2. AES Brasil Group
In Brazil since 1997
Operational Figures:
- Customers units: 7.7 million
- Population served: 20.2 million
- Distributed Energy: 54.4 TWh
- Generation Capacity: 3.298 MW
- Generated Energy : 14.270 GWh
7.6 thousand AES Brasil People
Investments 1998-2012: R$ 9.4 billion
Solid corporate governance and
sustainability practices
Safety our #1 Value
Disco
Genco
Service Provider
2
4. Mission & visions
Mission
Improving lives and promoting development by providing safe,
reliable and sustainable energy solutions
Visions
Be a leader in operational and financial management in the Brazilian
energy generation sector and expand installed capacity
Be the best distributors in Brazil
4
5. Sustainability - Corporate Social Responsibility:
annual investments of R$ 148 million
Development and transformation of communities
“Casa de Cultura e Cidadania” Project - Offers courses and activities in culture and sports. Directly benefits
approximately 5.6 thousand children and teenagers and indirectly 292 thousand people in 7 units located within
AES Brazil companies’ areas of operation
Children educational development
“Centros Educacionais Luz e Lápis” Project - Two units in São Paulo attending 300 children from
1 to 6 years old in condition of social vulnerability
Education on safety and efficiency in energy consumption
“AES Eletropaulo nas Escolas” Project - Education about safe and efficient use of energy to 4.5
thousand teachers and 404 thousand students from 900 public schools. The actions include
recreational activities offered in adapted trucks.
Converting consumers to clients
Developed for grid connection regularization. Between 2004 and 2012, more than 500
thousand families in low income communities were benefited from better energy supply
conditions and social inclusion.
5
6. Shareholding structure
BNDES
AES Corp
C 50.00% + 1 share
P 0.00%
T 46.15%
C 50.00% - 1 share
P 100%
T 53.85%
Cia. Brasiliana
de Energia
T 99.70%
AES Sul
C 99.99%
T 99.99%
AES
Serviços TC
C 99.99%
T 99.99%
C 71.35%
P 32.34%
T 52.55%
AES
Uruguaiana
AES
Tietê
C 76.45%
P 7.38%
T 34.87%
AES
Eletropaulo
C = Common Shares
P = Preferred Shares
T = Total
6
7. AES Tietê and AES Eletropaulo are listed
in BM&FBovespa
¹
¹ Free Float
Others²
Market Cap³
16.1%
19.2%
56.2%
8.5%
US$ 0.6 bi
24.2%
28.3%
39.5%
8.0%
US$ 3.9 bi
1 - Parent companies, AES Corp and BNDES, have similar voting capital on each of the Companies: approx 35.9% on AES Eletropaulo and 32.9% on AES Tietê
2 - Includes Federal Government and Eletrobrás shares in AES Eletropaulo and AES Tietê, respectively
3 - Base: 05/08/2013. Considers preferred shares for AES Eletropaulo and preferred and common shares for AES Tietê
7
8. AES Brasil among the top five in
the electric sector
Ebitda – 2012 (R$ billion)
3.9
3.6
3.1
2.6
2.5
2.1
1.6
1.5
1.3
0.8
CPFL
Cemig
Tractebel
AES Brasil Neoenergia
Cesp
Copel
Light
EDP
0.7
Duke
0.6
Coelce
-0.3
Equatorial
Celesc
Net income – 2012 (R$ billion)
3.8
1.6
Cemig
CPFL
1.5
1.3
1.1
Tractebel Neoenergia AES Brasil
Source: Companies’ financial reports
0.7
Copel
0.4
0.4
0.3
0.3
0.1
0.1
-0.3
Light
Coelce
EDP
Duke
Cesp
Equatorial
Celesc
8
9. AES Tietê is the 3rd largest private
generator in Brazil
Generation installed capacity (MW) - 20121
Main privately held Companies
CPFL
2,4%
AES Tietê
2,2%
ENDESA
Eletronuclear
0,8%
Eletrosul
2,8%
0,5%
Light DUKE CGTEE
1,7%
0,8%
0,7%
EDP
1,5%
Neoenergia
1,2%
AES
Tietê:
3rd
largest
among
private
generation companies
Tractebel
6%
Petrobrás
5%
Demais
28,9%
Copel
4%
Approximately 78% of country’s generation
installed capacity is state-owned2
Cemig
6%
18 GW of hydro capacity under construction:
Itaipu
6%
CESP
6%
CHESF
9%
Eletronorte
7%
Furnas
8%
– Santo Antonio and Jirau (Madeira River): 7 GW
– Belo Monte (Xingu River): 11 GW
Total Installed Capacity: 123 GW
Sources: ANEEL – Generation Data Source “BIG” (March, 2012) and Companies websites
2- Source: Banks’ reports
9
10. AES Brasil is among the top 3 largest
distribution players in Brazil
Consumers – Dec/2011
13%
30%
12%
AES Brasil
AES Brasil
12%
5%
CPFL Energia
CPFL Energia
Cemig
CEMIG
7%
63
distribution
companies
in
Brazil
distributing 430 TWh in 2011
AES Brasil is one of the largest electricity
distribution group in Brazil:
16%
7%
Energy
distributed
(TWh)
% of the
Brazilian
market
AES Eletropaulo
45
10.5
AES Sul
8.6
2.0
Neo Energia
Neoenergia
Consumption (GWh) - 2011
13%
Copel
Copel
12%
Light
Light
52%
EDP
EDP
11%
Outros
Outros
7%
AES Eletropaulo is the largest distribution
company in Brazil in terms of energy
distributed
6%
6%
6%
Source: Brazilian Association of Electricity Distributors (ABRADEE), 2011 and EPE (Energetic Research Company)
10
11.
