2 Agrícola Ancali Ltda. 5.8 (1) Includes energy redirected to the spot market (2) Inter-company agreement with AES Gener AES GENER S AND SUBSIDIARIES CONTRACTS FOR TRANSMISSION SYSTEM USE AES Gener had several contracts in 2014 with companies that use its transmission systems, including agreements with Termoeléctrica Colmito, Enap, Codelco, GNL Quintero, and others. The Company also has contracts with Chilectra and Transelec for the use of their transmission systems and facilities. 39

40 40 electric business 2014

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42 electric business 2014 finance 2014 / financial highlights 2014 All of these transactions have enabled the company to keep its capital structure balanced and in line with the requirements of an investment-grade company. Prepayment of AES Gener Bonds The Company successfully prepaid two bond issuances in Financing The Company undertook significant measures 2014 to streamline its financing structure. This enabled it to ensure financing for its second construction phase, take advantage of market conditions, and increase its financial flexibility. At the subsidiary level, Eléctrica Angamos refinanced its debt through a US$800 million senior bond issue, AES Gener s largest, and AES Chivor s bond was paid on its maturity date at a total of US$170 million. At the consolidated level, the Company increased its capital by US$150 million with a 98.6% subscription rate, and two bonds were prepaid, one 144A bond for US$147 million and a local bond in the amount of UF1.2 million. Finally, in order to generate administrative, operational, and commercial synergy, the Company completed the sale of Eléctrica Guacolda, retaining an ownership interest of 50% plus one share. The first took place on January 27 and involved senior bonds totaling US$147 million issued under Rule 144A and Regulations S of United States securities regulations. The funds used in the prepayment were a portion of those obtained from the subordinated bond issuance that took place in December of 2013 for a total of US$450 million and with a 60-year term. In addition, in July 2014 the Company redeemed its local Series O bonds early, in the amount of UF1.2 million, as they matured in June of The cross currency swap associated with this debt was also concluded prior to term in order to convert the bonds payments in UF, Chile s indexed currency, to United States dollars. Capital increase of US$150 Million The AES Gener special shareholder s meeting held on October 3, 2013 approved the company s proposed capital increase for up to US$450 million. The Company concluded the stock option period on April 30 with the issuance of new shares. A total of 330,619,858 shares were subscribed and paid at a value of Ch$255 each, a 98.6% subscription rate for an equivalent of US$150 million. The funds obtained in this capital increase, plus those taken in from its operation, will be used, in part, to finance the Company s investment plan. The plan involves the construction of new generation plants, including the Cochrane and Alto Maipo projects. AES Gener s controlling shareholder subscribed and paid 100% of its stock option.

43 Eléctrica Guacolda Transactions At the end of March, the Company exercised its preferred stock option to purchase the remaining 50% of Eléctrica Guacolda stock offered by Empresas Copec S.A. (Copec) and Inversiones Ultraterra Limitada (Ultraterra). The Company acquired the shares for US$728 million, half of which was paid each to Copec and Ultraterra at the time the purchase agreement was signed. In order to access sufficient funds to pay the amount agreed upon, the Company took out a loan for approximately US$700 million with Deutsche Bank Trust Company Americas, which has acted as coordinating and administrative agent on behalf of and representing a syndicate of banks consisting of Deutsche Bank AG, London Branch, and Sumitomo Mitsui Banking Corporation. On the same date as the purchase, the Company sold 50% of the Guacolda shares, minus one, to a company related to Global Infrastructure Partners (GIP). The transaction took place under financial conditions that were substantially similar to those of the purchase. The US$700 million loan was paid in full upon completion of the sale. As a result of the transaction, AES Gener owns 50%, plus one share, of Guacolda stock, while GIP obtained a 49.99% stake. We note that AES Gener does not consolidate Guacolda into its financial statements. Eléctrica Angamos Issues Senior Bonds for US$800 Million In November 2014, Eléctrica Angamos issued senior bonds totaling US$800 million under Rule 144A and Regulation S of United States securities regulations. The bonds mature in 15 years and accrue a nominal annual interest rate of 4.875%. The purpose of the issuance was to refinance the Project Finance debt with which Eléctrica Angamos financed the construction of its two units starting in The structure and term of the debt was selected to match the term of the power sales agreements signed by Eléctrica Angamos and to take advantage of the favorable interest rates available on the international credit markets. The issuance attracted the interest of over 80 investment accounts in Europe and the Americas, which submitted orders for over US$2.2 billion, or 2.5 times the amount offered in bonds. This issuance is the Company s largest in senior bonds denominated in U.S. dollars. The issuance was rated by the international rating agencies Moody s and Fitch Ratings at Baa3 and BBB-, respectively, due primarily to the strength of its contracts with nonregulated customers, its stable cash flow, and its relationship to AES Gener. Citibank, JP Morgan, and HSBC are the banks that coordinated and led the transaction. 43

44 44 US$170 Millon Paid on AES Chivor Bonds On December 30, 2014, the Company paid AES Chivor bonds totaling approximately US$170 million. The bonds had been issued in 2004 at a nominal annual interest rate of 9.75%. Hedging strategy Since the U.S. dollar is AES Gener s functional currency, the Company continued its strategy for hedging exchange rates in 2014, which limits the Company s exposure to exchange risks with the Chilean peso. Although most of the company s power supply agreements in Chile have rates denominated in dollars, they are actually paid in Chilean pesos at an exchange rate that is fixed for a specific period of time. Therefore, a strategy was established using exchange rate futures to hedge against the Company s net exposure to the dollar/peso exchange rate. The subsidiary AES Chivor in Colombia, which uses the Colombian peso as its functional currency, continued with an exchange rate strategy to hedge against the company s exposure to the volatility of the Colombian currency. This strategy also uses exchange rate futures, which cover up to 90% of accounts receivable from bilateral power sale agreements, whose tariffs are stated in Colombian pesos once expenses have been deducted in the local currency. used. However, the line was modified to take advantage of market conditions and to provide flexibility for the capital needs during the construction of the second expansion phase: the term of the credit line was extended to 2018, the interest rate decreased, and the Project Finance debt was excluded from the financial covenants. investor relations During 2014, AES Gener carried out and took part in a number of activities aimed at maintaining an ongoing flow of accurate, reliable communication with current and potential shareholders and investors, market analysts, and other interested parties. These activities included an onsite visit to the Alfalfal plant in San José de Maipo with some 60 investors, which provided an opportunity to show in detail how a run-of-river plant operates, as well as the similarities between Alfalfal and the Alto Maipo project. The Investor Relations team also continued participating in significant national and international conferences and in breakfast meetings organized by important financial institutions. credit Líne In order to give the Company liquidity and flexibility, the UF6,000,000 five-year credit line taken out in October 2011 with a syndicate of Chilean banks was retained in As of the end of 2013, this credit line had not been

45 Credit rating In 2014 AES Gener s national and international credit ratings were ratified by the main credit rating agencies, remaining at BBB- and Baa3 on the international scale and A+ on the national scale, all with stable outlooks. Moody s upgraded AES Chivor s rating from Ba1 to Baa3, still with a stable outlook, due to that agency s expectations regarding the company s capacity to generate cash flow over the medium term and to its business policy, subject to its generous dividend distribution policy. The company s shares were rated First Class Level 2 by Fitch Ratings and Feller Rate at the end of fiscal year The table below summarizes the Company s national and international credit rating on December 31, 2014: Standard & Poor s Internacional BBB- perspectiva estable Fitch Ratings BBB- perspectiva estable Moody s Baa3 perspectiva estable Feller Rate Fitch Ratings Nacional A+ perspectiva estable A+ perspectiva estable Colombian subsidiary AES Chivor s current international rating with Standard & Poor s was confirmed at investment grade BBB- with a stable outlook; the rating has held steady since Both credit ratings are in connection with AES Chivor s US$170 million bond issuance. With the early repayment of the bond on December 30, 2014, the ratings are no longer relevant. Fitch Ratings confirmed subsidiary Eléctrica Santiago s national credit rating in August 2014 at A with a stable outlook, while Feller Rate upgraded its national rating from BBB to A-, also with a stable outlook. The upgrade in Eléctrica Santiago s rating stems primarily from the strength of its individual credit profile, as its stable revenue base has expanded after the commissioning of new generation assets. The rating report issued by Fitch Ratings held subsidiary TermoAndes national credit rating steady at A with a stable outlook. 45

46 Operations and Maintenance Chile the Company carries out viability studies periodically in its search for options for expanding its current efficient generation capacity, and several short-term contracts have been signed to use LNG at the Nueva Renca backup plant at competitive prices. the AES group s activities on the SIC 46 business Policy The Company s business policy seeks to minimize cash flow volatility, 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. The AES Gener Group s electricity generation capacity on the SIC was 2,617 MW as of December 31, The parent company AES Gener contributes 715 MW produced by four hydroelectric and five thermoelectric plants. The Alfalfal, Maitenes, Queltehues, and Volcán hydroelectric plants generate 271 MW; while the two units at the Ventanas plants, the Laguna Verde TV (steam turbine), the Laguna Verde TG (gas turbine), the Mostazal plant (gas turbine) and the Laja cogeneration plant account for AES Gener s thermoelectric generation, with 445 MW of installed capacity. Sociedad Eléctrica Santiago, meanwhile, has an installed capacity of 750 MW and is composed of the Renca and Nueva Renca thermoelectric plants, the Los Vientos TG plant, and the Santa Lidia TG plant. Of the plants belonging to the AES Gener Group s other companies operating in the SIC, subsidiary Eléctrica Ventanas contributes 272 MW through its coal-fired Nueva Ventanas plant, and the subsidiary Eléctrica Campiche provides 272 MW with its coal-fired Ventanas IV plant. Subsidiary Guacolda, in turn, contributes 608 MW to the grid with its four-unit Guacolda thermoelectric plant. In its business 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 the SIC s principal thermoelectric generation company, which provides it with a highly reliable supply regardless of hydrological conditions. Similarly, During 2014, the AES Gener Group sold a total of 8,884 GWh to its customers on the SIC and to other generators in the system, 5,408 GWh of which was sold to distributing companies. AES Gener s contractual commitments in the SIC as of December 31, 2014 had decreased by 1.8% compared to 2013 due to the termination of supply contracts with CCU and Minera Los Pelambres.

47 AES GENER GROUP THERMOELECTRIC PLANTS IN THE SIC AES Gener GROSS CAPACITY (MW) Ventanas Plant (1) Laguna Verde TV Plant 47.0 Laguna Verde TG Plant 18.8 Laja Plant 12.6 San Francisco de Mostazal TG Plant 25.7 Eléctrica Santiago Nueva Renca Plant Renca Plant Los Vientos TG Plant Santa Lidia TG Plant Eléctrica Ventanas Nueva Ventanas Eléctrica Campiche Campiche Guacolda Guacolda Plant (2) Total 2,346.1 AES GENER GROUP HYDROELECTRIC PLANTS IN THE SIC AES Gener GROSS CAPACITY (MW) Alfalfal Queltehues 49.0 Maitenes 31.0 Volcán 13.0 Total Through the year, 100% of the power sold to customers was covered by power generated by AES Gener and its subsidiaries plus purchases from other producers in the system under long-term contracts that the Company has with Eléctrica San Miguel, Coyanco, Guacolda, Masisa, KDM, and Ancali. The power generated at the Nueva Renca plant was important to the central part of the country in 2014 due to the system s water shortage and restrictions on transmission; the plant was able to lend greater reliability to the SIC s energy supply during this time. Short-term liquefied natural gas (LNG) purchase agreements with various suppliers guaranteed the availability of this fuel for the plant from January to mid-may, enabling it to generate 393 GWh with LNG. The plant also delivered 728 GWh to the grid using diesel oil. Total production was 80% higher than in The AES Gener Group plants, including Guacolda, contributed 26% of the SIC s gross generation in AES GENER S ENERGY BALANCE IN THE SIC IN 2014 Energy (GWh) NET PRODUCTION (1) 7,846 Purchases Others 812 CDEC-SIC 225 Total Purchases 1,037 Sales CDEC-SIC 852 Distribution companies 5,525 Unregulated customers 2,507 Total sales 8,884 Losses on the grid -2 (1) Includes generation from the Nueva Ventanas (owned by the subsidiary Eléctrica Ventanas), Ventanas IV (owned by the subsidiary Eléctrica Campiche), and Nueva Renca (owned by the subsidiary Eléctrica Santiago) plants. 47

48 Operation and Maitenance / Chile the AES Gener group s activities on the SING the spot market. The actual consumption of customers Minera Escondida and Spence was 1,981 GWh. 48 The AES Gener group has gross generation capacity of 1,465 MW on the SING. The Norgener plant contributes 277 MW from its plant of the same name, 643 MW comes from the Salta plant owned by the subsidiary TermoAndes, and 545 MW is generated by the two units at the Angamos plant, which belongs to the subsidiary Eléctrica Angamos. The subsidiary TermoAndes Salta plant, located in the Argentine province of Salta, 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 Antofagasta Region. We note that in 2014 the TermoAndes plant, which is also connected to the Argentine grid, only exported power to the SING under blackout emergency conditions, since, as of December 2011, the plant sells power only to the SADI in Argentina. The AES Gener Group s coal-fired plants, Norgener and Angamos, have BESS systems (battery energy storage system) that allow them to replace a portion of their base reserves and increase their maximum dispatch capacity. The Norgener plant s 12 MW BESS system was installed at the SING s Andes substation, while the Angamos plant s BESS, with its 20 MW total, was installed at the Angamos substation. In 2014 the Company leased the CTM3 combined cycle plant from E-CL and purchased LNG to operate the plant in order to lower operating surcharges by replacing highercost diesel generation. Also in 2014, the Norgener and Angamos plants gross production on the SING was 2,103 and 3,955 GWh, respectively, while the CTM3 plant run on AES Gener s natural gas contributed another 322 GWh. All total, this accounts for 36.1% of overall production on the SING. Norgener generated a total of 1,964 net GWh and purchased 790 net GWh on the spot market during the year. Overall consumption of its customers SQM, Minera Escondida, Codelco, Minera Sierra Gorda, and Minera Quebrada Blanca for the year was 2,985 GWh. Angamos, in turn, generated a total of 3,544 net GWh and sold a total of 1,472 GWh on THE AES GENER GROUP S THERMOELECTRIC PLANTS IN THE SING GROSS CAPACITY (MW) Norgener Norgener Plant (1) Angamos Plant Angamos (2) TermoAndes Salta Plant (3) (1) Unit 1: MW; Unit 2: 141 MW (2) Unit 1: MW; Unit 2: MW (3) Plant located in Argentina and connected to the SING by a transmission line that belongs to InterAndes, a subsidiary of AES Gener. The plant currently sells power exclusively to the SADI grid in Argentina. NORGENER S ENERGY BALANCE IN THE SING IN 2014 Energy (GWh) NET PRODUCTION 1,949 Purchases Otros Generadores 316 CDEC-SING 790 Total purchases 1,107 Sales CDEC-SING 0 Unregulated customers 2,985 Total sales 2,985 Losses 71

49 ANGAMOS ENERGY BALANCE IN THE SING IN 2014 Energy (GWh) NET PRODUCTION 3,544 Purshashes CDEC-SING 0 Total purchases 0 Sales CDEC-SING 1,472 Unregulated customers 1,981 Total Sales 3,453 Losses 91 in the subsidiary Guacolda. Underlying the success of this project is the Company s ongoing effort to comply in full with all legal standards and, in many cases, going beyond the requirements of such standards. Another new standard that went into effect in 2014 in the power generation industry is Executive Decree No. 38 regarding noise emissions, effective as of June This standard required that modifications be made at the Nueva Renca plant located in the municipality of the same name in Santiago, as well as at the Ventanas plant. The project to install the equipment to meet these new requirements was contracted with an American company with extensive experience in these works and required an investment of some US$8 million. 49 Operación y mantenimiento The Company, and particularly the Operations Division, dealt with a number of operational challenges in 2014, such as taking over operations at Guacolda as a new AES Gener plant, commissioning new atmospheric emissions control equipment, and installing equipment to reduce noise emissions. Executive Decree No. 13 of January 18, 2011 and published on June 23 of that year established new emissions limits for new and existing generation plants. In order to comply with this standard, which is among the most stringent in the world, modern emissions control equipment was installed in Ventanas units 1 and 2, in Norgener units 1 and 2, and in Guacolda units 1, 2, and 4. This project required an investment of some US$360 million, including the Company s share A highlight in environmental matters was receiving two second-place awards in the contest organized by Recyclápolis and El Mercurio. The first award was in the Water Category for the Cooling Towers project at the Angamos plant, and the second was in the Air Category for the Industrial Gas Biorefinery project at the Ventanas plant. A total of 77 projects from different companies in a wide range of areas participated in the contest in its five different categories. The Cooling Towers project reduces the amount of seawater flow used to cool the Angamos plant by more than 90%. This significantly reduces the environmental impact in the water transport area and lowers electricity consumption, thus decreasing the emissions of greenhouse gasses.

