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Apresentação institucional 4_q12_en_v5

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AES Tietê
AES Tietê

AES Brasil is one of the largest electricity companies in Brazil, with 7.7 million consumption units, 54.4 TWh of distributed energy, and 2,658 MW of installed capacity. AES Tietê is a subsidiary of AES Brasil and is the third largest private electricity generator in Brazil with over 2,600 MW of installed capacity. AES Tietê has 12 hydroelectric plants in São Paulo and generates the majority of its revenue from a long-term contract with AES Eletropaulo, another AES Brasil subsidiary and one of the largest distributors in Latin America. AES Tietê has pursued a strategy of modernizing its power plants, expanding its client portfolio beyond AES Eletropaulo,

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Institutional March, 2013 1
AES Brasil Group •P Presence i B il since 1997 in Brazil i • Operational Figures: • Consumption units: 7.7 million 54.4 • Distributed Energy: 54 4 TWh • Installed Capacity: 2,658 MW • Generated Energy : 14.3 TWh • 7.4 thousand AES Brasil People • Investments 1998-2012: R$ 9.4 billion • Solid corporate governance and sustainable practices • Safety as value #1 Disco Genco Service Provider 2
AES Brasil widely recognized in 2009-2012  Management Excellence  Quality and Safety  Environmental Concern (AES Tietê) (AES Sul) (AES ( S Eletropaulo) ) (AES Ti tê) Tietê) (AES Brasil) (AES Tietê) (AES El t Eletropaulo) l ) (AES Eletropaulo) (AES Tietê) (AES Brasil) (AES Eletropaulo) (AES Tietê) (AES Tietê) (AES Eletropaulo) (AES Eletropaulo/ Tietê) (AES Tietê) (2011- AES Tietê; 2012 – AES Eletropaulo) (AES Eletropaulo) (AES Eletropaulo) 3
Mission & visions Mission • Improving lives and promoting development by providing safe safe, reliable and sustainable energy solutions Visions • Be a leader in operational and financial management in Brazilian energy generation sector and expand installed capacity • Be the best distributors in Brazil 4
Social responsability: annual investments of R$ 83 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 tho sand appro imatel 5.6 thousand children and teenagers and indirectly 292 tho sand people in 7 units located within indirectl thousand nits ithin 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. Since 2004, more than 500 thousand families in low income communities were benefited from better energy supply conditions and social inclusion. 5
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
AES Tietê and AES Eletropaulo are listed in i BM&F Bovespa B ¹ ¹ Free Float Others² Market Cap³ 16.1% 19.2% 56.2% 8.5% US$ 1.4 bi 24.2% 24 2% 28.3% 28 3% 39.5% 39 5% 8.0% 8 0% US$ 4 1 bi 4.1 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: 12/28/2012. Considers preferred shares for AES Eletropaulo and preferred and common shares for AES Tietê 7
AES Brasil is the second largest group in the electric sector Ebitda1 – 2011 (R$ Billion) 5.4 4.9 3.8 2.9 2.9 2.0 1.9 1.5 1.2 0.7 07 CEMIG Net AES BRASIL income1 2 CPFL TRACTEBEL NEOENERGIA CESP COPEL EDP LIGHT 0.3 0.3 DUKE CESP DUKE – 2011 (R$ Billion) ( ) 3.0 2.4 1.6 1.6 1.4 1.2 0.5 AES BRASIL2 CEMIG CPFL NEOENERGIA TRACTEBEL COPEL 1 – excluding Eletrobrás 2 – includes AES Atimus sale (aprox. R$ 1 billion in EBITDA and aprox. R$ 700 million in net income) LIGHT 0.1 01 EDP Source: Companies’ financial reports 8
Generation installed capacity (MW) - 20121 AES Tietê is the 3rd largest private generator in Brazil Main privately held Companies CPFL 2,4% AES Tietê 2,2% Eletronuclear 2,8% ENDESA Eletrosul 0,8% 0,5% CGTEE DUKE Light 0,7% EDP 1,7% 0,8% 1,5% Neoenergia 1,2%  AES Tietê is the 3rd largest among private generation companies  Approximately 78% of country’s generation country s installed capacity is state-owned2 Copel 4%  Three Petrobrás 5% Demais D i 28,9% Cemig 6% mega hydropower plants under construction in the North region of Brazil with 18 GW in installed capacity Itaipu 6% – Santo Antonio and Jirau (Madeira River): 7 GW Tractebel 6% CESP 6% CHESF 9% Eletronorte 7% – Belo Monte (Xingu River): 11 GW Furnas F 8% Total Installed Capacity: 123 GW 1- Sources: ANEEL – BIG (March, 2012) and Companies websites 2- Source: Banks’ reports 9
AES Brasil is among the top 3 largest distribution players in Brazil Consumers – D /2011 C Dec/2011 13% • 63 30% AES A Brasil 5% CPFL Energia 16% 7% Consumption (GWh) - 2011 in Brazil • AES Brasil is one of the largest electricity distribution group in Brazil: – AES Eletropaulo: 45 TWh distributed, Cemig 7% companies distributing 430 TWh 12% 12% distribution Neo Energia 10.5% of the Brazilian market – AES Sul: 8.6 TWh distributed, 2.0% of the Brazilian market 13% Copel 12% Light  AES Eletropaulo is the largest electricity distributor in Latin America in terms of revenue supply, according to ABRADEE¹ 52% EDP  Distribution companies’ operations are 11% Outros restricted to their concession areas 7% 6% 6% 6% 1 – Brazilian Association of Electricity Distributors  Acquisitions must only be performed by the holdings of economic groups 10 10
Apresentação institucional 4_q12_en_v5
AES Tietê overview Generation facilities  12 hydroelectric plants in São Paulo  30-year concession valid until 2029  Installed capacity of 2,658 MW, with physical guarantee1 of 1,278 MW average  Almost all the amount of energy that AES Tietê can sell is contracted with AES Eletropaulo until the end of 2015  AES Tietê can invest in generation, its main activity, and g , y, operate in energy trading  364 employees as of December, 2012 1 - Amount of energy allowed to be long term contracted 12
Generated energy shows high operational availability p y Generated energy (MW avarage1) 130% 2012 Generated energy by power plant (MW average1) 127% 125% 124% 4% 2%3% Agua Vermelha 5% Nova A N Avanhandava h d 5% Promissão 9% 1,665 1,599 1,582 61% Ibitinga Bariri 1,629 11% Barra Bonita Euclides da Cunha 2009 2010 Generation - Mwavg 2011 Other Power Plants * 2012 Generation/Physical guarantee 1 – Generated energy divided by the amount of hours * Caconde, Limoeiro, Mogi and SHPPs 13
A significant amount of billed energy and net revenues comes from the bilateral contract with AES Eletropaulo Billed energy (GWh) Net revenues (%) 89% 16,728 15,112 14,729 14,706 554 301 117 615 1,150 1,340 1,519 2,331 1,980 1,942 11,108 11,108 11,108 1,141 1 141 1,535 8,045 3% 2% 6% AES Eletropaulo 2009 2010 2011 2012 Other bilateral contracts AES Eletropaulo S Energy Reallocation Mechanism Spot Market S Other Bilateral Contracts O C Spot Market MRE1 1 ERM 1 – Energy Reallocation Mechanism 14
Power plants modernization investments Investments (R$ million) 213 175 19 • Main 2012 investments: o R$ 123.1 million in modernization projects $ p j 142 and new equipment of the power plants, 3 of special note to Nova Avanhandava, 82 12 Ibitinga, Euclides da Cunha and Limoeiro; g , ; 156 o R$ 11,6 million in IT upgrading; and 139 o R$ 4.1 million in the Jaguari Mirim Project 70 (São José SHPP), which started up operations in March 2010 2011 Investments * Small Hydro Power Plants 2012 2013 (e) New SHPPs* 15
Strategy for energy contracting in 2016: p p composition of client portfolio Clients portfolio evolution in 2012 • Goals: • Goals 2011/2012: commercial initiatives to expand clients portfolio in the free market • The current portfolio comprises 320 259 320 Mwavg, of which 288 MWavg were sold in 2012 84 90 1Q12 2Q12 • 143 Mwavg were sold to 2016 32 Before dec/2011 3Q12 4Q12 onward Mwavg g 16
Financial highlights Ebitda (R$ million) Net revenue (R$ million) 2.112 1.670 1.754 1.886 1.255 1.320 1.466 1.542 2011 2012 9 1.309 2009 2010 Net Revenue 2011 2012 1.311 2009 (54) 2010 75% 75% 81% 73% Recorrente Ebitda Margin 17
Steady earnings distribution on a quarterly q arterl basis Net income and dividend pay-out (R$ million) 117% 110% 109% 11% 706 11% 11% • Dividends distribution practice: 100% of net income 108% 12% – 25% of minimum p y pay-out according to bylaws 845 737 901 – 106% 15 – 31 Average payout since 2006: Average dividends since 2006: R$ 745 million per year 742 706 886 2009 (36) Pay- out 2010 Yield Pref 2011 Recurring 2012 Non-recurring 18
