AES Brasil Group is a major electricity distribution and generation company in Brazil with 7 million clients. In 2008, AES Brasil had R$3.2 billion in Ebitda and R$1.7 billion in net income. It has significant market share in distribution but smaller shares in generation. The document provides an overview of AES Brasil's operations, investments, financial performance, regulatory environment and key subsidiaries such as AES Eletropaulo and AES Tietê.
2. AES Brasil Group
Market Share
7 million clients
6 thousand AES People
... with a 2008 result:
R$ 3.2 billion (Ebitda)
R$ 1.7 billion (net income)
Discos
14,6%
85,4%
Gencos
3,0%
97,0%
Investments 1998-2008:
R$ 5 billion after privatization
AES Brasil
Others
Disco
Trading Co.
Genco
Telecom
2
3. Shareholding structure
BNDES
AES Corp
C 50.00% + 1 share
P 0.00%
T 46.15%
O = Common Shares
P = Preferred Shares
T = Total
C 50.00% - 1 share
Cia. Brasiliana de
Energia
T 99.76%
AES
Sul
C 99.99%
T 99.99%
AES
Infoenergy
C 100.00%
T 100.00%
AES
Uruguaiana
C 98.26%
T 98.26%
AES
Com RJ
C 76.46%
P 7.43%
T 34.80%
AES
Eletropaulo
C 71.35%
P 32.34%
T 52.55%
AES
Tietê
C 99.99 %
T 99.99 %
AES EP
Telecom
3
5. Energy sector agents in Brazil
Ministry of Mines and
Energy (MME)
(Set Guidelines and Policies)
National Council of
Energy Policy (CNPE)
(Formulates Policies)
Electricity Sector
Surveillance
Committee (CMSE)
Brazilian Electricity
Regulatory Agency
(ANEEL)
Energy Research
Enterprise (EPE)
(Monitors energy supply)
(Ruling, Inspection & Auditing,
Monitoring, and Mediation)
(Generation & Transmission
Planning)
Distribution
companies
Electric Energy
Commercialization
Chamber (CCEE)
Pricing and clearing of
energy transactions
Transmission
companies
System Operator
(ONS)
Generation
companies
Trading
companies
Generator resources
scheduling and dispatch
5
6. Energy sector in Brazil
(Contracting Environment)
Free Market
Regulated Market
Auctions
Distribution Companies
Spot Market
PPAs1
Trading Companies
Free Clients
•
Trading Companies
Free Clients
Main auctions (reverse auctions):
– New Energy (A-5): Delivery in 5 years, 15-30
Distribution
Companies
years regulated PPA
– New Energy (A-3): Delivery in 3 years, 15-30
years regulated PPA
– Existing Energy (A-1): Delivery in 1 year, 5-15
years PPA
1 – Power Purchase Agreement
6
7. Discos regulatory methodology
(Tariff Reset and Adjustment)
Tariff Readjustment and Reset
• Tariff Reset is applied each 3 to 5 years
• Parcel A Costs
− AES Eletropaulo: each 4 years
Energy
− AES Sul: each 5 years
Purchase
− Parcel A costs pass trough the tariff
Transmission
− Parcel B costs are set by ANEEL
− Non-manageable costs that totally
pass- through to the tariff
− Losses reduction improve the passthrough effectiveness
Sector Charges
• Tariff Adjustment: annually
− Parcel A costs pass trough the tariff
− Parcel B cost are adjusted by IGPM +/- X(1)
Factor
X WACC
Remuneration
Asset
Base
X Depreciation
(1) X Factor: index that capture productivity gains
Reference
Company
(PMSO)
Investment
Remuneration
Depreciation
Regulatory
Ebitda
• Reference Company:
– Efficient cost structure, determined by
ANEEL (National Electricity Agency)
• Remuneration Asset Base:
– Applicable investments used to
calculate the Investment Remuneration
(applying WACC) and Depreciation
Parcel A Non-Manageable Costs
Parcel B Manageable Costs
7
9. AES Eletropaulo overview
Concession Area
•
Largest electricity distribution company in Latin America
•
Serving 24 municipalities in the São Paulo Metropolitan area
•
Concession area with the highest GDP in Brazil:
São Paulo Metropolitan Area
–
17.1% of the Brazilian GDP and 50.3% of São Paulo’s state GDP
•
•
•
Regional ABC
1.1 million electricity poles
4,143 employees
•
5.9 million of consumption units
•
Total distributed volume of 41 TWh in 2008
Regional North
Regional South
4,526 km2 of concession area
•
Regional West
46 thousand kilometers of lines
Regional East
Note – Data as of Sept. 2009, except GDP which is 2006
9
10. Ranking¹ for energy distributors
8.000
Net Revenue - R$ MM
7.000
6.000
5.000
2007
2008
4.000
3.000
2.000
CELG
COELCE
CPFL
PIRATININGA
CELPE
AMPLA
ELEKTRO
CELESC
COELBA
COPEL
1.600
BANDEIRANTE
1.800
CPFL PAULISTA
1.000
LIGHT
1st
CEMIG
1st
AES
ELETROPAULO
Net Revenue
Ebitda - R$ MM
1.400
1.200
1.000
Ebitda
2nd
1st
800
600
400
1 – Source: ABRADEE (Brazilian Association of Energy Distributors); research among 48 energy distributors in Brazil.