50 Operation and Maitenance / Chile 50 The Industrial Gas Biorefinery project makes partial use of the gasses emitted by Ventanas units 1 and 2 as a nutrient source for biomass (microalgae), which is then processed and converted into biofuel (biodiesel and biogas), lipids (for use in foods), and biofertilizer. As for new plants, in April 2014 AES Gener took over operations of all operating units at the Guacolda complex. This milestone kicks off the process, still under development, by which Guacolda will reach the same operating, maintenance/ planning, and administrative standards as those used by AES Gener and, in general, the will apply the full range of AES Gener initiatives aimed at operating excellence and ongoing improvement. Regarding major maintenance, although no overhauls were performed in 2014, the Company did carry out regular annual preventive maintenance, including extensive maintenance on the Costa Complex Unit 2 at Ventanas. Various boiler pipe panels were replaced under the Performance Parameter Recovery Plan for that unit, with which approximately 60% of the Recovery Plan is now complete. The plan is slated for conclusion in The Operations Department dedicated a good portion of its efforts in 2014 to the continuing process of implementing the Physical Asset Management System under the AMS (Asset Management Standards) Project. This system, a step beyond the previously adopted AMF (Asset Management Framework), has practice standards that, like its predecessor, are based on the British Standard Institution s (BSI) PAS 55. It is also completely in line with ISO 55,001, 55,002 and 55,003:2014 standards. The goal of this project is to comply with the physical asset management guidelines set out by AES Corp. new benefits. Accordingly, AES Gener was once again recognized as one of Chile s most innovative companies, earning 1st place in the energy company segment of the Most Innovative Companies of 2014 ranking drawn up by the Universidad de Los Andes ESE Business School. The next step for 2015 will be to complete implementation of the innovation practices administration system, integrating this incremental system, also known as the ongoing improvement system, into the Company s integral concept of Operational Excellence. One of the values AES Gener emphasizes most is the safety of its own and its contractors workers. The company has proudly completed implementation of its integrated environment, health, and safety management system, called Genera, which was developed under ISO 14,001 OHSAS 18,001 standards and has been certified for all of its business units. Another important milestone reached during the year was completion of construction on the Ventanas IV unit, with over 7 million man hours worked without lost time incidents, an achievement recognized and honored by the National Safety Council (Consejo Nacional de Seguridad), which acknowledged this accomplishment as one of the most significant in Chile. Even more important was the recognition this agency gave AES Gener with its Rosalino Fuentes award, given to the Chilean company with the best accident prevention record. Finally, the Workers Safety Institute (IST, Instituto de Seguridad del Trabajador) honored AES Gener with its IST Grand Prize, an award the institute gives to its member company that has had the most outstanding prevention program. Work was also done in 2014 to develop the reference aspects, harmonize the system with the existing GENERA program, begin skill administration systems, manage OPEX and CAPEX, and systematize risk management. The program will then practice the implementation stages in order to be certified as scheduled. AES Gener believes that one way to generate a difference in the market is to make the most of its people s experience and knowledge to discover innovative ideas that will provide

51 51 AES GENER (SIC) Termoelectric Plants AES Gener s thermoelectric units include Units I and II at the Ventanas plant; the two diesel-fired steam units at the Laguna Verde plant; the diesel-fired turbine at the Laguna Verde plant; the diesel-fired turbine at the San Francisco de Mostazal plants; and, finally, the Laja plant, which runs on forestry biomass fuel. Unit I at the Ventanas plant generated 694 GWh in It underwent seven days of maintenance during the year, during which baghouse filters were installed and started up to limit emissions as required under Executive Decree 13. Unit II, in turn, generated 1,082 GWh and underwent 39 days of maintenance. Particularly important is the work done on the turbogenerator, where the blades of the first stage of the low-pressure turbine were repaired, the rotating exciter was replaced with one that is digitally controlled, and maintenance was performed on the turbine s main valves. On the boiler, 60% of the main superheater s pipes were replaced, along with 40 domestic pipe panels, expansion joints, and carbon pipes. In addition, the baghouse filters to control emissions were connected and started up, and safety valve silencers were installed. A lining was applied to the main condenser s pipes, which will extend their useful life. One of the water circulation system s main pumps was replaced, and a new system of fixed and movable screens was installed to allow for more efficient filtration of marine solids. These improvements are all part of the Recovery Plan mentioned previously, which will minimize load limit constraints and forced outages.

52 Operation and Maitenance / Chile The San Francisco de Mostazal diesel-fired TG operated occasionally, generating 1.3 GWh, while Laguna Verde s steam-fired units remained available to the grid but without production in Its diesel-fired TG was unavailable to the grid during the course of the year. 52 Finally, Laja, the only biomass plant, generated a total of 32 net GWh, in addition to the 160,645 tons of steam sold to the forestry company CMPC Maderas S.A. An important development this year was the completion of the process for replacing of all of the pipes on the boiler s generating bank, giving the plant greater reliability during the life of the contract. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availabity 2013 Availabity 2014 (MW) (BTU/KWh) (%) (%) Ventanas 1 Ventanas, V Región 1964 coal-steam , Ventanas 2 Ventanas, V Región 1977 coal-steam , Laguna Verde Laguna Verde, Valparaíso, V Región diesel-steam ,031 (1) Laguna Verde San Francisco de Mostazal Laguna Verde, Valparaíso, V Región San Fco. De Mostazal. VI Región 1990 diésel-tg ,419 (1) diésel-tg , Laja Cabrero, VIII Región 1995 cogenera-tion with biomass , These facilities are owned by AES Gener. There was no generation during the year; this figure is that of the plant s design.

53 Run-of-River Hydroelectric Plants AES Gener s Alfalfal, Maitenes, Queltehues, and Volcán hydroelectric plants are all run of river, meaning that they do not have reservoirs, which minimizes their environmental impact. These plants, with an installed capacity of 271 MW, are all located in the municipality of San José de Maipo The four plants remained in service throughout 2014 and generated a net 1,204 GWh during the year, 3.4% less than in 2013 due to lower-than-normal precipitation. A number of operating improvements were made in 2014 including the installation of new turbine runners at the Alfalfal plant, which increased capacity by 14 GWh per year. Scheduled maintenance was also successfully completed on the two Maitenes units, one Queltehues unit, and the two Alfalfal units. Maintenance was performed on the Alfalfal 2 unit s spherical valve and its excitation system was replaced in order to keep critical equipment updated. Plant Location Commissioned Turbine Units Capacity Availability 2013 Availability 2014 (MW) (%) (%) 53 Maitenes Los Maitenes, Cajón Río Colorado, RM francis Queltehues Los Queltehues, Cajón Río Maipo, RM pelton Volcán Cajón Río Maipo, RM pelton Alfalfal Cajón Río Colorado, RM pelton These facilities are owned by AES Gener.

54 Operation and Maitenance / Chile 54 Load Dispatch Center, and Operation and Maintenance of SIC Substations and Transmission Lines (TSIC) AES Gener began dispatch from the Guacolda plant in the second half of 2014 through its Dispatch Center. With the significant amount of power generated at the new solar and wind farms in the north of Chile (in addition to the delay or cancelation of local projects), the generation from the Guacolda units decreased based on transfer limits and the reliability of the trunk transmission system. Finally, in December and with a new EDAG system, the transfer limits of phases 1 and 2 between the Maitencillo and Nogales substations were increased by almost 60%. A tender process was held for a new Scada system in It was awarded to Siemens Chile and will be used to integrate AES Gener s dispatch onto the SIC and the SING. Simulations were carried out for such emergency situations as earthquake, tsunami, and fire in coordination with the Energy Ministry, the Onemi (the Oficina Nacional de Emergencia del Ministerio del Interior, the National Emergency Office), the CDECs (from the SIC and the SING) and the generating, transmission, and distribution companies. An emergency protocol was also drawn up among the government agencies, CDECs, and generating companies to determine and regulate how to coordinate communication during such events. Work continued on the SIC s transmission system in 2014 to repair the structures of the transmission towers located on the Valparaíso Region coast. In addition, the project for remote control of all the different sections of the SIC s transmission lines completed, which will enable the Company to implement its Service Recovery Plans. Ventanas established an alternative connection to feed the Quintero substation from the plant s main transformer and vice versa, so that N-1 feeding is now available for both facilities. Replacement of switches on the Las Vegas Cerro Navia line began at the Cerro Navia substation in 2014 due to the increase in potential short circuits with the entry of new plants and the works underway to expand the transmission system. In matters of safety and the environment, TSIC was recertified for ISO 14,001 and OHSAS 18,001 and was recognized by AES Corp for five years of operation without lost time incidents (LTI). AES GENER S TRANSMISSION LINES AND SUBSTATIONS Type of Circuit Voltaje AES Gener (KV) (KM) Single Dual Single Dual Total 327 AES Gener Substations Sections or connections to other companies substations Alfalfal Maitenes Queltehues La Laja Punta de Peuco Pachacama San Pedro Ventanas 110 Kv Ventanas 220 Kv Torquemada Laguna Verde Los Almendros Florida Cerro Navia Las Vegas La Calera Miraflores Quillota Nogales

55 55

56 Operation and Maitenance / Chile Eléctrica Santiago 56 Eléctrica Santiago operates: a) The Nueva Renca combined cycle plant, which has a gross installed capacity of 379 MW and operates interchangeably on liquefied natural gas (LNG) or diesel as its main fuels, and utilizes propane for the supplementary burners on the heat recovery boiler, and b) The Renca plant, which has two diesel-fired steam turbines that together have a joint gross capacity of 100 MW and, as of June 2014, the Los Vientos and Santa Lidia plants with gross installed capacity of 132 and 139 MW, respectively. The Nueva Renca plant ran on LNG and diesel oil in 2014, and was reliable in its dual operation. With its combination of LNG and diesel fuel, the plant had a net 2014 generation of 1,133 GWh, with 1,468 service hours fired by liquefied natural gas and 2,636 service hours running on diesel fuel. The plant s net generation was 85.7% higher than that of the previous year, primarily due to lower than normal precipitation and greater availability of LNG. No dispatch was required from the Renca plant, although it was available for operations in Sociedad Eléctrica SpA purchased the Los Vientos and Santa Lidia plants on June 1, 2014 from its parent, AES Gener. Over the last year, Los Vientos dispatched power at the direct or express injection point at the Cerro Navia 110 kv busbar and, under normal conditions, at the Las Vegas substation busbar. Los Vientos generated 10.3 GWh, while Santa Lidia operated less frequently than in 2013, generating 0.2 GWh in During the second half of the year, the combustion of the Nueva Renca gas turbine was inspected after completing 8,000 hours of generation, and at the end of the year a section of the heat recovery unit s pipes was replaced. In environmental matters, ISO 14,001 certification was accredited, and the first inspection for OHSAS 18,001 certification took place. Major investments were also made in 2014 in noise reduction construction and equipment at the Renca complex. Plant Location Commissioned Turbine Units Capacity Specific Consumption Disponibilidad 2013 Disponibilidad 2014 (MW) (BTU/KWh) (%) (%) Renca Comuna de Renca, Santiago, RM diésel-steam (1) Nueva Renca Comuna de Renca, Santiago, RM combined cycle 1 turbogas 1 steam turbine 379 (2) 7, Los Vientos Las Vegas, Llay Llay, V Región 2007 diésel-tg , Santa Lidia Cabrero, VIII Región 2009 diésel-tg , These facilities are owned by Eléctrica Santiago (1) There was no generation during the year; this figure is that of the plant s design. (2) The Nueva Renca plant has a capacity of 355 MW when operating on diesel and 379 MW when operating on natural gas.

57 Eléctrica Ventanas The coal-fired Ventanas III plant (Nueva Ventanas) owned by the subsidiary Eléctrica Ventanas was commissioned on February 5, The plant generated 1,994 net GWh in 2014 and had an availability rate of 92%. One of the important activities at this plant during the year was the 23 days of maintenance during which the low pressure turbine s blades were inspected (with no problems detected), the boiler s circulation pumps were replaced and repaired, smokestack silencers were installed in order to comply with Executive Decree 38, the ash transport system was streamlined, and one of the water circulation pumps was replaced. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) Nueva Ventanas Ventanas, V Región 2012 coal-steam , These facilities are owned by Eléctrica Ventanas. Eléctrica Campiche 57 La central a carbón Ventanas IV (Campiche) de la filial Eléctrica Campiche entró en operación comercial el 15 de marzo de En 2014 generó GWh netos y registró una disponibilidad de un 93%. Dentro de las actividades relevantes de esta unidad se contó la realización de un mantenimiento de 16 días, que incluyó el montaje del silenciador en chimenea para cumplimiento del Decreto Supremo N 38, la normalización de la planta de desalinización de agua de mar, reemplazo de la bomba de aceite de control de la turbina e inspecciones en los diferentes sistemas. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) Campiche Ventanas, V Región 2013 coal-steam , These facilities are owned by Eléctrica Campiche. Includes the parameters only for the days since its commissioning.

58 Operation and Maitenance / Chile Eléctrica Guacolda 58 The related company Guacolda has four coal-fired thermoelectric generation units of 152 gross MW each, for a total installed capacity of 608 gross MW located on the Guacolda Peninsula in the Atacama Region s Huasco Municipality. The Guacolda thermal complex s gross generation was 4,890 GWh in 2014, exceeding projected generation by 0.7%. Its availability rate was 94.5%, compared to a projected 90.8%. A great deal of progress was made on the Guacolda V project in The new plant remains on schedule at 80% complete, and it is expected to be commissioned at the end of 2015 as planned. Emissions control projects are also being executed, including systems to reduce particulate matter (PM10), sulfur dioxide (SO2), and nitrogen dioxides (NOx) in units 1, 2, and 4. Guacolda changed its ownership structure in 2014 with the entry of a new player, Global Infrastructure Partners (GIP). Nevertheless, AES Gener retained its ownership interest and GIP allowed it to take over management of the company. Particularly important among the maintenance performed on units 1, 3, and 4 was the chemical wash of boilers 3 and 4. The maintenance process was highly efficient, and in some cases the units were able to return to operation ahead of schedule. The 134 km double circuit Maitencillo-Cardones transmission line [220 kv] was sold in Another notable operative development during this period involves phases 1 and 2 of the Generation Disconnection Plan (EDAG, Esquema de Desconexión de Generación) requested by the CDEC to streamline capacity transfer to the SIC s load center on the Maitencillo line. In environmental matters, the continuous emissions monitoring systems (CEMS) were implemented and fully certified for the smokestacks on units 1, 2, 3, and 4. Recertification was also obtained for ISO 14,001 and OHSAS 18,001 in A highlight in the Company s community relations during the year was its participation in the government-sponsored three-party roundtable program Community, Public Services, and Companies within the framework of the government program Environmental Recovery in Huasco Municipality. In addition, the Company monitored and maintained good relationships with all of the Guacolda complex s stakeholders, reflected in the fact that the construction of Guacolda V, its environmental control projects, and the operation of units 1, 2, 3, and 4 have not been affected by external events that impact the normal functioning of the company. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) Guacolda Huasco, III Región carbón-vapor These facilities are owned by Eléctrica Guacolda. Guacolda Transmission Lines TYPE OF CIRCUIT VOLTAGE (KV) AES GENER (KM) DOUBLE 2X220 KV 34

59 Eléctrica Angamos The Angamos plant owned by the subsidiary Eléctrica Angamos has two units and a gross installed capacity of 545 MW. The plant s annual net generation in 2014 was 3,544 GWh, 321 GWh higher than the previous year. The record for net monthly generation during the year was set in May, with 346 GWh. Angamos is South America s most modern coal-fired plant, with cutting edge technology for controlling emissions and reducing seawater use. It is well within all the current legal standards in terms of emissions, liquid waste quality, and noise levels. Since Chile is a highly seismic country, the Angamos plant was designed to withstand mediumintensity quakes without forced outages. An important development in 2014 includes annual maintenance performed in less time than originally planned. This maintenance included preventive and corrective work in the turbine, generator, boiler, emissions control system, and baghouse filters. 59 Construction began in October 2014 on the first stage of the reverse osmosis desalinization plant, which will replace the evaporation plant currently in operation. The new plant will reduce the plant s variable costs, and any excess water produced can be sold to third parties. It is important to note that Eléctrica Angamos went four years and nine months without lost time incidents, per OHSAS standards. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) Angamos Mejillones, II Región 2011 coal-steam , These facilities are owned by Eléctrica Angamos.

60 Operation and Maitenance / Chile AES GENER (SING) The Norgener plant consists of two steam turbo generators with a coal-fired boiler and a gross generation capacity of 277 MW. The units generated 1,949 net GWh in Among the work performed at the Norgener plant during the year was the annual 21-day maintenance on both units, during which equipment was added to meet new environmental regulatory requirements. During the first half of the year, new voltage correction systems were installed on each unit s electrostatic precipitator in order to increase their efficiency and to comply with Executive Decrees 13 and 70. Then, in September and October the new baghouse filters went into use to better control the units particulate emissions. In addition to this maintenance, the Norgener plant performed well in terms of operational metrics, with 89.9% availability in Regarding safety, it is very important to note that 2014 marked the 11th year without lost time incidents among Norgener personnel, per OHSAS standards. Plant Location Commissioned Turbine Units Capacity Specífic Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) Norgener Tocopilla, III Región coal-steam These facilities are owned by AES Gener.