Debt profile Amortization schedule – principal (R$ million) Net debt (R$ billion) 0,7 0,7 0,6 0,3x 0,3x 0,3x 0,6 06 0,3x 300 0,4 0,5  Gross debt/Ebitda of 2.5x  2014 2015 0,5 2009 2010 2011 2012 Net Debt Net Debt / Ebitda Gross Debt/Ebitda Covenants 300 2013 (e) 0,4 300 Ebitda/Financial expenses of 1.75x Debt amortization flow (R$ million) 2011  Average Cost (% CDI)1 115% Average Cost 128%  Average Term (years) 1.3  Effective Rate 1 – Brazilian Interbank Interest Rate 2012 2.3 12.1% 9.8% 19
Capital markets Daily avg volume (R$ thousand) AES Tietê X Ibovespa X IEE 12 months1 739 703 A 120 8% 553 546 19,687 100 -1% -11% 11% -11% -12% 80 60 Dec-11 Feb-12 Apr-12 IEE Ibovespa Jun-12 Aug-12 Oct-12 TSR Dec-12 13,922 10,187 10 187 4,239 8,086 9,683 9,537 2009 2010 2011 5,269 3,397 2,101 14,418 2012 GETI3 Preferred GETI4 12,584 Common Shares negotiated (thousand) A 09/12/2012: The Brazilian Government announced the Energy Reduction Program, by the PM 579 y • Market Cap4: US$ 4.1 billion / R$ 8.5 billion • BM&FBovespa: GETI3 (common shares) and GETI4 (preferred shares) • ADRs ADR negotiated i US OTC M k t AESAY ( ti t d in Market: (common shares) and AESYY h ) d (preferred shares) 1 – Index: 12/29/2011 = 100 2 – Electric Energy Index 3 – Total Shareholders’ Return 4 – Index: 12/28/2012 20
Apresentação institucional 4_q12_en_v5
AES Eletropaulo overview Concession area  Largest electricity distribution company in Latin America  Serving 24 municipalities in the São Paulo Metropolitan area  Concession contract valid until 2028; renewable for another 30 years  Concession area with the highest GDP in Brazil  45 thousand kilometers of lines and 6.3 million consumption units in a concession area of 4,526 km2  45 TWh distributed in 2012  AES Eletropaulo, as a distribution company, can only invest in assets within its concession area  5,872 employees as of December, 2012 22
Consumption evolution Total market1 (GWh) Consumption by class – 2012 (%) 6.832 34.436 43.345 7.911 35.434 45.102 8.284 17 45.557 7.987 36.817 9 30 43 41.269 15 24 37.570 37 26 2009 2010 Captive Market 2011 2012 Brazil Free Clients Residential 1 – Net of own consumption AES Eletropaulo Industrial Commercial Others 23
Industrial class Industrial class X Industrial production in São Paulo State 15% 10% 5% 0% • -5% Economic crisis consumption influenced Economic  recovery -10% Industrial by is manufacturing industry performance in São Paulo -15% State Jul/07 Dec/07 May/08 Oct/08 Mar/09 Aug/09 Jan/10 Jun/10 Nov/10 Apr/11 Sep/11 Feb/12 Jul/12 Dec/12 Industrial Production SP (% 12 months) Industrial (% 12 months) Consumption of industrial class by activity1 – AES Eletropaulo • Recent slowdown is influenced by y the decrease of industrial production in 2011 and 2012 Other industries 51% 1 – As of December 2012. Vehicles, Chemical, Rubber, Plastic and Metal Products 49% 24
Residential class Residential class X A erage income in São Paulo Metropolitan Area Average Pa lo 4,800  4,300  3,800  3,300  Residentia GWh al ‐ Avg Real l Income R$ ‐ SP (Q 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  1 400 1,300  1,200   Residential consumption driven by average income 2,800  2 800  2,300  Paulo 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 2009 2010 2011 Income expansion trend in São Area will sustain growth of residential class 2012  Consumption per consumer (i kWh) C ti (in Consumption per consumer i C ti is still 8.6% lower than in the period before the rationing - 8.6% 258 Metropolitan Rationing 220 192 199 203 207 223 213 219 228 229 234 236 2009 2010 2012 1 - Two quarters of delay in relation to consumption 2000 2001 2002 2003 2004 2005 2006 2007 2008 2011 25
Investments focused on grid automation, maintenance and system expansion y p Investments breakdown (R$ million) 800 700 739 682 831 35 • Main 2012 investments: 22 647 28 26  System Expansion and Customer 600 Services - R$ 195.5 million was 500 invested to add 202,000 new clients 400 300 654 717 796  Loss Recovery - R$ 27 9 million 27.9 621 200 invested, regularizing 55,400 clandestine connections 100  Maintenance 0 2010 2011 Own resources 2012 2013(e) - R$ 213.0 million, mainly in maintaining the 2,005 km grid Paid by the clients 26
SAIDI below regulatory limits and in its lowest level since 2006 SAIDI¹ (last 12 months) SAIDI1 (LTM) -17% 10.09 11.86 9.32 8.68 10.60 10.36 2009 2010 7th 8.49 8.35 8.23 2012 2011 8th 8.67 jan/13 9.87 8.23 jan/12 jan/13 6th SAIDI (hours) SAIDI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers ► 1 - System Average Interruption Duration Index Source: ANEEL and AES Eletropaulo 2012 SAIDI ANEEL Reference: 8.49 hours 27
SAIFI remains below the regulatory limit and still decreasing SAIFI¹ (last 12 months) 7.87 7.39 SAIFI1 (LTM) 6.93 6.87 6.64 -15% 6.17 5.46 5.45 2009 2010 2011 7th 3rd 4.65 2012 5.37 4.55 jan/13 jan/12 4.55 jan/13 4th SAIFI (times) SAIFI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers ► 1 - System Average Interruption Duration Index Source: ANEEL and AES Eletropaulo 2012 SAIFI ANEEL Reference: 6.64 times 28
Losses level close to the regulatory reference for t e 3 d Cyc e o Tariff Reset e e e ce o the 3rd Cycle of a eset Losses (last 12 months) 11.8 11 8 Regulatory Reference² - Total Losses (last 12 months) 10.9 10.5 10.2 5.3 4.4 4.0 6.5 6.5 2010 2011 2012 9.8 9.4 2013/2014 2014/2015 6.1 2009 10.3 4.1 6.5 10.6 Technical Losses ¹ 2011/2012 2012/2013 Non Technical Losses 1 – In January 2012, the Company improved the assessment of the technical losses. As a consequence of this improvement, technical losses calculated are in a level of 6.1%. 2 – Values estimated by the Company to make them comparable to the reference for non-technical losses determined by the Aneel 29
Financial highlights Net revenues (R$ million) Ebitda (R$ million) 2.413 426 9,697 9,836 9 836 9,959 , 2.848 933 1.775 87 197 339 1.491 1.648 442 8,786 1.473 656 179 476 2009 2010 2011 2012 2009 2010 2011 2012 Recurring Regulatory assets and liabilities Non-recurring 1 – Non recurring 2011 : Includes sale of AES Eletropaulo Telecom with a R$ 707 million impact on Ebitda 1 30
Earnings distribution on semi-annual basis Net income and dividend payout1 (R$ million) N ti d di id d t illi ) 101,5% 114,4% 54,4% 25,0% 20,4% 28,6% 17,1% 1.572 0,9% 2.8% 140,0% 120,0% , 100,0% 80,0% 60,0% 40,0% 20,0% 0,0% • Dividends distribution distribution above the practice: minimum required 1.348 - 374 236 160 622 762 Average payout 74% per year – 350 25% of minimum according to bylaws – 1.157 Average dividends since 2006: R$ 890 million per year p y 652 287 634 108 pay-out since 2006: 229 (121) 2009 2010 2011 2012 Pay-out³ ³ Yield PN Adjusted Net Income Regulatory assets and liabilities One off 1 – Gross amount 2– Non recurring 2011 :Includes sale of AES Eletropaulo Telecom with a R$ 467 million impact on net income 31
Efficiency increase to operate within the regulatory limits “Criando Valor” (Creating Value) Project  Aims cost control gains by increasing productivity, optimizing supporting functions and enhancing efficiency in key processes  Benefits to be obtained in 2012 will absorb part of tariff reset impacts and pressure on costs Additional initiatives  Change of corporate headquarters Operational  Optimization of operational bases  Stores review by increasing of outsourcing  Organizational restructuring  30% growth in the productivity of operations teams of the regional north (being implemented for other regional) c ease the u be of clients served automatic channels  Increase in t e number o c e ts se ed by auto at c c a e s  Renegotiation of supplies contracts  Sale of real estate with an estimated value of $ 239 million of which R$ 160 million were already sold million, Financial  Covenants renegotiation and lengthening debt profile  Reducing manageable costs estimated at R$ 100 million from 2013 32
Debt refinancing conclusion of R$ 1 billion resulting in more flexible covenants  Decrease in debt amortization volume for 2013-15 by R$ 750 million Benefits  Increase in the a erage debt mat rit from 6 6 years to 7 2 years average maturity 6.6 ears 7.2 ears  Debt average costs decrease from CDI+1.29% to CDI+1.27%  More flexible covenants Debt amortization schedule Before restructuring After restructuring 1.133 875 R$ 513 million R$ 1,241 million 639 732 50 578 388 275 86 533 302 2013 387 47 228 2014 51 2015 58 280 54 337 2016 Debt in R$ (ex-pension plan debt ) 226 2017 383 227 62 436 2018 531 57 53 494 44 321 2019 157 400 2020 2028 Pension plan debt 129 104 53 43 85 2013 2014 589 46 180 2015 384 688 654 654 61 478 323 2016 834 745 2017 Debt in R$ (ex-pension plan debt ) 2018 2019 221 180 2020 2021 2028 Pension plan debt 33