12. AES Tietê overview
Generation facilities
12 hydroelectric plants in São Paulo
30-year concession expiring in 2029
Installed capacity of 2,658 MW, with physical guarantee1
of 1,278 MW average
Physical guarantee contracted with AES Eletropaulo (11
GWh)
through
Dec,
2015
(~R$183/MWh,
annually
adjusted by inflation)
369 employees as of March, 2013
Company listed at BM&Fbovespa
Rating:
Moody's
1 - Amount of energy allowed to be long term contracted
National
Aa1
International
Baa3
12
13. Generated energy shows high
operational availability
1Q13 Generated energy by power plant (MW average1)
Generated energy (MW avarage1)
125%
125%
124%
124%
127%
127%
130%
130%
4%
102%
102%
2%3%
Agua Vermelha
Nova Avanhandava
6%
5%
5%
Agua Vermelha
5% 3%
Nova Avanhandava
8%
44%
Ibitinga
Ibitinga
5%
1.753
1,753
1.599
1,599
1.582
1,582
1.629
1,629
2011
2011
Generation - Mwavg
Geração - MW médio
2012
2012
1Q12
1T12
1Q13
1T13
61%
12%
Bariri
Barra Bonita
Barra Bonita
Euclides da Cunha
11%
2010
2010
Bariri
9%
1.480
1,480
Promissão
Promissão
17%
Euclides da
Demais Usinas* Cunha
Other Power Plants *
Generation/Physical guarantee
Geração/Garantia física
In December 2012, AES Tietê was the first Latin American company to receive the PASS-55 certification of the
British Standards Institute, for its reliability and sustainability of assets
1 – Generated energy divided by the amount of hours
* Caconde, Limoeiro, Mogi and SHPPs
13
14. Hydrological conditions improving
and rationing is unlikely
Brazilian reservoir levels1 (%)
AES Tietê reservoirs levels (%)
100
93%
90
97%
80%
80
Max (%)
70
100%
91%
80%
62
55
60
46
50
40
100%
90%
38
30
20
10
0
Jan
Feb
Mar
Apr
May
Jun
Historical Data Since 2001
Jul
Aug
2001
Sep
Oct
2012
Nov
Dec
Caconde
A. Vermelha
2013
Apr-12
B. Bonita
Promissão
Apr-13
Thermal capacity available for dispatch: 14 GW vs. 4 GW in 2001
AES Tietê Q1 13 impact of R$ 115 million due to hydrological risk sharing
- 2013 estimated impact ranges from R$ 231 million to R$ 441 million
1 – Average reservoir levels of the National System (percent of maximum storage capacity)
14
15. System physical guarantee reduction resulted in
spot market exposure since September/2012
Allocation of physical guarantee for AES Tietê (MWm)
Monthly evolution of the spot price (R$/MWh)
414
375
376
340
320
161
89
77
76
280
72
260
215
-21
-42
-31
-32
-85
-108
-308
125
48
29
jan
Physical guarantee reduction
118
119
91
23
Secondery energy
183
181
193
feb
51
26
12
17
mar
apr
may
2011
32
23
20
jun
jul
aug
sep
37
21
2012
46
44
oct
nov
dec
2013
15
17. Investments in power plants
modernization
Investments (R$ million)
213
175
2013
139
major
investments
in
Nova
Avanhandava, Ibitinga and Agua Vermelha
19
power plants, that represent 71% of AES
4
Tietê capacity
213
156
13%
135
21
3
17
2011
2012
Investments
1- Small Hydro Power Plants
2013 (e)
27
1Q12
1Q13
New SHPPs¹
17
18. Growth projects
“Thermal São Paulo” Project (550 MW)
Natural gas combined cycle thermal plant
Previous license granted in Oct, 2011 valid for 5 years
Pending gas supply
Next steps: Obtain installation license
“Thermal Araraquara” Project (579 MW)
Natural gas combined cycle thermal plant
Purchase option acquired in March, 2012
Pending gas supply
Next steps: Obtain installation license
18
19. Contracting strategy: driven to free market
Clients portfolio evolution in 1Q13
265%
Assured Energy (1,278 MW avg)
259
Consolidated
portfolio
New client
portfolio
2012
2016
90
84
307
2T12
3T12
1Q13
1T13
320
32
2020
Antes
dez/2011
84
1T12
1Q12
1T12
4T12
MWavg
MWméd
Strategy post-2015: contract energy in the free market with large unregulated customers
- Currently serving 45 customers (307 MW) with 3-5 year contracts
- Current prices for delivery in 2016: $52-$57/MWh1 (annually adjusted for inflation) – driven by supply/demand
- 143 MWavg sold from 2016 onwards
1 - AES analysis
19
21. Steady earnings distribution on a
quarterly basis
Net income and dividend pay-out (R$ million)
117%
109%
108%
11%
11%
10%
737
742
2011
Net Income
Average dividends since 2006:
pay-out
R$ 741 million per year
901
-24%
706
246
2010
Average payout since 2006: 105%
845
25%
of
minimum
according to bylaws
2012
186
1Q12
1Q13
Yield PN
Payout
21
25. AES Eletropaulo overview
Concession area
Largest distribution company in Brazil in terms of energy
distribution
Serving 24 municipalities in the São Paulo Metropolitan area
Concession contract expire in 2028
Concession area with the highest GDP in Brazil (16,8% of
Brazilian GDP¹)
46 thousand kilometers of lines and 6.5 million consumption
units in a concession area of 4,526 km2
46 TWh distributed in 2012
6,168 employees as of March, 2013
Company listed at BM&FBovespa
Investment grade: Fitch
S&P
Moody’s
National
AA
AA-
Aa1
BBB-
BB
Baa3
International
1 – Source: IBGE, 2010.
25
26. Consumption evolution
Consumption by class1 – 1Q13 (%)
Total market1 (GWh)
9
15
23
43,345
7,911
45,102
45,567
8,284
7,987
38
31
19
2%
35,434
36,817
37,570
46%
11,401
11,156
9,250
2011
Captive Market
2012
37
2,092
1,906
2010
68%
9,309
1Q12
28
1Q13
Free Clients
Brasil
Residential
Commercial
AES Eletropaulo
Industrial
Others
State of São Paulo GDP growth 3.3% (5-year average)
- Expectation for 2013 3.0%, grows to 3.5% in 2014-2015
1 – Net of own consumption
26
27. Industrial class
Consumption of industrial class by activity1 –
AES Eletropaulo
Industrial class X Industrial production in
São Paulo state
15%
10%
5%
0%
Other
industries
51%
-5%
-10%
Economic crisis
Economic crisis
Economic recovery
Vehicles,
Chemical,
Rubber,
Plastics and
Metal
Products
49%
Industrial production SP (% 12 months)
1 – As of March, 2013.