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62 Operation and Maitenance / Chile Load Dispatch Center, and Operation and Maintenance of SING Substations and Transmission Lines Regarding transmission in the SING, in 2014 the Norgener Dispatch Center was moved to the Angamos plant as an operational reliability measure. The Center was also key in the electrical studies for the SING-SADI interconnection project at the Andes substation, as well as in the coordination and operation of that project. Se realizaron los mantenimientos preventivos de todo el sistema de transmisión y subestaciones pertenecientes a Norgener, AES Gener, Angamos y clientes en el SING, destacándose la reparación de la línea de Transmisión 220 KV Norgener-Crucero, sector Pampa y el cambio de protección diferencial de barras de la Subestación Norgener. 62 The Center also took part in the study and empty connection of the 345 kv Andes-Salta transmission line to improve the voltage level of the mining companies to which we sell power in the mountain region of the SING. Finally, we note that, in matters of environment and safety, the company has gone 12 years and seven months without lost-time incidents per OHSAS standards. AES GENER S TRANSMISSION LINES AND SUBSTATIONS Circuit Voltage AES Gener Norgener Eléctrica Angamos (Kv) (Km) (Km) (Km) Single Single Dual Single Single 220 Leased 228 Total AES Gener Norgener Angamos Substations Andes Nueva Zaldívar Laberinto Norgener Oeste Minsal La Cruz Angamos Nueva Zaldivar extension Laberinto extension Battery energy storage system (BESS) Sections or connections to other companies substations BESS Angamos 20 MWh 2 sections at Mantos Blancos substation BESS ANDES 12,8 MWh 1 section at Lomas Bayas Substation 2 sections at Crucero substation 2 sections at Barriles substation

63 InterAndes InterAndes has a concession for transmitting electricity from the Salta plant in Argentina and the Paso Sico node on the Chilean border. It also has an agreement with TermoAndes to provide the latter with electrical power and capacity transport services between the Salta plant and that border node. Three successful interconnection tests were completed in 2014 between Chile s northern and the Argentine grid, with the participation of CAMMESA, the CDEC-SING, and InterAndes personnel. The tests confirmed the conditions needed for the two grids to operate continuously and reliably in synchronization. In environmental and safety matters, InterAndes had no lost-time incidents involving its own and contractors personnel in InterAndes also retained its certification for the ISO 14,001 environmental standard as well as the public safety and emergency plan systems, ENRE 057 and 22, respectively. 63 AES GENER S TRANSMISSION LINES AND SUBSTATIONS Tipo de Circuito Voltaje InterAndes (KV) (KM) Single Total 268 InterAndes Subestaciones Salta These facilities are owned by InterAndes.

64 Operations and Maintenance COLOMBIA market with which a price was set in dollars. We note the company s activities on the unregulated market with an eye to gaining a larger share of those customers; a consultant was hired to provide regulatory, operative, and strategic assistance in this regard. Regarding tenders on this market, AES Chivor focused on submitting bids in U.S. dollars. The aes gener group s share on the sin 64 business Policy AES Chivor s commercial strategy is 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 each plant s generation profile and its customer credit rating policy. The year 2014 brought important challenges for AES Chivor s strategy of giving the margin adding value, including an ongoing search for the best ways to optimize water use, price volatility on energy markets, energy sales under energy agreements, backup sales of firm energy to cover maintenance periods at some of the system s plants, and additional coverage through the energy derivatives market, the Derivex. The company also drew up a pilot plan to provide power to an unregulated customer in 2014 and In addition, it initiated activities to sell energy in 2015 to the largest power user, Cerromatoso, a customer on the unregulated AES Chivor owns the third largest hydroelectric plant in the country, with an installed capacity of 1,000 MW. In 2014, water flowed into its La Esmeralda reservoir at 90.6% of the historical average, and the reservoir s level was at 77.9% of its useful capacity by the end of the year. AES Chivor s net power production during the year was 3,985 GWh. It sold 5,979 GWh, of which 2,573 GWh was traded on the energy market and the remaining 3,407 GWh was sold through long-term agreements. THE AES GENER GROUP S PLANT IN COLOMBIA INSTALLED CAPACITY [MW] AES Chivor 1,000.0 Total 1,000.0 AES CHIVOR S ENERGY BALANCE IN COLOMBIA IN 2014 Energy [GWh] Net Production 3,985.4 Purchases Spot Market 1,966.7 Total Purchases 1,966.7 Sales Contracts 3,406.8 Spot Market 2,572.6 Total Purchases 5,979.4 Losses 27.3

65 Operations y maintenance The amount of water flowing into the AES Chivor basin in 2014 was at 90.6% of the historical average, the tenth lowest of the last 36 years. There was potentially an El Niño event over the Pacific Ocean during the year, especially during the first quarter and in the middle of the third quarter of the year, but it never materialized. Nevertheless, this event did affect climatic conditions to some extent, resulting in longer, more intense dry spells than normal. Monthly precipitation was quite low in six months of 2014, especially in May and November, with 52% and 63%, respectively. The wettest months for the region were June, July, and August, which are typically when the most precipitation falls. AES Chivor generated 3,985 GWh of power in 2014, which represents 97.5% of the average and covered 6.2% of the country s total energy demand in Given the maturity and solidity with which the asset management standards are applied, maintenance strategies emphasized the execution of projects to restore water conduction assets. Accordingly, the company conducted large-scale shutdowns of the Chivor II conduction system in order to extend the plant s useful life and to guarantee its long-term reliability and integrity. The system was first inspected to determine the degree of intervention needed given its condition and associated risk. The conduction system was first emptied and then maintenance was done on the upper tunnel (including the gravel trap), the floor of the lower tunnel, and the spherical valves, and the vertical well was inspected. Maintenance scheduled under the Master Maintenance Plan was also performed on the generation units, namely the reconditioning of unit 7 and general maintenance on unit 8, which allowed technology updating projects to be completed ahead of schedule, such as the updating of PLCs, spherical valves, and annunciators. Other scheduled maintenance was performed on the units in the second half of the year, including general maintenance on unit 1, needle replacements in units 2 and 5, and other maintenance on the plant s ancillary electromechanical equipment and civil structures. Thus, care is taken to keep the assets in operating condition and to meet the technical and business needs to ensure business continuity. 65 Plant Location Commissioned Turbine Units Capacity Availability 2013 Availability 2014 (MW) (%) (%) AES Chivor Boyacá, Colombia Pelton 8 1, These facilities are owned by AES Chivor. As part of the company s ongoing improvement program, in 2014 the local certification agency audited compliance with AES Chivor s management system. Once again, it was concluded that the organization s management model is solid and mature, has interactive processes, and is focused on constant improvement and sustainability over time. Throughout the year, the current management model was projected toward an integral asset management model designed to respond to the requirements established in the corporate Asset Management Standards (AMS), which are based on international asset management norms (PAS 55 and the ISO 55,000 family of standards).

66 Operations and Maintenance ARGENTINA Record eneration Levels The TermoAndes plant set a record for annual generation in 2014: generation for the year was 4,455 GWh, beating the previous record of 4,184 GWh set in THE AES GENER GROUP S THERMOELECTRIC Gross Capacity PLANTS IN THE SADI (MW) TermoAndes Salta Plant Total business Polity TermoAndes is authorized to sell a portion of its power generation to customers in the Energy Plus program, and the rest is sold on the spot market. TermoAndes commercial strategy is to maximize income and increase its business margins. AES CHIVOR S ENERGY BALANCE IN ARGENTINA IN 2014 Energy (GWh) Net Production 4,455 Purchases Purchases 0 Total Purchases 0 Sales Contracts 1,285 Spot Market 3,168 Total Sales 4,453 Losses (2) The goal of this strategy is to increase the average price and capacity contracted under the Energy Plus program. It should be noted that TermoAndes has remained the leader in sales on the SADI. It is also essential to have a low-cost natural gas supply available and to ensure the technical availability of its equipment in order for the company to meet its Energy Plus contract commitments. Due to increased demand and a lack of new investment, regulations state that future increases in demand must be covered by contracts under the Energy Plus program. Given Argentina s supply deficit and the fact that TermoAndes is the most efficient plant on the grid, TermoAndes is expected to continue supplying a significant portion of Argentine industries increasing demand for power. Operations y maintenance The Salta plant consists of a combined cycle unit made up of two gas turbo generators (TG) that can be fueled by either natural gas or diesel oil, two heat recovery boilers, and a steam turbo generator (TV). It has the capability of connecting any one of the three turbo generators to either power grid, the SING in Chile or the SADI in Argentina, without interconnecting the two grids.

67 67 The Salta plant provided power to the SADI under normal conditions in It generated 4,455 GWh, the highest annual figure ever for the plant. The previous record of 4,184 GWh had been set in All of the power generated was delivered to the SADI, of which 1,285 GWh was sold to customers and 3,170 GWh was sold on the spot market. TermoAndes remained the leader in sales, ahead of its competitors on the Energy Plus market in 2014, with a 32% market share in that segment. In June 2014, construction was completed on a 45 km 132 kv power transmission line begun in The line connects the Salta plant directly to the distribution ET (transformer station, ET from its name in Spanish) called the ET Salta Este located in the city of Salta, streamlining the delivery of TermoAndes power production to the market and increasing the reliability of the system. Another 2014 milestone was the beginning of works to install the 345/500 kv transformer, which will increase the interconnection capacity between the Chilean SING grid and the Argentine SADI grid. In environmental and safety matters, 2014 was the fifth year in a row without lost-time incidents among TermoAndes plant and contractor personnel. The company also retained quality certification ISO 9001 and environmental certification ISO 14,001, while obtaining OHSAS 18,001 certification in Plant Location Commissioned Turbine Units Capacity Salta Salta, Argentina These facilities belong to TermoAndes combined cycle 2 turbogás 1 steam turbine Specific Consumption Availability 2013 Availability 2014 (MW) (BTU/KWh) (%) (%) ,

68 PrOjectS under construction and upcoming challenges 68 Business development In order to be able to respond efficiently to the needs and opportunities on the Chilean and Colombian markets, and in line with its growth strategy, AES Gener has embarked on an ambitious second phase of expansion, developing and beginning construction on major power generation projects. This has enabled the Company to become a key player in the development and construction of new initiatives to satisfy the Chilean electric system s growing demand for energy. The Company successfully continued in 2014 with the construction of its second expansion phase, incorporating into its portfolio the Angamos plant s water desalinization project and the Solar Andes project, both on the SING. Financing for both projects closed at the end of 2013 for a total of US$4 billion using a capital structure balanced between debt, mainly at the project level, and capital. This has enabled the Company to maintain its investment grade rating among national and international credit rating agencies. Work continued on the construction of the Tunjita project in Colombia and on the fifth unit of the Guacolda complex on the SIC, as well as on the installation of emissions control equipment at Units I and II of the Ventanas and Norgener complexes. Construction at Cochrane, located on the SING, continues on time and on budget, while work is progressing on the construction of tunnels at Alto Maipo, located on the SIC. This new phase of expansion will increase installed capacity by 25%, or 1,256 MW, compared to 2014 capacity at 5,082 MW. Projects under construction 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 Atacama Region. The new 152 MW-capacity unit will be similar to the other existing units. It is being built under a turnkey arrangement by Mitsubishi Corporation, the same contractor that built the other units at the complex. The plant will use pulverized coal technology and will be fueled by bituminous and sub-bituminous coal. The project is designed with reduction systems to control SO2, NOx, and particulate emissions. The project obtained its environmental permit in Financing for the project closed at the end of 2012 with a credit line for US$318 million with the Banco Itaú Chile and BancoEstado de Chile. The remaining amount of the investment has been provided by Empresa Eléctrica Guacolda s partners according to their ownership interest through the reinvestment of dividends distributed. Construction of the plant continued according to schedule in 2014 and by the end of the year 87% of the works were complete, including final installation of the boiler, turbine, and generator, connection of the power supply for commissioning, and hydrostatic testing of the boiler. This unit will contribute approximately 1,200 GWh to the SIC each year. Start-up is slated for the end of 2015.

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70 Projects under costruction and upcoming challenges 70 Tunjita hydroelectric Project (Sin-Colombia) The Tunjita hydroelectric project involves the construction of a 20 MW run-of-river plant next to AES Chivor s Esmeralda Reservoir. It makes use of the water capacity generated by diverting the Tunjita River and takes advantage of the tunnel that channels the river s water to the reservoir. Construction on this project continued in 2014 with works 91% complete by the end of the year, including the lining of the trench and connection gallery. In addition, work began to prepare the existing tunnel so that it will be able to withstand the pressure used at this type of plant. Commissioning of the Tunjita plant is scheduled for the second half of Cochrane Thermoelectric Project (Sing-Chile) The Cochrane thermoelectric project entails the construction of two coal-fired thermoelectric plants of 266 gross MW each and a 20 MW battery energy storage system (BESS) that will be built north of Antofagasta in the municipality of Mejillones in the Antofagasta Region. The project obtained environmental approval in September The plant, which will use pulverized coal technology, will be fueled by bituminous and sub-bituminous coal, and it will have reduction systems to control SO2, NOx, and particulate emissions. The EPC contract (engineering, procurement, and construction) was signed in 2011 under a lump sum, fixed date, turnkey arrangement with Posco E&C, the contractor that had previously built the Angamos plant, which has similar characteristics. The Company completed construction of the Angamos project on schedule and within budget. The Cochrane project already has long-term power sales agreements with SQM, Quebrada Blanca, and Sierra Gorda for almost 100% of the power it will generate. agencies as well as financial institutions from those two countries. Mitsubishi Corporation is also involved through Diamond Pacific Investment Limitada in the company Empresa Eléctrica Cochrane SpA by virtue of its 40% stake in that company. As of December 31, 2014, AES Gener had invested US$686 million on the Cochrane project and it was 74% complete, on schedule and on budget. According to the Occupational Safety and Health Administration, OSHA, the project reached the milestone of 2 million man hours worked without lost time. On the same date, the Cochrane- Encuentro transmission line being built by Sigdo Koppers, had reached 98.9% completion. Both units and the BESS should be connected to the SING in 2016 to help meet the growing demand for power from the large mining companies operating in northern Chile. Alto Maipo hydroelectric Project (Sic-Chile) The Alto Maipo hydroelectric project consists of the construction of two consecutive run-of-river plants in the Maipo River basin, called Alfalfal II (264 MW) and Las Lajas (267 MW), with a total installed capacity of 531 MW. The project itself received its environmental approval in 2009, the transmission system was approved in 2010, and the power concession was granted in December of The main agreements to provide the generation equipment and to build the underground works were signed in 2012 with three top-level international contractors. The main civil works and tunnels will be built by the Austrian firm Strabag AG through its Chilean subsidiary Strabag SpA, along with Constructora Nuevo Maipo SpA, owned by the German company Hochtief AG and the Italian firm CMC Di Ravenna. The Brazilian and Chilean subsidiaries of the German company Voith Hydro will supply and assemble the plants electromechanical equipment. The reason for selecting two contractors to build the underground works was to mitigate risks and to start construction at the two plants simultaneously. Closing on a non-recourse financing loan for US$1 billion took place in March 2013 for 74% of the total investment. The lenders are Japanese and South Korean export credit Non-recourse financing for the project closed in December 2013 with a syndicate of development financial institutions

71 71 and local and international banks for up to US$1.217 billion, or 60% of the total investment. The remaining portion will be financed by AES Gener and the Los Pelambres mining company (a subsidiary of Antofagasta Minerals S.A.), which became a shareholder of Alto Maipo SpA when it acquired 40% of that company s shares in July of In the agreement, AES Gener and Minera Los Pelambres agreed to provide the funds necessary to continue construction of the project at 60% and 40%, respectively. A power purchase agreement was also signed with Los Pelambres for up to 110 MW of capacity for up to 20 years to supply energy its mining activities, which are already in operation. Alto Maipo will be a key energy source for the SIC, producing 2,200 to 2,300 GWh per year of clean, efficient, economical power. The project will not significantly impact the environment since 90% of its works are underground and it does not involve a reservoir, and the SIC will benefit significantly from its reliability in power transmission and savings on transmission costs as a result of the project s proximity to the city of Santiago, with only 17 kilometers of new transmission lines needed. By December 2014, US$405 million had been invested in Alto Maipo and the works were 11% complete, including earthmoving activities such as the construction of access roads and camps on the worksites and the beginning of tunnel excavation. A total of one kilometer of tunnels was completed by the end of the year. In early January 2015, two of the three tunnel boring machines, or TBMs, arrived at the Chilean port. One was transported to the excavation site at the end of January, and the second TBM is expected to be transported to the site shortly. Orders were given to the three main contractors in December 2013 to proceed with connecting the first unit to the SIC in the fourth quarter of 2017, and the second unit in the second quarter of 2018.

72 72 Project to install emissions control equipment and retrofitting (SIC and SING Chile) In 2011, the Ministry of the Environment issued Executive Decree 13 on the prevention and control of particulate matter, SO2 (sulfur dioxide), NOx, and mercury emissions in zones that are declared unsaturated, latent, or saturated in terms of pollution. As a result, in 2012 AES Gener began retrofitting emissions control equipment at four plants at Ventanas (Units I and II) and Norgener (Units I and II), all built between 1964 and Related company Guacolda also began installing emissions control equipment at its Units I, II, and IV in August of water desalinization project at the angamos plant (SING-CHILE) On June 2, 2014, the Company signed an agreement with the company Abengoa for the construction and subsequent operation of a desalinization plant alongside the Angamos plant in the town of Mejillones. It will replace TVC technology with reverse osmosis to increase the efficiency of the plant s own energy use with high quality water and, in the future, to sell desalinated water to industries in the north of Chile. The plant will have a production capacity of 4,800 m3 per day, which may be increased in a second phase to 19,200 m3 per day. The project involves a total investment of US$26 million, and it was 28% complete as of December 31, These projects will help reduce the emissions from these plants and will comply with Chilean standards for thermoelectric plants that limit particulate and gaseous emissions produced by fossil fuels, particularly coal. For existing plants, including those currently under construction, the limits on particulate matter have been in effect since the end of 2013, while the new limits on sulfur dioxide, nitrogen oxide, and mercury will go into effect in mid The exception is in areas declared saturated or latent, where the limits will go into effect in June of The main works completed thus far are the purchase orders issued for the main equipment needed, metal structures, and the excavation for concrete foundations at the worksite. The plant is expected to go into operation in the second half of Investments will total US$251 million at AES Gener plants and US$222 million at Guacolda, of which the Company will pay 50.01%. By December 2014, the Company had invested US$203 million at the consolidated level and US$114 million at Guacolda for installing this equipment.