More flexible covenants and considering IFRS changes FROM TO Net d bt Adj t d Ebitda 3.5 N t debt / Adjusted Ebitd < 3 5 Financial Index Gross debt / Adjusted Ebitda < 3.5 Default If the limit is exceeded in any quarter Regulatory assets and liabilities Not considered in the calculation (equivalent to 4.5x Gross Debt / Adjusted Ebitda) If the limit is exceeded for two consecutive quarters Considered in the calculation (concept before IFRS adoption) Debt recognized in liabilities excluding the Pension plan debt Compulsory loans Total debt recognized in liabilities Considered in the calculation of debt “corridor” concept Out of debt calculation 34
Debt profile Net debt 4.9x 1.5x 2.4 2.3 0.9x 0.9x 3.1 2.5 2010 2011 2.3 2009 2012 2.4 2010 2011 3.1 2012 Net Debt (R$ billion) Net Debt/Ebitda Adjusted with Fcesp Net Debt (R$ billion) December, 2012: Indexed by: 70% CDI²; 29% IGP-DI³ and 0.7% others 35 1 – According the new covenants 2 – Brazilian Interbank Interest Rate 3 – Inflation Index
Capital markets Average d il volume (R$ th A daily l thousand) d) AES El t Eletropaulo X Ibovespa X IEE l Ib A 12 months¹ B 120 8% 100 -11% 21,960 24,496 26,897 23,057 2011 2012 80 -44% 44% 60 -54% 40 2009 20 Dec-11 Feb-12 Ibovespa Apr-12 IEE² Jun-12 Aug-12 AES Eletropaulo PN Oct-12 Dec-12 2010 Preferred AES Eletropaulo TSR³ A Material Fact 04/10/2012: technical notes published by Aneel regarding the calculation of the preliminar tariff review rate, including the regulatory asset basis . B Material Fact 07/02/2012 and 07/03/2012: Aneel final terms about tariff review rate, including the regulatory asset basis and tariff adjustments . • Market cap4: US$ 1.4 billion/R$ 2.8 billion • BM&FBOVESPA: ELPL3 (common shares) and ELPL4 (preferred shares) • ADRs at US OTC Market: EPUMY (preferred shares) 1 – Information until 12/28/2012. Index: 12/29/2011 = 100 3 – Total Shareholder Return 2 – Electric Energy Index 4– Index: 12/28/12. Calculation includes only preferred shares 36
Attachment I
Distribution Companies: Tariff methodology Tariff reset and readjustment • 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 Readjustment: 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 R ti 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 38
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 Sti l t 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 39
3rd Cycle of the 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 4,445.1  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 R i T iff Review +  A Average effect t b perceived b th consumer : +5.51% ff t to be i d by the 5 51%  Economical Effect: +4.45%  Average effect to be perceived by the consumer : -2.26% Adjustment Administrative appeal  In 17th July Company filed a request for reconsideration of the Homologation Resolution No July, No. 1,327/2012 about the Regulatory Asset Base and the non-technical losses trajectory 40
Discussions with Regulator Discussion Arguments  Shielded RAB was approved by Aneel in 2003  Shielded RAB Aneel excluded R$ 728 million f A l l d d illi from shielded RAB, due to the decrease in the amount of cables between the accounting records and the shielded RAB, between cycles RAB b t l and was confirmed in 2007, considering a global consistency criteria  If the exclusion of the amount of cables is maintained, an addition of R$ 660 million of , $ assets in operation (2003 BRR) should be considered  Investments  Losses Aneel did not recognize a R$ 427 million investment performed in the incremental period on Minor Components to Main Equipments (“COM”) and Additional q p ( ) Costs (“CA”) Aneel changed the benchmark company proposed in the Public Hearing, modifying the regulatory losses reduction from 0.49% to 1%  Adequacy of the regulatory standards applied by Aneel for the valuation of real costs incurred in execution of works and recorded in accounting books  Benchmark company is an outlier p y  Regulatory losses reduction shall be restored to the previous number of 0.49% 41
Energy cost reduction program  Program created by Provisional Measure 579 (“PM 579”) in 09/12/2012;  Law Decree 7805 was published on 09/17/2012 and regulates the terms of PM 579;  On January 14 2013 the PM 579 was converted into Law No 12 783 and sanctioned by President Dilma Rouseff 14, 2013, No.12.783  It aims to reduce tariffs by an average of 20% (Residential: 16.2% and industrial 20% to 28%), as from February, 2013, through: - Reduction Sector Charges (RGR, CCC and CDE): - 7% - Renewal Leases Generation and Transmission: - 13%  New rules are only valid for the concessions granted before 1995, i.e, they are not valid for AES Eletropaulo (concession expires in 2028) nor for AES Tietê (concession expires in 2029). 42
Energy cost reduction program Generation & Transmission  Extension for 30 years with effects anticipated for 2013: - Assets not depreciated / amortized will be evaluated based on the methodology of the new replacement value (NRV). Holders of concession will be compensated with such amount  Concession renewal will be based on O&M costs, industry charges, fees and network usage  Energy associated with the renewal of concessions will be fully allocated to the regulated market  Extension for 30 years Distribution  Rules for renewal has not been defined  Jan, 20 2013: Final resolution of the energy quotas for Discos (ANEEL) Other terms and timeline  Feb, 05 2013: Disco’s extraordinary review of the distribution rates perception for the consumers (ANEEL)  Concessions that are not renewed will be auctioned under the same conditions of the renewed concessions 43
Energy cost reduction program AES Tietê Opportunities O t iti  Competitive prices in the free market (~ R$ 100 – R$ 110/MWh)  Possible pressure of higher prices at the free market in the short term AES Eletropaulo  Marginal benefits in collection and g potential decrease in delinquency, since energy costs will be reduced  Increase in energy consumption, as a potential result of the drop in t iff t ti l lt f th d i tariffs  Exchange rate variation of the energy price purchased from Itaipu will no longer be suportted by distribution companies, but by Eletrobras Risks  Investments in modernization to be recognized by ANEEL at the end of the concession  Cash impact between tariff adjustments of hydrological risks due to the allocation of energy quotas 44
Costs and expenses Costs and operational expenses1 (R$ million) 570 415 201 433 419 187 174 198 372 214 2009 246 245 2010 2011 2012 Energy Purchase, Transmission and Connection Charges, and Water Resources Other Costs and Expenses 1 2 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 45
Costs and expenses Costs and operational expenses1 (R$ million) PMS2 and other expenses (R$ million) 1,531 8,390 6,431 1,306 6,745 6 745 6,940 , 1,255 1,306 1,255 1,251 165 192 1,251 1,531 ,53 254 261 705 700 647 546 443 513 565 2010 2011 2012 6,858 5,125 5,490 5,689 352 2009 2010 2011 Energy Supply and Transmission Charges 2012 PMS² and Others Expenses 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 2009 Material and Third Party Personnel and Payroll Others 46
Energy Summary Energy Supply Balance - 2012 (GWh) SUPPLY (GWh) ITAIPU BILAT. TIETÊ BILAT. OTHERS PROINFA AUCTION (Hidro) AUCTION (Thermo) CCEE BILLING (GWh) 9,911 17,029 11,138 11,815 COMMERCIAL 5,803 INDUSTRIAL 48 1,003 Required Energy 17,879 43,693 4,434 -720 RESIDENTIAL 2,922 P. SECTOR AND OTHERS 43 OWN CONSUMPTION 941 TRANSMISSION LOSS 5,139 DISTRIBUTION LOSS The energy supply balance shown above reflects the numbers at the end of 2012, supplied by the Electricity Marketing Chamber (CCEE) in December 2012. The numbers shown in the explanatory notes to the Financial Statements reflect values estimated by the Company at the time of the preparation of the accounts and which will be readjusted in the following months when CCEE supplies its final numbers. 47