Mar-13
Nov-12
Jul-12
Mar-12
Nov-11
Jul-11
Mar-11
Nov-10
Jul-10
Mar-10
Nov-09
Jul-09
Mar-09
Nov-08
Jul-08
Mar-08
Nov-07
Jul-07
-15%
Industrial (% 12 months)
27
28. Residential class
Residential class X Average income in São Paulo Metropolitan Area
4,800
4,300
3,800
3,300
Residential - GWh
Avg Real Income R$ - SP (Q -2*)
1
Residential Consumption x Real Income - São Paulo (Q-2*)
2,200
2,100
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,300
1,200
Residential consumption reflects
GDP per capita growth
2,800
Average growth of the residential
class (aggregate) in the last 5
years: 4.8%
2,300
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2007
2008
2009
2010
2011
2012
2013
Consumption per consumer (in kWh)
Consumption per residential
consumer: average growth of 1.5%
in the last 5 years
- 8.5%
258
Rationing
213
220
199
203
2005
223
228
229
2009
2010
234
236
2011
2012
207
2004
219
192
2000
2001
2002
2003
2006
2007
2008
1 - Two quarters of delay in relation to consumption
28
29. Investments focused on grid automation,
operational reliability and
system expansion
Investments breakdown (R$ million)
831
2013 investments plan:
35
739
22
substation repowering, adding 133 MVA
647
26
capacity to the system
29.7 km of new transmission lines
maintenance in over 5,200 km of
717
796
distribution grid
621
-21%
regularization of 75,000 illegal
184
7
177
2011
2012
Own Resources
2013(e)
1Q12
connections and replacement of 125,000
145
11
134
obsolete meters.
1Q13
Funded by the clients
29
30. SAIDI below regulatory reference
and in its lowest level since 2006
SAIDI¹ (last 12 months)
SAIDI1 (YTD)
8.67
9.32
8.68
8.49
8.67
10.09
-9%
9.32
10.60
10.36
8.35
9.57
8.32
10.60
11.86
2010
7th
2011
6th
DEC (horas)
2012
4th
8.68
1Q12
10.36
2009
Referência Aneel
SAIDI (hours)
2010
3.06
Jan-Apr 12
1Q13
3.36
Jan-Apr 13
2011
SAIDI (hours)
SAIDI Aneel Reference
ABRADEE ranking position among the 28 utilities with more than 500 thousand customers
1 - System Average Interruption Duration Index
Sources: ANEEL and AES Eletropaulo
30
31. SAIFI below regulatory reference
SAIFI¹ (last 12 months)
7.39
6.93
SAIFI1 (YTD)
6.87
6.87
6.64
7.87
5.46
5.45
4.65
5.09
7.39
3rd
2011
FEC (vezes)
4th
2012
3th
1Q12
-5%
4.60
6.17
2010
6.93
2009
SAIFI (times)
2010
1.68
Jan-Apr 13
5.45
1Q13
Referência Aneel
1.76
Jan-Apr 12
5.43
2011
FEC (vezes)
SAIFI Aneel Reference
ABRADEE ranking position among the 28 utilities with more than 500 thousand customers
1 - System Average Interruption Duration Index
Sources: Aneel and AES Eletropaulo
31
32. Losses level within regulatory threshold
Losses (last 12 months)
10.9
6.5
Regulatory Reference² - Total Losses (last 12 months)
10.5
10.4
10.4
10.1
6.5
6.1
6.4
6.1
10.6
4.4
4.0
4.1
4.0
2011
2012
1Q12
1Q13
9.8
9.4
2011/2012
2012/2013
2013/2014
2014/2015
4.0
2010
10.3
Non Technical Losses
Technical Losses ¹
1 – In January 2012, the Company improved the assessment of the technical losses.
2 – Values estimated by the Company to make them comparable to the reference for non-technical losses determined by the Aneel
32
33. Financial highlights
Net revenues (R$ million)
14,714
Ebitda (R$ million)
2,848
15,314
15,240
831
739
2,413
5,017
5,405
442
339
5,354
426
933
-14%
9,697
9,097
9,128
3,835
186
1,362
-57%
993
2,286
2010
2011
2012
1,648
3,283
1Q13
1,473
636
179
298
206
92
476
2,146
1Q12
145
2010
Net revenue ex-construction revenue
Deduction to Gross Revenue
Construction revenues
1 – Non recurring 2011 : Includes sale of AES Eletropaulo Telecom with a R$ 707 million impact on Ebitda.
