Presentation credit suisse - v brazil equity ideas conference

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Presentation credit suisse - v brazil equity ideas conference

  1. 1. Institutional January, 2012 1
  2. 2. AES Brasil Group • Presence in Brazil since 1997 • Comprised of four companies in the sectors of energy generation and distribution • 7.4 thousand AES Brasil People • Investments 1998-2010: R$ 6.9 billion • Good corporate governance practices • Sustainable practices in businesses • Safety as a main value • Strong cash generation capacity • 25% of minimum pay-out according to bylaws • Differentiated practice of dividend distribution since 2006: – AES Tietê: 100% of net income on quarterly basis – AES Eletropaulo: distribution above the minimum required (25% of net income) on semi-annual basis 2
  3. 3. AES Brasil widely recognized in 2009-2011  Management excellence (AES Eletropaulo) (AES Tietê)  Quality and safety  Environmental concern (AES Tietê) (AES Eletropaulo) (AES Sul) (AES Brasil) (AES Eletropaulo) (AES Eletropaulo) (AES Tietê) (AES Brasil) (AES Tietê) (AES Tietê) (AES Tietê) (AES Eletropaulo) (AES Eletropaulo) 3
  4. 4. 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 Infoenergy C 99.00% T 99.00% 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 4
  5. 5. Listed Companies Shareholding Composition ¹ ¹ Free Float Others² Market Cap³ 16.1% 19.2% 56.2% 8.5% R$ 4.8 bi 24.2% 28.3% 39.5% 8.0% R$ 8.5 bi 1 - Parent companies, AES Corp and BNDES, have equal voting capital on the Companies: 38.2% on AES Eletropaulo and 35.7% on AES Tietê 2 - Includes Federal Government and Eletrobrás shares in AES Eletropaulo and AES Tietê, respectively 3 - Base: 09/30/2011. Considers preferred shares for AES Eletropaulo and preferred and common shares for AES Tietê 5
  6. 6. AES Brasil is the second largest group in electric sector Ebitda1 – 2010 (R$ Billion) 4.5 4.2 3.4 3.0 2.6 2.0 1.6 1.6 1.5 0.6 CEMIG Net Income1 2.3 AES BRASIL CPFL NEOENERGIA TRACTEBEL CESP EDP LIGHT COPEL DUKE – 2010 (R$ Billion) 2.2 1.8 1.6 1.2 1.0 0.6 0.6 0.2 CEMIG AES BRASIL 1 – excluding Eletrobrás NEOENERGIA CPFL TRACTEBEL COPEL EDP LIGHT DUKE 0.1 CESP Source: Companies’ financial reports 6
  7. 7. AES Tietê is an important player among private energy generators Generation Installed Capacity (MW) - 2012 1 Main privately held Companies AES TIETÊ 2,3% CPFL 2,3% DUKE 1,9%  AES Tietê is the 2nd largest among EDP 1,6% private generation companies and 10th NEOENERGIA 1,2% ENDESA 0,8% LIGHT 0,8% TRACTEBEL 6,1% largest overall  Approximately 78% of country’s generation installed capacity is stateCHESF ³ DEMAIS 26% owned2 9% FURNAS 8% ³ ELETRONORTE 8% under construction in the North region of ³ Brazil with 18 GW in installed capacity ITAIPU ³ 6% COPEL 4% PETROBRÁS 5%  There are three mega hydropower plants CEMIG 6% CESP 6% Total Installed Capacity: 117 GW ELETRONUCLEAR ³ 3% CGTEE ³ 1% ELETROSUL³ 0,5% – Santo Antonio and Jirau (Madeira River): 7 GW – Belo Monte (Xingu River): 11 GW 1- Sources: ANEEL – BIG (January, 2012) and Companies websites 2- Source: Merrill Lynch 3 – Eletrobrás, totaling 35% 7
  8. 8. AES Brasil is the largest distribution group in Brazil Consumption (GWh) - 2010 13% • 63 distribution companies in Brazil distributing 419 TWh 12% 40% AES A Brasil CPFL Energia 10% Cemig 6% 6% AES Brasil Neo Energia the largest electricity distribution group in Brazil: representing 10.3% of the Brazilian market – AES Consumers – Dec/2010 Copel 12% is – AES Eletropaulo: 43 TWh distributed, 7% 6% • Sul: 9 TWh representing 2.2% of distributed, the Brazilian market Light 30%  Distribution companies’ operations are 12% EDP 12% 5% Outros restricted to their concession areas  Acquisitions must be only performed by the holdings of economic groups 7% 7% 16% 8
  9. 9. Energy Sector in Brazil