AES Tiete's expansion obligation Efforts being made Privatization Notice established the obligation to expand the installed capacity in 15% (400 MW) until 2007, 2007 either in greenfield projects and/or through long term purchase agreements with new plants Judicial Notice: 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, 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” Thermo 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 Sep/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), hi h forbids bilateral 10 848/2004) which f bid bil t l agreements between generators and distributors In response to a p Popular Action (filed by individuals against the Federal Government, Aneel, AES Tietê and Duke), the Company p p y 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) Lawsuit: The Company appealed to the State of Sao Paulo State Court of Appeals and the injunction was kept Decision in the first appeal level determined the state of São Paulo to express about AES Tietê’s Expansion program capacity • Thermal SP - Project of a 550MW gas fired thermo plant • Thermal Araraquara - Acquisition of a purchase option 48
Growth opportunities “Thermal São Paulo” Project - Natural N t l gas combined cycle th bi d l thermal plant, with 550 MW of i t ll d capacity l l t ith f installed it - Environmental License was restored after the decision of São Paulo State Court of Justice - Next steps: Obtain installation license “Thermal Araraquara” Project “Th lA ”P j t - Natural gas combined cycle thermal plant, with 579 MW of installed capacity - Purchase option acquired in March, 2012 - Next steps: Obtain installation license 49
Eletrobras lawsuit State-owned Eletropaulo was spunoff into four companies and, according to our understanding based g 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 p Privatization event . State-owned Eletropaulo became AES Eletropaulo Sep/01 p Eletrobrás and CTEEP appealed to the Superior Court of Justice (SCJ) Sep/03 p Based on the spin-off protocol, the 2nd Instance Court excluded AES Eletropaulo f El l from the h lawsuit Oct/05 Jun/06 The SCJ annulled the d 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. 50
Eletrobras 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 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 AP’s conclusion, Instance Court decision will be issued > In case of an unfavorable decision: May/09 y Dec/10 Eletrobrás requested the beginning of the appraisal procedure before the 1st Instance Court Jul/11 Eletrobrás requested the ithd th withdrawal of the l f th judicial deposit made by state-owned Eletropaulo in 1988, which now amounts for R$ 95 MM (principal of the loan ( f taken in 1986), as a direct consequence of Eletrobrás’ victory on the merits Dec/12 Jan/12 Feb/12 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 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, determination. Also the Company requested a preliminary injunction to stay the execution proceedings until the ruling of the appeal 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 6 – Eletrobrás can request the seizure of the guarantee 7 - Appeals to the Superior Courts and file an injunction to stay the execution proceedings 51
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 g  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 time 52
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 9.25% minus Costs • Income Tax / Social Contribution: – 34% over taxable income • ICMS: 22% over Revenue (average rate) – Residential: 25% – I d t i l and commercial: 18% Industrial d i l – Public entities: free • PIS/Cofins: – 9.25% over revenue minus Costs 53
AES Sul Overview • • • • • • • Net Revenue – R$ million 2,300  2,100  Ebitda – R$ million 2,341 2,500  Serving 118 Municipalities in the State of Rio Grande do Sul Concession area: 99,512 km2 1.1 million consumption units Population Served: 3.6 million' 1,308 directed employees Next tariff reset: April, 19 2013 Concession valid through November, 2027 Net income – R$ million 490 550 2,027 1,866 373 246 450 1,900  1,700  350 1,500  281 255 2011 2012 199 1,300  250 1,100  900  150 700  500  50 2010 2011 2012 2010 2011 2012 2010 54
AES Uruguaiana g Overview • Natural independent gas-fired thermal power generation Company founded in 2000 • Located in the State of Rio Grande do Sul – city of Uruguaiana • Use of liquefied natural gas (LNG) transported through the Argentine gas pipeline network • Installed capacity 640 MW • Two combustion turbines (capacity of 187.5 MW each) • One steam turbine (265 MW capacity) • Plant hibernated in April 2009 because of interruption on the g supply p p gas pp y • Operations restarted in February 2013 • Ongoing negotiations for longer term operation in combined cycle 55
Attachment II Energy Sector in Brazil
Energy sector in Brazil: business segments Free Clients Distribution Transmission Generation • 13 groups controlling 76% of • C Consumption of 113 TWh ti f • 63 companies i • 68 companies i (26% of Brazilian total market) • 430 TWh of energy • 68% private sector • Conventional sources: above distributed in 2011 • High voltage transmission 3,000 3 000 kW • 70 million consumers illi (>230 kV) ( ) • 67% private sector • 98,648 km in extension • Annual tariff adjustment lines (SIN¹) • Tariff reset every four or • Regulated public service five years with free access • 5% biomass • Regulated public service • Regulated tariff (annually • 4% SHPP2 • Regulated contracting adjusted b inflation) dj t d by i fl ti ) • 1% Wind • Alternative sources: between 500 kW and 3,000 kW g • Large consumers can purchase energy directly from generators • Free contracting environment ¹ Interconnected National System ² Small Hydro Power Plants environment total installed capacity • 22% private sector • 1,862 power plants • 117 GW of installed capacity • 73% hydroelectric • 17% thermoelectric • Contracting environment – Sources: EPE, Aneel, ONS and Banks’ reports free and regulated markets 57
Energy sector in Brazil: contracting environment g Regulated market Free market Generators, 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 PPA1 – Existing Energy (A-1): Delivery in 1 year, 5-15 years regulated PPA1 1 – Power Purchase Agreement 58
Electric sector in Brazil: demand and supply balance Static balance1 – Load x Supply2 (considering reserve energy3) Static balance - Load x Suppl (MW avg) e ly 100,000 100 000 90,000 • Brazilian electric system 80,000 presents a surplus in the 70,000 , energy balance b l for f the h 60,000 years to come 50,000 40,000 • Expansion p 30,000 opportunities pp since this capacity is not 20,000 yet fully contracted 10,000 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Balance (%) 5.9% 7.8% 11.2% 9.6% 8.4% 10.0% 10.6% 8.2% 5.4% 4.2% Balance 3,528 4,875 7,443 6,684 6,097 7,590 8,404 6,734 4,673 3,770 Reserve 439 1,007 1,509 1,743 1,746 2,959 2,959 2,959 2,959 2,959 Supply 62,912 66,355 72,585 74,492 76,823 80,320 84,428 85,886 87,601 90,409 Load 59,823 62,487 66,651 69,551 72,472 75,689 78,983 82,111 85,887 89,598 1 -Ten-year Energy Plan 2020, May/2011 – EPE 2- Supply based on physical guarantee 3- Energy destined to equalize the differences between the sum of power plants’ physical guarantees and the system’s physical guarantee. 59
Generation market overview Installed capacity (GW)1 Growth by source - new auctions (GW) 141 136 162 166 171 156 148 11 14 19 41 42 42 123 133 13 23 24 28 33 8 38 110 110 110 110 110 110 110 110 110 110 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total: 22 GW 117 6 Current installed capacity 5 3 2 Auctioned Thermal2 2.6 Hydro 8.6 Renewables 10.6 Upcoming auctions • Brazilian installed capacity to grow 4-5% y.o.y (~ 5 GW) over the next 10 years • Renewable energies will lead the capacity increase with competitive cost vs. other technologies and strong Government support • Gas-fired thermal to leverage on the pre-salt discoveries and on the dispatchability benefit 1- Source: EPE (Energetic Research Company), Ten-year Energy Plan 2020, May/2011 2- Amount related to thermal is an estimate of the Company 60
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 f lt d th t ti l l forecasts b t based on th expectations of th C d the t ti f the Company’s M ’ Management i t 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.

