2. AES Brasil Group
• Presence in Brazil since 1997
• Comprised of seven companies in the sectors
of energy generation, distribution, trade and
telecommunications
• 7.7 thousand AES Brasil People
• Investments 1998-2009: R$ 5.8 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 dividend practice since 2006:
–
AES Tietê: 100% pay-out on quarterly basis
–
AES Eletropaulo: 95% pay-out on semiannually basis
2
4. Shareholding Structure
AES Corp
BNDES
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%
AES
Uruguaiana
C 71.35%
P 32.34%
T 52.55%
AES
Tietê
C 76.45%
P 7.38%
T 34.87%
AES
Eletropaulo
C 98.25%
T 98.25%
AES
Com Rio¹
C 99.99 %
T 99.99 %
AES Eletropaulo
Telecom¹
C = Common Shares
P = Preferred Shares
T = Total
1 – AES Atimus
4
5. Listed Companies 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
5
6. AES Brasil is the second largest group in
electric sector
Ebitda1 – 2009 (R$ Billion)
4.0
3.2
2.8
2.6
2.2
1.8
1.7
1.4
1.2
0.5
CEMIG
AES BRASIL
CPFL
NEOENERGIA
TRACTEBEL
CESP
COPEL
EDP
LIGHT
DUKE
Net Income1 – 2009 (R$ Billion)
1.9
1.8
1.6
1.3
1.1
1.0
0.8
0.6
0.6
0.2
CEMIG
1 – excluding Eletrobrás
AES BRASIL
NEOENERGIA
CPFL
Source: Companies’ financial reports
TRACTEBEL
COPEL
CESP
EDP
LIGHT
DUKE
6
7. AES Tietê is an important player among private
energy generators
Generation Installed Capacity (MW) - 2010
Privately held companies
2%
2%
6%
4%
AES
5%
35%
Tietê
is
the
2nd
largest
among
private
generation companies and 10th largest overall
6%
10 largest gencos correspond to 63% of the total
6%
7%
installed capacity
There are three mega hydropower plants under
10%
9%
8%
construction in the North region of Brazil with 18 GW
in installed capacity
112 GW
AES TIETÊ
DUKE
TRACTEBEL
COPEL
PETROBRÁS
CEMIG
ITAIPU
CESP
ELETRONORTE
FURNAS
CHESF
OTHERS
– Santo Antonio and Jirau (Madeira River): 7GW
– Belo Monte (Xingu River): 11GW
Source: ANEEL (Regulator) – BIG (October, 2010)
7
8. AES Brasil is the largest distribution group
in Brazil
Consumption (GWh) - 2009
13%
• 64 discos in Brazil distributing 388 TWh
13%
40%
• AES
Brasil
is
the
largest
electricity
distribution group in Brazil:
10%
– AES Eletropaulo: 41 TWh distributed,
representing 10.6% of the Brazilian
7%
5%
6%
market
6%
– AES
Consumers – Dec/2009
Sul:
8
TWh
distributed,
representing 1.9% of the Brazilian
13%
market
30%
12%
There
is
competition
restricted
12%
5%
7%
6%
16%
a
limited
in
to
Brazil
operate
opportunity
for
as
are
discos
within
their
concession areas
8
9.
10. AES Tietê Overview
Concession Area
16 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 2,657 MW, with physical guarantee1 of
1,280 MW
All amount of energy that AES Tietê can sell in the long
term is contracted to AES Eletropaulo until the end of 2015
As a pure energy generator, AES Tietê can only invest in
its core business
313 employees
1 - Amount of energy allowed to be long term contracted
10
11. Energy sector in Brazil:
supply perspectives
Installed Energy Capacity in Brazil
Total installed capacity is expected to reach 167 GW by 2019
Brazilian energy matrix is not expected to materially change over the next 10 years
2010
2019
Natural gas; 7%
Natural gas; 8%
Biomass; 5%
Biomass; 5%
SHPP; 4%
SHPP; 4%
Oil; 3%
Oil; 5%
Nuclear; 2%
Hydro; 74%
Others; 9%
112 GW
1 - Small Hydro Power Plant
Coal; 1%
Diesel; 1%
Wind; 1%
Steam; 1%
Hydro; 70%
Annual Growth: 4.5% p.a.