2011
2012
1Q12
128
6
122
1Q13
Adjusted Ebitda
Non-recurring¹
Regulatory assets and liabilities
33
34. 17.1%
28.6%
2.8%
Average payout of 74% p.a. since 2006
1,572
Net
28.6%
income and dividend payout1 (R$ million)
17.1%
1,348
1,572
54.4%
365
17.1%
1,348
28.6%
358
358
25.0%
621
2.8% 350
25% of minimum
according to bylaws
55
Average payout
97
74% per year
229
29
Average dividends since 2006:
(121)
R$ 890 million per year (30)
1,572
1,348
621
350
365
2.8%
114.4%
365
640
358
586
621
350
640
55
586
640
586
229
(174)
2010
2011
2010
2012
2011
(174)
97
2010
55
229
(174)
2011
2012
218
29
97
(121) Adjusted Net Income
(30)
218
(121)
1Q12
2012
Adjusted Net Income
Adjusted
Non-recurring² Net Income
Non-recurring²
Regulatory assets assets and liabilities
Regulatory and liabilities
Yield PN Yield PN
1Q12
(1)
pay-out
since 2006:
218
(1)
1Q12
1Q13
29
Non-recurring²
(30)
1Q13
(1)
Regulatory assets and liabilities
1Q13
Yield PN
Pay-out
1 – Gross amount
2– Non recurring 2011 :Includes sale of AES Eletropaulo Telecom with a R$ 467 million impact on net income
34
35. Cost management excellence
Efficiency programs and results
PMSO¹ per customer (R$ million)
Started in 2007 and evolved from cost cutting to
207
business process transformation
- Strategic sourcing
178
- Shared services
- Process redesign
- IT tools implementation
2010-2012 cumulative P&L savings of R$ 331 million
Reducing manageable costs estimated at R$ 100
million from 2013 onwards
AES Eletropaulo among the lowest cost operators in
AES Eletropaulo
Comparable peers²
the country
1 - Personnel, Material, Third Party Services and Other Costs and Expenses
2 - Eletropaulo peers: CPFL Paulista, Light, Cemig. EDP Bandeirante. Sul Peers: Elektro, RGE, CPFL Piratininga. Eletropaulo metric excludes SIRP (one timer R$29)
35
36. Debt refinancing conclusion of R$ 1 billion
with more flexible covenants
Decrease in debt amortization volume for 2013-15 by R$ 750 million
Benefits
Increase in the average debt maturity from 6.6 years to 7.2 years
Debt average costs decrease from CDI+1.29% to CDI+1.27%
More flexible covenants
Debt amortization schedule
Before restructuring
R$ 1,063 million
495
388
372
48
533
302
249
2012
2013
2014
71
302
276
533
2015
52
337
2014
228
337
226
2015
2016
59
2016
2017
Local Currency (ex FCesp)
385
281
55
48
228
2013
After restructuring
R$ 319 million
579
45
297
857
(as of September, 2012)
436
226
2017
2018
321
2018
2019
2019
2020 - 2028
Market debt in (s/ (ex-pension plan
Moeda Nacional R$ Fundação CESP) debt )
Fundação CESP
495
388
372
297
48
400
321
579
45
677
63
436
(as of October, 2012)
249
180
53
2020 20282013
85
589
302
533
478
276
688
52
2015
2013
2016
337
228
2014
2017
2015
6
55
48
323
180
2012
2014
71
2016
2018
38
59
281
2019
436
32
226
221
2017
2020
180
2018
20
2021 - 2028
Local Currency (ex FCesp)
Market Nacional R$ Fundação CESP) debt )
Moeda debt in (s/ (ex-pension plan
Fundação CESP
36
37. Covenants change
FROM
TO
Net debt / Adjusted Ebitda < 3.5
Financial Index
Gross debt / Adjusted Ebitda < 3.5
Default
If the limit is exceeded in any quarter
Regulatory assets
and liabilities
(equivalent to 4.5x Gross Debt / Adjusted Ebitda)
If the limit is exceeded for two consecutive
quarters
Not considered in the calculation
Considered in the calculation
(same as before IFRS adoption)
Debt recognized in liabilities excluding the
Pension plan debt
Total debt recognized in liabilities
Compulsory loans
Considered in the calculation of debt
“corridor” concept
Out of debt calculation
37
38. Covenants limits amended due to tariff
reset delay and higher energy costs
Accounting
impacts due to
tariff reset
postponement
Covenants consider Ebitda adjusted
by regulatory assets/liabilities
Jun/12: tariff reset regulatory liability
final release (R$ 287 million)
Amendment of covenants limits
completed in March/2013:
Net Debt / Adjusted Ebitda:
- 5.5x in 1Q13;
- 3.75x in 2Q13;
- 3.5x from 3Q13 onwards
Covenants breach is not expected to
repeat since:
Higher
net debt
Higher cost of energy since Sep/12
lowered cash position
- no impact on LTM Ebitda after May/13
related to regulatory liability
(Jul11/Jun2012);
- higher cost of energy funded by CDE
or reflected in tariff adjustment
38
39. Debt profile
Net debt
Average cost
6.96.9
6.6 6.6
4.9x
0.9x
6.7
6.4
4.4x
0.8x
1.1x
3.0
2.4
2.3
2010
2011
Net Debt (R$ billion)
Covenants
112.2%
3.1
109.8%
2.4
2012
1Q12
0.0%
0.0%
0.0%
0.0%
2011
1Q12
2011
1Q13
2012
1Q13
2012
% of CDI²
Net Debt/Ebitda Adjusted¹
12.0%
Net Debt/Adjusted Ebitda <= 3.5x
- Q1 13: limit amended to 5.5x
- Q2 13: limit amended to 3.75x
Average Time - years
Interest Rate
11.7%
Average Time - years
Average Time - years
% of CDI
% of CDI
Adjusted Ebitda/Financial Expenses >= 1.75x
1 – According the new covenants
2 – Brazilian Interbank Interest Rate
3 – Inflation Index
39
40. Debt profile
Debt amortization schedule (financial liabilities as of March, 2013)
2,578
1,719
905
780
209
79
79
50
2013
119
55
260
87
2014
360
130
48
138
52
682
147
55
590
480
156
59
554
690
325
182
2015
Local Currency (ex FCesp)
2016
2017
166
63
2018
Fcesp (ex Corridor¹)
2019
465
679
177
68
221
181
2020
2021-2028
Fcesp (Corridor¹)
Due to the ICVM 695, the corridor (accumulated gains and losses) became fully recognized in the
Company balance sheet from January, 2013 on
40
41. AES Eletropaulo: challenges
“Criando
Valor”
(Creating
Value) project
launch
2010
Filling of
administrative
appeals at
Aneel
Jul/12
3rd Tariff
Reset Cycle
and 2012
Tariff
Adjustment
1 – CDE: Energy Development Account
Beginning of
out-of-the-merit
thermals
dispatch,
affecting discos
cash flows
Sep/12
Debt
restructuring
(R$ 1 billion)
Pension plan
accounting
changes
imposed by
CVM
Resolution 695
Dec/12
Sale of real
estate property
“Cambuci” (R$
160 million),