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Apresentação institucional 4_q12_en_v5

  • 2. AES Brasil Group •P Presence i B il since 1997 in Brazil i • Operational Figures: • Consumption units: 7.7 million 54.4 • Distributed Energy: 54 4 TWh • Installed Capacity: 2,658 MW • Generated Energy : 14.3 TWh • 7.4 thousand AES Brasil People • Investments 1998-2012: R$ 9.4 billion • Solid corporate governance and sustainable practices • Safety as value #1 Disco Genco Service Provider 2
  • 3. AES Brasil widely recognized in 2009-2012  Management Excellence  Quality and Safety  Environmental Concern (AES Tietê) (AES Sul) (AES ( S Eletropaulo) ) (AES Ti tê) Tietê) (AES Brasil) (AES Tietê) (AES El t Eletropaulo) l ) (AES Eletropaulo) (AES Tietê) (AES Brasil) (AES Eletropaulo) (AES Tietê) (AES Tietê) (AES Eletropaulo) (AES Eletropaulo/ Tietê) (AES Tietê) (2011- AES Tietê; 2012 – AES Eletropaulo) (AES Eletropaulo) (AES Eletropaulo) 3
  • 4. Mission & visions Mission • Improving lives and promoting development by providing safe safe, reliable and sustainable energy solutions Visions • Be a leader in operational and financial management in Brazilian energy generation sector and expand installed capacity • Be the best distributors in Brazil 4
  • 5. Social responsability: annual investments of R$ 83 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 tho sand appro imatel 5.6 thousand children and teenagers and indirectly 292 tho sand people in 7 units located within indirectl thousand nits ithin 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. Since 2004, 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 i BM&F Bovespa B ¹ ¹ Free Float Others² Market Cap³ 16.1% 19.2% 56.2% 8.5% US$ 1.4 bi 24.2% 24 2% 28.3% 28 3% 39.5% 39 5% 8.0% 8 0% US$ 4 1 bi 4.1 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: 12/28/2012. Considers preferred shares for AES Eletropaulo and preferred and common shares for AES Tietê 7
  • 8. AES Brasil is the second largest group in the electric sector Ebitda1 – 2011 (R$ Billion) 5.4 4.9 3.8 2.9 2.9 2.0 1.9 1.5 1.2 0.7 07 CEMIG Net AES BRASIL income1 2 CPFL TRACTEBEL NEOENERGIA CESP COPEL EDP LIGHT 0.3 0.3 DUKE CESP DUKE – 2011 (R$ Billion) ( ) 3.0 2.4 1.6 1.6 1.4 1.2 0.5 AES BRASIL2 CEMIG CPFL NEOENERGIA TRACTEBEL COPEL 1 – excluding Eletrobrás 2 – includes AES Atimus sale (aprox. R$ 1 billion in EBITDA and aprox. R$ 700 million in net income) LIGHT 0.1 01 EDP Source: Companies’ financial reports 8
  • 9. Generation installed capacity (MW) - 20121 AES Tietê is the 3rd largest private generator in Brazil Main privately held Companies CPFL 2,4% AES Tietê 2,2% Eletronuclear 2,8% ENDESA Eletrosul 0,8% 0,5% CGTEE DUKE Light 0,7% EDP 1,7% 0,8% 1,5% Neoenergia 1,2%  AES Tietê is the 3rd largest among private generation companies  Approximately 78% of country’s generation country s installed capacity is state-owned2 Copel 4%  Three Petrobrás 5% Demais D i 28,9% Cemig 6% mega hydropower plants under construction in the North region of Brazil with 18 GW in installed capacity Itaipu 6% – Santo Antonio and Jirau (Madeira River): 7 GW Tractebel 6% CESP 6% CHESF 9% Eletronorte 7% – Belo Monte (Xingu River): 11 GW Furnas F 8% Total Installed Capacity: 123 GW 1- Sources: ANEEL – 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 – D /2011 C Dec/2011 13% • 63 30% AES A Brasil 5% CPFL Energia 16% 7% Consumption (GWh) - 2011 in Brazil • AES Brasil is one of the largest electricity distribution group in Brazil: – AES Eletropaulo: 45 TWh distributed, Cemig 7% companies distributing 430 TWh 12% 12% distribution Neo Energia 10.5% of the Brazilian market – AES Sul: 8.6 TWh distributed, 2.0% of the Brazilian market 13% Copel 12% Light  AES Eletropaulo is the largest electricity distributor in Latin America in terms of revenue supply, according to ABRADEE¹ 52% EDP  Distribution companies’ operations are 11% Outros restricted to their concession areas 7% 6% 6% 6% 1 – Brazilian Association of Electricity Distributors  Acquisitions must only be performed by the holdings of economic groups 10 10
  • 12. AES Tietê overview Generation facilities  12 hydroelectric plants in São Paulo  30-year concession valid until 2029  Installed capacity of 2,658 MW, with physical guarantee1 of 1,278 MW average  Almost all the amount of energy that AES Tietê can sell is contracted with AES Eletropaulo until the end of 2015  AES Tietê can invest in generation, its main activity, and g , y, operate in energy trading  364 employees as of December, 2012 1 - Amount of energy allowed to be long term contracted 12
  • 13. Generated energy shows high operational availability p y Generated energy (MW avarage1) 130% 2012 Generated energy by power plant (MW average1) 127% 125% 124% 4% 2%3% Agua Vermelha 5% Nova A N Avanhandava h d 5% Promissão 9% 1,665 1,599 1,582 61% Ibitinga Bariri 1,629 11% Barra Bonita Euclides da Cunha 2009 2010 Generation - Mwavg 2011 Other Power Plants * 2012 Generation/Physical guarantee 1 – Generated energy divided by the amount of hours * Caconde, Limoeiro, Mogi and SHPPs 13
  • 14. A significant amount of billed energy and net revenues comes from the bilateral contract with AES Eletropaulo Billed energy (GWh) Net revenues (%) 89% 16,728 15,112 14,729 14,706 554 301 117 615 1,150 1,340 1,519 2,331 1,980 1,942 11,108 11,108 11,108 1,141 1 141 1,535 8,045 3% 2% 6% AES Eletropaulo 2009 2010 2011 2012 Other bilateral contracts AES Eletropaulo S Energy Reallocation Mechanism Spot Market S Other Bilateral Contracts O C Spot Market MRE1 1 ERM 1 – Energy Reallocation Mechanism 14
  • 15. Power plants modernization investments Investments (R$ million) 213 175 19 • Main 2012 investments: o R$ 123.1 million in modernization projects $ p j 142 and new equipment of the power plants, 3 of special note to Nova Avanhandava, 82 12 Ibitinga, Euclides da Cunha and Limoeiro; g , ; 156 o R$ 11,6 million in IT upgrading; and 139 o R$ 4.1 million in the Jaguari Mirim Project 70 (São José SHPP), which started up operations in March 2010 2011 Investments * Small Hydro Power Plants 2012 2013 (e) New SHPPs* 15
  • 16. Strategy for energy contracting in 2016: p p composition of client portfolio Clients portfolio evolution in 2012 • Goals: • Goals 2011/2012: commercial initiatives to expand clients portfolio in the free market • The current portfolio comprises 320 259 320 Mwavg, of which 288 MWavg were sold in 2012 84 90 1Q12 2Q12 • 143 Mwavg were sold to 2016 32 Before dec/2011 3Q12 4Q12 onward Mwavg g 16
  • 17. Financial highlights Ebitda (R$ million) Net revenue (R$ million) 2.112 1.670 1.754 1.886 1.255 1.320 1.466 1.542 2011 2012 9 1.309 2009 2010 Net Revenue 2011 2012 1.311 2009 (54) 2010 75% 75% 81% 73% Recorrente Ebitda Margin 17
  • 18. Steady earnings distribution on a quarterly q arterl basis Net income and dividend pay-out (R$ million) 117% 110% 109% 11% 706 11% 11% • Dividends distribution practice: 100% of net income 108% 12% – 25% of minimum p y pay-out according to bylaws 845 737 901 – 106% 15 – 31 Average payout since 2006: Average dividends since 2006: R$ 745 million per year 742 706 886 2009 (36) Pay- out 2010 Yield Pref 2011 Recurring 2012 Non-recurring 18
  • 19. Debt profile Amortization schedule – principal (R$ million) Net debt (R$ billion) 0,7 0,7 0,6 0,3x 0,3x 0,3x 0,6 06 0,3x 300 0,4 0,5  Gross debt/Ebitda of 2.5x  2014 2015 0,5 2009 2010 2011 2012 Net Debt Net Debt / Ebitda Gross Debt/Ebitda Covenants 300 2013 (e) 0,4 300 Ebitda/Financial expenses of 1.75x Debt amortization flow (R$ million) 2011  Average Cost (% CDI)1 115% Average Cost 128%  Average Term (years) 1.3  Effective Rate 1 – Brazilian Interbank Interest Rate 2012 2.3 12.1% 9.8% 19