73 Solar Andes Project (SING-CHILE) The Los Andes Solar project, located adjacent to the Los Andes substation, 260 km southeast of Antofagasta, involves the construction in various stages of a 220 MW photovoltaic solar farm. The project s environmental permit was approved in At the end of June 2014, the order was signed to proceed with the construction of the project s first stage, involving 21 MW. The following stages may be built in units of different sizes until the full 220 MW project is complete. The project will supply power to current mining customers under long-term power purchase agreements. Construction should take nine to 12 months. As of December 31, 2014, the project was 16% complete. The main milestones reached during the year were the installation of the on-site camps, which is still in process, and the reception of the main metal structures at the site. Projects under development The Company has an extensive project portfolio that includes renewable energy projects such as battery energy storage systems and solar, mini-hydro, and wind generation projects. Some of these are scheduled for development and construction in the medium term, such as the Los Andes solar project, whose environmental permit has been issued and on which the first stage of construction has already begun. the SING - SADI interconnection The SING SADI interconnection project makes use of the AES Gener transmission line currently in place between Chile and Argentina to export energy from Chile s Northern Grid (the SING) to the Argentine Grid (the SADI). This line, which connects the TermoAndes plant in Salta, Argentina, with the Los Andes substation in Chile, is currently the only international transmission line in Chile. Three interconnection operation tests were completed in 2014 in which power of up to 200 MW flowed in both directions, thus confirming the technical viability of the project. The tests had positive results, with a significant improvement in the SING s frequency regulation, all in accord with the technical studies that AES Gener submitted to the regulatory agencies CDEC-SING and CAMMESA. A maximum of 250 MW of power will be exchanged only when there are surpluses available and it is economically beneficial to both countries. Therefore, neither reliability of service nor local prices will be adversely affected in Chile. 73 In early February 2015, the Chilean government authorized the exportation of power requested by the Company in July The pertinent decree is to be published in the coming weeks and will include the export permit and regulation.

74 74 Corporate governance

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76 CORPORATe governance During fiscal year 2014, the Company s Directors did not receive remuneration of any kind for additional duties; for expenses of representation, travel, or gifts; or any other stipend. However, those Directors that are also Board Committee members received remuneration as detailed in the following section. In 2014, the Board of Directors did not make use of the US$25,000 annual budget authorized by the annual shareholders meeting on April 29, 2014, for consultation services. 76 Documents of incorporation 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 Diario Oficial No 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 role of the board of Directors The Board of Directors is the official body 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. board Commitee members The members of the Company s Board Committee are Mr. Iván Díaz-Molina (Chairman and Independent Director), Mr. José Pablo Arellano (Independent Director), and Mr. Radovan Razmilic. Remunerations for board members and company executives Remunerations and budget At the annual shareholders meeting held on April 29, 2014, it was agreed to set Board Committee members fees at 160 UF per month. The Board Committee contracted for an independent insurance market study to determine the value of the premiums that could be obtained for the insurance required by the Company to cover its business operations. The cost of the study, performed by Indecs Consulting Ltd., was charged against the Committee s 2014 expense budget of US$25,000 authorized at the annual shareholders meeting. The cost of the study was US$12,947. Remunerations were paid to the Directors who are Board Committee members in the amounts shown in the following table.

77 Board Commitee Remunerations (in UF) Juan Andrés Camus 640 1,920 Iván Díaz-Molina 1,920 1,920 Radovan Razmilic 1,920 1,920 José Pablo Arellano Total 4,800 5,760 The operations between related companies examined by the Committee were in accord with market conditions and in the interest of the corporation, so the Committee recommended their approval by the Board of Directors. At the January 25 meeting, the Committee examined the information, and agreed, by a unanimous vote of its members, to approve the Company s balance sheet, financial statements, and External Auditors Report for the fiscal year ending December 31, main ExECUTives Remunerations for the Company s executive officers during 2014 totaled US$4.661 million. 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 its 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. At the February 26 meeting, the Committee: Examined the data and, in a unanimous vote of the members present, agreed to recommend that the Board proceed with the annual renewal of the insurance policy held with AES Global Insurance, an AES Corp related company, covering the Company and all of its subsidiaries against all risk and business interruption. Examined the data and unanimously agreed to recommend that the Board enter into a cash balance management agreement between AES Gener and its subsidiaries. 77 It should be noted that, according to Company policy, AES Gener executives who are members of related companies Boards of Directors do not receive remuneration for their duties as Directors, or they may decline the allowance due them as individuals. In 2014, the Company disbursed US$420,000 in severance pay for executive officers. board commitee activities In accordance with Article 50 bis of the Chilean Corporations Law Code, amended by Law 20,382, the Board Committee met on eight occasions in 2014 to make decisions regarding the Company s operations and contracts with related companies in accordance with Title XVI of Law 18,046 governing corporations. It also discussed other matters within its legal capacity and subsequently notified the Board of Directors of its decisions and recommendations. At the March 24 meeting, the Committee reviewed the data and, in a unanimous vote of the members present, agreed to recommend that the Board approve the Corporate Governance Policy report and submit it to the Chilean Securities and Insurance Commission (SVS) as required under General Standard 341. At the March 26 meeting, the Committee examined the data and unanimously agreed to recommend to the Board that, at the company s next annual shareholders meeting, the Ernst & Young auditing firm be proposed as the first choice for external auditors for fiscal year 2014, followed by BDO Auditores & Consultores Ltda. as a second option.

78 Corporate Governance 78 At the April 23 meeting, the Committee: Analyzed the data and unanimously agreed to recommend that the Board approve the 2014 internal auditing plan to be conducted by the parent, AES Corp, as well as the funds necessary for these services. It also recommended: 1. To analyze the appropriateness of replacing the special service item Travel and Entertainment Expenses with another type that is more pertinent to the Company s business, while still monitoring this type of expenses as usual; and 2. That certain transactions that take place between the Company and its parent as operations between related parties be reviewed by an independent auditor hired by the Board Committee for this purpose. Analyzed the data and unanimously agreed to recommend that the Board issue a US$25 million letter of credit to the subsidiary Inversiones Nueva Ventanas SpA. by the management and unanimously agreed to recommend that the Board approve the changes to be made to the corporate structure and the transfer of the assets involved, and that the Company enter into and sign all statements, contracts, and documents in the manner and under the terms and conditions presented to the Committee, as well as all other statements, contracts, agreements, declarations, or documents that may be necessary, pertinent, or adequate to improve, clarify, or complement the reorganization of the Company s subsidiaries. Analyzed the data and unanimously agreed to recommend that the Board approve a loan to the subsidiary Norgener S.A. in the amount of US$240 million to finance the distribution of a dividend to be paid by Norgener to the Company in the manner and under the terms and conditions proposed to the Committee. At the August 20 meeting, the Committee examined the data and unanimously agreed to recommend that the Board approve a transaction with the insurance company AIGIC, an AES Corp related company, for two losses: Analyzed the data on the corporate restructuring plan within the AES Gener holding company proposed by the management and unanimously agreed to request that the management present the final conclusions of its analysis at the next meeting of the Board Committee so that the Committee can issue a decision on the proposal. At the May 28 meeting, the Committee: Analyzed the data and unanimously agreed to recommend that the Board approve a coal purchase swap agreement between AES Gener and its subsidiary Empresa Eléctrica Guacolda S.A. for one or two shipments, which would give rise to a net payment between the parties of approximately US$5 million per shipment. Analyzed the data on the corporate restructuring plan within the AES Gener holding company proposed A loss in the Tunjita tunnel at the Chivor plant (Colombia), for which it recommended acceptance of payment of US$0.3 million in compensation; and A loss involving a turbine rotor blade at the Nueva Renca plant, for which it recommended acceptance of payment of US$4.4 million in compensation. At the November 24 meeting, the Committee examined the data and unanimously agreed to recommend that the Board renew, for a three-year period, the global IT support services agreement between AES Gener and AES Servicios América, a subsidiary of AES Corp, under which the latter provides the former with technical assistance for SAP and its respective licenses and applications, the maintenance and configuration of systems, new versions of SAP, and other services. The value of these services is US$1.6 million per year.

79 79 Code of conduct and ethics and compliance program The Board approved the Code of Conduct and the Ethics and Compliance Program, whose purpose is to ensure that the Company and its employees, business partners, suppliers, and contractors behave according to the highest ethical standards and comply with all legal and regulatory requirements in effect in Chile. One of the most important local laws is No. 20,393 (Law on the Criminal Responsibility of Legal Entities), as well as the pertinent international laws and standards as the OECD Convention on Combating Bribery of Public Officials in International Business Transactions and other anti-fraud and corruption laws, the U.S. Foreign Corrupt Practices Act, and other applicable legislation. As a requirement for employment, our Code of Conduct regulates the actions of all those who work at AES Gener, including those employed by our subsidiary companies. The Ethics and Compliance Department provides training, information, and certification programs for AES Gener employees on the Code of Conduct, as well as programs to prevent and detect criminal activity, to promote a business culture that encourages ethical behavior and respect for the law, and to monitor and enforce Company policies on corruption, bribery, money laundering, and connections with terrorist groups. The Code of Conduct is published on the website Any changes made to the Code of Conduct will be published on the website. Finally, in order to ensure compliance with General Standard 270 issued by the Securities and Insurance Commission

80 Corporate Governance 80 (SVS) on December 31, 2009, the Company sets forth in its Manual for Handling Information of Interest to the Market its internal policies and standards governing the handling of all information that, without being material events or information, is useful for a proper financial analysis of AES Gener and its subsidiaries, its securities, or the sale of the securities. The Manual is understood to include all legal, economic, and financial information regarding aspects relevant to the corporate business or that could have a significant impact on these aspects ( information of interest ). This document may be found at the Company s web site, Responsability to shareholders and investors AES Gener s commitment to its shareholders and investors is one of the basic pillars of how it does business and relates to others. The Company aims not only for adequate returns on its investments, but seeks to make them sustainable over time. The successful capital increase and the corporate bond issued by Eléctrica Angamos in December 2014 reflect the growing interest and confidence that national and foreign investors have in the Company thanks to the efforts put forth by all of AES Gener s various departments. ownership and control of the company AES Gener is an open stock corporation whose shares are traded on three stock exchanges: the Santiago Stock Exchange, the Valparaiso Securities Exchange, and the Chilean Electronic Stock Exchange. As of December 31, 2014, shareholders equity stood at US$2.394 billion, divided into 8,400,318,891 shares and distributed among 1,494 shareholders. At the end of the fiscal year, Inversiones Cachagua Ltda. held a 70.71% stake in AES Gener. The American company AES Corp. controls AES Gener indirectly through its approximately 99.9% ownership of Inversiones Cachagua SpA. For AES Gener, transparency of relevant Company information, as well as the quality, efficacy, and promptness of its availability to the public, in keeping with the laws governing corporations and securities markets, are an important part of its corporate responsibility, all while carefully considering what strategic information must be kept confidential in order to do business properly. Due to the fact that the ownership of AES Corp is highly disperse, the names of the individuals who own shares of that company are omitted from this report. Regarding the Company s relations with investors, it held periodic meetings in 2014 with local and foreign analysts to present its official results and to explain its business strategy and its operational, commercial, and financial goals. Particularly important were the conference calls, held quarterly, during which the CEO and the CFO explained important developments during the period. Many investors that follow the Company took part in these calls. AES Gener also participated in conferences with local investors as well as some of the most important ones held in other countries. The senior management has been involved in breakfast meetings with relevant financial groups, and the Company has hosted groups of foreign stakeholders in on-site visits.

81 twelve largets shareholders Name No. of Shares Ownership Interest Inversiones Cachagua SpA 5,940,023, % Banco de Chile on behalf of Third Parties Banco Itau on Behalf of Inverstors 232,593, % 184,662, % Provida C Pension Fund 181,166, % Habitat C Pension Fund 133,077, % BTG Pactual Chile S.A. Stock Brokers 130,584, % Cuprum A Pension Fund 109,200, % Capital C Pension Fund 105,118, % Habitat A Pension Fund 100,912, % Provida A Pension Fund 98,815, % Banco Santander - JP Morgan 98,808, % Cuprum C Pension Fund 97,329, % Total 12 largest shareholders 7,412,293, % Other shareholders (1,482) 988,025, % Total shareholders 8,400,318, % Type of Shareholder No. of Shareholder No. of Shares Ownership Interest (%) Chilean individual 1,224 26,416, Foreign individual 2 3, Foreign legal entity 7 339,144, Chilean legal entity 261 8,034,753, Total Shareholders 1,494 8,400,318, ownership structure 70.7% 12.9% 16.4% AES Pension Funds Others 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. However, the by-laws do state that, in order for the Company to fulfill its corporate purpose, it may manage the investments that it makes in each 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, commercial, technical, and legal consulting services; and, in general, services of any kind that are deemed necessary for best performance. 81 The by-laws also state that whenever it forms companies by contributing assets directly related to the generation of electricity, AES Gener will retain at least 51% of the ownership.

82 Corporate Governance dividend policy As instructed in Chilean Securities and Insurance Authority (SVS) Bulletin No. 687, the Board of Directors, at meeting 599 held on March 26, 2014, agreed on the dividend policy it considers suitable for the Company s 2014 fiscal year. This policy is stated below dividend policy As instructed in Chilean Securities and Insurance Authority (SVS) Bulletin No. 687, the Board of Directors, at meeting 575 held on March 27, 2013, agreed on the dividend policy it considers suitable for the Company s 2013 fiscal year. This policy is stated below. 82 It is the intention of the Board of Directors to distribute up to 100% of the net income generated during 2014 in dividends among its shareholders. The Board expressly states its intention to distribute interim dividends during the 2014 fiscal year, but it also expressly states that fulfillment of this dividend policy will be subject to the 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 contained in the Company s by-laws and in existing loan agreements, which consist largely of requiring 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 approved at the AES Gener annual shareholders meeting held on April 29, The previous year s divided policy is stated below: It is the intention of the Board of Directors to distribute up to 100% of the net income generated during 2013 in dividends among its shareholders. The Board expressly states its intention to distribute interim dividends during the 2013 fiscal year, but it also expressly states that fulfillment of this dividend policy will be subject to the 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 contained in the Company s by-laws and in existing loan agreements, which consist largely of requiring 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 approved at the AES Gener annual shareholders meeting held on April 30, 2013.

83 Dividends Paid Against Fiscal Year 2013 Profits At the annual shareholders meeting held on April 29, 2014, it was agreed to distribute US$201,320, or approximately 100% of fiscal year 2013 net income, by distributing: An interim dividend of US$ per share paid in December 2013 for a total of US$78,000,096.91, equivalent to 38.74% of 2013 earnings. A first additional dividend of US$ per share paid on May 22, 2014 for a total of US$62,829,869.70, equivalent to 31.21% of 2013 earnings. A second additional dividend of US$ for a total of US$60,490,818.44, equivalent to 30.05% of 2013 earnings, paid on August 27, Dividends distributed in recent years, in dollars per share: Then, and in accordance with the dividend policy approved at the annual shareholders meeting held on April 29, 2014, the Board of Directors, at meeting no. 607 held on November 24, 2014, agreed to distribute US$109,300, in an interim dividend of US$ per share, to be charged to fiscal year 2014 net income. This interim dividend amounts to 50.60% of fiscal year 2014 net income, and was paid on December 15, de 2014, la cantidad de US$ ,25 mediante el reparto de un dividendo provisorio de US$0, por acción, el cual corresponde a 50.60% de las utilidades del ejercicio de 2014, el cual fue pagado a contar del día 15 de diciembre de N Dividendo Tipo dividendo Fecha pago Monto por acción (US$) Imputado al ejercicio % de las utilidades 88 Interim % 89 Final % 90 Final additional % 91 Final additional % 92 Interim % 93 Final % 94 Eventual % 95 Interim % 96 Final % 97 Final additional % 98 Final additional % 99 Interim % 100 Final additional % 101 Final additional % 102 Interim % 103 Final % 104 Final % 105 Interim % 83

84 Corporate Governance income distribution Utilidad Distribuible MUS$ PRECIO Y VOLUMEN TRANSADO DE LA ACCIóN EN LA BOLSA DE COMERCIO DE SANTIAGO EN Net income attributable to parent company shareholders, fiscal year ,651 Less interim dividends paid (109,301) Balance of distributable net income attributable to parent company shareholders, fiscal year ,350 Retained Earnings IFRS as of ,818 Retained Earnings IFRS as of ,757 Final 2013 dividends paid and charged to 2013 earnings (123,323) Adjustment per SVS Official Bulletin No. 856 (130,742) Retained Earnings and Proposed Dividend Reserve Accumulated for Distribution Total Retained Earnings + Reserve for Future Dividends 502, ,860 stock market information Mes Nº acciones Ch$ Totales Precio Promedio (Ch$) January 109,220,071 29,614,084, February 51,520,820 14,515,448, March 71,970,052 21,089,388, April 72,297,204 21,544,627, May 62,634,982 18,412,887, Jun 72,082,470 20,341,253, July 44,275,854 12,803,138, August 43,388,499 12,968,936, September 38,909,040 12,155,647, October 88,318,697 27,230,471, November 66,386,404 21,638,524, December 57,265,849 18,348,409, Total 778,269, ,662,818,309 share transactions (1) There were no share transactions with related parties during the 2013 and 2014 fiscal years. Include transactions on the Santiago Stock Exchange, the Valparaíso Securities Exchange, and the Chilean Electronic Exchange

85 Share price SUMMARY OF SHAREHOLDERS COMMENTS AND PROPOSALS During 2014, 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. EXTERNAL AUDITORS At the April 29, 2014 shareholders meeting, the auditing firm Ernst & Young was designated as the independent auditor for the 2014 fiscal year. INSURANCE jan-14 feb-14 mar-14 apr-14 may-14 jun-14 jul-14 aug-14 sep-14 oct-14 nov-14 dec-14 Insurance is an integral part of the company s risk management. AES Gener s focus in insurance is on mitigating financial losses and guaranteeing the continuity of its business activities. Among its relevant insurance coverage are all-risk policies covering the operation and construction of all of its plants, including coverage for material damage US$ CLP 0.40 and financial losses resulting from business interruption due to machinery breakdown, fire, acts of nature, and other types of risk coverage offered on the insurance market. Assets that must be imported such as coal, replacement and spare parts, and other supplies are covered under allrisk maritime, land, or air shipping policies. In addition, AES Gener has general liability insurance coverage for itself and its employees, as well as its contractors and subcontractors. It also provides insurance policies for its workers in addition to that required under Chilean law, including life insurance. 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 slogans. The Company has also registered its brands Internet domain names to protect its intangible interests and assets.