RGE
CEMAR
CPFL
PIRATININGA
AMAZONAS
COELCE
CELPE
AMPLA
ELEKTRO
COPEL
CPFL PAULISTA
COELBA
LIGHT
CEMIG
AES
ELETROPAULO
200
10
13. Investments amounted up to
R$ 324 million in 9M09
Investments 9M09
Investments Breakdown – R$ million
8%
523
433
378
457
4%
4%
55
45%
16%
47
69
305
77
468
324
26
22%
36
27%
410
364
301
269
298
Customer Service and
System Expansion
Customer Financed
2006
2007
Capex
2008
2009e
9M08
9M09
Maintenance
IT
Loss Recovery
Others
Paid by customers
13
14. SAIDI & SAIFI
SAIDI - System Average Interruption Duration Index
11.81
11.34
SAIFI - System Average Interruption Frequency Index
10.92
8.61
8.49
7.87
8.90
9.20
11.01
5.52
2006
2007
2008
3rd
3rd
5th
SAIDI (hours)
8.41
9M09¹
SAIDI Aneel Target
5.64
2006
3rd
5.20
5.78
2007
2008
9M09¹
1st
1st
SAIFI (times)
SAIFI Aneel Target
ABRADEE ranking position between 28 distributors with
over 500 thousand consumers
1 – Last twelve months
Source: ABRADEE, ANEEL e AES Eletropaulo
14
15. Operational indexes
Losses – %
Collection Rate – % over gross revenue
- 1.3 b.p.
99.1
99.5
- 0.4 b.p.
101.4
97.8
97.7
12.0
11.5
11.6
11.6
11.8
5.5
2007
2008
9M08
5.2
5.3
6.5
6.5
6.5
6.5
2006
9M09
5.1
6.5
2006
5.0
2007
2008
9M081
9M091
Commercial Losses
•
Disconnections and Reconnection – Monthly Average (9M08 X
9M09)
•
Technical Losses²
Fraud and Illegal Connections (9M09)
–
– Disconnections: increase from 233 thousand to 733 thousand
271,000 inspections e 32,000 frauds detected
–
57,000 illegal connections regularized
– Reconnection: increase from 248 thousand to 488 thousand
•
Past due bill credit report (9M09 average): 190 thousand
1 – Last 12 months
2 - Current Technical Losses used retroactively as reference
15
16. Net revenue of R$ 5.9 billion in 9M09
Net Revenue – R$ million
Ebitda – R$ million
2003
EMBI+ BR
Regulatory WACC (%)
2007
4.63% 2.21%
Selic target 16.50% 11.25%
+ 10%
17.1
7,193
15.1
7,529
6,852
1,766
5,540
2006
2007
2008
9M08
1,566
5,855
1,696
1,140
9M09
2006
2007
2008
1,143
9M08
9M09
16
17. Net income of R$ 538 million in 9M09
Dividend payout1 – R$ million
Net Income – R$ million
Pay-out
Dividends
+ 175%
100.3%
101.5%
14.4%
1,027
20.3%
34.9%
713
Yield2 PNB
3.2%
496
373
1,043
538
715
323
130
2006
2007
2008
9M08
2006
9M09
2007
2008
9M09
•
•
1 – Gross amount
2 – Considered 1st semester data
25% of minimum pay-out according to bylaw
Practice on semi-annual basis of maximum permitted
dividend distribution, since 2006 results
•
Yield2 of 6.3% and pay-out² of 106.7%
17
19. Debt profile
Amortization Schedule – R$ million
Net Debt
2.1x
1.3x
1.4x
1.2x
1,532
3.7
3.0
78
2.7
2.5
2006
2007
2008
2009
9M09
Net Debt (R$ billion)
524
2010
62
66