  10. 10. Energy Sector in Brazil: business segments Free Clients Distribution Transmission • Consumption of 105 TWh • 63 companies • 68 companies (25% of Brazilian total market) • 415 TWh of energy • 68% private sector • Conventional sources: above 3000 kW • Alternative sources: between 500 kW e 3000 kW distributed in 2010 • High voltage transmission • 68 million consumers • 67% private sector • 98.648 km in extension • Annual tariff adjustment • Large consumers can purchase energy directly from generators • Free contracting environment (>230 kV) • Tariff reset every four or lines (SIN)¹ • Regulated public service with free access five years • Regulated public service • Regulated contracting • Regulated tariff (annually adjusted by inflation) environment • 13 groups controlling 76% of total installed capacity • 22% private sector • 1,862 power plants • 115 GW of installed capacity • 73% hydroelectric • 17% thermoelectric • 5% biomass • 4% SHPP • 1% Wind • Contracting environment – ¹ Interconected National System ² Small Hydro Power Plants Generation Sources: EPE, Aneel, ONS and Merrill Lynch free and regulated markets 10
  11. 11. Energy sector in Brazil: contracting environment Regulated Market Free Market Auctions Spot Market PPAs1 Distribution Companies Trading Companies Trading Companies Free Clients Free Clients • Main auctions (reverse auctions): – New Energy (A-5): Delivery in 5 years, 15- Distribution Companies 30 years regulated PPA1 – New Energy (A-3): Delivery in 3 years, 1530 years regulated PPA – Existing Energy (A-1): Delivery in 1 year, 5-15 years PPA 1 – Power Purchase Agreement 11
  12. 12. Energy sector in Brazil: demand perspectives Macroeconomic Scenario EPE’s1 Assumptions: GDP - Annual growth (%) 2004-2008 2010 2011 3.6 7.2 4.0 • Latest EPE’s estimates considers an economic activity slowdown in Brazil (industrial stagnation and higher inflation). 2012-2015 5.0 Brazilian Consumption Evolution (TWh) 5.0% p.a. 3.6% 493 4.0% p.a. 515 469 423 444 408 349 369 380 376 • For the next years, the good performance of domestic market and the perspectives of higher investments are factors indicating that the Brazilian economy will recover the growth path observed before the global crisis. • Brazil will also benefit from the growth of emerging markets, with impact on exports of primary products. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1 - Source: EPE (Energetic Research Company) / ONS (National System Operator) – Second Review – september/11 12
  13. 13. Energy sector in Brazil: supply perspectives Installed Energy Capacity in Brazil1  Total installed capacity is expected to reach 171 GW by 2020  Brazilian energy matrix will present higher diversification, but in the next 10 years hydropower plants will continue to prevail 2011: 115 GW 2020: 171 GW 2 SHPP: 4% Natural gas: 7% Biomass: 5% 2 SHPP: 4% Natural gas: 8% Oil: 5% Biomass: 5% Oil: 3% Nuclear: 2% Hydro: 73% Others: 10% Hydro: 67% Others: 17% Coal: 2% Diesel: 1% Wind: 1% Steam: 1% 1- Source: EPE (Energetic Research Company), Ten-year Energy Plan 2020, May/2011 Nuclear: 2% Coal: 2% Diesel: 1% Wind: 7% Steam: 0% 2 - Small Hydro Power Plant 13
  14. 14. Energy sector in Brazil: regulatory methodology Tariff Reset and Readjustment • Tariff Reset is applied each 4 years for AES Eletropaulo • Parcel A Costs − Base date: Jul/2011 − Parcel A: costs pass trough the tariff − Parcel B: costs are set by ANEEL • Tariff Readjustment: annually − Parcel A costs pass trough the tariff − Parcel B cost are adjusted by IGPM +/- X(1) Factor X WACC Energy Purchase Transmission Sector Charges Regulatory Opex (PMSO) Investment Remuneration Remuneration Asset Base X Depreciation Depreciation Regulatory Ebitda 1 – X Factor: index that captures productivity gains − Non-manageable costs that are totally passed through to the tariff − Losses reduction improve the passthrough effectiveness • Regulatory Opex: – Efficient cost structure, 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 14