  • 20. Capital markets Daily avg volume (R$ thousand) AES Tietê X Ibovespa X IEE 12 months1 739 703 A 120 8% 553 546 19,687 100 -1% -11% 11% -11% -12% 80 60 Dec-11 Feb-12 Apr-12 IEE Ibovespa Jun-12 Aug-12 Oct-12 TSR Dec-12 13,922 10,187 10 187 4,239 8,086 9,683 9,537 2009 2010 2011 5,269 3,397 2,101 14,418 2012 GETI3 Preferred GETI4 12,584 Common Shares negotiated (thousand) A 09/12/2012: The Brazilian Government announced the Energy Reduction Program, by the PM 579 y • Market Cap4: US$ 4.1 billion / R$ 8.5 billion • BM&FBovespa: GETI3 (common shares) and GETI4 (preferred shares) • ADRs ADR negotiated i US OTC M k t AESAY ( ti t d in Market: (common shares) and AESYY h ) d (preferred shares) 1 – Index: 12/29/2011 = 100 2 – Electric Energy Index 3 – Total Shareholders’ Return 4 – Index: 12/28/2012 20
  • 22. AES Eletropaulo overview Concession area  Largest electricity distribution company in Latin America  Serving 24 municipalities in the São Paulo Metropolitan area  Concession contract valid until 2028; renewable for another 30 years  Concession area with the highest GDP in Brazil  45 thousand kilometers of lines and 6.3 million consumption units in a concession area of 4,526 km2  45 TWh distributed in 2012  AES Eletropaulo, as a distribution company, can only invest in assets within its concession area  5,872 employees as of December, 2012 22
  • 23. Consumption evolution Total market1 (GWh) Consumption by class – 2012 (%) 6.832 34.436 43.345 7.911 35.434 45.102 8.284 17 45.557 7.987 36.817 9 30 43 41.269 15 24 37.570 37 26 2009 2010 Captive Market 2011 2012 Brazil Free Clients Residential 1 – Net of own consumption AES Eletropaulo Industrial Commercial Others 23
  • 24. Industrial class Industrial class X Industrial production in São Paulo State 15% 10% 5% 0% • -5% Economic crisis consumption influenced Economic  recovery -10% Industrial by is manufacturing industry performance in São Paulo -15% State Jul/07 Dec/07 May/08 Oct/08 Mar/09 Aug/09 Jan/10 Jun/10 Nov/10 Apr/11 Sep/11 Feb/12 Jul/12 Dec/12 Industrial Production SP (% 12 months) Industrial (% 12 months) Consumption of industrial class by activity1 – AES Eletropaulo • Recent slowdown is influenced by y the decrease of industrial production in 2011 and 2012 Other industries 51% 1 – As of December 2012. Vehicles, Chemical, Rubber, Plastic and Metal Products 49% 24
  • 25. Residential class Residential class X A erage income in São Paulo Metropolitan Area Average Pa lo 4,800  4,300  3,800  3,300  Residentia GWh al ‐ Avg Real l Income R$ ‐ SP (Q 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  1 400 1,300  1,200   Residential consumption driven by average income 2,800  2 800  2,300  Paulo 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 2009 2010 2011 Income expansion trend in São Area will sustain growth of residential class 2012  Consumption per consumer (i kWh) C ti (in Consumption per consumer i C ti is still 8.6% lower than in the period before the rationing - 8.6% 258 Metropolitan Rationing 220 192 199 203 207 223 213 219 228 229 234 236 2009 2010 2012 1 - Two quarters of delay in relation to consumption 2000 2001 2002 2003 2004 2005 2006 2007 2008 2011 25
  • 26. Investments focused on grid automation, maintenance and system expansion y p Investments breakdown (R$ million) 800 700 739 682 831 35 • Main 2012 investments: 22 647 28 26  System Expansion and Customer 600 Services - R$ 195.5 million was 500 invested to add 202,000 new clients 400 300 654 717 796  Loss Recovery - R$ 27 9 million 27.9 621 200 invested, regularizing 55,400 clandestine connections 100  Maintenance 0 2010 2011 Own resources 2012 2013(e) - R$ 213.0 million, mainly in maintaining the 2,005 km grid Paid by the clients 26
  • 27. SAIDI below regulatory limits and in its lowest level since 2006 SAIDI¹ (last 12 months) SAIDI1 (LTM) -17% 10.09 11.86 9.32 8.68 10.60 10.36 2009 2010 7th 8.49 8.35 8.23 2012 2011 8th 8.67 jan/13 9.87 8.23 jan/12 jan/13 6th SAIDI (hours) SAIDI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers ► 1 - System Average Interruption Duration Index Source: ANEEL and AES Eletropaulo 2012 SAIDI ANEEL Reference: 8.49 hours 27
  • 28. SAIFI remains below the regulatory limit and still decreasing SAIFI¹ (last 12 months) 7.87 7.39 SAIFI1 (LTM) 6.93 6.87 6.64 -15% 6.17 5.46 5.45 2009 2010 2011 7th 3rd 4.65 2012 5.37 4.55 jan/13 jan/12 4.55 jan/13 4th SAIFI (times) SAIFI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers ► 1 - System Average Interruption Duration Index Source: ANEEL and AES Eletropaulo 2012 SAIFI ANEEL Reference: 6.64 times 28
  • 29. Losses level close to the regulatory reference for t e 3 d Cyc e o Tariff Reset e e e ce o the 3rd Cycle of a eset Losses (last 12 months) 11.8 11 8 Regulatory Reference² - Total Losses (last 12 months) 10.9 10.5 10.2 5.3 4.4 4.0 6.5 6.5 2010 2011 2012 9.8 9.4 2013/2014 2014/2015 6.1 2009 10.3 4.1 6.5 10.6 Technical Losses ¹ 2011/2012 2012/2013 Non Technical Losses 1 – In January 2012, the Company improved the assessment of the technical losses. As a consequence of this improvement, technical losses calculated are in a level of 6.1%. 2 – Values estimated by the Company to make them comparable to the reference for non-technical losses determined by the Aneel 29
  • 30. Financial highlights Net revenues (R$ million) Ebitda (R$ million) 2.413 426 9,697 9,836 9 836 9,959 , 2.848 933 1.775 87 197 339 1.491 1.648 442 8,786 1.473 656 179 476 2009 2010 2011 2012 2009 2010 2011 2012 Recurring Regulatory assets and liabilities Non-recurring 1 – Non recurring 2011 : Includes sale of AES Eletropaulo Telecom with a R$ 707 million impact on Ebitda 1 30
  • 31. Earnings distribution on semi-annual basis Net income and dividend payout1 (R$ million) N ti d di id d t illi ) 101,5% 114,4% 54,4% 25,0% 20,4% 28,6% 17,1% 1.572 0,9% 2.8% 140,0% 120,0% , 100,0% 80,0% 60,0% 40,0% 20,0% 0,0% • Dividends distribution distribution above the practice: minimum required 1.348 - 374 236 160 622 762 Average payout 74% per year – 350 25% of minimum according to bylaws – 1.157 Average dividends since 2006: R$ 890 million per year p y 652 287 634 108 pay-out since 2006: 229 (121) 2009 2010 2011 2012 Pay-out³ ³ Yield PN Adjusted Net Income Regulatory assets and liabilities One off 1 – Gross amount 2– Non recurring 2011 :Includes sale of AES Eletropaulo Telecom with a R$ 467 million impact on net income 31
  • 32. Efficiency increase to operate within the regulatory limits “Criando Valor” (Creating Value) Project  Aims cost control gains by increasing productivity, optimizing supporting functions and enhancing efficiency in key processes  Benefits to be obtained in 2012 will absorb part of tariff reset impacts and pressure on costs Additional initiatives  Change of corporate headquarters Operational  Optimization of operational bases  Stores review by increasing of outsourcing  Organizational restructuring  30% growth in the productivity of operations teams of the regional north (being implemented for other regional) c ease the u be of clients served automatic channels  Increase in t e number o c e ts se ed by auto at c c a e s  Renegotiation of supplies contracts  Sale of real estate with an estimated value of $ 239 million of which R$ 160 million were already sold million, Financial  Covenants renegotiation and lengthening debt profile  Reducing manageable costs estimated at R$ 100 million from 2013 32
  • 33. Debt refinancing conclusion of R$ 1 billion resulting in more flexible covenants  Decrease in debt amortization volume for 2013-15 by R$ 750 million Benefits  Increase in the a erage debt mat rit from 6 6 years to 7 2 years average maturity 6.6 ears 7.2 ears  Debt average costs decrease from CDI+1.29% to CDI+1.27%  More flexible covenants Debt amortization schedule Before restructuring After restructuring 1.133 875 R$ 513 million R$ 1,241 million 639 732 50 578 388 275 86 533 302 2013 387 47 228 2014 51 2015 58 280 54 337 2016 Debt in R$ (ex-pension plan debt ) 226 2017 383 227 62 436 2018 531 57 53 494 44 321 2019 157 400 2020 2028 Pension plan debt 129 104 53 43 85 2013 2014 589 46 180 2015 384 688 654 654 61 478 323 2016 834 745 2017 Debt in R$ (ex-pension plan debt ) 2018 2019 221 180 2020 2021 2028 Pension plan debt 33