70
250
10
41
3
250
250
75
50
80
125
375
2011
2012
2013
2014
2015
2016-2028
Local Currency (w/out Pension Fund)
Pension Fund
Foreign Currency2
Net Debt / Adjusted Ebitda1
•
September, 2009:
–
Average debt cost is 116.5% of CDI3 per year which means an effective rate of 13.9% per year
–
Average debt maturity is 7.3 years
1 - Last 12 months of adjusted Ebitda
2 – Exchange rate in 09/30/2009 – US$ 1.00 = R$ 1.7781
3 - Brazil’s Interbank Interest Rate19
20. Capital market
AES Eletropaulo1 X Ibovespa X IEE
Average Daily Volume3 - R$ thousand
YTD ’09
170
B
150
130
64%
64%
C
26,066
25,677
21,187
46%
A
7,508
110
90
dec-082 jan-09 feb-09 mar-09 apr-09 may-09 jun-09 jul-09 aug-09 sep-09
ELPL6
IEE
2006
2007
2008
9M09
IBOV
•
A) 25/02/2009 – Finsocial and São Paulo municipality agreement
•
B) 16/04/2009 - Public Consultation of Tariff Reset
•
C) 16/06/2009 – Conclusion of Second Periodic Tariff Reset
1 – Shares were adjusted by declared dividend of the period under analysis
2 – Data Base: 12/28/07 = 100
20
22. AES Tietê overview
Concession Area
•
30 year concession, expires in 2029, renewable for
another 30 years
•
10 hydroelectric plants in the State of São Paulo at Tietê,
Pardo and Mogi Guaçu rivers
Atlantic Ocean
•
Installed capacity of 2,657 MW, with assured energy1 of
1,280 MW
Name and Installed Capacity of AES Tietê’s Plants:
Água Vermelha (1,396 MW)
Ibitinga (132 MW)
Nova Avanhandava (347 MW)
Euclides da Cunha (109 MW)
Promissão (264 MW)
Limoeiro (32 MW)
Bariri (143 MW)
100% of assured energy contracted with AES
Caconde (80 MW)
Barra Bonita (141 MW)
•
Mogi-Guaçu (7 MW)
1 - Amount of energy allowed to be long term contracted
Eletropaulo until the end of 2015
•
310 employees
22
23. Operational Performance
Billed Energy – GWh2
Energy Generation – MW average
September ’09 Prices (R$ / MWh)
AES Eletropaulo
129%
121%
MRE
118%
1,646
1,424
13,421
12,774
1,510
13,148
573
330
1,740
1,680
10,336
536
1,130
327
1,663
11,108
11,108
2007
Generation – MW average
2008
9M09
Generation / Assured Energy2
2006
2007
AES Eletropaulo
1 - Energy Reallocation Mechanism 2 - Amount of energy allowed to be long term contracted
10,728
607
1,571
11,138
8,346
2006
39.68
Spot (9M09 avg.)
112%
1,543
152.00
8.18
2008
9M08
MRE1
8,550
9M09
Spot Market
23
24. Investments
Investments – R$ million
9M09 Investments
New SHPP’s1
Investments
47
63
59
14
51
8
33%
20
12
33
49
43
39
•
45%
19%
35
2006
3%
11
22
2007
2008
2009(e)
9M09
9M09 x 9M08: higher reforestation expending, due to
Carbon Credit Project, partially offset by lower investments
on Piabanha SHPP
1- Small Hydro Power Plant Jaguari Mirim and Piabanha
Equip. and Maint.
