Santander Annual Conference

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Santander Annual Conference

  1. 1. Institutional August, 2010
  2. 2. AES Brasil Group Market Share¹ Discos Gencos 14.6% 3.0% 85.4% 97.0% 7 million clients 6 thousand AES People 2009 Results: • Ebtida - R$ 3.2 bi • Net Income - R$ 1.9 bi Investments 1998-2009: R$ 5.8 bi after privatization 1 - Source: Abradee (Discos) and Aneel (Gencos) - Data as of December 2008 2
  3. 3. Shareholding structure AES Corp BNDES C 50.00% + 1 share C 50.00% - 1 share P 0.00% P 100% T 46.15% T 53.85% Cia. Brasiliana de Energia C 76.45% C 71.35% C 99.99% C 99.00% C 98.25% P 7.38% P 32.34% C 99.99 % T 99.70% T 99.99% T 99.00% T 98.25% T 34.87% T 52.55% T 99.99 % AES AES AES AES AES AES AES Eletropaulo Sul Infoenergy Uruguaiana Com Rio Eletropaulo Tietê Telecom C = Common Shares P = Preferred Shares T = Total 3
  4. 4. Shareholding composition Free Float Others¹ 16.1% 19.2% 56.2% 8.5% 24.2% 28.3% 39.5% 8.0% 1 – includes Federal Government and Eletrobrás shares in AES Eletropaulo and AES Tietê, respectively 4
  5. 5. 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:  17.3% of the Brazilian GDP and 50.9% of São Paulo’s state GDP (2007)  46 thousand kilometers of lines  4,526 km2 of concession area  1.1 million electricity poles  4,557 employees  6.0 million of consumption units  Total distributed volume of 41 TWh in 2009  Concession contract valid until 2028 6
  6. 6. Ranking for energy distributors 9,000 8,000 7,000 Net Revenue – R$ Million 2008 2009 6,000 5,000 1st 1st 4,000 3,000 2,000 1,000 0 R C LI C B C A C C C A EL C C G EM EL A ES PF O O M EL O PF G EK N E H PE EL PL EL ES L PE L IG D T EL TR EI L B A C PA PI C A E ET R R O U A A R LI N TI O TE ST N P 1,800 IN A A UL G A 1,600 1,400 O 1,200 Ebitda – R$ Million 1,000 1st 1st 800 600 400 200 0 LI B R C A C C EL C A C C C C EM A G ES O PF EL M O EM O EM G EK N E H EL PL EL PE L PE D IG A A T EL TR EI B A C L PA R T A E ET R O U A R LI N O TE ST P A A UL 7 O Source: Abradee (Brazilian Association of Energy Distributors); research among 29 energy distributors in Brazil
  7. 7. Consumption evolution Total Market (GWh1) 1H10 Consumption Share (GWh1) 1% 6% R: CAG 14% 41,243 41,269 37% 39,932 7,383 6,832 7,355 17% 19,904 21,248 410 3,293 3,811 26% 32,577 33,860 34,436 16,611 17,437 Residential 2007 2008 2009 1H09 1H10 Commercial Captive market Free Clients Free Clients Industrial Others 8 1 – Net of own consumption
  8. 8. Main consumption classes Residential (GWh¹) – CAGR 2007-09: 4% Commercial (GWh¹) – CAGR 2007-09: 2% 15,015 10,752 14,427 10,301 13,500 10,072 7,564 5,556 7,236 5,282 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 Industrial (GWh¹) – CAGR 2007-09: -2% Captive Market¹ (GWh¹) – CAGR 2007-09: 2% 34,436 6,475 6,559 33,860 6,032 32,577 2,989 17,437 2,792 16,611 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 9 1 – Net of own consumption
  9. 9. Consumption Consumption Evolution (GWh¹) +4.5 % +7.1 % +5.2 % +2.1 % +5.0% +4.8% +6.7% 19,904 21,248 16,611 17,437 7,236 7,564 5,282 5,556 2,792 2,989 1,301 1,328 3,293 3,451 Residential Industrial Commercial Public Captive Market Free Clients Total Market Sector and Others 1H09 1H10 10 1 – Net of own consumption
  10. 10. Investments amounted R$ 229 million in 1H10 Investments Breakdown (R$ million) Investments 1H10 691 3%3% 7% 54 516 37 14% 457 433 51% 47 69 637 229 213 22% 478 16 18 410 364 195 213 Customer service / Maintenance System expansion 2007 2008 2009 2010(e) 1H09 1H10 Losses recovery Paid by the clients Own resources Paid by customers IT Other 11
  11. 11. SAIDI & SAIFI SAIDI - System Average Interruption Duration Index SAIFI - System Average Interruption Frequency Index 8.49 11.34 8.41 10.92 10.09 7.87 8.90 9.20 11.86 10.47 13.39 5.64 5.20 6.17 5.48 6.73 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 3o 5o 1o 1o SAIDI (hours) SAIDI Aneel Target SAIFI (times) SAIFI Aneel Target ► 2010 SAIDI ANEEL Target: 9.32 horas ► 2010 SAIFI ANEEL Target: 7.39 times ABRADEE ranking position between 28 distributors with over 500 thousand consumers Source: ABRADEE, ANEEL e AES Eletropaulo 12