  • 34. More flexible covenants and considering IFRS changes FROM TO Net d bt Adj t d Ebitda 3.5 N t debt / Adjusted Ebitd < 3 5 Financial Index Gross debt / Adjusted Ebitda < 3.5 Default If the limit is exceeded in any quarter Regulatory assets and liabilities Not considered in the calculation (equivalent to 4.5x Gross Debt / Adjusted Ebitda) If the limit is exceeded for two consecutive quarters Considered in the calculation (concept before IFRS adoption) Debt recognized in liabilities excluding the Pension plan debt Compulsory loans Total debt recognized in liabilities Considered in the calculation of debt “corridor” concept Out of debt calculation 34
  • 35. Debt profile Net debt 4.9x 1.5x 2.4 2.3 0.9x 0.9x 3.1 2.5 2010 2011 2.3 2009 2012 2.4 2010 2011 3.1 2012 Net Debt (R$ billion) Net Debt/Ebitda Adjusted with Fcesp Net Debt (R$ billion) December, 2012: Indexed by: 70% CDI²; 29% IGP-DI³ and 0.7% others 35 1 – According the new covenants 2 – Brazilian Interbank Interest Rate 3 – Inflation Index
  • 36. Capital markets Average d il volume (R$ th A daily l thousand) d) AES El t Eletropaulo X Ibovespa X IEE l Ib A 12 months¹ B 120 8% 100 -11% 21,960 24,496 26,897 23,057 2011 2012 80 -44% 44% 60 -54% 40 2009 20 Dec-11 Feb-12 Ibovespa Apr-12 IEE² Jun-12 Aug-12 AES Eletropaulo PN Oct-12 Dec-12 2010 Preferred AES Eletropaulo TSR³ A Material Fact 04/10/2012: technical notes published by Aneel regarding the calculation of the preliminar tariff review rate, including the regulatory asset basis . B Material Fact 07/02/2012 and 07/03/2012: Aneel final terms about tariff review rate, including the regulatory asset basis and tariff adjustments . • Market cap4: US$ 1.4 billion/R$ 2.8 billion • BM&FBOVESPA: ELPL3 (common shares) and ELPL4 (preferred shares) • ADRs at US OTC Market: EPUMY (preferred shares) 1 – Information until 12/28/2012. Index: 12/29/2011 = 100 3 – Total Shareholder Return 2 – Electric Energy Index 4– Index: 12/28/12. Calculation includes only preferred shares 36
  • 38. Distribution Companies: Tariff methodology Tariff reset and readjustment • 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 Readjustment: 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 R ti 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 38
  • 39. 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 Sti l t 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 39
  • 40. 3rd Cycle of the 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 4,445.1  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 R i T iff Review +  A Average effect t b perceived b th consumer : +5.51% ff t to be i d by the 5 51%  Economical Effect: +4.45%  Average effect to be perceived by the consumer : -2.26% Adjustment Administrative appeal  In 17th July Company filed a request for reconsideration of the Homologation Resolution No July, No. 1,327/2012 about the Regulatory Asset Base and the non-technical losses trajectory 40
  • 41. Discussions with Regulator Discussion Arguments  Shielded RAB was approved by Aneel in 2003  Shielded RAB Aneel excluded R$ 728 million f A l l d d illi from shielded RAB, due to the decrease in the amount of cables between the accounting records and the shielded RAB, between cycles RAB b t l and was confirmed in 2007, considering a global consistency criteria  If the exclusion of the amount of cables is maintained, an addition of R$ 660 million of , $ assets in operation (2003 BRR) should be considered  Investments  Losses Aneel did not recognize a R$ 427 million investment performed in the incremental period on Minor Components to Main Equipments (“COM”) and Additional q p ( ) Costs (“CA”) Aneel changed the benchmark company proposed in the Public Hearing, modifying the regulatory losses reduction from 0.49% to 1%  Adequacy of the regulatory standards applied by Aneel for the valuation of real costs incurred in execution of works and recorded in accounting books  Benchmark company is an outlier p y  Regulatory losses reduction shall be restored to the previous number of 0.49% 41
  • 42. Energy cost reduction program  Program created by Provisional Measure 579 (“PM 579”) in 09/12/2012;  Law Decree 7805 was published on 09/17/2012 and regulates the terms of PM 579;  On January 14 2013 the PM 579 was converted into Law No 12 783 and sanctioned by President Dilma Rouseff 14, 2013, No.12.783  It aims to reduce tariffs by an average of 20% (Residential: 16.2% and industrial 20% to 28%), as from February, 2013, through: - Reduction Sector Charges (RGR, CCC and CDE): - 7% - Renewal Leases Generation and Transmission: - 13%  New rules are only valid for the concessions granted before 1995, i.e, they are not valid for AES Eletropaulo (concession expires in 2028) nor for AES Tietê (concession expires in 2029). 42
  • 43. Energy cost reduction program Generation & Transmission  Extension for 30 years with effects anticipated for 2013: - Assets not depreciated / amortized will be evaluated based on the methodology of the new replacement value (NRV). Holders of concession will be compensated with such amount  Concession renewal will be based on O&M costs, industry charges, fees and network usage  Energy associated with the renewal of concessions will be fully allocated to the regulated market  Extension for 30 years Distribution  Rules for renewal has not been defined  Jan, 20 2013: Final resolution of the energy quotas for Discos (ANEEL) Other terms and timeline  Feb, 05 2013: Disco’s extraordinary review of the distribution rates perception for the consumers (ANEEL)  Concessions that are not renewed will be auctioned under the same conditions of the renewed concessions 43
  • 44. Energy cost reduction program AES Tietê Opportunities O t iti  Competitive prices in the free market (~ R$ 100 – R$ 110/MWh)  Possible pressure of higher prices at the free market in the short term AES Eletropaulo  Marginal benefits in collection and g potential decrease in delinquency, since energy costs will be reduced  Increase in energy consumption, as a potential result of the drop in t iff t ti l lt f th d i tariffs  Exchange rate variation of the energy price purchased from Itaipu will no longer be suportted by distribution companies, but by Eletrobras Risks  Investments in modernization to be recognized by ANEEL at the end of the concession  Cash impact between tariff adjustments of hydrological risks due to the allocation of energy quotas 44
  • 45. Costs and expenses Costs and operational expenses1 (R$ million) 570 415 201 433 419 187 174 198 372 214 2009 246 245 2010 2011 2012 Energy Purchase, Transmission and Connection Charges, and Water Resources Other Costs and Expenses 1 2 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 45
  • 46. Costs and expenses Costs and operational expenses1 (R$ million) PMS2 and other expenses (R$ million) 1,531 8,390 6,431 1,306 6,745 6 745 6,940 , 1,255 1,306 1,255 1,251 165 192 1,251 1,531 ,53 254 261 705 700 647 546 443 513 565 2010 2011 2012 6,858 5,125 5,490 5,689 352 2009 2010 2011 Energy Supply and Transmission Charges 2012 PMS² and Others Expenses 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 2009 Material and Third Party Personnel and Payroll Others 46
  • 47. Energy Summary Energy Supply Balance - 2012 (GWh) SUPPLY (GWh) ITAIPU BILAT. TIETÊ BILAT. OTHERS PROINFA AUCTION (Hidro) AUCTION (Thermo) CCEE BILLING (GWh) 9,911 17,029 11,138 11,815 COMMERCIAL 5,803 INDUSTRIAL 48 1,003 Required Energy 17,879 43,693 4,434 -720 RESIDENTIAL 2,922 P. SECTOR AND OTHERS 43 OWN CONSUMPTION 941 TRANSMISSION LOSS 5,139 DISTRIBUTION LOSS The energy supply balance shown above reflects the numbers at the end of 2012, supplied by the Electricity Marketing Chamber (CCEE) in December 2012. The numbers shown in the explanatory notes to the Financial Statements reflect values estimated by the Company at the time of the preparation of the accounts and which will be readjusted in the following months when CCEE supplies its final numbers. 47
