2. I. Overview of the Company
II. Energy Distribution Market
III. Operational Performance
IV. Financial Indicators
V. Regulatory Scenario
VI. Conclusion
2
3. I. Overview of the Company
II. Energy Distribution Market
III. Operational Performance
IV. Financial Indicators
V. Regulatory Scenario
3
4. Background
April 1998: Privatization of Eletropaulo
Lightgas controlled at the time – through Light – by (AES, EDF, Reliant, CSN) and
BNDESpar
January 2000: BNDESPar carried out a public offering for the sale of
Eletropaulo’s preferential stock
AES acquired 64% of the preferential stock for US$ 1.1 billion through AES Transgas
December/2000: CSN and Reliant sold participations in Light/Eletropaulo
February 2002: Consolidation of the restructuring process between EDF and
AES
AES assumed the control of Eletropaulo
EDF assumed the control of the administration of Light
The corporate restructuring was approved by ANEEL
June 2002: CVM approves AES ELPA to go public
November 2002: AES ELPA stock was segregated from Light’s stock
AES ELPA stock is negotiated under the ticker AELP3 at BOVESPA
4
5. Shareholder structure
Shareholder structure (*) Shareholder structure(*)
before decross after decross
AES
AES
50,45%
70.37%
EDF
19.92%
Other Federal
20.40% Other
Govern. Federal
20.40%
9.23% Gov
(*) total shares (*) total shares 9.23%
Minority
100% 88,2% 11,8%
AES
Transgás Elpa Cemig
Minority Government
77,8%ON 22,2%ON
64,1%PN 7,4%PN 26,4%PN
and 2,1%
PN
5
6. Concession Area
The largest electrical energy distribution company in Latin America
5.0 million consumers
The most attractive concession area in Brasil
A solid economic basis containing a population with high income
High percentage of sales to the residential sector
Brazil Eletropaulo %
2
Km 8.547.403 4.526 0,05%
Population 176.315.325 15.200.000 8,62%
Energy (GWh/year)* 290.465 32.451 11,17%
* Source: Eletrobrás and Eletropaulo
FY 2002
6
7. I. Overview of the Company
II. Energy Distibution Market
III. Operational Performance
IV. Financial Indicators
V. Regulatory Scenario
7
9. Consumption Evolution
Monthly Consumption (GWh)
3.400
3.200
3.000
2.800
2.600
2.400
2.200
2.000
r
r
l
ne
ly
r
h
y
ay
y
er
st
ri
be
be
be
r
c
ar
Ju
Ap
ua
gu
ob
Ju
ar
M
em
em
nu
em
M
br
Au
ct
Ja
ov
ec
pt
O
Fe
N
Se
D
1999 2000 2001 2002 2003
9
16. Losses with Rationing
R$ MM
2.300
2.100 ?
1.900
1.700
1.500
1.300
1.100
900
3 Q 00
2 Q 01
1 Q 02
4 Q 00
1 Q 01
3 Q 01
4 Tri 01
4 Q 02
1 Q 00
2 Q 00
2 Q 02
3 Q 02
Net Revenue BNDES Loan Net Revenue w/out Rationing
BNDES still has to release a tranche of R$ 240 million related to rationing losses
? incurred in January and February/2002
Assuming the historical growth of 3.5% estimated losses were – R$ 1,965MM
16
17. Debt restructuring process in 1Q2003
In July 2002 Eletropaulo started a process to restructure its debt due to problems of
credit liquidity by trying to establish a balance between maturity dates of obligations
and Eletropaulo’s capacity for generating cash
Approximately R$ 880 million (net of funding) was paid and R$ 1.5 billion was refinanced
Between January and April of 2003 approximately R$ 282 million was paid and R$ 371 million
was renegotiated
(R$ MM)
221 (*)
150(**)
105
65 70
43
jan/03 fev/03 mar/03 abr/03
PAID RENEGOTIATED
(*) CP and Bladex’s Loan (was renegotiated in February – pushing back final maturity from 2005 to 2006).
(**) 2nd Serie of 7th Debentures issue.