subject to
Aneel’s approval
Covenants
limits
amendment
Jan/13
Mar/13
Extraordinary Tariff
Adjustment due to
Energy Cost
Reduction
Program, with 20%
average tariff
reduction
Starting to
receive
monthly
CDE1 funding
to cover
higher energy
costs
Apr/13
2013 Tariff
Adjustment
Jul/13
Expected events: Decision
by Aneel regarding
administrative appeals and
regulatory liabilities start to
be returned through tariffs,
due to the postponement of
the 3rd Tariff Reset Cycle
41
44. AES Sul overview
Overview and Business Drivers
Overview
Serving 118 Municipalities in the State of Rio Grande do Sul
Concession area: 99,512 km2
1.2 million consumption units
1,308 directed employees
Concession valid until November, 2027
Business drivers
Regional GDP growth 2.5% (5-year average)
- Expectation for 2013 3.6%, grows to 4.3% in 2014-2015
2013 tariff reset concluded in April – in-line with our
expectations
Quality of services: SADI/SAIFI ~30% better than 2009 levels
Consolidation of efficiency programs, leading to operating
costs below regulatory levels (~2%)
Dividend payout of 63% in 2012 2011 clearing of regulatory
restrictions allowed distribution of dividends)
44
46. AES Uruguaiana overview
Overview and Business Drivers
Overview
Independent natural gas-fired thermal power generation Company with
commercial operations achieved in 2000
Authorization expiration in 2027
Installed capacity of 640 MW
Located in the State of Rio Grande do Sul – city of Uruguaiana
Suspended operations in 2008 due to lack of gas supply from YPF in Argentina
(pending arbitration)
Business Drivers
Emergency operation from February 2013 to March 2013 to support reservoir
recovery
Working to return the plant to long-term service
Leveraging on AES Brazil-Argentina relationship
46
48. Energy sector in Brazil: business segments
Free Clients
Distribution
Transmission
Consumption of 14.770 MWavg
64 companies
68 companies
(26% of Brazilian total market)
448 TWh of energy
68% private sector
Conventional sources: above
3,000 kW
Alternative sources: between
500 kW and 3,000 kW
Large consumers can purchase
energy directly from generators
Free contracting environment
distributed in 2012
72 million consumers
67% private sector
Annual tariff adjustment
Tariff reset every four or five
High voltage transmission
(>230 kV)
103,362 km in extension lines
(SIN¹)
Regulated public service with
13 groups controlling 76% of
total installed capacity
22% private sector
2,809 power plants
121 GW of installed capacity³
66% hydroelectric
27% thermoelectric
free access
years
Regulated public service
Regulated contracting
Regulated tariff (annually
adjusted by inflation)
environment
3% SHPP²
2% wind
2% nuclear and others
Contracting environment – free
1 - Interconnected National System, as of 2011
and regulated markets
2 - Small Hydro Power Plants
3 - Aneel Fiscalization Report
Generation
Sources: EPE, Aneel, ONS and Banks’ reports
48
49. Energy sector in Brazil:
contracting environment
Regulated market
Free market
Generators, Independent Power Producers
(IPPs), Trading companies and Auto producers
Generators and Independent
Power Producers (IPPs)
Auctions: New Energy
and Existing Energy
Distribution companies
Bilateral contracts (PPAs1)
Free clients
Main auctions (reverse auctions):
– New Energy (A-5): Delivery in 5 years, 15-30 years regulated PPA1
– New Energy (A-3): Delivery in 3 years, 15-30 years regulated PPA
– Existing Energy (A-1): Delivery in 1 year, 5-15 years regulated PPA
– Extraordinary (A-0): Delivery at the same year, 1-yearr regulated PPA
1 – Power Purchase Agreement
49
50. Electric sector in Brazil:
generation market overview
Installed capacity (GW)
Growth by source - new auctions (GW)
Total: 25 GW
182
121
5
130
14
138
22
144
27
1
37
40
Thermal
41
5 GW
41
2
25
17
11
6
4
2
33
163
157
151
174
168
41
Hydro
10 GW
116
116
116
116
116
116
116
116
116
116
2012
2013
2014
2015
2016
2017
2018
2019
2020
Wind
2021
Current installed capacity
Auctioned
10 GW
Upcoming Auctions
~ 3% annual GDP growth over the last 5 years
~ 4% annual demand growth through 2021, implying 60 GW of additional capacity needed (~6 GW/year) – 35 GW
already auctioned
Gas-fired thermal to leverage on the dispatchability benefit and on the hydrology risk
Sources: EPE (Energetic Research Company): Ten-year Energy Plan 2021; AES analysis
50
52. Distribution companies:
tariff methodology
Tariff reset and adjustment
• Tariff Reset is applied each 4 years for AES Eletropaulo
− Next tariff reset: Jul/2015
• Parcel A Costs
− Parcel A: costs are largely passed through to the tariff
− Parcel B: costs are set by ANEEL
• Tariff Adjustment: annually
− Parcel A : costs are largely passed through to the tariff
− Parcel B: cost are adjusted by IGPM +/- X(1) Factor
X WACC
Energy
Purchase
Transmission
Sector Charges
Regulatory
Opex
(PMSO)
Investment
Remuneration
Remuneration
Asset Base
X Depreciation
Depreciation
Regulatory
Ebitda
1 – X Factor: index that captures productivity gains
− Non-manageable costs that are largely
passed through to the tariff
− Incentives to reduces costs
• Regulatory Opex:
– Efficient operating cost determined by
ANEEL (National Electricity Agency)
• Remuneration Asset Base:
– Prudent investments used to calculate
the investment remuneration (applying
WACC) and depreciation
Parcel A - Non-Manageable Costs
Parcel B - Manageable Costs
52
53. Distribution companies:
tariff methodology
3rd Cycle of tariff reset – X factor
X FACTOR
=
Pd
+
Q
+
T
DEFINITION
Distribution
productivity
Quality of service
Operational expenses
trajectory
OBJECTIVE
Capture productivity
gains
Stimulate
improvement of
service quality
Implement
operational expenses
trajectory
APPLICATION
Defined at tariff reset,
considers the average
productivity of sector