  • 48. AES Tiete's expansion obligation Efforts being made Privatization Notice established the obligation to expand the installed capacity in 15% (400 MW) until 2007, 2007 either in greenfield projects and/or through long term purchase agreements with new plants Judicial Notice: 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, 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” Thermo 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 Sep/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), hi h forbids bilateral 10 848/2004) which f bid bil t l agreements between generators and distributors In response to a p Popular Action (filed by individuals against the Federal Government, Aneel, AES Tietê and Duke), the Company p p y 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) Lawsuit: The Company appealed to the State of Sao Paulo State Court of Appeals and the injunction was kept Decision in the first appeal level determined the state of São Paulo to express about AES Tietê’s Expansion program capacity • Thermal SP - Project of a 550MW gas fired thermo plant • Thermal Araraquara - Acquisition of a purchase option 48
  • 49. Growth opportunities “Thermal São Paulo” Project - Natural N t l gas combined cycle th bi d l thermal plant, with 550 MW of i t ll d capacity l l t ith f installed it - Environmental License was restored after the decision of São Paulo State Court of Justice - Next steps: Obtain installation license “Thermal Araraquara” Project “Th lA ”P j t - Natural gas combined cycle thermal plant, with 579 MW of installed capacity - Purchase option acquired in March, 2012 - Next steps: Obtain installation license 49
  • 50. Eletrobras lawsuit State-owned Eletropaulo was spunoff into four companies and, according to our understanding based g 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 p Privatization event . State-owned Eletropaulo became AES Eletropaulo Sep/01 p Eletrobrás and CTEEP appealed to the Superior Court of Justice (SCJ) Sep/03 p Based on the spin-off protocol, the 2nd Instance Court excluded AES Eletropaulo f El l from the h lawsuit Oct/05 Jun/06 The SCJ annulled the d 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. 50
  • 51. Eletrobras 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 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 AP’s conclusion, Instance Court decision will be issued > In case of an unfavorable decision: May/09 y Dec/10 Eletrobrás requested the beginning of the appraisal procedure before the 1st Instance Court Jul/11 Eletrobrás requested the ithd th withdrawal of the l f th judicial deposit made by state-owned Eletropaulo in 1988, which now amounts for R$ 95 MM (principal of the loan ( f taken in 1986), as a direct consequence of Eletrobrás’ victory on the merits Dec/12 Jan/12 Feb/12 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 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, determination. Also the Company requested a preliminary injunction to stay the execution proceedings until the ruling of the appeal 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 6 – Eletrobrás can request the seizure of the guarantee 7 - Appeals to the Superior Courts and file an injunction to stay the execution proceedings 51
  • 52. 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 g  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 time 52
  • 53. 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 9.25% minus Costs • Income Tax / Social Contribution: – 34% over taxable income • ICMS: 22% over Revenue (average rate) – Residential: 25% – I d t i l and commercial: 18% Industrial d i l – Public entities: free • PIS/Cofins: – 9.25% over revenue minus Costs 53
  • 54. AES Sul Overview • • • • • • • Net Revenue – R$ million 2,300  2,100  Ebitda – R$ million 2,341 2,500  Serving 118 Municipalities in the State of Rio Grande do Sul Concession area: 99,512 km2 1.1 million consumption units Population Served: 3.6 million' 1,308 directed employees Next tariff reset: April, 19 2013 Concession valid through November, 2027 Net income – R$ million 490 550 2,027 1,866 373 246 450 1,900  1,700  350 1,500  281 255 2011 2012 199 1,300  250 1,100  900  150 700  500  50 2010 2011 2012 2010 2011 2012 2010 54
  • 55. AES Uruguaiana g Overview • Natural independent gas-fired thermal power generation Company founded in 2000 • Located in the State of Rio Grande do Sul – city of Uruguaiana • Use of liquefied natural gas (LNG) transported through the Argentine gas pipeline network • Installed capacity 640 MW • Two combustion turbines (capacity of 187.5 MW each) • One steam turbine (265 MW capacity) • Plant hibernated in April 2009 because of interruption on the g supply p p gas pp y • Operations restarted in February 2013 • Ongoing negotiations for longer term operation in combined cycle 55
  • 57. Energy sector in Brazil: business segments Free Clients Distribution Transmission Generation • 13 groups controlling 76% of • C Consumption of 113 TWh ti f • 63 companies i • 68 companies i (26% of Brazilian total market) • 430 TWh of energy • 68% private sector • Conventional sources: above distributed in 2011 • High voltage transmission 3,000 3 000 kW • 70 million consumers illi (>230 kV) ( ) • 67% private sector • 98,648 km in extension • Annual tariff adjustment lines (SIN¹) • Tariff reset every four or • Regulated public service five years with free access • 5% biomass • Regulated public service • Regulated tariff (annually • 4% SHPP2 • Regulated contracting adjusted b inflation) dj t d by i fl ti ) • 1% Wind • Alternative sources: between 500 kW and 3,000 kW g • Large consumers can purchase energy directly from generators • Free contracting environment ¹ Interconnected National System ² Small Hydro Power Plants environment total installed capacity • 22% private sector • 1,862 power plants • 117 GW of installed capacity • 73% hydroelectric • 17% thermoelectric • Contracting environment – Sources: EPE, Aneel, ONS and Banks’ reports free and regulated markets 57
  • 58. Energy sector in Brazil: contracting environment g Regulated market Free market Generators, 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 PPA1 – Existing Energy (A-1): Delivery in 1 year, 5-15 years regulated PPA1 1 – Power Purchase Agreement 58
  • 59. Electric sector in Brazil: demand and supply balance Static balance1 – Load x Supply2 (considering reserve energy3) Static balance - Load x Suppl (MW avg) e ly 100,000 100 000 90,000 • Brazilian electric system 80,000 presents a surplus in the 70,000 , energy balance b l for f the h 60,000 years to come 50,000 40,000 • Expansion p 30,000 opportunities pp since this capacity is not 20,000 yet fully contracted 10,000 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Balance (%) 5.9% 7.8% 11.2% 9.6% 8.4% 10.0% 10.6% 8.2% 5.4% 4.2% Balance 3,528 4,875 7,443 6,684 6,097 7,590 8,404 6,734 4,673 3,770 Reserve 439 1,007 1,509 1,743 1,746 2,959 2,959 2,959 2,959 2,959 Supply 62,912 66,355 72,585 74,492 76,823 80,320 84,428 85,886 87,601 90,409 Load 59,823 62,487 66,651 69,551 72,472 75,689 78,983 82,111 85,887 89,598 1 -Ten-year Energy Plan 2020, May/2011 – EPE 2- Supply based on physical guarantee 3- Energy destined to equalize the differences between the sum of power plants’ physical guarantees and the system’s physical guarantee. 59
  • 60. Generation market overview Installed capacity (GW)1 Growth by source - new auctions (GW) 141 136 162 166 171 156 148 11 14 19 41 42 42 123 133 13 23 24 28 33 8 38 110 110 110 110 110 110 110 110 110 110 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total: 22 GW 117 6 Current installed capacity 5 3 2 Auctioned Thermal2 2.6 Hydro 8.6 Renewables 10.6 Upcoming auctions • Brazilian installed capacity to grow 4-5% y.o.y (~ 5 GW) over the next 10 years • Renewable energies will lead the capacity increase with competitive cost vs. other technologies and strong Government support • Gas-fired thermal to leverage on the pre-salt discoveries and on the dispatchability benefit 1- Source: EPE (Energetic Research Company), Ten-year Energy Plan 2020, May/2011 2- Amount related to thermal is an estimate of the Company 60
  • 61. 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 f lt d th t ti l l forecasts b t based on th expectations of th C d the t ti f the Company’s M ’ Management i t 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.