  15. 15. Energy sector in Brazil: regulatory methodology 3rd Cycle of Tariff Reset – X Factor X FACTOR = Pd + Q + T Operational expenses trajectory DEFINITION Distribution productivity OBJECTIVE To capture productivity gains with distribution To stimulate the improvement of the service quality To implement operational expenses trajectory during the tariff cycle Defined at tariff reset, considering market growth and variation of consumer units since last reset Defined at each tariff readjustement, according to the variation of SAIDI and SAIFI and comparative performance of discos in the previous year Defined at tariff reset, considering the limits of expenses established by reference company and benchmarking methodologies APLICATION Quality of service 15
  16. 16. AES Tietê Overview Generation facilities  17 hydroelectric plants within the states of São Paulo and Minas Gerais  30-year concession valid until 2029; renewable for another 30 years  Installed capacity of 2,659 MW, with physical guarantee1 of 1,280 MW average  Almost all the amount of energy that AES Tietê can sell in the long term is contracted to AES Eletropaulo until the end of 2015  AES Tietê can invest in generation, its main activity, and operate in energy trading  343 employees 1 - Amount of energy allowed to be long term contracted 17
  17. 17. Generated energy shows high operational availability Generated energy (MW avarage1) 130% 125% Generated energy by power plant (MW avarage1) 129% 4% 126% 118% Água Vermelha 11% Bariri Barra Bonita 7% Euclides da Cunha 5% 58% 4% 1,665 1,703 1,599 2008 2009 Generation - Mwavg 2010 9M10 Nova Avanhandava 5% 1,550 1,512 Ibitinga Promissão 6% Other Power Plants* 9M11 Generation/Physical guarantee 1 – Generated energy divided by the amount of hours * Caconde, Limoeiro, Mogi and SHPPs 18
  18. 18. A significant amount of billed energy and net revenues comes from the bilateral contract with AES Eletropaulo Energy Billed (GWh) Net Revenues (%) 14,706 14,729 1,340 2,331 1,980 331 1,680 -3% 301 1,150 13,148 117 11,483 215 94% 11,114 346 1,135 1,188 1,554 11,138 11,108 1,535 11,108 8,578 8,045 1% 2% 3% AES Eletropaulo 2008 1 2009 AES Eletropaulo 2010 MRE 2 9M10 9M11 Other bilateral contracts Spot Market Other bilateral contracts Spot Market 1 – Leap Year 2 – Energy Reallocation Mechanism MRE 19
  19. 19. Investments in the modernization of Nova Avanhandava, Ibitinga and Caconde power plants Investments (R$ million) 9M11 Investments 84% 169 +122% 18 119 14 82 56 53 12 4% 12% 151 7 13 105 70 46 43 Equipment and Modernization 2009 2010 2011 (e) 9M10 9M11 New SHPPs* Investments New SHPPs* IT projects *Small Hydro Power Plants 20
  20. 20. Growth opportunities Perspectives • Project features - Combined cycle using natural gas - Estimated investment of R$ 1.1 billion - Natural gas consumption: 2.5 million m3/day - 550 MW of installed capacity • Updates Environmental license obtained on October, 20th 2011 - (valid for 5 years) Gas unavailability for A-5 Energy Auction in 2011 - • Next events - Obtain installation license - Participate in A-3 Auction expected to be realized in March 2012 - Evaluate energy offering in the free market 21
  21. 21. Financial highlights* Ebitda (R$ million) Net Revenue (R$ million) +1% +1% 1,254 1,320 1,255 1,035 1,048 9 1,605 1,670 1,754 1,334 1,344 1,311 1,309 (54) 2009 2010 9M10 9M11 2009 2010 9M10 9M11 78% 2008 2008 75% 75% 78% 78% Recurring Non-recurring Ebitda margin (*) 2009 and 2010 numbers in IFRS 22
  22. 22. Practice of total net income distribution on quarterly basis* Net Income and Dividend Pay-out1 (R$ million) 117% 110% 100% 12% 11% 11% 737 706 692 31 +2% -5% 570 816 582 28 784 542 (74) (36) 2008 Pay -out 1 – Gross value (*) 2009 and 2010 numbers in IFRS 2009 Yield Pref (78) 2010 Recurring (40) 9M10 9M11 Non-recurring IFRS Effect 23
  23. 23. Debt profile Amortization Schedule – Principal (R$ million) Net Debt (R$ billion) 0.3x 0.3x 0.3x 0.3x 0.4x 300 300 300 2013 2014 2015 0.6 0.4 0.4 0.4 0.5 2008 2009 2010 9M10 9M11 Net debt / EBITDA Net debt • September, 2011: – – Average debt maturity of 2.8 years – Net debt: R$ 0.6 billion – 1 – Brazilian Interbank Interest Rate Average debt cost in 9M11 was 115% of CDI1 p.a. or 15% p.a. Net debt/EBITDA: 0.4x 24