  12. 12. Operational indexes Collection Rate (% over gross revenue) Losses (%) 1.6 p.p. 0.3 p.p. 101.1 102.0 101.5 99.5 11.6 11.8 12.0 98.5 11.5 11.3 5.0 5.1 5.3 5,3 5.5 4.8 6.5 6.5 6,5 6.5 66,5 6.5 6.5 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 Commercial Losses Technical Losses • Disconnections and Reconnections – Monthly Average (1H09 X 1H10) • Fraud and Illegal Connections (1H10) – Disconnections: increase from 84 thousand to 97 thousand – 139 thousand inspections e 21 thousand frauds detected – Reconnection: increase from 55 thousand to 88 thousand – 30 thousand illegal connections regularized • Past due bill credit report (1H10 monthly average): 154 thousand 13
  13. 13. Net revenues of R$ 4.3 billion in 1H10 Net Revenue (R$ million) R: 4% CAG 8,050 7,529 7,193 4,339 3,743 2007 2008 2009 1H09 1H10 14
  14. 14. Operating costs and expenses Operating Costs and Expenses¹ (R$ million) R: 5% CAG 3,473 6,422 5,893 3,026 5,537 667 1,312 655 1,193 1,440 4,097 4,700 5,110 2,806 2,371 2007 2008 2009 1H09 1H10 Energy Supply and Transmission Charges PMS² and Other Expenses 1 - Depreciation not included 2 - Personnel, Material and Services 15
  15. 15. Ebitda of R$ 1.1 billion in 1H10 Ebitda (R$ million) : 0.1% CAGR 1,566 1,696 1,573 1,102 697 2007 2008 2009 1H09 1H10 16
  16. 16. Net income of R$ 622 million in 1H10 Net Income (R$ million) Dividend payout (R$ million) Dividends Pay-out Yield PNB 106.7% 101.5% 101.6% 100.5% 100.3% : 14% CAGR 20.3% 20.4% 14.4% 1,063 1,080 1,027 1,043 10.8% 6.6% 713 622 715 625 302 323 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 • 25% of minimum pay-out according to bylaws • Since 2006, practice of 95% payout on semi-annually basis 17
  17. 17. R$ 489 million paid as dividends in 1H10 Managerial Cash Flow (R$ million) 2007 2008 2009 1H10 Inicial Cash 1,166 1,334 1,536 1,249 Operational Cash Generation Operating Cash Flow 2,488 1,893 1,970 1,156 Investments (407) (374) (378) (250) Net Financial Expenses (501) (161) (118) (166) Net Amortizations (182) (94) (136) 251 CESP Foundation (198) (192) (166) (91) Income Tax (418) (295) (189) (182) EP Telecom sell - - - 308 Free Cash Flow 783 777 706 804 Dividends (615) (576) (993) (489) Final Cash 1,334 1,536 1,249 1,786 18
  18. 18. Debt profile Net Debt Amortization Schedule¹ (R$ million) 1.8x 1.8x 1.7x 1,914 1.5x 1.3x 3.2 1,361 3.0 3.0 2.9 2.5 599 342 365 74 416 312 322 301 71 65 69 84 89 79 553 524 39 251 277 296 525 223 332 223 56 39 2007 2008 2009 1H09 1H10 2010 2011 2012 2013 2014 2015 2016 2017 From 2018 to 2028 Net Debt (R$ billion) Local Currency (ex Pension Fund) Pension Fund Net Debt / EBITDA Adjusted with Pension Fund • June, 2010: – Average debt cost in 1H10 was 106% of CDI² per year or 13.9% per year – Average debt maturity of 7 years 19 1 – Includes 12th and 13th bonds 2 - Brazil’s Interbank Interest Rate
  19. 19. Capital market AES Eletropaulo X Ibovespa X IEE Average Daily Volume (R$ thousand) Last 12 months1 140 26,066 25,677 25,165 130 21,960 120 18% 110 18% 4% 100 90 80 Jun-09 Sep-09 Dec-09 Mar-09 Jun-10 2007 2008 2009 1H10 ELPL6 IEE IBOV • Common shares and preferred shares class A and B listed on BM&FBOVESPA under the tickers ELPL3, ELPL5 and ELPL6. • ADRs at US OTC Market under the tickers EPUMY and ELPSY. 20 1 – Index: 06/30/2009 = 100
  20. 20. AES Tietê overview Concession Area • 30 year concession, valid until 2029, renewable for another 30 years • 10 hydroelectric plants in the state of São Paulo at Tietê, Pardo, Grande, and Mogi Guaçu rivers • 6 small hydro power plants in the state of Minas Gerais • Installed capacity of 2,657 MW, with physical guarantee1 of 1,280 MW • 100% of physical guarantee contracted with AES Eletropaulo until the end of 2015 • 339 employees 1 - Amount of energy allowed to be long term contracted 22