adjusted by market
growth and
consumption variation
Defined at each tariff
readjustment, considers
variation of SAIDI and
SAIFI and comparative
performance of discos
Defined at tariff reset,
considers reference
company and
benchmarking
methodologies
53
54. 3rd Cycle of Tariff Reset
for AES Eletropaulo
Gross Regulatory Asset Base: R$ 10,748.8 million
Tariff Review
Net Regulatory Asset Base: R$ 4,445.1 million
Parcel B: R$ 2,007.1 million
Non Technical Losses (referenced in the low voltage market): start point at 11.56% and get to 8,56%,
by the end of the cycle
Average effect to be perceived by the consumer: -9.33%
Economical Effect: -5.60%
Tariff Adjustment
Tariff Review +
Average effect to be perceived by the consumer : +5.51%
Economical Effect: +4.45%
Average effect to be perceived by the consumer : -2.26%
Adjustment
Administrative
Appeal
In 17th July, Company filed as administrative appeal at Aneel about the Regulatory Asset Base and
the non-technical losses trajectory. Aneel’s decision expected to be rendered by July, 2013
54
55. Discussions with the Regulator
Discussion
Exclusion R$ 1,260 million from shielded
RAB:
Shielded RAB
- Exclusion of cables: R$ 728 million
Arguments
Shielded
RAB
approved
in
2003,
reconfirmed in 2007, based on global
consistency criteria
- Reclassification/equipment volume: R$
533 million
Investments
Losses
R$ 446 million investments not recognize,
related to
Minor
Components
and
Additional Costs (“CA”)
Adequacy of regulatory standards versus
Changed the benchmark in Public Hearing
(regulatory losses reduction from 0.49% to
1%)
Benchmark company is an outlier, previous
actual spending
number of 0.49% shall be restored
55
56. 3rd Cycle of Tariff Reset
for AES Sul
Gross Regulatory Asset Base: R$ 2,503.0 million
Parcel B: R$ 542.2 million
Non Technical Losses (referenced in the low voltage market): start point at 4.91% will be kept
during the entire tariff cycle (no trajectory)
Average effect to be perceived by the consumer: 3.92%
appeal
Net Regulatory Asset Base: R$ 1,488.5 million
Administrative
Tariff Review
Economical Effect: 4.49%
The Company will file an administrative appeal at Aneel about Regulatory Technical Losses,
that were not adequately calculated by the methodology
56
57. Regulatory pressure to lower tariffs…
“Energy Cost Reduction Program” established by Provisional Measure 579 and Law 12.783
Overview
- Valid for concessions granted before 1995
- 20% average reduction in electricity costs, funded by:
- Generation and transmission concessions expiring 2015-2017: -13%
- Lower sector charges: -7%
-Minimal impact on AES Brasil businesses – concessions expire between 2027-2029
Generation &
Transmission
Concessions
Extension for 30 years with effects anticipated for 2013:
Distribution
Extension for 30 years, as per contract
Concessions
Rules for renewal has not been defined
- Evaluation of assets using new replacement value methodology
Concession renewal will be based on O&M costs, industry charges, fees and network usage
57
58. … combined with poor hydrological conditions
impacted discos cash position…
Out-of-merit-order: higher EES¹
Low affluence impacting
reservoirs level
Thermals dispatch of 12 GW
since Sep, 2012
Within-the-merit-order: rising
energy costs
Energy Cost Reduction
Program2
Hydrological risk transferred to
discos through quotas allocation
Exposure to the spot market
(~ 2 GWavg)
Non-renewal of some generation
concessions
Impact on cash position of discos since Sep/2012
1 - ESS (Service System Charges), which pays for the dispatch of thermals that are out-of-merit
2 – Provisional Measure 579 and Law 12.783
58
59. … resulted in a measure to preserve discos
financial stability
After
Component
Energy Purchase
(within-the-merit-orderthermal-dispatch)
Decree #7.945
Tariff Adjustment
ESS¹ (out-of-themerit-order thermal
dispatch)
Hydrological risk¹
CDE funding via
CCEE settlement
Involuntary
Exposure¹
1 – Before Decree # 7.945, such costs would be passed-through via Tariff Adjustment.
59
60. Spot price new methodology
Previous
Regulation
CNPE Resolution # 3/2013
Transitory regulation
(April to July, 2013)
Charged
from:
• Discos
• Free cust.
Spot
Price
Other 50%
for:
• Agents
with
exposure
to spot
prices
Resolution CNPE #3/2013:
Charged from
all market
agents:1
• Discos
• Free cust.
• Generators
• Traders
ESS
Spot
Price
Methodology for adequacy of risk aversion
mechanisms for spot prices formation
- Risk Aversion Curve (“CAR”) of 5 years
(starting from Aug/2013)
System Service Charges (“ESS”): prorated
among all market players (including generators)
ESS
ESS
ESS²
From August, 2013 on
Uptrend in spot prices, which should influence
prices in energy contracts representing an
opportunity to AES Tietê
Spot
Price
Includes out-of-themerit-order thermal
dispatch
1 - Proportional to average commercialized energy of the last 12 months.
2 - ESS (System Service Charges), which pays for the dispatch of thermals that are out-of-merit
3 – Risk Aversion Curve
60
62. AES Tietê's expansion obligation
Efforts being made
Judicial Notice:
Privatization Notice
established the
obligation to expand the
installed capacity in
15% (400 MW) until
2007, either in
greenfield projects
and/or through long
term purchase
agreements with new
plants
Aneel informed
that the issue is
not related to
the concession
agreement and
must be
addressed with
the State of São
Paulo
The Company was notified
by the State of São Paulo
Attorney's Office to present
its understanding on the
matter, having filed its
response on time, the
proceedings were ended,
since no other action was
taken by the Attorney's
Office
AES Tietê was
summoned to answer a
Lawsuit filed by the
State of São Paulo,
which requested the
fulfillment of the
obligation in 24 months.