  24. 24. Capital Markets Daily Avg. Volume (R$ thousand) AES Tietê X Ibovespa X IEE 13,922 YTD1 110 10,187 +5% +2% -2% 4,239 12,828 3,370 8,160 2,101 90 2,692 -25% 9,683 9,458 2009 2010 9M11 Preferred 70 Common 8,086 5,468 50 Dec-10 Mar-11 Jun-11 Sep-11 2008 TSR 2 AES TIETÊ PF IBOVESPA IEE 3 • Market Cap4: R$ 8.5 billion • BM&FBovespa: GETI3 (common shares) and GETI4 (preferred shares) • ADRs negotiated in US OTC Market: AESAY (common shares) and AESYY (preferred shares) 1 – Index: 12/30/2010 = 100 2 – Total Shareholders’ Return 3 – Electric Energy Index 4 – Index: 09/30/11 25
  25. 25. 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, 1.2 million electricity poles and 6.1 million consumption units in a concession area of 4,526 km2  Total distributed volume of 43 TWh in 2010  AES Eletropaulo, as a distribution company, can only invest in assets within its concession area  5,647 employees 27
  26. 26. Consumption Evolution Total Market1 (GWh) 9M11 Consumption by Class (%) 6% 45,000 40,000 41,243 7,383 41,269 43,345 +5% 7,911 6,832 35,000 32,198 30,000 5,846 36% 26 33,769 18% 43 6,246 26% 25,000 20,000 33,860 34,436 35,434 15,000 9 14 14% 28 17 26,352 27,523 10,000 36 26 5,000 0 2008 2009 Captive Market 2010 9M10 9M11 Brazil Free Clients Residential 1 – Net of own consumption AES Eletropaulo ¹ Commercial Industrial Others 28
  27. 27. Residential consumption evolution Consumption per consumer (in kWh) – YTD September - 9.7% 260 235 228 220 212 217 2008 2009 2010 220 2007 228 206 198 198 2003 2004 192 2000 2001 * 2002 * 2005 2006 2011 - Average annual growth (2003 – 2011): • total residential market: 5.5% y.y. • consumption per consumer: 2.1% y.y. - Consumption per consumer is still 9.7% lower than in the period before the rationing * Rationing 29
  28. 28. Investments amounted R$ 530 million in 9M11 Investments 9M11 (R$ million) Investments Breakdown (R$ million) 166 744 800 682 700 29 600 516 500 37 383 400 654 300 200 +38% 28 715 128 47 530 16 16 21 27 125 22 513 478 362 Maitenance 100 Client Service 0 2009 2010 2011(e) 9M10 9M11 System Expansion Losses Recovery Capex Paid by Customers IT Paid by the Clients Others 30
  29. 29. SAIDI & SAIFI SAIDI - System Average Interruption Duration Index SAIFI - System Average Interruption Frequency Index 8.41 7.87 7.39 10.92 10.09 9.32 9.20 11.86 10.68 11.95 10.30 6.17 5.43 6.06 5.42 2009 2010 9M10 9M11 7th 3rd 5.20 2008 2009 2010 5th 8th 7th SAIDI (hours) 9M10 9M11 2008 1st SAIDI Aneel Reference SAIFI (times) SAIFI Aneel Reference ABRADEE ranking position among the 28 utilities with more than 500 thousand customers ► 2011 SAIDI ANEEL Reference: 8.68 hours Sources: ANEEL, AES Eletropaulo and ABRADEE ► 2011 SAIFI ANEEL Reference: 6.93 times 31
  30. 30. Operational Indexes Losses (%) 11.6 Collection Rate (% over Gross Revenues) 11.8 10.9 11.0 101.1 10.6 102.4 100.3 103.0 98.5 5.1 5.3 4.4 4.5 4.1 6.5 6.5 6.5 6.5 6.5 2008 2009 2010 9M10 9M11 Technical Losses ¹ 2008 2009 2010 9M10 9M11 Commercial Losses ANEEL References: From Jul/09 to Jun/10: 12.32% From Jul/10 to Jun/11: 12.13% 1 – Current technical losses used retroactively as a reference 32
  31. 31. Financial Highlights* Net Revenues (R$ million) Ebitda (R$ million) 2,413 9,697 8,786 10,000 9,000 8,000 426 +5% 7,046 7,371 7,000 339 1,607 7,530 1,775 87 197 1,491 2009 2010 1,870 1,648 2008 - 8% 1,696 89 245 1,716 58 332 1,325 1,326 9M10 9M11 301 6,000 5,000 4,000 3,000 2,000 1,000 0 2008 2009 2010 9M10 9M11 Recurring Regulatory assets and liabilities Non-recurring (*) 2009 and 2010 numbers in IFRS 33
  32. 32. Practice of dividend distribution on semi-annual basis* Net Income and Dividend Payout1 (R$ million) 115.4% 120.0% 100.0% 80.0% 101.5% 20.3% 93.4% 1,348 0.0% 350 1,027 2008 2009 885 282 0.0% 89 214 583 160 622 10.0% 1,037 171 236 698 -15% 5.0% 374 329 20.0% 15.0% 1,156 40.0% 30.0% 25.0% 20.4% 60.0% 20.0% 28.6% 35.0% 582 9M10 9M11 762 2010 Pay-out Yield PN Net Income - ex one-off and regulatory assets and liabilities Regulatory assets and liabilities 1 – Gross amount One-off (*) 2009 and 2010 numbers in IFRS 34