Source: EPE (Energetic Research Company)
Others; 14%
Nuclear; 2%
Coal; 2%
Diesel; 1%
Wind; 4%
Steam; 0%
167 GW
11
12. 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
12
13. Operational Performance: billed energy growth
due to high availability and bilateral contracts
Energy Generation (MW average1)
Billed Energy (GWh)
130%
14,729
14,706
125%
13,421
118%
573
13,148
301
117
1,150
1340
2,331
1,980
1,740
121%
331
1,680
11,108
11,138
11,108
11,108
2007
2008
2009
2010
1,665
1,599
1,545
2007
Generation - MWAvg
1,512
2008
2009
2010
Generation/Physical guarantee
1- Generated energy divided by the amount of hours
AES Eletropaulo
2- Energy Reallocation Mechanism
2
MRE
Spot market
Other bilateral contracts
13
14. Planned modernization at Nova Avanhandava,
Ibitinga and Caconde power plants in
2010 and 2011
Investments Breakdown1 (R$ million)
2010 Investments
158
1%
6
6%
82
14%
12
59
20
57
152
79%
13
70
39
43
Equipment and Maintenance
2008
2009
Investments
2010
2011 (e)
2
New SHPPs
1 - Do not include capitalization of interests during the plants modernization and development of projects
2 - Small Hydro Power Plants
New SHPPs
IT projects
Environment
14
15. Thermo SP: Expansion of 550MW in
installed capacity
Expected timeline
• Preparation of
basic project
• Land
acquisition
Instalation
license
Environmental license
issuance
2010
2011
JAN
Start of
the
EIA/RIMA
filed at
CETESB
Operational
license
FEB
MAR
APR
Beginning of
the project
presentation
to the
community
MAY
JUN
JUL
2012
AUG
Environmental
Public
license
hearing issuance
SEP
OCT
NOV
2015
Commercial
operation
date
2016
DEC
New energy
auction date
15
17. Net income of R$ 737 million, with a
pay-out of 117%, in 2010*
Net Income and Dividend Pay-out1 (R$ million)
117%
110%
100%
100%
14%
100%
12%
12%
80%
11%
11%
10%
10%
8%
60%
6%
40%
4%
20%
609
706
692
737
2%
0%
0%
2007
Pay-out
1 – Gross amount
(*) 2009 and 2010 numbers in IFRS
2008
2009
Yield PN
2010
Net income
17
18. Debt profile
Amortization Schedule – Principal (R$ million)
Net Debt (R$ billion)
0.6
0.3
0.3
0.3
0.7
297
0.4
2007
0.4
2009
2010
300
2014
2015
0.4
2008
299
Net debt
Net debt / EBITDA
•
2013
December, 2010:
–
–
Average debt maturity of 3.3 years
–
Net debt: R$ 0.4 billion
–
1 – Brazilian Interbank Interest Rate
Average debt cost in 2010 was 114% of CDI1 p.a. or 14% p.a.
Net debt/EBITDA: 0.3x
18
19. Capital Markets
Daily Avg. Volume (R$ thousand)
AES Tietê X Ibovespa X IEE X TSR²
2010 1
140
130
120
+ 20%
110
+ 12%
100
+ 1%
13,922
+ 30%
10,187
9,096
8,160
3,566
2,101
2,692
90
8,086
5,531
80
Dec-09
Mar-10
GETI4
Jun-10
IEE
Sep-10
IBOV
4,239
5,468
2007
2008
9,683
Dec-10
TSR
2
Preferred
•
2010
Common
Common shares and preferred shares listed on BM&FBOVESPA
under the tickers GETI3 and GETI4
•
2009
ADRs at US OTC Market under the tickers AESAY and AESYY
1 – Index: 12/30/2009= 100
2 – Total Shareholder Return – considers preferred shares price variation and dividends declared in the period
19
20.
21. 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
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
As a pure energy distributor, AES Eletropaulo can only invest
within its concession area
5,663 employees
21
22. Energy sector in Brazil:
demand perspectives
Macroeconomic Scenario
EPE’s1 Assumptions:
GDP - Annual growth
2004-2008
2010-2014
2015-2019
World
4.6
4.2
4.0
Brazil
4.7
5.2
5.0
•
Global financial sector recovery will not
take longer;
•
Brazilian economic growth will outpace
global
Brazilian Consumption Evolution (TWh)
international
5.0% p.a
633
331
346
•
393
context
even
of
in
an
moderate
Emerging markets – especially China –
will
378
growth,
expansion;
4.4% p.a.