86 86 our people

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88 our people 88 human capital The number of workers employed by the company in 2014 remained the same as in the previous year. Personnel Employed by AES Gener and Subsidiaries at December 31, 2014 AES Gener employees N of Employees Executives 52 Professionals staff members 336 Technicians and administrative personnel 371 Subtotal 759 Subsidiaries Employees AES Chivor 90 TermoAndes 51 Eléctrica Santiago 72 Eléctrica Angamos 106 Eléctrica Cochrane 35 Eléctrica Alto Maipo 78 Eléctrica Guacolda 197 Subtotal 629 Total Employees AES Gener and Subsidiaries 1,338 In matters of recruiting and hiring, 120 positions were filled in 2014, most of which were in connection with new projects. In order to attract new talent to the company, AES Gener has continued with the internship agreements with the industrial schools near our plants. The goal is to attract internship-level students who are interested in our company in order to develop and maintain ties over the long term. In 2014, students from the different towns filled 80 internships, a figure that is expected to increase in In order to ensure that newcomers to the company receive key information on the organization, approximately 98% of new hires participate in the company s e-learning induction program as well as its traditional on-site workshop Occupational Health and Safety Because AES Gener considers the human factor to be the pillar that supports its business activities, Safety heads the list of its corporate values. In order to take the company to an accident-free level, we strive daily to meet the world s highest standards of health and safety. We encourage all AES Gener personnel and contractors to live a culture of safety not only at work, but when they are off the job as well. The Company has adopted four safety tenets in order to strengthen an awareness of how to perform daily activities more safely: 1. Safety comes first for our personnel, our contractors, and the people in our communities. All work activities must be carried out safely in order to promote personal health, safety, and wellbeing. 2. All occupational incidents can be prevented. 3. Working safely is a condition for employment, and all individuals are responsible for their own safety, as well as for that of their co-workers and of the people in the communities where we work. 4. It is the right and obligation of all AES Gener personnel and contractors to stop work immediately whenever they see a situation that they consider to be unsafe. This fourth tenet was developed as a final barrier to prevent accidents, and it is the senior executives of the company who have enacted it and empowered all Company personnel, whether its own or that of collaborating companies, to put it into practice as soon as an unsafe condition or action is detected. In the Company, all activities are carried out in accord with AES Corp standards, which are based on international standards such as OSHA, ANSI, and others. We also comply with all Chilean standards and laws on risk prevention such as Law 16,744 and its decrees and annually implemented protocols.

89 89 AES Gener S.A. and its subsidiaries use an integrated management system called Genera, based on ISO 14,001 and OHSAS 18,001:2007. This management system, in place since 2013, was recertified at all work centers in 2014, during which all of the inspections were completed without Major Noncompliance observations. Like AES Gener group workers, contractors also carry out their activities following the guidelines of the Safety, Occupational Health, and Environmental Management Regulations for collaborating companies, which must be applied in all works, worksites, and/or service contracting. These regulations seek to protect the safety of the individuals, equipment, materials, and environment involved in the work done by AES Gener and contractor employees. The regulations also require that contractors conduct their activities under a safety management system whose starting point is our Occupational Environmental, Safety, and Health Management system, Genera. As a means to empower prevention among collaborating companies, the Company has urged contractors to certify their management systems in line with Genera so that their activities are carried out consistently, effectively, and as safely as possible. Our virtual safety champion, Máximo Segura, has continued to be used in campaigns to emphasize safety in the Cardinal Rules of Occupational Safety and Health, responsibility in reporting incidents, and techniques to create a super safe workplace. A total of two lost-time incidents (LTI) occurred among all AES Gener Group workers in Chile in In 2014, an average of 1,279 AES Gener employees worked a total of 3,455,482 man-hours. This results in an LTI rate (per OSHA) of There were no contractor accidents involving lost time (OSHA LTI) in 2014 during the 4,553,744 man-hours worked by an average of 1,995 contractor employees. Therefore, a monthly average of 3,274 AES Gener and contractor employees worked 8,009,226 man-hours with only two lost time incidents (OSHA LTI), giving an LTI rate of 0.049, lower than the best 10% of the members of the Edison Electric Institute (a rate of 0.14 for generation and transmission companies). AES is a member of Edison Electric and bases its global risk prevention goals on that Institute s figures. Our construction projects are also built to exacting safety standards. In 2014, construction contractor personnel worked a total of 15,600,258 man-hours with an average of 6,747 workers. Among the honors the Company received in 2014, the National Safety Council (Consejo Nacional de Seguridad) recognized AES Gener for its outstanding risk prevention at the Guacolda V project, which recorded 6 million man-hours without LTI, and at the Ventanas project, which posted 2 million man-hours in the installation of emissions control equipment with no LTI.

90 90 MEMORIA ANUAL AES GENER 2014 The south region s Work Safety Institute (IST) awarded AES Gener the Merit Prize for its five LTI-free years at the Santa Lidia plant, along with the national Outstanding Prevention Action or Contribution prize, the IST s highest award for its members recognizing workers performance in risk prevention. Finally, the Costa complex s manager earned the central region s Effective Leadership in Prevention award. Human Resources, Work Benefits, and Quality of Life on the Job With a view toward Company sustainability and benefit to its workers, AES Gener aims for its members to develop along with the organization in order to be adequately equipped to handle present and future challenges, which adds value to our business. To administer its generating plants efficiently and to bring the projects in its portfolio to fruition, the Company seeks to attract, stimulate, and retain the best people while strengthening its team by adding the right individual for each position, those with the development potential to handle new projects and to make up replacement staff. During 2014, the AES Gener Group invested Ch$1,000,047,775 in Chile in training and organizational development programs, 10% more than in The Training Department offered 382 courses with a total of 57,438 class hours to 1,213 workers during the year, amounting to an investment of Ch$907,353,687. The increase in hours spent, individuals trained, and investment made stemmed primarily from the startup of the e-learning program, called the Technical School (Escuela Técnica), which allows for the retention and transfer of knowledge within the organization through courses designed by in-house operations, maintenance, and transmission experts to meet the specific needs of our business. The result was a higher number of individuals LTI Rate refers to the number of accidents with injury per each 200,000 man-hours worked.

91 trained, which lowered the investment and time needed for training. To date, 883 people have received training over the course of eight months, with a total of 22 courses given through 17,820 hours of education. The Technical School was first implemented for Chile, although it is already up and running in Argentina as well and will soon be implemented in Colombia, becoming a regional training program for SBU Andes. Additionally, the Performance Management process continued this year as a key tool for strengthening the performance of all of the Company s collaborators. All employees from all of the departments participate, both from AES Gener and its subsidiary companies. The process has three essential stages: (i) setting performance objectives and criteria for measuring achievement; (ii) review or feedback at midyear to take a look at the progress made so far; and (iii) final assessment of goals and skills at the end of the year. The main goal of the Performance Management Process applied in the Company is to promote each person s professional development, which helps the individual properly perform his or her specific job. To this end, the relevant skills and objectives are assessed annually in order to identify which aspects need to be developed over the coming year to maximize an individual s effectiveness in that position. This helps achieve the company s objectives while also enhancing the employees personal development. In order to strengthen this process, the Performance Management course was implemented for all Company employees through the e-learning method, which provides tools to carry out this process more effectively. The Great Place to Work survey was given for the third year in a row, in which AES Gener ranked 45th among the best companies to work in Chile, four places higher than in the previous survey. The main goal is to compare companies from the same industry and to improve our current procedures and plans for the company s human resource management. We will continue to participate in the annual survey, which will be held again in 2015, in order to continue strengthening our procedures and plans for HR management. In 2014, Ch$92,694,068 was invested in different companywide programs focused on enhancing important aspects of our organization s work environment. AES Corp and the AES Gener companies use the Hay Group methodology in their practices and policies to set the companies pay scales in such a way as to ensure a balance between internal fairness and external competitiveness. This methodology provides tools and common language to describe each position s actual responsibility and then, based on eight factors, determines the proper level and range of salaries for each position depending on what the market is paying and our in-house situation in order to maintain balance and fairness. The companies internal situation is determined using market studies on pay scales and benefits. We have also implemented follow-up tools for personnel to handle salaries, promotions, and positions on the salary scale. From the first day they enter our company, AES Gener employees receive a number of benefits that give them and their families peace of mind and help them in the different areas of their lives. Workers have complementary health and life insurance that covers spouses and children up to the age of 24 in addition to the standard group coverage with the Isapre, or insurance company. In addition, in 2014 all workers aged 35 and up were given a preventive health checkup, repeated every two years at no cost to the worker, for early detection of illnesses that can affect their quality of life. When a worker goes on medical leave, the company pays the first three days of the leave, which are not covered by the Isapre, as well as a complementary payment in addition to that received from the Isapre so that they continue to receive their regular salary during their illness. Women employees with children under the age of five receive a monthly supplement to help defray the cost of child care until the child enters kindergarten. In 2014, outlay for this item was Ch$31 million. The company also offers educational benefits, including a program for workers and their college-age children to apply for scholarships to universities and professional institutes. It gave out 115 of these scholarships in 2014, as well as 10 91

92 Our People scholarships based on academic excellence for elementary and secondary school students in the Tocopilla area. In addition, all children of employees receive annual bonuses for schooling, the amount of which depends on what grade they are in. In all, the company paid out approximately Ch$300 million in educational benefits in AES Gener provides recreational and sports facilities for workers and their families in Valle Alegre and Maitenes, and it sponsors activities for workers children during their winter and summer school vacations. Approximately 200 children of employees participated in these activities in the central, southern, and northern regions of Chile. 92 The Quality of Life Program, which is implemented systematically in all of the country s work centers, has continued to benefit workers health. Exercise and massage programs are held during breaks and nutrition services are offered, all of which helps employees to connect with one another and enhances the work environment. Likewise, the alcohol and drug abuse prevention policy continued with its program of random testing. Workers also receive bonuses for births, weddings, and vacations. In 2014, 62 birth and 17 marriage bonuses were given, along with two payments made for the death of direct family members

93 93

94 94 CORPORATE SOCIAL RESPONSIBILITY AND THE ENVIRONMENT

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96 CORPORATE SOCIAL RESPONSaBILITY AND THE ENVIRONMENT customers, shareholders, investors, suppliers, contractors, and partners. Its goal is to be an efficient, reliable company that understands that the main issues in its business are risk management, innovation, and creating value for all of its stakeholders, and thus being mindful of its own sustainability. It is being a company whose business activity, as a whole, makes a positive contribution to society. 96 There are three pillars underlying AES Gener s CSR: education, employability, and community infrastructure. Through the AES Gener Foundation, the Company carries out activities in these three areas in all of the municipalities in which it has operations. Community and Environment At AES Gener, Corporate Social Responsibility (CSR) or Responsible Business (RB) is a way of doing business that takes into account the social, environmental, and economic effects of business activities, and incorporates respect for ethical values, individuals, communities, and the environment. AES Gener understands CSR to be part of its operational excellence, which is not simply how it operates its plants and business activities, but also how it relates with the communities where it carries out these activities, the same ones that are home to a large percentage of its workers and contractors, and with which it has a permanent good neighbor policy. The Company seeks to be socially responsible by fulfilling its business mission to provide a reliable source of power while acting ethically and responsibly toward all the company s stakeholders: its employees, communities, Community Relations AES Gener s Policy on Ties and Relations with Local Communities (PVRCL, from its initials in Spanish) guides its relationship with the communities in which its plants and projects are located, enabling the Company to manage its social and environmental ties with the community effectively and sustainably. In addition to the CSR policy that AES Gener implements through its AES Gener Foundation, each complex has specific alliances established with their neighboring communities. One example is the Angamos complex, which has signed agreements with the Mejillones Municipality and with educational establishments. It also serves on the Board of the Foundation for the Sustainability of the Tern as well as on the Board of the Mejillones Industrial Association. The Norgener Complex sponsored a number of initiatives in 2014 with its neighboring community. One highlight was the third annual AES Gener Foundation Cup held jointly with the Fundación Ganamos Todos (the We all Win Foundation). In addition, the cooperation agreement with the Tocopilla Municipality was renewed for the third year, as was the strategic alliance with the Tocopilla Polytechnic High School. Donations were also made to the municipality s fire department to update their equipment, which is key to handling emergencies in the area. In the Metropolitan Region, the Renca and Nueva Renca plants have close ties with the community, and students

97 from various industrial schools and institutes frequently visit the facilities. Particularly important is its collaboration with the Andes Professional Technical High School, the only secondary school associated with DUOC Chile, a branch of the Catholic University of Chile. The management and workers also take part in a variety of activities with the community and in conjunction with the Municipality of Renca and its social and athletic organizations. The AES Gener hydroelectric plants in the Cajón del Maipo continue to maintain their long-standing tradition (Maitenes, dating back to 1923) of keeping close ties with the communities near their production centers, particularly the towns of Alfalfal and Maitenes, all in line with company policy. In 2014, in connection with the construction of the Alto Maipo project, local residents received training in such skills as rigger operator, housekeeper, agro-industrial quality control agent, and security guard, all positions in great demand in the construction of the project. In 2014, 40 San José de Maipo residents received entrepreneurial and information technology training in the first AES POETA Project, an program developed by AES Gener in connection with the Alto Maipo project that provides entrepreneurial skills to young people and fosters socioeconomic development in the town. Students were taught how management, marketing, production processes, and sales skills can be applied to the fields of tourism, confectionery, greenhouses, and services. The classes were given in a classroom equipped with computers, software, and tools donated by the AES Gener Foundation, Magenta, Microsoft, and the Trust for the Americas, an agency in cooperation with the Organization of American States (OAS). In addition, thanks to an alliance between the Alto Maipo project and the Claro cell phone company, residents of the villages of Maitenes and Alfalfal and the surrounding areas were able to access cell phone and Internet service for the first time. Several programs have been implemented at the Ventanas plant to foster community development, and one important contribution was the remodeling of the town s municipal gymnasium. The bleachers, locker rooms, restrooms, and flooring were all improved, and the building was painted both inside and out. This building is very important to the residents of the area, as it is the only facility for hosting athletic and cultural events indoors. A project that AES Gener has implemented in conjunction with other companies in the area provides transportation grants to solve a problem common among higher education students from Puchuncaví: the cost of traveling to schools outside of their home municipality. A total of 250 students received these grants that ease families expenses and support community development by helping these future professionals. Scholarships were also awarded for students to attend college entrance exam preparation centers, or what are called pre-universities, and for students who attain the municipalities highest scores on the PSU, the national college entrance exam. In 2014, 30 students from two Puchuncaví high schools (the Sargento Aldea de Ventanas Educational Complex and the General Velásquez School) received year-long college preparation scholarships at the Pre-universitario de Pedro de Valdivia in Viña del Mar, enabling them to prepare for the PSU in the subjects of language and math. The three highest PSU scores also received a one-time financial award. One of the most important initiatives implemented in 2014 in Puchuncaví is the competitive grant fund, a program that will last for 10 years. THE AES GENER FOUNDATION The Foundation began in 1995 as a non-profit agency named the Maitenes Foundation. Its mission was to offer outdoor educational programs to contribute to the educational and ethical development of children, young people, and adults. In 2011, the Maitenes Foundation changed its legal name to the AES Gener Foundation as part of an effort to further strengthen its role in formulating and implementing the Company s community programs. The organization s activities expanded to include designing and executing educational and work training programs, promoting employment, improving 97

98 98 community infrastructure, and supporting sports, culture, and the arts. All of this is done within the framework of the Foundation s primary values: sustainability, environmental protection, and safety. The AES Gener Foundation has a General Council made up of Company executives and professionals who see to it that the Foundation fulfills its objectives and that its funds are properly administered. The Foundation is led by a General Director who directs, oversees, and leads the implementation of the programs and activities that are scheduled each year. EDUCACIÓN Programa MUNK The MUNK program has been in place in Mejillones and Tocopilla public schools since In 2014, it benefited over 2,000 fifth to eighth graders who attend the public schools in those towns. This program works actively with local schools to provide students access to an online platform that uses cartoons and games to help the students practice their English. The focus is on edutainment, which combines education and entertainment to encourage a love of learning and to improve grades. each pupil. They then use this data to focus their teaching on areas where the class or individual students are having the most difficulty. The parents receive progress reports and other information on their children. In 2011 the AES Gener Foundation, in an effort to expand the career options available to young people, established its Pre-university Scholarship program for high school seniors from Puchuncaví. The program awarded 30 scholarships to the Pedro de Valdivia college entrance exam preparation center in Viña del Mar to local 12th graders in As in 2013, academic excellence scholarships were awarded to the students who achieved Puchuncaví s three highest 2014 college entrance exam (PSU) scores to help defray their living expenses during their first year at the university. Work/Study and Employability The AES Gener Foundation sponsors the Work/Study program at the Ventanas plant in the Municipality of Puchuncaví. The program seeks to produce competent professionals with practical experience in their area of expertise, to help young people become more employable, to have better trained technical personnel with skills adapted to actual industrial conditions, and to create a link between the Company and the community. MUNK gets the students teachers and parents involved as well. The educators monitor their students progress through online reports for the class overall as well as for Under this program, 11th and 12th graders at Puchuncaví s Sargento Aldea Educational Complex go to the AES Gener Ventanas plant twice a week to gain hands-on experience