  33. 33. Debt Profile Amortization Schedule – Principal (R$ million) Net Debt (R$ billion) 1.5x 1.4x 1.2x 1.0x 0.9x 1,047 2.7 2.5 2.6 2.4 579 48 2.9 360 80 22 2008 2009 2010 9M10 9M11 346 45 281 301 2011 2012 2013 2014 2015 2016 283 58 225 2017 Fcesp ² 437 62 847 375 180 2018 2019 2028 September, 2011: – Average debt cost in 3Q11 was 112% of CDI1 or 12.6% p.a. – Average debt maturity of 6.9 years – Net debt: R$ 2.9 billion – 1 – Brazilian Interbank Interest Rate 335 Local Currency (ex FCesp) Net Debt/Ebitda Adjusted with Fcesp Net Debt (R$ billion) • 532 277 51 226 390 55 Net debt/EBITDA of 1.2x adjusted with Pension Fund 2 – Pension Fund 35
  34. 34. Capital Markets Average Daily Volume (R$ thousand) AES Eletropaulo X Ibovespa X IEE A 125 9M11 1 28,500 29,000.00 B 25,677 27,000.00 115 24,496 + 11% 25,000.00 105 21,960 + 2% 23,000.00 95 21,000.00 85 - 11% 75 - 24 % 19,000.00 17,000.00 65 Dec-10 Feb-11 Ibovespa IEE² A Apr-11 Jun-11 AES Eletropaulo PN Ex dividends: 04/30/2011 Aug-11 15,000.00 AES Eletropaulo TSR³ B 2008 2009 2010 9M11 Ex dividends: 08/11/2011 • Market cap4: R$ 4.8 billion • BM&FBOVESPA: ELPL3 (common shares) and ELPL4 (preferred shares) • ADRs at US OTC Market: EPUMY (preferred shares) 1 – Index: 12/30/2010 = 100 3 – Total Shareholders’ Return 2 – Electric Energy Index 4 - Index: 09/30/11. Calculation includes only preferred shares. 36
  35. 35. Social Responsibility
  36. 36. Commitment with sustainability SUSTAINABLE ENERGY GENERATION EFFICIENCY IN THE USE OF RESOURCES ... means using economic, social and environmental resources in a balanced fashion, preserving the present time and ensuring the future ... means allocating them in such a manner that balanced and perennial results are ensured for all stakeholders, abiding by the values practiced by the company Cross-cutting themes SAFETY DEVELOPMENT & VALUATION OF COWORKERS, SUPPLIERS AND COMMUNITIES ... means an attitude of protection of our employees, suppliers and population. ...means knowing, involving in a transparent form and positively influencing our coworkers, suppliers and communities to build a collective agenda that generates value for everyone INNOVATION IN PRODUCTS AND SERVICES ... means providing an environment and culture that inspire solutions that improve people’s lives, ensuring quality and excellence in the services rendered to the customer. – Education for sustainability – Stakeholders active participation – Communication, knowledge and information 38
  37. 37. Social Responsibility: Main Projects Development and transformation of communities Education, culture and sport “Casa de Cultura e Cidadania” Project It offers courses and activities in culture and sport for 5.2 thousand children and teenagers in 7 units of AES Brazil. In two AES Eletropaulo’s units the project benefits 1.6 thousand people in low-income communities. Children education and development “Centros Educacionais Luz e Lápis” Project Two units in São Paulo attending 320 children from 1 to 5 years old, in social vulnerability. Education about 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, between 2010 and 2011. The actions include recreational activities offered in adapted trucks. 39
  38. 38. Social Responsibility: Main Projects Inclusive and Social Business Women inclusion and income generation “Fornecedor Cidadão” Project Empowerment of female electricians to work on energy cutting and reconnection. Project started in 2010 with 41 women. Social inclusion and income generation “Empreender com energia” Project In partnership with the “Aliança Empreendedora” Institution, community residents of Vl. Guacuri neighborhood – SP are empowered to entrepreneurship, in groups or individually, in order to improve their income and life quality. Starting in 2010, the project now has two productive groups and 19 individual entrepreneurs. 40