An injunction was
granted in order to have
a project submitted
within 60 days.
19th
In March,
the
Company’s appeal
was denied. Thus,
on April, 26th AES
Tietê presented
“Thermo São Paulo”
project as the plan
to fullfill the
obligation to
expand the installed
capacity.
by the Company to
meet the obligation :
• Long-term energy
contracts (biomass)
totaling an average of
10 MW
• SHPP São Joaquim started operating in
July, 2011, with 3 MW
of installed capacity
1999
2007
Aug/08
Oct/08
Jul/09
Sep/10
Sep/11
Nov/11
Apr/12
Dec/12
• SHPP São José started operating in
March, 2012, with 4
MW of installed
Company faces restrictions until
deadline:
• Insufficiency of hydro resources
• Environmental restrictions
• Insufficiency of natural gas
supply
• New Model of Electric Sector
(Law # 10,848/2004), which forbids
bilateral agreements between
generators and distributors
In response to a
Popular Action
(filed by individuals
against the Federal
Government, Aneel,
AES Tietê and
Duke), the Company
presents its defense
before the first
instance
Popular Action:
Due to the plaintiffs
failure to specify the
persons that should be
named as Defendants, a
favorable decision was
rendered by the first
Instance Court
(an appeal has been
filed)
6th
Lawsuit:
The Company
appealed to the
State of Sao
Paulo State
Court of
Appeals and
the injunction
was kept
In December
was joined
to the process a
manifestation of the State of
São Paulo over the
Expansion Plan Capacity
presented by AES Tietê
Next Steps:
shortly, the Company shall
be intimated to pronounce
on the manifestation
capacity
• Thermal SP - Project
of a 550MW gas fired
thermo plant
• Thermal Araraquara
- Acquisition of a
purchase option
62
63. Eletrobrás lawsuit
State-owned
Eletropaulo was spunoff into four companies
and, according to our
understanding based
on the spin-off
agreement, the
discussion was
transferred to CTEEP
Stated-owned
Eletropaulo borrowed
money from Eletrobrás
Nov/86
Dec/88
State-owned
Eletropaulo and
Eletrobrás disagreed on
how to calculate
interest over that loan
and two lawsuits, which
were later merged into
one, were initiated
Jan/98
Eletrobrás, after
winning the interest
calculation discussion,
filed an Execution Suit
aiming the collection of
the amounts that were
in default
Apr/98
Privatization event .
State-owned
Eletropaulo became
AES Eletropaulo
Sep/01
Eletrobrás and CTEEP
appealed to the
Superior Court of
Justice (SCJ)
Sep/03
Based on the spin-off
protocol, the 2nd
Instance Court
excluded AES
Eletropaulo from the
lawsuit
Oct/05
Jun/06
The SCJ annulled the
2nd Instance Court
decision and sent the
Execution Suit back to
the 1st Instance Court,
with the determination
to identify the amount
to be paid and who
should be liable for
such payment, which
should be done through
an appraisal procedure.
63
64. Eletrobrás lawsuit
In accordance to the
procedure that was
stipulated by 2nd
Instance Court after
an appeal from AES
Eletropaulo,
Eletrobrás requested
the 1st Instance
Court to appoint an
expert
The 1st Instance
Court determined
AES Eletropaulo and
CTEEP to present
their arguments,
which occurred in
August
The 1st instance
Court dismissed the
parties’ requests of
producing evidences
and rendered a
decision stating AES
Eletropaulo’s
responsibility for the
debt pursuant to the
Spin-Off Protocol
The Rio de
Janeiro State
Court of Appeals,
granted on 15th a
preliminary
injunction that
suspended the
effects of the
December 2012
decision
Next Steps:
1 - The appraisal procedure (AP) is
expected to begin in the 1st half of
2013 and is expected to last over 6
months
2 – AP is not expected to be
concluded in a period shorter than 6
months from its beginning
3 - After AP’s conclusion, a 1st
Instance Court decision will be issued
> In case of an unfavorable decision:
May/09
Dec/10
Eletrobrás requested
the beginning of the
appraisal procedure
before the 1st
Instance Court
Jul/11
Eletrobrás requested
the withdrawal of the
judicial deposit made
by state-owned
Eletropaulo in 1988,
which now amounts
for R$ 95 MM
(principal of the loan
taken in 1986), as a
direct consequence of
Eletrobrás’ victory on
the merits
Dec/12
Jan/12
AES Eletropaulo filed an
appeal on Jan 7th arguing that
the decision is invalid, because
the procedure preceding such
decision should encompass full
discovery, pursuant to Superior
Courts determination. Also,
the Company requested a
preliminary injunction to stay
the execution proceedings until
the ruling of the appeal
Feb/12
On 21st, AES
Eletropaulo became
aware of the
favorable decision
granted by the
TJRJ, which fully
annulled the first
instance decision
and determined the
return of the case to
the 1st instance
4 – Appeal to the 2nd Instance Court
and file an injunction to stay the
execution proceedings
5 – If the injunction is not granted, the
execution proceeding can be resumed
and Eletropaulo will have to post a
guarantee
6 – Eletrobrás can request the seizure
of the guarantee
7 - Appeals to the Superior Courts and
file an injunction to stay the execution
proceedings
64
66. Pension plan expenses and disbursements
are calculated using different assumptions
ACCOUNTING
EXPENSE
Regulatory Agency
CASH
DISBURSEMENT
CVM (Brazilian SEC)
PREVIC (Pension plans regulator)
Difference between interest on actuarial
Determination
liabilities and assets
Calculated in accordance to market
Discount rate
value (National Treasury Notes/NTN-B)
on 12/31/2012: 3.75% p.a.
Recognition
Company Financial Statements
Result of the FCesp actuarial valuation
Calculated in accordance to a study performed
by FCesp (Resolution CNPC No. 9): 5.5% p.a.