  21. 21. Operational Performance Energy Generation (MW average1) Billed Energy (GWh) 138% 131% 130% 121% 1, 809 118% 14,704 1,664 13,421 116 13,148 1,665 1,149 1,545 1,740 1,680 1,512 7,880 2,331 573 330 7,135 132 33 949 463 11,138 1,146 11,108 11,108 1,105 5,534 5,653 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 AES Eletropaulo Spot Market Generation – MW Avg. Generation / Physical Guarantee MRE Other Bilateral Contracts 1- Generated energy divided by the amount of hours 23
  22. 22. Investments Investments (R$ million) 1H10 Investments 1% 67 3% 9 11% 59 57 51 8 20 13 58 85% 24 43 44 19 2 39 6 13 22 2007 2008 2009 2010 (e) 1H09 1H10 Investments New SHPPs Equip. and Maint. New SHPPs Environment IT 24
  23. 23. 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 Concluded Concluded  6 MW of co-generation through biomass, contracted for 15 years beginning in 2010 (PPA1)) (PPA1  7 MW of hydro generation through SHPPs2 in Jaguari Mirim River Under Under – São José SHPP (4 MW) has an estimated start-up in 1H11 Construction Construction – São Joaquim SHPP (3 MW) has an estimated start-up in 1H11  550 MW of thermo generation through natural gas Under Under – Location has been defined in Nov/2009 Development Development – Environmental licensing process initiated in March 2010 – Technical feasibility study in advanced stage  22 MW of hydro generation through one SHPP, in stage of technical and economic feasibility studies 1 – Power Purchase Agreement 2 – Small Hydro Power Plants 25
  24. 24. Net revenues of R$ 862 million in 1H10 Net Revenues (R$ million) 1H10 Average Prices (R$ / MWh) AES Eletropaulo 152.00 % R: 20 MRE 8.51 CAG 1,670 Spot 40.70 1,605 1,449 862 832 2007 2008 2009 1H09 1H10 26
  25. 25. Operating costs and expenses Operating Costs and Expenses1 (R$ million) R: 5% CAG Operational Provisions 410 Other Costs and Expenses2 351 350 3 55 Energy Purchase, Transmission and Connection Charges, 97 186 109 141 165 and Water Resources 16 57 67 281 239 214 108 103 28 2007 2008 2009 1H09 1H10 1 – Depreciation and amortization not included 2 - Personnel, Material, Third Party Services and Other Costs and Expenses 27
  26. 26. Ebitda of R$ 677 million in 1H10 Ebitda (R$ million) R: 5% CAG 1,260 1,254 1,099 677 667 2007 2008 2009 1H09 1H10 28
  27. 27. Sustainable profitability and dividend payment Net Income (R$ million) Dividend Payout1 (R$ million) Dividends Pay-out Yield PN 100 % 100 % 100 % 100 % 100 % 12% 11% R: 9% 10% 6% CAG 6% 780 780 692 692 609 609 414 411 414 411 2007 2008 2009 1H09 1H10 2007 2008 2009 1H09 1H10 • 25% of minimum pay-out according to bylaws • Since 2006, practice of 100% payout on quarterly basis 1 - Gross amount 29
  28. 28. R$ 379 million paid as dividends in 1H10 Consolidated Managerial Cash Flow (R$ million) 2007 2008 2009 1H10 Initial Cash 688 638 840 615 Operational Cash Generation 1.120 1.222 1.243 714 Investments (46) (55) (58) (24) Net Financial Expenses (72) (49) (48) (15) Net Amortization (197) (194) (224) (95) Income Tax (247) (66) (309) (361) Free Cash Flow 558 858 604 218 Dividends and Interest on Equity (608) (656) (829) (379) Final Cash 638 840 615 455 30
  29. 29. Debt Net Debt (R$ billion) Overlook on 1st Debenture Issuance 0.6x • R$ 900 million 0.3x 0.3x 0.3x 0.4x • 5 years term • CDI + 1.20% a.a. 0.7 • Payment on semiannual basis 0.4 0.4 0.4 0.4 • Fixed amortization on the 3rd, 4th, and 5th years • Objective: pre-payment of Eletrobras debt 2007 2008 2009 1H09 1H10 Net Debt Net Debt / Ebitda 31
  30. 30. Capital Market AES Tietê X Ibovespa X IEE Daily Avg. Volume - R$ thousand 13,974 12 months1 10,187 140 9,096 130 8,160 + 18% 120 9,668 + 18% 8,086 110 5, 531 5,468 100 + 2% 90 80 4,606 Jun-091 Sep-09 Dec-09 Mar-09 Jun-10 3,566 2,692 2,101 GETI4 IEE IBOV 2007 2008 2009 1H10 Preferred Common • Common shares and preferred shares listed on BM&FBOVESPA under the tickers GETI3 and GETI4. • ADRs at US OTC Market under the tickers AESAY and AESYY. 1 – Index: 06/30/09= 100 32
  31. 31. Social Responsibility and Environmental Actions