17
18. 1Q2003 Debt
In 2002 hedge contracts were not renewed due to lack of credit lines
As part of the debt restructuring process 66% of Dollar debt was converted into Reais
In 1Q2003, Eletropaulo maintained 45% of its total debt in Dollars
Eletropaulo regained access to hedge lines
total hedge in March 2003 - US$ 110 million
14,2% of total Dollar debt is hedged
Consolidated debt - 12/31/2002 Consolidated debt – 03/31/2003
(R$ 5.91 billion, of which R$ 2.7 billion (R$ 5.8 billion, of which R$ 2.6 billion
were in US$)* were in US$)*
45%
46% R$ R$
54%
US$ US$
55%
9% w/ hedge 14,2% w/ hedge
(*) The amounts were exchanged by Ptax in the end of each month:
Dec/ 2002 – 3,533
March/ 2003 – 3,353
18
19. Indebtness - Short Term x Long Term
12/31/2002 03/31/2003
32% 27%
68% 73%
Short Term Long Term Short Term Long Term
short term debt does not reflect the actual schedule for payments maturing because it
includes debts with breach of contractual obligations (financial covenants) and cross-
default.
The amount of consolidated debt re-classified as Short Term with schedule of
amortizations unaltered is R$ 1,922 million.
By schedule of payment maturities, about 40% of total debt will mature in the short
term
19
20. Due Dates of Principal Payments in 2003
The company intends to proceed with its strategy of adapting the due dates of
its debt to its generation of cash by lengthening the payment terms of its loans
Commercial Paper
Bank Loan
228
225 228 (US$ 49MM)
Syndicated Loan Commercial Deustche 225
(US$ 25MM) Paper (US$ Bank
7,7MM) and (US$ 60MM) 199
199
Syndicated Loan
Syndicated Loan
(US$ 25MM)
(US$ 25MM)
Syndicated
Loan JP
143
143 Morgan (R$
Debentures 160MM)
(R$ 55MM)
92 91
92 91 89
89
60
50 49
35 35 37 37
8 8 9 9 9 9 9 10 10
3 5 5
1
abr/03 mai/03 jun/03 jul/03 ago/03 set/03 out/03 nov/03 dez/03
US$ R$ BNDES
Note: the maturity of principal payments of dollar debts as 03/31/2002 were converted by the exchange rate (US$/R$ = 3,3531)
20
21. Results – 1Q2003 (R$ MM)
4o tri 02 1o tri 03
Drop in consumption due to
seasonal effects
NET INCOME 1.542,8 1.409,1 -8,7%
Drop in:
Electric power purchase
OPERATING EXPENSES (1.662,2) (1.255,9) -24% expense due to the reduction by
25% of Initial Contracts,
Other Operational Expenses due
EBITDA (119,3) 153,2 +228% to provisions occurred in 4Q02,
that did not repeat in 1Q03
FINANCIAL INCOME 66,2 (13,9) -222%
Monetary Variation in Local
(EXPENSES)* Currency – besides debt cost in
Reais
RESULTS BEFORE TAXES AND (281,7) 70,5 +213%
Provision for Actuarial Liabilities
OTHER ITEMS
with CESP Foundation– CVM 371
– It is no longer accounted as
Extraordinary Item, but as
Personnel Expense
OTHER ITEMS NET OF TAXES (106,0) - 347%
Main Reasons for 1Q2003 Profit:
Decrease in Provisions
Real Revaluation
NET PROFIT (LOSSES) (339,4) 14,2 +104%
(*) Consolidated Figures
21
22. EBITDA Adjusted
4th Quarter 2002 1st Quarter 2003
EBITDA
R$ -119,3 MM
EBITDA
(taking into account Provisions) R$ 153,2 MM (with CVM 371 effects)
Provision for Doubtful Debt
R$ 88,8 MM
Provision for the debt of São Provision for Actuarial Liabilities
with CESP Foundation – CVM 371
R$ 148,3 MM
Paulo City Hall R$ 123,6 MM
Provisions for Labor and
R$ 155,7 MM Cetemec Contingencies
EBITDA
EBITDA (WITHOUT THE EFFECT
R$ 273,5 MM
(WITHOUT THE R$ 276,8 MM
R$ 276,8 MM OF PROVISIONS)
R$ 273,5 MM EFFECT OF
PROVISIONS)
22
23. I. Overview of the Company
II. Energy Distribution Market
III. Operational Performance
IV. Financial Indicators
V. Regulatory Scenario
23
24. Tariff Reset
Principle of maintainance of the economic-financial equilibrium of the
concession through:
Annual Readjustment: according to the pre-established formula of the Concession
Contract
Tariff Readjustment Index = VPA + VPB * (IGPM +/- X)
Revenues
Periodic Reset: every four years after privatization, without a pre-established
methodology in the Concession Contract
Extraordinary Resets: When significant changes to cost base of concessions occur,
altering economic-financial equilibrium
Currency devaluation in June 1999
Privatization Reset Reset
Year 0 1 2 3 4 5 6 7 8 9 10
Annual Readjustment Annual Readjustment (X factor = 0)
(X Factor = zero in first four years)
24
25. Mechanism for Tariff Reset
Distributors have tariffs readjusted annually to pass through non-manageable costs
(Parcel A) and update manageable costs (Parcel B) based on IGP-M.