358
average
grow
faster
than
developed
economies, positively affecting industrial
420
388
sector in Brazil;
• Income elasticity of energy demand (20102019): 1.04
• Households growth: 2.2% p.a
2004
2005
2006
2007
2008
1 - Source: EPE (Energetic Research Company)
2009
2010
2019
22
23. Energy sector in Brazil:
regulatory methodology
Tariff Reset and Readjustment
• Tariff Reset is applied each 4 years for AES Eletropaulo
• Parcel A Costs
− Next 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
Reference
Company
(PMSO)
Investment
Remuneration
Remuneration
Asset Base
X Depreciation
Depreciation
Regulatory
Ebitda
(1) X Factor: index that capture productivity gains
− Non-manageable costs that totally
pass- through to the tariff
− Losses reduction improve the passthrough effectiveness
• 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
23
29. Practice of 95% pay-out
on semi-annually basis*
Net Income and Dividend Payout1 (R$ million)
1 40 .0 %
114.4%
1 20 .0 %
100.3%
101.5%
101.6%
1 00 .0 %
28.6%
8 0.0%
20.3%
6 0.0%
20.4%
14.4%
4 0.0%
2 0.0%
0 .0 %
1,027
1,156
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
1,348
713
2007
Net Income
1 – Gross amount
(*) 2009 and 2010 numbers in IFRS
2008
Pay-out¹
2009
2010
Dividend Yield
29
30. Debt Profile
Amortization Schedule – Principal (R$ million)
Net Debt (R$ billion)
1.8x
1.5x
1.4x
0.9x
1,082
3.0
2.5
2.7
2.4
336
83
253
2007
2008
2009
2010
323
45
278
342
48
294
2011
2012
2013
Net Debt/Ebitda Adjusted with Fcesp
Net Debt (R$ billion)
•
577
51
526
2014
276
55
221
62
222
67
373
2015
2016
2017
2018
Local Currency (ex FCesp)
285
903
179
20192028
Fcesp¹
December, 2010:
–
Average debt cost in 2010 was 110% of CDI1 or 12.9% p.a.
–
Average debt maturity of 7.2 years
–
Net debt: R$ 2.4 billion
–
1- Brazilian Interbank Interest Rate
440
390
58
331
Net debt/EBITDA of 0.9x adjusted with Pension Fund
30
31. Capital Markets
Average Daily Volume (R$ thousand)
AES Eletropaulo X Ibovespa X IEEX TSR²
2010 1
B
A
125
27,000.00
26,066
25,677
24,496
+ 18%
25,000.00
115
+ 12%
21,960
23,000.00
105
+ 1%
21,000.00
95
- 7%
19,000.00
85
17,000.00
75
15,000.00
Dec-09
Feb-10
Ibovespa
A
Apr-10
IEE
Jun-10
Aug-10
AES Eletropaulo PN
Ex dividends: 05/01/2010
B
Oct-10
Dec-10
2007
2008
2009
2010
AES Eletropaulo TSR³
Ex dividends: 08/06/2010
•
Common shares and preferred shares listed on BM&FBOVESPA under the
tickers ELPL3 and ELPL4
•
ADRs at US OTC Market under the tickers EPUMY and ELPSY
1 – Index: 12/30/2009 = 100
2 – Total Shareholder Return - considers preferred shares price variation and dividends declared in the period
31
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
•
7 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
33
34. Social Responsibility
Volunteering Program
Distributing
Energy of
Good
Acting to
Transform
Specific social mobilization or
emergency campaign.
Opportunities for volunteering in
social organizations, which are
partners of AES Brazil
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
•
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
36. Brazilian Economy: good performance,
fast recovery after financial crisis
Brazil - GDP and Investment - Annual growth - % (IBGE)
25.6
• Strong growth was interrupted
13.9
13.6
6.1
by the financial crisis
7.5
5.2
• The GDP for 2009 was mainly
(0.6)
affected
(10.3)
2007
2008
GDP
2009
5.3
investment
(reversal of expectations)
Investment (Gross Fixed Capital Formation)
• Brazil´s economic performance
7.5
5.2
lower
2010
GDP growth - Brazil x Other countries (IBGE, BCB, IMF and OECD)
6.1
5.7
by
during crisis was better than
other countries
5.6
3.6
3.9
• Strong recovery in GDP for
3.1
-0.6
2010, specially investments
-2.2
-2.2
2007
Brazil
2008
2009
Emerging markets (ex Brazil, India and China)
2010
1
OECD
1- OECD (Organization for Economic Co-operation and Development) – international organization of 31 developed countries.