  32. 32. Social responsibility Volunteering Program Distributing Acting to Energy of Transform Good Specific social mobilization or Opportunities for volunteering in emergency campaign. social organizations, which are partners of AES Brazil Winter clothes, Christmas Co-workers can enroll in campaign, among others. volunteer activities available at AES Brazil volunteering portal since September/09 www.energiadobem.com.br • Launched in December, 2008; • Objective: to get the co-workers committed to the transformation of low income communities and development of non-governmental institutions; • 1,137 volunteers 34
  33. 33. Social responsibility “Casa da Cultura e Cidadania” Project • Over 6.7 thousand children, teenagers, and adults have been benefited • Own and incentive investments: approximately R$ 15 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 • 6 operating units “Centros Educacionais Infantis Luz e Lápis” - Project • 300 benefited children between 1 and 6 years old • Own investments amounting R$ 1.5 million in 2009 • Units: Santo Amaro and Guarapiranga 35
  34. 34. Attachments
  35. 35. Shareholders Agreement On December 22, 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 Main Highlights 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 that participation at the same price offered by a third party • Tag Along Rights - In the case of change in Brasiliana’s control, tag along rights are triggered for the following companies (only if AES is no longer controlling shareholder): - AES Eletropaulo: Tag along of 100% in its common and preferred B shares and 80% in its preferred A shares - AES Tietê: Tag along of 80% in its common shares - AES Elpa: Tag along of 80% in its common shares • Drag Along Right for Brasiliana - Once the offering party exercises the Drag Along clause, offered party is obligated to dispose of all its shares at the time, if the Right of 1st Refusal is not exercised by offered party 37
  36. 36. 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 Brazilian Electricity Energy Research Surveillance Regulatory Agency Enterprise (EPE) Committee (CMSE) (ANEEL) (Monitors energy supply) (Ruling, Inspection & Auditing, (Generation & Transmission Monitoring, and Mediation) Planning) Distribution companies Electric Energy Transmission System Operator Commercialization companies (ONS) Chamber (CCEE) Generation Generator resources Pricing and clearing of scheduling and dispatch energy transactions companies Trading companies 38
  37. 37. 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): Distribution – New Energy (A-5): Delivery in 5 years, 15-30 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 39 1 – Power Purchase Agreement
  38. 38. Discos regulatory methodology (Tariff Reset and Readjustment) Tariff Reset and Readjustment • Tariff Reset is applied each 3 to 5 years • Parcel A Costs − AES Eletropaulo: each 4 years (next 2011) − Non-manageable costs that totally Energy pass- through to the tariff − AES Sul: each 5 years (next 2011) Purchase − Losses reduction improve the pass- − Parcel A: costs pass trough the tariff Transmission through effectiveness − Parcel B: costs are set by ANEEL Sector Charges • Tariff Readjustment: annually Reference • Reference Company: − Parcel A costs pass trough the tariff Company – Efficient cost structure, determined by (PMSO) − Parcel B cost are adjusted by IGPM +/- X(1) Factor ANEEL (National Electricity Agency) X WACC Investment Remuneration • Remuneration Asset Base: Remuneration Asset – Applicable investments used to Base calculate the Investment Remuneration X Depreciation Depreciation (applying WACC) and Depreciation Regulatory Parcel A - Non-Manageable Costs Ebitda (1) X Factor: index that capture productivity gains Parcel B - Manageable Costs 40
  39. 39. 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 41
  40. 40. 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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