Parcel A Parcel B
Manageable costs
Exchange variation – energy from
Itaipu O&M
Required Income =
Required Income = CCC
Costs with transmission grid Depreciation
Purchased Energy
Cost of monitoring
Return on
Capital
CVA* was created in 2001 to allow pass through of changes in costs of Parcel A that
occurred between tariff readjustments
Measure MME/MF 116/03, of the 4th of April 2003 postponed, for 12 months, the compensation
of the balance of CVA and this will be compensated over 24 months starting in July 2004
* CVA – Compensation Account for Variations of Values of Parcel A’s items
25
27. Tariff Reset Dynamics
Periodic Reset % = Required Revenues
Verified Revenues
Required Income
Verified
Income Parcel A
Parcel A
O&M
O&M
MWh
MWh
x
x
Tariff
Tariff Depreciation
Depreciation
Parcel B
x WACC
WACC
Base
Base
(Pre-Tax)
(Pre-Tax)
Return
Return
27
28. Tariff Reset Eletropaulo
Schedule of Eletropaulo’s Tariff Reset (2003):
26th May – Technical Note – Preliminary Number = 9.62%
18Th June – Public Hearing – already held
4th July – Tariff Reset Implementation – Final Number = 11,35%
10.95% (Tariff Reset)
0.4% (collateral costs for energy purchase and some rationing costs incurred by EP
during the rationing period)
The main factors that were not considered were:
Rate Base calculation – Aneel is considering a preliminary level, which is a
percentage of fixed assets adjusted by inflation – subject to Public Hearing
to be scheduled
FCESP – The actuarial cost with Cesp Foundation is not being considering by
Aneel
Test Year
Allowance for bed debts
28
29. Regulatory Perspectives
Tariff Reset 2003
Basis of Does not recover
Remuneration investments made
TARIFF
Does not mirror the
WACC
X actual cost of capital
Not compatible with
INFLATION X Factor Subjective RC* criteria
Deferral of CVA Affects leverage and
credit limit
(*) Reference Company
29
30. I. General Overview of the Company
II. Energy Distribution Market
III. Operating Performance
IV. Financial Indicators
V. Regulatory Scenario
VI. Conclusion
30
31. Eletropaulo
Eletropaulo is the largest energy distribution company in Latin America
Its concession area includes the Brazilian population with the highest
purchasing power
Since privatization Eletropaulo has presented significant improvements in
operating performance indicators, which resulted in better services for the
population within its concession area
Rationing caused losses of R$ 1,965 million, only partially compensated by
the Sector’s General Agreement
Rationing and closure of financial markets led to maturity concentration in
the short term, the impossibility to renew hedges, and hence, the need to
restructure Eletropaulo’s debt, extending maturity terms and converting
Dollar debts into Reais
The greatest challenges that Eletropaulo faces at this time relate to
regulatory issues, due to the Government’s intervention aimed at reducing
the inflationary effect of tariff resets
Solid and feasible company that seeks to match the maturities of its
loans with its cash generation and mitigate the effects of the instability
of the regulatory scenario
31