99 in subjects whose theory they have studied in school in their different areas of expertise: administration, electronics, and electricity. AES Gener not only opens its doors to the students, but also provides them with an expense allowance, meals, safety equipment, and bus fare. SPORTS The AES Gener Foundation Cup This athletic event, sponsored by the AES Gener Foundation together with the Ganamos Todos Foundation since 2012, seeks to encourage athletic activity among boys and girls in 5th to 8th grade who live and study in Tocopilla. The purposes of the program are to encourage physical activity; create jobs for young people and adults through training as coaches, umpires, and leaders; encourage good nutrition to improve quality of life; and reinforce social values such as teamwork, discipline, and perseverance. The AES Gener Foundation Cup has helped decrease drug and alcohol use among young people in the community, many of whom live in highly vulnerable socioeconomic conditions. A highlight of the 2014 championship was the participation of the Pedro Aguirre Cerda Special School team, made up of special-needs children in the municipality. TRAINING AND EMPLOYABILITY PROGRAMS The improvement and construction project on the Mejillones Sports Complex was completed in The complex now has two fields for five-player soccer, two fields for sevenplayer soccer, and one regulation size field with locker rooms, restrooms, and an administrative office. The tennis courts and a multi-purpose court were also remodeled, and bleachers were built on the north side of the Mejillones Municipal Stadium. Total investment was Ch$1.2 billion. SAN JOSÉ DE MAIPO GRANT FUND The AES Gener Foundation administers the social program that was created under the Community Accord signed with the community of San José de Maipo as part of the Alto Maipo Hydroelectric Project (PHAM for its initials in Spanish). This program consists of the Fondo Concursable San José de Maipo fund for projects that will benefit the community as a whole. The program will last for 30 years and finances projects for UF5,807 per year. In July and August, over 100 people learned how to draw up bids for community projects and micro-entrepreneur funding. A manual on presenting a proposal was used to help with the training and is available on the AES Gener Foundation website ( Out of the 104 projects proposed in 2014, a selection was made of 16 proposals submitted by community organizations in the fields of education and training, community development and infrastructure, and a variety of athletic disciplines. 99 The AES Gener Foundation has developed programs to improve job opportunities in the communities where the Company has operations or is building new plants. For example, programs to train residents as rigger operators, housekeepers, agro-industrial quality control agents, and security guards have been offered in San José de Maipo, while in Tocopilla residents have been trained as customs agents, linemen, and nurses aides. COMMUNITY INFRASTRUCTURE Nine micro business projects were also awarded funding. The initiatives are highly diverse, and include the projects Learning for Entrepreneurship, An Interactive Library in our Preschool, Sports and Fun Culture for my Neighbor, Technology for Better Communication, Creating Hope through Practicing Mountain and River Sports, and many others led by community organizations. Among the micro business projects selected are Ana María s Secrets, Souvenir, and the Historical Heritage of San José de Maipo. One of the pillars of AES Gener s CSR area is to help improve community infrastructure.

100 Corporate Social Responsabilityand the Environment AES GENER PUCHUNCAVÍ GRANT FUND The AES Gener Puchuncaví grant fund, established in 2014, benefits 31 social organizations that develop projects to support community infrastructure, social development, and initiatives that foster tourism and culture, promote and develop productive or service activities, and promote a healthy, active lifestyle. CUSTOMERS AES Gener is fully aware that the service it provides is very important to individuals quality of life and to the economic development of the country. The Company knows that the reliability and efficiency of our processes are highly relevant to the competitiveness of our industrial customers and to the budgets of end consumers. 100 The AES Gener Puchuncaví will contribute UF4,117 per year for 10 years to help residents to create the community they desire. Knowing that a reliable power supply is crucial, AES Gener, as the country s largest thermoelectric generation company, seeks to back its contracts with actual efficient generating capacity to ensure that electricity really will be available under critical supply conditions. With a view to process efficiency, we at the company constantly monitor our operational parameters, seeking to reach world-class standards in our generation practices. For each one of our projects, the company selects the fuel option that is most economically efficient for generating electricity and that meets specific standards of reliability and safety, all while complying with all applicable regulations and its environmental policy. Likewise, AES Gener stresses the prevention of outages or technical problems that are unlikely but could cause potentially serious impacts, constantly seeking to improve the quality of its service.

101 SUPPLIERS AND CONTRACTORS Providing proper health and safety conditions is AES Gener s primary responsibility toward workers and contractors that regularly or occasionally work at company facilities. The safety equipment measures and standards in place 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 screening to reduce the risk of accidents. AES Gener s policy is to give priority to hiring suppliers and contractors from the towns in which the Company operates and that meet both the safety and expertise standards required. Also to ensure 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 enables 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 players, 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. 101 Another relevant aspect, primarily regarding 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 outsourced personnel as part of a stable relationship of mutual cooperation that demands high quality service at competitive prices. In 2014, AES Gener added new options for handling international tender processes, ensuring equal access to information for all potential suppliers and the application of objective selection criteria, thus incorporating best practices into the procurement system.

102 102 ADDITIONAL INFORMATION

103 103 07

104 MATERIAL EVENTS REPORTS SUBMITTED TO THE CHILEAN SECURITIES AND INSURANCE AUTHORITY (SVS) IN MARCH 21, 2014 The Company reported that the Board of Directors agreed primarily to the following regarding AES Gener S.A. s issuance of cash shares: (i) to offer and place 335,229,412 cash shares to be charged against the Company s capital increase approved at the Special Shareholders Meeting held on October 3, 2013; (ii) to set the deadline for determining the shareholders who will be entitled to a preferred stock option at March 26, 2014; (iii) to set the period for exercising the preferred stock option from April 1, 2014 to April 30, 2014; and (iv) to establish the subscription price of Ch$255 per share. MARCH 28, 2014 Material Event Pursuant to Article 9 and paragraph two of Article 10 of Law 18,045 and to SVS General Standard No. 30, the Company reported as a material event that on this date the Company agreed to buy the shares representing a 50% ownership interest in Empresa Eléctrica Guacolda S.A. offered by Empresas Copec S.A. and Inversiones Ultraterra Limitada. AES Gener S.A. agreed to purchase from Empresas Copec and Inversiones Ultraterra Limitada 108,845,612 shares in Empresa Eléctrica Guacolda S.A. at a total price of US$728,000,000 to be paid to those companies in equal parts. The transaction is to take place within 15 days of the acceptance of the offer. The Company also reported that, in order to have access to sufficient funds to pay the purchase price, AES Gener had signed a non-revolving corporate financing credit for up to US$700,000,000 with Deutsche Bank Trust Company Americas, which acted as coordinating and administrative agent on behalf and in representation of a syndicate of banks including Deutsche Bank AG, London Branch, and Sumitomo Mitsui Banking Corporation. Finally, it reported that, also on this date, AES Gener agreed to sell 108,845,611 Empresa Eléctrica Guacolda shares to Global Infrastructure Partners under conditions substantially similar to those of AES Gener s purchase of those shares from Empresas Copec S.A. and Inversiones Ultraterra Limitada, under the condition precedent that AES Gener first acquire the shares from those companies. As a result of these transactions, AES Gener S.A. will become owner, directly or indirectly, of 50.01% of the shares in Empresa Eléctrica Guacolda S.A., which will become a subsidiary of the former, while Global Infrastructure Partners will become indirect owner of the approximately 49.99% remaining ownership interest. MARCH 28, 2014 Material Event Pursuant to Article 9 and paragraph two of Article 10, both of Law 18,045 governing the securities market, and to SVS General Standard No. 30 and Bulletin 660, the Company reported as a material event that at regular board meeting 599 held on March 26, 2014, the AES Gener S.A. Board of Directors agreed to call an Annual Shareholders Meeting to be held on April 29, 2014 in order to present and vote on the following matters: (i) Approval of the Financial Statements and the Annual Report for the fiscal year ended December 31, 2013, including the external auditors report; (ii) Distribution of earnings and the final dividend; (iii) Setting of the remunerations for the Board Committee members, approval of the Committee s budget and its consultants for 2014, and the report on the Committee s expenses and activities during 2013; (iv) Designation of an external auditing company for the 2014 fiscal year; (v) Dividend policy; (vi) Information on transactions between related companies as referred to in Title XVI of Law 18,046 governing corporations; (vii) Other matters of Company interest pertinent to this type of meeting; and (viii) Any other agreements necessary to implement the decisions made at this Shareholders Meeting. MARCH 28, 2014 Material Event Pursuant to Article 9 and paragraph two of Article 10, both of Law 18,045 governing the securities market, and to SVS General Standard No. 30 and Bulletin 660, the Company reported as a material event that in board meeting 559 held on March 26, 2014, in which it was agreed to call for the Annual Shareholders Meeting on April 29, 2014, the Board also agreed to propose at the Shareholders Meeting the

105 distribution of 100% of the earnings of the fiscal year ended December 31, 2013 that may be distributed as dividends, for a total of US$201,320, It also reported that the amount of the final per-share dividend to be distributed would be determined upon completion of the Company s share issuance and placement that was in process at that time, and whose preferred stock option period would begin on April 1. The interim dividend of US$ paid in December 2013, totaling US$78,000,096.91, would be deducted from that amount; this interim dividend represented 38.74% of the earnings for the year ended December 31, 2013 that were eligible for distribution as dividends. Of the balance to be paid as final dividend, US$62,829,869.70, or 31.21% of the earnings for the fiscal year ended December 31, 2013 to be distributed in dividends, would be distributed among shareholders entitled to receive it on May 22, 2014; and on August 27, 2014, the amount of US$60,490,818.44, or 30.05% of the earnings for the fiscal year ended December 31, 2013 to be distributed in dividends, would be paid to the shareholders entitled to receive it. APRIL 3, 2014 Pursuant to SVS Bulletin 832 of April 2, 2014, the Company reported that as of that time it had not detected any effects or impacts as a result of the earthquake that occurred on April 1, APRIL 11, 2014 Material Event Pursuant to Article 9 and paragraph two of Article 10 of Law 18,045, and to SVS General Standard No. 30, the Company reported as a material event that on this date the Company purchased 108,845,612 of the shares in Empresa Eléctrica Guacolda S.A. from Empresas Copec S.A. and Inversiones Ultraterra Limitada for a total of US$728,000,000, an amount which was paid in equal parts to the two selling companies, as each company owned 54,422,806 shares of Empresa Eléctrica Guacolda S.A. stock. It also reported that, on the same date, AES Gener S.A. sold 108,845,611 shares of Empresa Eléctrica Guacolda S.A. stock to El Aguila Energy SpA, a Global Infrastructure Partners related company, under conditions substantially similar to those under which AES Gener S.A. acquired the shares from Empresas Copec S.A. and Inversiones Ultraterra Limitada. As a result of these transactions, AES Gener S.A. became direct owner of approximately 50.01% of Empresa Eléctrica Guacolda S.A. s capital stock, by which the latter became a subsidiary of AES Gener S.A., while El Aguila Energy SpA became direct owner of the approximately 49.99% remaining shares. Finally, the Company reported that AES Gener S.A. would not consolidate its new subsidiary Empresa Eléctrica Guacolda S.A. in its accounting given the agreement reached with Global Infrastructure Partners. AES Gener and its subsidiary Empresa Eléctrica Guacolda entered into a services agreement on this same date. APRIL 30, 2014 Material Event The company reported the decision made at the AES Gener Annual Shareholders Meeting held on April 29, 2014 to distribute US$201,320, in dividends, to be charged against the earnings of the 2013 fiscal year. This amount is 100% of the 2013 earnings eligible for dividend distribution. The interim dividend of US$ per share, totaling US$78,000,096.91, which was paid in December 2013 must be deducted from the final dividend. The balance to be paid as a final dividend will be paid in a first additional dividend, distributed among the shareholders entitled to receive it, totaling US$62,829,869.70, or 31.21% of the earnings of the fiscal year ended December 31, 2013 that are eligible for dividend, to be paid on May 22, 2014; and a second additional dividend, to be distributed among the shareholders entitled to receive it, on August 27, 2014, totaling US$60,490,818.44, or 30.05% of the earnings of the fiscal year ended December 31, 2013 that are eligible as dividends. The Company also reported that, given that on this date the Company s share issuance and placement process was still in progress, with the preferred stock option period having begun on April 1, at this time it was not possible to determine the exact per-share amount of the dividend to be paid. Therefore, the amount to be paid on each date would be determined by dividing the total amount of the dividend to be paid by the total number 105

106 106 of shares entitled to receive the dividend that had been registered with the Company s Shareholders Registry by midnight on the fifth working day prior to the payment date indicated. MAY 2, 2014 Material Event Pursuant to Article 9 and paragraph two of Article 10 of Law 18,045, and to SVS General Standard No. 210, the Company reported as a material event that on April 29, 2014, it learned of the resignation of Mr. Juan Andrés Camus as Regular Director of AES Gener. MAY 5, 2014 Material Event at a later date decide on the end use of the 4,609,554 cash shares that were not subscribed during the preferred stock option period. MAY 9, 2014 Material Event The Company reported that, as a complement to the additional dividend payment information reported on April 30, 2014, having completed the preferred stock option period for the Company s cash shares that began on April 1, 2014, the Company determined the number of shares that would be entitled to receive the first additional dividend payment and the per-share amount to be paid in the dividend, which would be US$ per share. Pursuant to Article 9 and paragraph two of Article 10 of Law 18,045, and to General Standard No. 30 and Bulletin 1375, both of the SVS, the Company reported that, regarding the capital increase approved at the Special Shareholders Meeting held on October 3, 2013, when the preferred stock option period ended on April 30, 2014 for the 335,229,412 first-issue cash shares, charged against the said capital increase, a total of 330,619,858 shares had been subscribed and paid at a price of Ch$255 per share, and that Ch$84,308,063,790 had been raised. The Company also reported that the controlling shareholder, Inversiones Cachagua SpA, subscribed and paid 100% of its stock option. Finally, it reported that the Board would MAY 29, 2014 Material Event Pursuant to Articles 9 and 10 of Law 18,045 on the securities market and to SVS General Standard No. 30, the Company reported as a material event that, in its meeting held on May 28, 2014, the AES Gener S.A. Board of Directors agreed to change the group s corporate structure, primarily for the purpose of simplifying its business structure. To this end, the following were among the decisions made: (i) Through a sales agreement, AES Gener would transfer the group s Santa Lidia and Los Vientos diesel-fired generating plants to the subsidiary Sociedad Eléctrica Santiago SpA (ESSA).

107 The coal-fired thermal generation plant owned by Norgener S.A. (Norgener) in the municipality of Tocopilla in the Antofagasta Region (the Tocopilla plant), consisting of two units of 136 MW and 141 MW of capacity each, respectively, would be transferred to AES Gener. To achieve this, AES Gener S.A., as majority stockholder of Norgener, would divide that company and would assign the Tocopilla plant, as well as all of its commercial power sales and operations agreements, to the new corporation that would be created in the division. Immediately afterward, the said company that would be created in the division and that would be assigned the Tocopilla plant and its contracts would be absorbed by AES Gener, who would finally be the new owner of the Tocopilla plant and Norgener s legal successor in all contracts; and (ii) the consolidation in Norgener of the entire operation generated by the Special Purpose Subsidiary or Affiliate Finance Project and the investment in the Colombian subsidiary AES Chivor S.C.A. ESP. June 13, 2014 Pursuant to Section II of SVS General Standard No. 30, the Company submitted to that Commission a copy of the early redemption notice for the Series O bearer bond redemption published in the newspaper El Mercurio on June 12, OCTOBER 6, 2014 Pursuant to Article 63 of Law 18,046 governing corporations, the Company reported that, regarding the resignation tendered by Mr. Juan Andrés Camus as regular director of AES Gener S.A. on April 29, 2014, the Board voted at its September 24, 2014 meeting to call for a Special Shareholders Meeting on October 23, 2014 in order to study and vote on the following matters: (i) The dissolution and election of a new board of directors for the company; (ii) Information on transactions with related parties governed by Title XVI of Law 18,046 on corporations; and (iii) Any other agreements needed to implement the decisions made at this Shareholders Meeting OCTOBER 23, 2014 Material Event Pursuant to Article 9 and Article 10, paragraph 2 of Law 18,045 governing the securities market and to Section II, No. 2.2 of SVS General Standard No. 30, the Company reported that the Company s board of directors was dissolved at the Special AES Gener Shareholders Meeting held on October 23, 2014 and that a new board was elected. The new board will exercise its functions until the 2017 Annual Shareholders Meeting and is made up of the following regular and alternate members: Regular Andrés Gluski W. Radován Razmilic Arminio Borjas Andrew Vesey Tom O Flynn Iván Díaz-Molina José Pablo Arellano Alternate Stephen Coughlin Joel Williams Abramson Martín Genesio Margaret Tigre Bernerd Da Santos Varsovia Valenzuela Rafael González Amaral The Company also reported that the directors Iván Diaz Molina and José Pablo Arellano Marín and their respective alternates will serve as independent directors as stated in Article 50 bis of Law 18,046. Finally, it reported that at the special board meeting held on this same date, and after the Special Shareholders Meeting previously mentioned, the Board of Directors appointed Mr. Andrés Gluski Weilert as Chairman of the Board and President of the Company. 107

108 Additional Information NOVEMBER 20, 2014 Material Event Pursuant to Article 9 and Article 10, paragraph 2 of Law 18,045 governing the securities market, and to SVS General Standard 30, the Company reported that on November 19, 2014 it learned of the resignation tendered by Mr. Andrew Vesey as regular director of the AES Gener Board. The resignation is effective November 30, NOVEMBER 24, 2014 Material Event The Company reported that the AES Gener S.A. Board of Directors in its November 24, 2014 meeting agreed to distribute US$109,300, in an interim dividend of US$ per share, to be charged to fiscal year 2014 earnings. The dividend would be paid in cash on December 15, NOVEMBER 21, 2014 Material Event Pursuant to Articles 9 and 10 of Law 18,045 governing the securities market, and to SVS General Standard 30, the Company reported that on this date Empresa Eléctrica Angamos S.A., a subsidiary of AES Gener S.A., agreed to issue and place on the international market, under Rule 144A and Regulation S of United States securities regulations, US$800,000,000 in long-term bonds at an initial annual interest rate of 4.875% and maturing in It reported that the purpose of these bonds would be to finance: (a) a portion of the loan with which Angamos financed the construction of its plant; (b) the costs of terminating the derivative agreements entered into by Angamos in connection with the loan referred to in letter (a) above; (c) the costs involved in the 144A bond issuance; and (d) other general corporate purposes of Angamos, including work capital.