New SHPPs
IT
Environment
24
25. Expansion requirement of 15%
Increase installed capacity in Sao Paulo State by 15% (400 MW), either in greenfield projects or through long term
purchase agreement with new plants
The obligation was supposed to be accomplished by December 2007, however AES Tietê was not able to comply with this
requirement due to the following restrictions:
–
Insufficient remaining hydro resources within the State of São Paulo
–
Environmental restrictions
–
Insufficiency of gas supply / timing issue
–
More restricted regulation on energy sale established by the New Model of Electric Sector (Law # 10,848/2004)
which eliminated the self dealing
•
In August 2008, Aneel informed that the issue is not linked to the concession
•
Popular law action against Federal Government, Aneel, AES Tietê, and Duke
–
Status: Defense filed on first instance in October 2008 by AES Tietê. In December, 2008, the author replied AES
Tietê defense and, since this, both parties are waiting judge movement about the necessity of proves production
•
On July 27, 2009, AES Tietê was notified by the State Government Attorney’s Office to present arguments on compliance
with the expansion obligation
–
The Company filed a response on July, 29th, which exhausts the procedure for notification. Possible deployment
depends on new manifestation of the Prosecution
25
26. Projects
expansion requirement
AES Tietê has been seeking opportunities to increase its installed capacity to comply with the 15%
increase requirement in the State of São Paulo
•
6MW of co-generation by biomass contracted for 15 years (initiating in 2010)
•
7 MW of hydropower generation through SHPPs2 in Jaguari Mirim river
– SHPP São José (4 MW) is expected to begin the operation in 1H10
– SHPP São Joaquim (3 MW) is expected to begin the operation in 1H10
•
500 MW of natural gas fired thermo plant
– In stage of defining plant location
•
Concluded
Concluded
(PPA1))
(PPA1
32 MW of hydropower generation through SHPPs under technical and economic viability study
In Progress
In Progress
Under
Under
Evaluation
Evaluation
1 - Power Purchase Agreement
2 - Small Hydro Power Plant
26
27. Net revenue of
R$ 1.3 billion in 9M09
Net Revenue – R$ million
Ebitda – R$ million
+ 17%
+ 14%
1,254
1,621
1,464
1,387
1,277
1,097
1,099
1,028
1,186
2006
2007
2008
9M08
936
9M09
2006
2007
2008
9M08
9M09
27
28. Sustainable profitability and dividend payment
Dividend Payout1 – R$ million
Net Income – R$ million
Dividends
Pay-out
100 %
692
614
2007
2008
100 %
10%
12%
636
609
614
9M08
9M09
609
2006
495
2006
100 %
12%
+ 13%
Yield PN2
2007
692
2008
636
9M09
•
•
1 - Gross amount
2 - Average Weighted Price during the Period
25% of minimum pay-out according to bylaw
Practice on quarterly basis of maximum permitted
dividend distribution, since 2006 results
•
Yield2 of 9.4% and pay-out of 100% in 9M09
28
29. Strong cash flow
Managerial Cash Flow – R$ million
3T08
Initial Cash
Operating Cash Flow
Investments
Net Financial Expenses
Net Amortization
Income Tax
Dividends and IoE
Free Cash Flow
Final Cash – Parent Company
Final Cash of Subs. And Assoc. Comp
Final Cash
673
340
(14)
(13)
(50)
(19)
(134)
110
783
5
788
4T08
783
337
(22)
(7)
(52)
(17)
(188)
53
836
5
840
1T09
836
297
(9)
(6)
(53)
(252)
0
(24)
812
2
814
2T09
812
332
(8)
(13)
(55)
(20)
(409)
(173)
639
2
641
3T09
639
316
(14)
(15)
(58)
(19)
(199)
12
651
1
652
29
33. Social Responsibility
Volunteering Program
distributing
Energy of
Good
Acting to
Transform
Enterprising in
the Community
Specific social mobilization or
emergency campaign.
Opportunities for volunteering in
social organizations, which are
partners of AES Brazil
Acknowledgement and
support of projects for the
development of social
organizations.
Winter clothes, Christmas
campaign, among others.
Co-workers can enroll in
volunteer activities available at
AES Brazil volunteering portal
since September/09
www.energiadobem.com.br
Volunteers may submit
projects to help other
organizations develop. Launch
scheduled for January/10.
•
Launched in December,2008;
•
Objective: to get the co-workers committed to the transformation of low income communities and development
of non-governmental institutions
•
1,100 volunteers
33
34. Social Responsibility
“Casa da Cultura e Cidadania” Project
•
Over 6 thousand children, teenagers,
and adults have been benefited
•
Own and incentive investments:
approximately R$ 14 million in 2009
•
Activities of acting, dancing, circus arts, visual arts, music,
gymnastics, courses of income generation, and education of safe
use of electrical power and the right use of natural resources
•
5 units operating and another one to be launched in the
municipality of Osasco in November, 2009
“Centros Educacionais Infantis Luz e Lápis” - Project
•
302 benefited children between 1 and 6 years old
•
Own investments amounting R$ 1.5 million in 2009
•
Units: Santo Amaro and Guarapiranga
34
35. Environmental actions
•
Carbon Credit
– Clean Development Methodology (CDM) approved by United Nations Framework Convention on Climate Change
(UNFCCC), allows up to 10,000 hectare reforestation on reservoir borders
– AES Tietê is seeking for good business opportunities, and has not transacted credits so far
•
Reforestation
– One million of seedlings production in seed-plot of Promissão hydroelectric power plant
– Donation of seedlings to the society, rural producers, city halls, and non-governmental organizations
•
Fish Farming
– Reproduction of 2.5 million fishes in 10 reservoirs of AES Tiete's plants
•
Archeological Park
– Community involvement into archeological artifacts conservation and better understanding of its scientific
importance
– Social access to the archeological history of the reservoir area
35
36. Contacts:
ri.eletropaulo@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.