36
37. Brazilian Economy: industry recovery and
recent foreign trade expansion
Brazil – Industrial production - Annual growth - % (IBGE)
10.4
6.0
3.1
• Brazilian industry has reached
3.1
2.8
pre-crisis level since mar/10
• In 2010, industry grew 10.4%
• Exports limited the recovery in
(7.4)
2005
2006
2007
2008
2009
2010
2009
Brazil – Trade Balance – US$ billion (Funcex)
25
20
15
10
5
0
-5
-10
-15
-20
• 2010: growth of exports (world
economy recovery) and imports
Exports
Imports
Trade Balance
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
(capital goods)
37
38. Domestic market is responsible for the
good performance
Unemployment rate - % (IBGE)
14
13
12
11
10
9
8
7
6
5
• Brazilian´s good performance
was driven by the expansion of
the domestic market
– Unemployment rate has been
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
6.4
decreasing over the years
Real average income (R$) and income inequality (IBGE and IPEA)
1.600
0,59
0.583
1.500
0.572
0,58
0.569
0,57
0.563
1.400
1.550
0.548
1.485
1.450
1.395
1.348
2004
1.291
1.261
2003
1.100
1.259
1.200
persistently since 2005
0,56
0.556
1.300
– Real income has been growing
0,55
– There was an improvement in
0.543
0,54
income distribution
0,53
1.000
0,52
2005
2006
Real average income
2007
2008
2009
2010
1
Gini Index
1- It measures the degree of income inequality. It may vary from 0 (complete equality) to 1 (complete inequality).
38
39. Domestic market is responsible for the
good performance
Brazil – Loans to individuals – R$ million (BCB)
600
537
470
500
• Besides the improvement on
394
400
318
300
labor market, credit expansion
238
191
was also responsible for the
200
good performance
100
2005
2006
2007
2008
2009
Oct*
Brazil – Retail Sales – seasonally adjusted – 2003 = 100 (IBGE)
• Retail sales is growing fast:
180
– 6.0% in 2009 despite the crisis
170
160
– 7.2% p. a. between 2005 and 2009
150
140
130
– 10.9% in 2010
120
110
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
100
39
40. Costs and Expenses
Costs and operational expenses1 (R$ million)
415
365
434
351
187
84
112
281
201
239
246
2008
2007
214
2009
2010
Energy Purchase, Transmission and Connection Charges, and Water Resources
2
Other Costs and Expenses
1 – Do not include depreciation and amortization
2 - Personnel, Material, Third Party Services and Other Costs and Expenses
40
41. Costs and Expenses
Costs and operational expenses1 (R$ million)
6,745
5,537
5,893
6,431
1,306
1,255
1,193
1,440
4,097
2007
4,700
5,125
5,490
2008
2009
2010
Energy Supply and Transmission Charges
1 – Do not include depreciation and amortization
PMS² and Others Expenses
2 - Personnel, Material, Third Party Services and Other Costs and Expenses
41
42. 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
•
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
•
Popular law action against Federal Government, Aneel, AES Tietê, and Duke
–
2008 – In October, defense filed on first instance by AES Tietê; In December, the author replied AES Tietê defense
–
2010 – In September, due to the plaintiffs failure to specify the individuals that should be named as Defendants, a favorable
decision was rendered by the 1st Instance Court (but there can be appeals)
42
43. 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
State-owned
Eletropaulo and
Eletrobras
disagreed on how
to calculate
interest over that
loan and a lawsuit
was started
Jan/98
Eletrobras, after
winning the
interest
calculation
discussion, filed
an Execution Suit
to collect the due
amount
Eletrobras and
CTEEP appealed
to the Superior
Court of Justice
(SCJ)
Eletrobras
requested the 1st
level of court
judge to appoint
an expert
Next Steps:
1- Eletrobras will
request the
auditing process
2 - The auditing
procedure will be
concluded at least
in 6 months
Apr/98
Privatization
event . Stateowned
Eletropaulo
became AES
Eletropaulo
Sep/01
Sep/03
The 2nd level of
court excluded
AES Eletropaulo
from the
discussion based
on the spin-off
agreement
Oct/05
Jun/06
May/09
The SCJ decided
to send the
Execution Suit
back to the 1st
level of court
Feb/10
The Judge
appointed the
expert who will
indicate the amount
and the debtor
3 - After
conclusion of the
expert work, the 1st
level of court
decision will be
released
4 - Appealing to
the 2nd level of
court
5 - Appealing to
the 3rd level of
court
Due to a paperwork
issue, Eletrobras
will request the
expert selection
again
43
44. 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
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
Drag along
rights
Once the offering party exercises the Drag Along clause, offered party is obligated to dispose of all
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
44
45. 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
45
46. 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.