  39. 39. Social Responsibility: Main Projects Converting Consumers to Clients A project developed to work on electrical network regularization. Since 2004, more than 437 thousand families in low income communities were benefited from better energy supply conditions and social inclusion. The project has already substituted: 880 thousand lamps 22 thousand refrigerators and 7 thousand showers for more efficient equipments “Energia do Bem” Project Active participation of employees to transform low income communities and to work on institutions development. Starting in 2008, the program counts on the participation of 12% of AES Eletropaulo employees, in activities like winter clothes campaigns and support in several activities institutions. www.energiadobem.com.br 41
  40. 40. Attachments
  41. 41. Costs and Expenses Costs and operational expenses1 (R$ million) 415 433 351 239 2008 214 2009 296 115 174 187 299 125 112 201 181 9M10 9M11 246 2010 Energy Purchase, Transmission and Connection Charges, and Water Resources Other Costs and Expenses 2 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 43
  42. 42. Costs and Expenses Costs and operational expenses1 (R$ million) PMS and Other Expenses (R$ million) 1,306 1,193 6,431 5,893 1,306 6,745 254 1,255 165 970 1,255 1,193 379 5,006 970 5,129 352 443 5,125 308 4,036 2009 368 5,490 700 4,220 647 485 2008 67 909 329 4,700 202 909 2010 Energy Supply and Transmission Charges 9M10 9M11 PMS² and Others Expenses 2008 461 3 2009 Personnel and Payroll 2010 475 9M10 9M11 Material and Third Party Others 1 – Do not include depreciation and amortization 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 3 – In 2009 expenses with Pension Fund increased due to inflation rate (IGP-M) increase and reversal of R$ 63 million in 4Q08 caused by actuarial liability adjustment 44
  43. 43. Action Plan: R$ 242 million with increase of R$ 122 million in emergency teams  availability of 353 emergency teams Concluded in September 2011  38% increase in call center positions (150 positions)  doubling of SMS receipt capacity to 100 thousand / day  training of 276 maintenance and construction electricians  hiring of 30 additional pruning electricians  training of 240 electricians for emergency attendances in powered grid Concluded in November 2011  beginning of 276 maintenance and construction electricians activities and training conclusion of other 304  300 additional stand by positions in call center for emergency situations  increase of call center service capacity by 27 times from 2 thousand to 54 thousand calls/hours December to March increase of 120 emergency teams, totaling 473 teams 45
  44. 44. AES Tiete's expansion obligation Privatization Notice established the obligation to expand the installed capacity in 15% (400 MW) until 2007, either in greenfield projects and/or through long term purchase agreements with new plants Aneel informed that the issue is not related to the concession agreement and must be addressed with the State of São Paulo Judicial Notice: The Company was notified by the State of São Paulo Attorney's Office to present its understanding on the matter, having filed its response on time, the proceedings were ended, since no other action was taken by the Attorney's Office AES Tietê was summoned to answer a Lawsuit filed by the State of São Paulo, which requested the fulfillment of the obligation in 24 months. An injunction was granted in order to have a project submitted within 60 days. Efforts being made 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, 1999 2007 Ago/08 Out/08 Jul/09 Set/10 Set/11 Nov/11 2011, with 3 MW of installed capacity •SHPP São José – under construction, with 4 MW Company faces restrictions until deadline: • Insufficiency of hydro resources • Environmental restrictions • Insufficiency of natural gas supply • New Model of Electric Sector (Law # 10,848/2004), which forbids bilateral agreements between generators and distributors of installed capacity, In response to a Popular Action (filed by individuals against the Federal Government, Aneel, AES Tietê and Duke), the Company presents its defense before the first instance Popular Action: Due to the plaintiffs failure to specify the persons that should be named as Defendants, a favorable decision was rendered by the first Instance Court (an appeal has been filed) Lawsuit: expected to be The Company appealed to the State of Sao Paulo State Court of Appeals and the injunction was stayed operational in 2012 • Thermo-SP - Project of a 550MW gas fired thermal plant 46