109 Information on Related Companies as of December 31, 2014 AES CHIVOR & CIA SCA ESP Identification Type of company Foreign partnership limited by shares Address: Av. Calle 100 No , Piso 9, Bogotá, Colombia Telephone: (57 1) Fax: (57 1) Business activities Generation and sale of electricity. Maintenance and repair of equipment used in generation or other similar types of plants. Capital and shares Paid-in capital US$ 0 (Col$ 0) Subscribed and paid shares 222,818,836 Ownership 99.99% indirectly through Norgener S.A. (222,769,668) and AES Gener (1 share) Business activities The subscription, acquisition, sale of, or investment in securities, shares, bonds convertible into shares, and all types of debt instruments; investments in other companies; investments in all types of goods for it to carry out its business activities; joint ownership of other companies, contributing capital to or acquiring or holding shares and debt of other companies. It does not collateralize or guarantee third-party debt or that of its own shareholders. Capital and shares Paid-in capital US$57,554 (Col$120,000,000) Subscribed and paid shares 120,000 Ownership 99.38% directly and indirectly through Norgener S.A. and Sociedad Eléctrica Santiago SpA. ALTO MAIPO SPA 109 Regular Directors Daniel Stadelmann (2) Luis Carlos Valenzuela Roberto Junguito Luis Felipe Cerón (1) Elizabeth Hackenson Alternate Directors Federico Echavarría Alberto Zavala (9) Brian Miller Arminio Borjas (3) Annemarie Reynolds Chief Executive Officer Federico Echavarría Personnel* 7 administrative staff 15 executives 30 professional staff 38 technical staff Identification Type of company Limited liability stock company Chilean Taxpayer ID No.: Address: Rosario Norte No. 532, Piso 19, Las Condes, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Hydroelectric power generation; providing engineering services; transmission and distribution of electricity. AES CHIVOR S.A. (SOCIO GESTOR DE AES CHIVOR & CIA SCA E.S.P.) Identification Type of company Foreign corporation Address: Av. Calle 100 Nº Piso 9, Bogotá, Colombia Telephone: (57 1) Fax: (57 1) Capital and shares Paid-in capital US$ 128,577,301 Subscribed and paid shares 6,320,160 Subscribed and paid shares; 134,575 shares subscribed and pending payment

110 Information on Related Companies 110 Ownership 60% indirectly through Norgener SpA. President Daniel Stadelmann (2) Regular Directors Luis Felipe Cerón (1) Daniel Stadelmann (2) Alejandro Rivera Nicolás Caussade Alternate Directors Vicente Javier Giorgio (4) Alberto Zavala (9) Anna Gretchina Juan Esteban Poblete Chief Executive Officer Luis Knaak Quezada (8) Empresa Eléctrica Angamos S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: K Address: Rosario Norte No. 532, Piso 19, Las Condes, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Generation, transmission, purchase, sale, and distribution of electricity or any other kind of energy, anywhere in the country or the world. Empresa Eléctrica Campiche S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: Address: Rosario Norte 532 piso 19 Las Condes, Santiago, Chile Telephone: (56 2) Business activities Generation, transmission, sale, and distribution of electricity; extraction, distribution, and exploitation of fuels. Capital and shares Paid-in capital US$8,669,066 Shares issued and paid 522,974,841 Ownership 100% directly and indirectly through Inversiones Nueva Ventanas S.A. President Vicente Javier Giorgio (4) Chief Executive Officer Luis Knaak Quezada (8) Capital and shares Paid-in capital US$ 326,869, Shares issued and paid 22,150,749,834 Ownership 100% directly and indirectly through Inversiones Nueva Ventanas S.A. President Ricardo Falú (5) Chief Executive Officer Vicente Javier Giorgio (4) Directors Ricardo Falú (5) Vicente Javier Giorgio (4) Osvaldo Ledezma (6) Empresa Eléctrica Cochrane SpA Identification Type of company: Limited liability stock company Chilean Taxpayer ID No.: Address: Rosario Norte No. 532, Piso 19, Las Condes, Santiago, Chile Telephone: (56 2) Directors Ricardo Falú (5) Vicente Javier Giorgio (4) Luis Knaak Quezada (8) Personnel* Technical and Administrative staff: 60 Professional staff: 45 Executives: 1 Business activities Generation of energy; engineering services; transmission and distribution of electricity.

111 Capital and shares Paid-in capital US$ 173,413,746 Subscribed and paid shares 257,163,745 Ownership 60% indirectly through Inversiones Nueva Ventanas S.A. President Ricardo Falú (5) Regular Directors Luis Felipe Cerón (1) Ricardo Falú (5) Masao Ikeya Toshiro Shimazaki Luis Knaak Quezada (8)* Alternate Directors Vicente Javier Giorgio (4) Alberto Zavala (9) Takao Fujii Montserrat Galimany Valerie Barnich (7) Chief Executive Officer Luis Knaak Quezada (8) Empresa Eléctrica GUACOLDA S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: Address: Apoquindo No. 3885, piso 10 Las Condes, Santiago, Chile Telephone:(56 2) Fax: (56 2) Business activities Exploitation, generation, transmission, purchase, distribution, and sale of electricity; provision of port and pier, engineering, and other services. Capital and shares Paid-in capital MUS$343,160, President Jorge Rodríguez Grossi Regular Directors Luis Felipe Cerón (1) Daniel Stadelmann (2) Vicente Javier Giorgio (4) Jonathan Bram Thomas Frazier Randy Robertson Alternate Directors Alberto Zavala (9) Juan Ricardo Inostroza (10) Luis Knaak Quezada (8) Churcri Hjeily Patricio Chico Roberto Callahan Chief Executive Officer Vicente Javier Giorgio(4) Empresa Eléctrica VENTANAS S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: Address: Rosario Norte No. 532, Piso 19, Las Condes, Santiago, Chile Telephone: (56 2) Business activities Generation, transmission, purchase, sale, and distribution of electricity or any other kind of energy, anywhere in the country or the world; extraction, distribution, sale, and exploitation, in any way, of solid, liquid, and gaseous fuels; sale and provision of engineering-type maintenance and repair services; lease, construction, or acquisition of piers or ports and their exploitation, in any way; and all other productive and commercial activities that are complementary to these business activities. Capital and shares Paid-in capital US$ 29,553,528 Subscribed and paid shares 39,719,916, Shares issued and paid 217,691,224 Ownership 50.01% Ownership 100% directly and indirectly through Inversiones Nueva Ventanas S.A. President Vicente Javier Giorgio (4) * Luis Knaak Quezada resigned on March 27, 2015 and was replaced by Elizabeth Hackemson.

112 Information on Related Companies 112 Directors Vicente Javier Giorgio (4) Luis Knaak Quezada(8) Ricardo Falú(5) Energen S.A. Chief Executive Officer Luis Knaak Quezada(8) Identification Type of company: Corporation Address: Reconquista 336, Piso 3, Oficina GG, Ciudad Autónoma de Buenos Aires C1003ABH, Argentina Telephone: (54 11) Business activities Wholesale purchase and sale of electricity generated by and to be used by third parties; import, export, consignment, brokerage, and sale of electricity in Argentina and/or in other countries; any type of business and/or activity related to electricity generation, transmission, and distribution; fuel sales of any kind. Capital and shares Paid-in capital AR$51,710 (US$21,000) Shares issued and paid 51,710 Ownership 94% directly and 6% indirectly through Gener Argentina S.A. President Martín Genesio Regular Directors Patricio Testorelli Vicente Javier Giorgio (4) Alternate Director Emiliano Chaparro Chief Executive Officer Martín Genesio Gasoducto Gasandes S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: Address: Avenida Chena 11650, Parque Industrial Puerta Sur, San Bernardo, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Transporting natural gas and investing in everything related to natural gas services in Chile or in other countries, on its own behalf, in association with, or on behalf of third parties, with the ability to apply for the concessions and permits needed for these purposes. May take part in any kind of business or activity directly or indirectly related to its line of business, including but not limited to: establishing, operating, exploiting, handling, and using natural gas transportation facilities or networks; separating and processing natural gas liquids; the engineering and technical services necessary for pipelines or ducts; administering the construction of pipes or ducts; and, in general, all of the services or activities connected with transporting, marketing, storing, or processing natural gas. Capital and shares - Capital issued US$ 16,264,000 Subscribed and paid shares 172,800 Ownership 13% President Hugo Antranik Eurkirian Regular Directors Hugo Antranik Eurkirian Santiago Marfort Matias Brea Emilio Daneri Victor Turpaud Fernandéz Francisco Gazmuri Klaus Lührmann Poblete Osvaldo Edezma Santiago Garcia Mira Alternative Directors Néstor Raffaeli Fernand Ketchian José Rolandi Bernardo Andrews

113 Gasoducto Gasandes Argentina S.A. Identification Type of company: Foreign corporation Address: Bonpland 1745, Ciudad Autónoma de Buenos Aires, Argentina Telephone: (54 11) Fax: (54 11) Business activities Natural gas transportation. Capital and shares Paid-in capital AR$83,467,000 (US$ 19,393,000) Subscribed and paid shares 83,467,000 Ownership: 13% Directors Matías María Brea Emilio Daneri Conte-Grand Víctor Turpad Fernández Santiago José García Mira Osvaldo Ledezma (6) Matías Pérez Cruz Eduardo Hugo Antranik Eurnekian Santiago Marfort Klaus Richard Luhrmann Poblete gener Argentina S.A. Identification Type of company: Foreign corporation Address: Reconquista 336, Piso 3, Oficina GG, Ciudad Autónoma de Buenos Aires C1003ABH, Argentina Business activities Financial and investment transactions on its own or others behalf, including granting or taking out loans; capital contributions; purchase and sale of shares, debentures, negotiable debt instruments, transferable securities, and commercial papers; taking part directly or through other controlled or related companies in bid(s) for shares of companies whose assets are hydraulic or thermal plants that have not yet been privatized by the Argentine government or develop other projects in the Argentine power industry. Capital and shares Paid-in capital AR$544,443,672 (US$ 224,928,640) Subscribed and paid shares 544,443,672 Ownership 92.0% directly and 7.96% indirectly through Norgener SpA President Martín Genesio Regular Directors Patricio Testorelli Vicente Javier Giorgio (4) Alternate Directors Emiliano Chaparro Gener Blue Water Limited Chief Executive Officer Martín Genesio Identification Type of company: Foreign corporation Address: P.O. Box 309, Ugland House Grand Cayman KY1-1104, Cayman Islands Telephone: (1 345) Fax: (1 345) Business activities Any line of business, may conduct all types of business activities and investments. 113 Telephone (54 11) Capital and shares Paid-in capital US$ 24,165,943.97

114 Information on Related Companies 114 Ownership 100% Directors Ricardo Falú (5) Vicente Javier Giorgio (4) Alberto Zavala (9) Genergia Power LTD. Identification Type of company: Foreign limited liability corporation Address: P.O. Box 309, Ugland House Grand Cayman KY1-1104, Cayman Islands Telephone: (1 345) Fax: (1 345) Business activities Investments in South America. Capital and shares Paid-in capital US$ 22,448,116 Ownership 100% Capital and shares Paid-in capital US$ 20,613,514 Subscribed and paid shares 2,488,637 Ownership 99.99% indirectly through Genergia Power Ltd. President Vicente Javier Giorgio(4) Directors Ricardo Falú (5) Vicente Javier Giorgio (4) Osvaldo Ledezma (6) InterAndes S.A. Chief Executive Officer Cristián Antúnez (11) Identification Type of company: Corporation Address: Reconquista 336, Piso 3, Oficina GG, Ciudad Autónoma de Buenos Aires C1003ABH, Argentina Telephone: (54 387) Fax: (54 387) Directors Ricardo Falú (5) Vicente Javier Giorgio (4) Alberto Zavala (9) Genergía S.A. Identification Type of company: Close corporation Chilean Taxpayer ID No.: Address: Rosario Norte No.532, Piso 19, Las Condes, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Investments, engineering consulting services. Business activities Building, operating, and/or maintaining power transmission lines and systems of any voltage; transmitting power of any voltage within Argentina or across its borders; and generating, selling, exporting, and importing electricity. Capital and shares Paid-in capital AR$ 135,365,996 (US$ 55,876,946) Subscribed and paid shares 135,365,996 Ownership 13% directly and 87% indirectly through Gener Argentina S.A. resident Martín Genesio

115 Regular Directors Patricio Testorelli Vicente Javier Giorgio (4) Alternate Director Emiliano Chaparro Chief Executive Officer Martín Genesio Inversiones Nueva Ventanas Spa. Identification Type of company: Limited liability stock company Chilean Taxpayer ID No.: Address: Rosario Norte No. 532, Piso 19 Las Condes, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Investments in all types of assets movable and immovable, tangible and intangible; ownership interest in other companies. Capital and shares Paid-in capital US$ 373,003,211 Subscribed and paid shares 261,660,937,852 Ownership 100% directly and indirectly through Norgener SpA Managing Partner Norgener SpA Chief Executive Officer Vicente Javier Giorgio(4) Inversiones Termoenergia de Chile Limitada Business activities All types of energy projects: generation, transmission, marketing, and purchase and sale of electricity, natural gas, and all types of energy, on its own or others behalf. Capital Paid-in capital US$24,165,944 Ownership 99.99% indirectly through Gener Blue Water Ltd. Norgener SpA. Identification Type of company: Limited liability stock company Chilean Taxpayer ID No.: Address: Jorge Hirmas 2960, Renca, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Electricity generation, transmission, and sales. Capital and shares Paid-in capital US$324,167, Subscribed and paid shares 2,859,166,629 Ownership 99.99% directly Managing Partner AES Gener S.A. 115 Identification Type of company: Limited liability company Chilean Taxpayer ID No.: Address: Rosario Norte No. 532, Piso 19 Las Condes, Santiago, Chile Telephone: (56 2) Fax: (56 2) Chief Executive Officer Vicente Javier Giorgio (4)

116 Information on Related Companies 116 Sociedad Eléctrica Santiago SPA. Identification Type of company: Limited liability stock company Chilean Taxpayer ID No.: Address: Jorge Hirmas 2964, Renca, Santiago, Chile Telephone: (56 2) Fax: (56 2) Business activities Exploitation, generation, transmission, purchase, distribution, and sale of electricity or any other type of energy; sale of fuels; engineering services. Ownership 8.82% directly and 91.18% indirectly through Gener Argentina S.A. President Martín José Genesio Regular Directors Patricio Testorelli Emiliano Chaparro Alternate Director Vicente Javier Giorgio (4) Chief Executive Officer Martín Genesio Personnel* Technical and Administrative staff: 34 Professional staff: 15 Executives: 2 Capital and shares Paid-in capital US$247,765,685 Subscribed and paid shares 125,308,749 Ownership 100% directly Managing Partner AES Gener S.A. Chief Executive Officer Carlos Moraga Personnel* Technical and Administrative staff: 44 Professional staff: 28 AES Gener S.A. s business relations with its related companies are governed by contracts that are currently in force. Their effects are presented in the Financial Statements. AES Gener S.A. executives do not receive remunerations for serving as directors of related companies. The information on subsidiaries whose corporate capital is expressed in a foreign currency other than the U.S. dollar is presented in this section in U.S. dollars using the exchange rate in effect on December 31, TermoAndes S.A. Identification Type of company: Sociedad Anónima Address: Reconquista 336, Piso 3, Oficina GG, Ciudad Autónoma de Buenos Aires C1003ABH, Argentina Telephone: (54 387) Fax: (54 387) Business activities Production, sales, export, and import of electricity, on its own or others behalf. Capital and shares Paid-in capital AR$ 581,869,516 (US$ 299,833,447) Shares subscribed and paid 581,869,516 (1) Chief Executive Officer of AES Gener S.A. (2) Chief Financial Officer of AES Gener S.A. until December 31, (3) Director of AES Gener S.A. (4) Chief Operations Officer of AES Gener S.A. (5) Chief Financial Officer of AES Gener S.A. as of January 2, (6) Environmental Director 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) Legal Counsel of AES Gener S.A. (10) Commercial Director of AES Gener S.A. (11 Assistant Supply Chain Manager of AES Gener S.A. (12 Equipment Manager of AES Gener S.A. (13) CIO and Senior Vice President of Global Business Services, AES Corp *Personnel from related companies whose results are consolidated with those of AES Gener and that have hired personnel.