FCesp Financial Statements
66
67. Main amendments on accounting rules
Until 12.31.2012
(Res. CVM 600)¹
Expected return on
plan assets
Actuarial Gains
and losses
Corridor over 10%
of plan liabilities
From 01.01.2013
(Res. CVM 695)
Determined by a study of a specialized
Corresponds to the actuarial liabilities
company (6.79% for 2012)
discount rate (3.75% for 2013)
Accrued over the years in the "corridor"
(10% excess of actuarial liabilities
recognized in the income statement)
Amortized over the average future
service period of active participants
and recognized in income statement
1 – Revoked by CVM Resolution 695, on December 13, 2012
Fully recognized in the Company's balance
sheet (Liabilities and Shareholders‘ Equity)
There is no impact (fully recognized in the
balance sheet of the Company)
67
68. Impact on the income statement due to
changes imposed by CVM
2012
2013
R$ million
R$ milllion
Service cost
16.3
Discount rate decreases from 5.5% to 3.75%
29.3
Rate costs
916.6
Discount rate decreases from 5.5% to 3.75%
1,018.1
Expected return
on plan assets
(788.6)
Rate of return decreases from 6.79% to 3.75%
(696.5)
Amortization
of actuarial
gains and losses
15.3
Extinction of the corridor method
-
Total expenditure
159.7
350.9
Increase on expense shall be reversed through equity in the coming years due a grater expected
profitability of the plan compared to the expected return on plan assets used in the calculation
Average return over the last five years on 16% (above the actuarial target period)
68
69. Cash impacts with the plan
Amendments set forth by CVM 695 has no influence on assumptions and on the calculation
method of the pension plan cash disbursement
2012
+4.4%
R$ million
Cash disbursement
before and after CVM 695
271.7
2013
R$ million
IGP-DI discount rate decreases from +6% to +5.5%,
offset by marking securities to market
283.6
For 2014 is not expected a significant increase on cash disbursement, since the actuarial
assumptions were maintened
69
71. Shareholders agreement
On Dec-2003 AES and BNDES executed a Shareholders’ Agreement to regulate their relationship as shareholders of
Brasiliana and its controlled companies. The Agreement is available at www.aeseletropaulo.com.br/ri,
http://ri.aestiete.com.br/ and http://www.aeselpa.com.br/.
Shareholders can dispose its share at any time, considering the following terms:
Right of 1st
refusal
Any party with an intention to dispose its shares should first provide the other party the right to buy
Tag along
rights
In the case of change in Brasiliana’s control, tag along rights are triggered for the following
Drag along
rights
Once the offering party exercises the Drag Along clause, offered party is obligated to dispose of all
the corporate interest at the same price offered by a third party
companies (only if AES is no longer controlling shareholder):
– AES Eletropaulo: Tag along of 100% on its common and preferred shares
– AES Tietê: Tag along of 80% on its common shares
– AES Elpa: Tag along of 80% on its common shares
its shares at the time, if the Right of 1st Refusal is not exercised by offered party
71
72. Costs and expenses
Costs and operational expenses1 (R$ million)
570
433
419
187
174
198
126%
264
41
372
246
117
245
51
224
66
2010
2011
2012
1Q12
1Q13
Energy Purchase, Transmission,Connection Charges and Water Resources
Other Costs and Expenses
²
1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses
72
73. Energy costs pushed the costs and
operating expenses in the 1Q13
Operating costs and expenses¹ (R$ million)
2
8
282
271
4
3
165
117
electric energy
purchased for resale
264
117
1Q12
267
1 - Not including depreciation and amortization
operat. Provisions and personnel, material and
Other Exp.
third party services
transmission and
Conection
financ. comp. for use of
wat. resources
1Q13
73
74. Costs and expenses
Costs and operational expenses1 (R$ million)
PMS2 and other expenses (R$ million)
1,551
6,927
261
1,255
5,609
5,715
1,255
165
1,551
1,251
192
1,251
565
443
15%
7%
513
421
4,354
1,632
421
450
1,211
2010
2011
2012
1Q13
725
546
1,422
1Q12
647
2010
2011
2012
99
106
134
190
1,872
450
132
5,376
4,464
211
1Q12
1Q13
Energy Supply and Transmission Charges¹
PMS² and Others Expenses
1 – Do not include depreciation and amortization
2 - Personnel, Material, Third Party Services and Other Costs and Expenses
Personnel and Payroll
Material and Third Party
Others
74
75. Manageable PMSO¹ items
below the inflation in 1Q13
PMS and other expenses¹ – 1Q13 (R$ million)
-1.4%
88
(65)
(60)
(3)
1
69
(3)
450
421
362
356
297
1Q12
FCesp
297
Contingencies, 1Q12
ADA and Manageable
Write-Offs
294
292
Personal
1 - Personnel, Material, Third Party Services and Other Costs and Expenses
Materials
Others
and
Third Party Services
292
292
1Q13 Contingencies,
Manageable ADA and
Write-Offs
FCesp
1Q13
75
76. Brazilian main taxes
AES Eletropaulo
AES Tietê
• Income Tax / Social Contribution:
– 34% over taxable income
• ICMS (VAT tax)
– deferred tax
• PIS/Cofins (sales tax):
– Eletropaulo´s PPA: 3.65% over Revenue
– Other bilateral contracts: 9.25% over Revenue
minus Costs
• Income Tax / Social Contribution:
– 34% over taxable income
• ICMS: 22% over Revenue (average rate)
– Residential: 25%
– Industrial and commercial: 18%
– Public entities: free
• PIS/Cofins:
– 9.25% over revenue minus Costs
76
77. Contacts:
ri.aeseletropaulo@aes.com
ri.aestiete@aes.com
+ 55 11 2195 7048
The statements contained in this document with regard to the business prospects, projected operating and financial
results, and growth potential are merely forecasts based on the expectations of the Company’s Management in
relation to its future performance. Such estimates are highly dependent on market behavior and on the conditions
affecting Brazil’s macroeconomic performance as well as the electric sector and international market, and they are
therefore subject to changes.