  45. 45. Eletrobras Lawsuit State-owned Eletropaulo was spun-off into four companies and, according to our understanding based on the spin-off agreement, the discussion was transferred to CTEEP Stated-owned Eletropaulo borrowed money from Eletrobras Nov/86 Dec/88 Jan/98 Eletrobras, after winning the interest calculation discussion, filed an Execution Suit to collect the due amount Apr/98 Sep/01 Eletrobras and CTEEP appealed to the Superior Court of Justice (SCJ) Sep/03 Oct/05 Eletrobras requested the 1st level of court judge to appoint an expert Jun/06 May/09 On July 7, the judge determined Eletropaulo and CTEEP to present their considerations, which occurred in August Dec/10 Jul/11 Next Steps: 1 - The auditing procedure (AP) is expected to begin by the 1st half of 2012 2 – AP is expected to be concluded in at least 6 months 3 - After AP’s conclusion, a 1st level court decision will be released 4 - Appealing to the 2nd instance court State-owned Eletropaulo and Eletrobras disagreed on how to calculate interest over that loan and a lawsuit was started Privatization event . Stateowned Eletropaulo became AES Eletropaulo The 2nd level of court excluded AES Eletropaulo from the discussion based on the spin-off agreement The SCJ decided to send the Execution Suit back to the 1st level of court Eletrobras requested the beginning of the appraisal procedure, which is under 1st. instance court analysis 5 - Foreclosure starts. Presentation of guaranty 6 - Request to withdraw the guaranty 7 - Appeals to the 3rd instance courts 47
  46. 46. Shareholders Agreement On Dec 2003 AES and BNDES signed 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 Shareholders can dispose its share at any time, considering the following terms: Right of 1st refusal  Any party with an intention to dispose its shares should first provide the other party the right to buy Tag along rights  In the case of change in Brasiliana’s control, tag along rights are triggered for the following Drag along rights  Once the offering party exercises the Drag Along clause, offered party is obligated to dispose of all that participation at the same price offered by a third party companies (only if AES is no longer controlling shareholder): – AES Eletropaulo: Tag along of 100% in its common and preferred shares – AES Tietê: Tag along of 80% in its common shares – AES Elpa: Tag along of 80% in its common shares its shares at the time, if the Right of 1st Refusal is not exercised by offered party 48
  47. 47. Brazilian Main Taxes AES Tietê • Income Tax / Social Contribution: – 34% over taxable income • ICMS (VAT tax) – deferred tax • PIS/Cofins (sales tax): – Eletropaulo´s PPA: 3.65% over Revenue – Other bilateral contracts: 9.25% over Revenue minus Costs AES Eletropaulo • Income Tax / Social Contribution: – 34% over taxable income • ICMS: 22% over Revenue (average rate) – Residential: 25% – Industrial and Commercial: 18% – Public Entities: free • PIS/Cofins: – 9.25% over Revenue minus Costs 49
  48. 48. Contacts: ri.aeseletropaulo@aes.com ri.aestiete@aes.com + 55 11 2195 7048 The statements contained in this document with regard to the business prospects, projected operating and financial results, and growth potential are merely forecasts based on the expectations of the Company’s Management in relation to its future performance. Such estimates are highly dependent on market behavior and on the conditions affecting Brazil’s macroeconomic performance as well as the electric sector and international market, and they are therefore subject to changes.

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