117 ADDRESSES AND TELEPHONE NUMBERS OF POWER PLANTS Angamos Plant 7ª Industrial No esquina Avda. Longitudinal Barrio Industrial Portuario de Mejillones, Mejillones, Chile Telephone: (56 55) San Francisco de Mostazal Plant Longitudinal Sur Km. 63, San Francisco de Mostazal, Chile Telephone: (56 72) Santa Lidia Plant Camino a Yungay s/n Km.7 Cabrero, Chile Telephone: (56 43) Alfalfal Plant Ruta G-345 Km. 23, San José de Maipo, Chile Telephone: (56 2) Chivor Plant Chivor Hydroelectric Plant Santa María, Boyacá, Colombia Telephone: (57 1) Guacolda Plant Isla Huasco s/n, Huasco, Chile Telephone: (56 51) Laguna Verde Plant Camino Principal s/n, Valparaíso, Chile Telephone: (56 32) Cochrane Project Puerto 1 No.7705 Barrio Industrial Portuario Mejillones, Chile Telephone: (56 55) Alto Maipo Project Ruta G-345 Km. 14 (formerly the Maitenes camp) San José de Maipo, Chile Telephone: (56 55) Renca Administrative Building Jorge Hirmas 2960 Renca, Chile Telephone: (56 2) TermoAndes Plant Ruta Nacional No 9 - Km (4432) Cobos-Salta, Argentina Telephone: (56 2) Volcán Plant Ruta G- 465, km. 3, San José Maipo, Chile Telephone: (56 2) Edificio Matta Rosario Norte 532, piso 19, Las Condes Santiago, Chile Telephone: (56 2) Laja Plant Camino a Laja Km. 1.5, Cabrero, Chile Telephone: (56 43) Los Vientos Plant Ruta 5 Norte, Km. 91 Llay Llay, Chile Telephone: (56 2) Maitenes Plant Ruta G-345 Km. 14, San José de Maipo, Chile Telephone: (56 2) Norgener Plant Balmaceda s/n, Tocopilla, Chile Telephone: (56 55) Ventanas Plant Camino Costero s/n, Puchuncaví, Chile Telephone: (56 32) Queltehues Plant Ruta G-465, Km. 3, San José de Maipo, Chile Telephone: (56 2) Renca and Nueva Renca Plants Jorge Hirmas 2964 Renca, Chile Telephone: (56 2)

118 118 financial statements AES Gener S.A.

119 119 08

120 Independent Auditors Report Independent Auditors Report To the Shareholders and Directors of AES Gener S.A. We have conducted an audit of the attached consolidated financial statements of AES Gener S.A. and its subsidiaries, consisting of the consolidated statements of financial situation as of December 31, 2014 and the corresponding consolidated statements of comprehensive income, changes in equity, and cash flow for the year ended on the same date, as well as the notes to the consolidated financial statements. 120 The Management s responsibility for the financial statements: The Management is responsible for preparing these consolidated financial statements and for presenting them with explanatory notes, per the instructions and standards for preparing and presenting financial information issued by the Superintendencia de Valores y Seguros (SVS, Chilean Securities and Insurance Commission) as described in Note 2 of the consolidated financial statements. The Management is also responsible for designing, implementing, and maintaining the pertinent internal control for the preparation and presentation, with notes, of the consolidated financial statements in such a way that they are free from material misrepresentation, whether due to fraud or to error. The auditor s responsibility: Our responsibility consists of expressing an opinion on these consolidated financial statements based on our audit. We have conducted our audit using generally accepted auditing standards in Chile. These practices require that we plan and carry out our work in order to achieve a reasonable degree of certainty that the consolidated financial statements are free from material misrepresentation. An audit consists of conducting procedures to obtain auditing evidence on the amounts and disclosures presented in the consolidated financial statements. The procedures are selected at the discretion of the auditor, including the assessment of the risk of material misrepresentation in the consolidated financial statements, whether due to fraud or to error. When assessing these risks, the auditor considers the pertinent internal controls used in the preparation and presentation, with notes, of the entity s consolidated financial statements in order to design auditing procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. Therefore, we do not express such an opinion. An audit also includes an assessment of the adequacy of the accounting policies used and the reasonableness of the significant accounting estimates made by the Management, as well as an assessment of the overall presentation of the consolidated financial statements. We believe that the auditing evidence that we have obtained is sufficient and adequate to provide us with a basis for our auditing opinion.

121 Report on regulatory accounting: In our opinion, the aforementioned consolidated financial statements fairly present, in all material respects, the financial situation of AES Gener S.A. and its subsidiaries as of December 31, 2014, and the results of its operations and its cash flow for the year ended on that date, in accordance with the instructions and standards for preparing and presenting financial information issued by the Superintendencia de Valores y Seguros described in Note 2. Basis of Accounting As stated in Note 2 of these consolidated financial statements, by virtue of the power vested in it, the Superintendencia de Valores y Seguros issued Official Bulletin 856 on October 17, 2014, instructing the oversight agencies to record against equity in the respective fiscal year any differences between deferred tax assets and liabilities that may arise as a direct result of the increase in corporate income tax imposed under Law 20,780, which changes the framework for preparing and presenting financial information in effect until that time since the previous framework (International Financial Reporting Standards) were to be adopted fully, explicitly, and unreservedly. The quantification of this change in accounting framework as of December 31, 2014 and for the year ended on that date is also described in Note 2. Our opinion is not affected by this matter. Other matters: 121 We had previously audited the attached consolidated financial statements of AES Gener S.A. and its subsidiaries for the year ended December 31, 2013 using generally accepted auditing standards in Chile. In our February 25, 2014 report, we issued an unmodified audit report on those consolidated financial statements. Oscar Gálvez R. EY LTDA. Santiago, February 25, 2015

122 Classified Consolidated Statements of Financial Position As of December and 2013 (In thousands of US dollars) ASSEETS Note December 31, 2014 December 31, 2013 MUS$ MUS$ CURRENT ASSETS Cash and Cash Equivalents 8 228, ,516 Other Current Financial Assets 9 7,205 25,462 Other Current Non-Financial Assets 11 18,359 15,263 Trade and Other Receivables , ,421 Related Party Receivables 13 3,631 1,680 Inventory , ,760 Income taxes Receivable 15 43,794 23,346 Total Current Assets 803,096 1,216, NON-CURRENT ASSETS Other Non-Current Financial Assets 9 39,429 83,377 Other Non-Current Non-Financial Assets 11 38,367 40,614 Trade and Other Receivables 12 50,632 1,402 Investments in Associates , ,759 Intangible Assets 17 53,308 48,765 Goodwill 17 7,309 7,309 Property, Plant and Equipment 18 5,432,043 4,871,754 Deferred Taxes 15 69, Total Non-Current Assets 6,033,801 5,375,454 TOTAL ASSETS 6,836,897 6,591,902 The accompanying notes form an integral part of these consolidated financial statements.

123 LIABILITIES AND EQUITY Note December 31, 2014 December 31, 2013 ThUS$ ThUS$ CURRENT LIABILITIES Other Current Financial Liabilities , ,135 Trade and Other Payables , ,882 Related Party Payables 13 28,256 17,517 Provisions 21 3,541 2,624 Income taxes Payable 15 40,451 13,266 Employee Benefits 22 2,684 1,244 Other Current Non-Financial Liabilities 23 36,952 38,581 Total Current Liabilities 710, ,249 NON-CURRENT LIABILITIES Other Non-Current Financial Liabilities 19 2,869,307 2,425,982 Trade and Other Payables 20 46,223 55,318 Non-Current Related Party Payables ,169 47,019 Provisions ,741 65,892 Deferred Taxes , ,144 Employee Benefits 22 34,320 36,505 Other Non-Current Non-Financial Liabilities 23 10,928 14,827 Total Non-Current Liabilities 3,761,689 3,062,687 TOTAL LIABILITIES 4,472,538 3,954, EQUITY Issued Capital 24 2,052,076 1,901,720 Retained Earnings , ,818 Share Premium 49,864 49,908 Other Components of Equity , ,817 Other Reserves 24 (372,282) (169,907) Equity Attributable to Shareholders of Parent 2,312,552 2,543,356 Non-Controlling Interests 51,807 93,610 Total Equity 2,364,359 2,636,966 TOTAL EQUITY AND LIABILITIES 6,836,897 6,591,902 The accompanying notes form an integral part of these consolidated financial statements.

124 Consolidated Statements of Comprehensive Income For the years ended December 31, 2014 and 2013 (In thousands US dollars, except for earnings (losses) per share shown in dollars) 124 STATEMENT OF COMPREHENSIVE INCOME Note December 31, 2014 December 31, 2013 ThUS$ ThUS$ Statement of Income Net Income Operating Revenues 25 2,328,406 2,244,790 Cost of Sales 26 (1,792,020) (1,734,711) Gross Profit 536, ,079 Other Operating Income 1, Administrative Expenses 26 (93,322) (113,366) Other Operating Expenses 26 (1,128) (4,608) Other Income (Loss) 27 (20,187) 5,239 Finance Income 28 10,490 8,962 Finance Expenses 28 (151,532) (123,906) Equity Participation in Net Income of Associates 16 38,781 38,526 Foreign Currency Exchange Differences 28 (66,435) (38,856) Income before Taxes 254, ,042 Income Tax Expense 15 (79,546) (84,525) Net Income from Continuing Operations 174, ,517 Net Income from Discontinued Operations - - Net Income 174, ,517 Income Attributable to: Income Attributable to Shareholders of Parent 183, ,321 Income Attributable to Non-Controlling Interests (8,755) (2,804) Net Income 174, ,517 Earnings per Share Basic Earnings per Share Basic Earnings per Share from Continuing Operations Basic Earnings per Share from Discontinued Operations - - Basic Earnings per Share Diluted Earnings per Share Diluted Earnings per Share from Continuing Operations Diluted Earnings per Share from Discontinued Operations - - Diluted Earnings per Share The accompanying notes form an integral part of these consolidated financial statements.

125 Accumulated STATEMENT OF COMPREHENSIVE INCOME December 31, 2014 December 2013 ThUS$ ThUS$ Net Income 174, ,517 Components of Other Comprehensive Income that not be Reclassified to Net Income, before Taxes Other Comprehensive Income from Actuarial Gains (Losses) on Defined Benefit Plant, before Taxes (4,686) 462 Other Comprehensive Income from investments in equity instruments, before Taxes Other Comprehensive Income that will not be Reclassified to Net Income, before Taxes (4,363) 462 Components of Other Comprehensive Income that will be Reclassified to Net Income, before Taxes Income (Loss) from Foreign Currency Traslation Adjustments (85,699) (42,119) Unrealized Income (Loss) for Cash Flow Hedges (255,101) 115,340 Other Comprehensive Income from Associates and Joint Arrangements accounted for under Equity Method 2,448 7,080 Other Comprehensive Income that will be Reclassified to Net Income, before Taxes (338,352) 80,301 Other Components of Other Comprehensive Income, before Taxes (342,715) 80,763 Income Tax Related to Components of Other Comprehensive Income that will not be Reclassified to Net Income Income Tax Related to Actuarial Gains (Losses) on Defined Benefit Plans 1, Income Tax Related to Components of Other Comprehensive Income that will not be Reclassified to Net Income 1, Income Tax Related to Cash Flow Hedges of Other Comprehensive Income that will be Reclassified to Net Income Income Tax Related to Cash Flow Hedges of Other Comprehensive Income 70,683 (23,218) Income Tax Related to Comprehensive Income that will be Reclassified to Net Income 70,683 (23,218) Income Tax Related to Other Components of Other Comprehensive Income 71,912 (23,038) Total Other Comprehensive Income (270,803) 57,725 Total Comprehensive Income (95,907) 256,242 Comprehensive Income Attributable to: Comprehensive Income Attributable to Shareholders of Parent (18,724) 248,484 Comprehensive Income Attributable to Non-Controlling Interest (77,183) 7,758 Total Comprehensive Income (95,907) 256,242 The accompanying notes form an integral part of these consolidated financial statements.

126 Consolidated Statements of Changes in Equity For the years ended December 31, 2014 and 2013 (In thousands of United States dollars) 126 Statement of Changes in Equity Issued Capital Share Premiun Others Components of Equity Foreign Currency Translation Reserve ThUS$ ThUS$ ThUS$ ThUS$ Opening Balance, January 1, ,901,720 49, ,817 31,261 Changes in Equity Comprehensive Income Net Income Other Comprehensive Income (85,699) Comprehensive Income Issued Capital 150,356 (44) Dividends Increases (Decreases) for Transfers and Other Changes Total Changes in Equity 150,356 (44) 974 (85,699) Ending Balance, December 31, ,052,076 49, ,791 (54,438) Statement of Changes in Equity Issued Capital Share Premium Other Components of Equity Foreign Currency Translation Reserve ThUS$ ThUS$ ThUS$ ThUS$ Opening Balance, January 1, ,901,720 49, ,859 73,380 Change in Equity Comprehensive Income Net Income Other Comprehensive Income (42,119) Comprehensive Income Dividends Increases (Decreases) for Tranfers and Other Changes Total Changes in Equity (42,119) Ending Balance, December 31, ,901,720 49, ,817 31,261 The accompanying notes form an integral part of these consolidated financial statements.

127 Other Comprehensive Income Cash Flow Hedge Reserve Defoned Benefit Plan Reserve Others Miscellaneous Reserves Total Others Comprehensive Income Retained Earnings Equity Attributable to Shareholders of Parent Equity Attributable to Non-Controlling Interests Total Equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ (87,059) (7,499) (106,610) (169,907) 537,818 2,543,356 93,610 2,636, , ,651 (8,755) 174,896 (113,542) (3,457) 323 (202,375) - (202,375) (68,428) (270,803) (18,724) (77,183) (95,907) 150, , (232,624) (232,624) - (232,624) (130,742) (129,768) 35,380 (94,388) (113,542) (3,457) 323 (202,375) (179,715) (230,804) (41,803) (272,607) (200,601) (10,956) (106,287) (372,282) 358,103 2,312,552 51,807 2,364,359 Other Comprehensive Income Cash Flow Hedge Reserve Defined Benefit Plan Reserve OTher Miscellaneous Reserves Total Other Comprehensive Income Retained Earnings Equity Attributable to Shareholders of Parent Equity Attributable to Non-Controlling Interests Total Equity ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ MUS$ (175,699) (8,141) (132,790) (243,250) 546,430 2,477,667 3,354 2,481, , ,321 (2,804) 198,517 88, ,163-47,163 10,562 57, ,484 7, , (209,933) (209,933) - (209,933) ,180 26,180-27,138 82, ,636 88, ,180 73,343 (8,612) 65,689 90, ,945 (87,059) (7,499) (106,610) (169,907) 537,818 2,543,356 93,610 2,636,966 The accompanying notes form an integral part of these consolidated financial statements.

128 Consolidated Statements of Cash Flows (Direct Method) For the years ended December 31, 2014 and 2013 (In thousands of United States dollars) 128 STATEMENT OF CASH FLOWS - DIRECT METHOD Cash Flows Provided by (Usedin) Operating Activities December 31, 2014 December 31, 2013 ThUS$ Th US$ Classes of receipts from Operating Activities: Receipts from Sales of Goods and Services 2,783,513 2,886,910 Other receipts from Operating Activities 52,074 14,851 Classes of payments Payments to Suppliers for Goods and Service (1,997,217) (2,240,386) Payments to Employees (68,819) (69,759) Other Payments for Operating Activities (57,587) (17,296) Dividends Paid (230,434) (209,932) Dividends Received 736 1,996 Interest Paid (162,337) (111,475) Interest Received 7,330 8,938 Income Taxes Paid (38,566) (104,018) Other Cash Outflows (31,065) (19,467) Net Cash Flows Provied by Operating Activities 257, ,362 Cash Flows Provided by (Used in) Investing Activities Proceeds from loss of control of subsidiaries or other businesses 731,180 - Cash Flow used to obtain control of subsidiaries of other bussinesses (728,000) - Proceeds from sales of equity or debt instruments of other entities 26,019 - Proceeds from sales of Property, Plant an Equipment Purchases of Property, Plant and Equipment (829,489) (531,614) Purchases of Intangible Assets (2,216) (6,139) Purchases of Other Assets (73,313) - Other Cash Inflows 3, Net Cash Flows Used in Investing Activities (871,786) (536,422) Cash Flows Provied by (Used in) Financing Activities Proceeds from Share Issuance 184, ,695 Proceeds from Long-Term Borrowings 1,234, ,619 Proceeds from Short-Term Borrowings 700,000 - Loan Payments (1,884,001) (32,435) Payment of Finance Lease Obligations (2,046) (2,042) Other Cash Outflows (70,182) (50,636) Net Cash Flows Used in Financing Activities 162, ,201 Net Cash and Cash Equivalent Decrease, before Foreign Exchange Difference (451,317) 334,141 Net Foreign Exchange Differences on Cash and Cash Equivalents Net Foreign Exchange Differences on Cash and Cash Equivalents (27,508) (23,829) Decrease in Cash and Cash Equivalents (478,825) 310,312 Cash and Cash Equivalents at Beginning of Period 707, ,204 Cash and Cash Equivalents at End of Period 228, ,516 The accompanying notes form an integral part of these consolidated financial statements.

129 SIGNING AND STATEMENT OF RESPONSIBILITY As required by the regulations of the Superintendencia de Valores y Seguros (SVS, the Chilean Securities and Insurance Authority) this AES Gener S.A. annual report has been approved and signed by the Company s Chief Executive Officer and the Directors listed below, who comprise a majority of the AES Gener S.A. Board of Directors as it stands as of the date this report was published. They assume responsibility, under oath, for the accuracy of the information contained in this report. 129 Andrés Gluski Weilert Chairman of the Board Passport: Citizen of Venezuela Arminio Borjas Director Passport: DO Citizen of Venezuela Radovan Razmilic Director Chilean ID No.: Citizen of Chile Iván Díaz-Molina Director Chilean ID No.: Citizen of Argentina Luis Felipe Cerón Cerón Chief Executive Officer Chilean ID No.: Citizen of Chile

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