1
InstitutionalMay, 2011
2
AES Brasil Group
• Presence in Brazil since 1997
•
Comprised of seven companies in the sectors of energy generation, distribution, trade and telecommunications
• 7.6 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 dividend practice since 2006: –
AES Tietê: 100% pay-out on quarterly basis
–
AES Eletropaulo: 95% pay-out on semi-
annually basis
3
AES Brasil widely recognized in 2009-2010
Environmental concern
Management excellence
Quality and safety
(AES Eletropaulo) (AES Sul) (AES Eletropaulo) (AES Eletropaulo)
(AES Tietê) (AES Eletropaulo) (AES Tietê) (AES Tietê)
(AES Brasil) (AES Tietê)
(AES Eletropaulo)
4
AESInfoenergy
AESUruguaiana
AESCom Rio¹
AESEletropaulo
AESTietê
AES EletropauloTelecom¹AES Sul
AES Corp BNDES
C = Common SharesP = Preferred Shares
T = Total
Shareholding Structure
C 99.99 %T 99.99 %
C 99.99%T 99.99%
C 76.45%P 7.38%T 34.87%
Cia. Brasiliana de Energia
C 50.00% - 1 shareP 100%T 53.85%
C 50.00% + 1 shareP 0.00%T 46.15%
C 71.35%P 32.34%T 52.55%
C 98.25%T 98.25%T 99.70%
C 99.00%T 99.00%
1 –
AES Atimus
5
24.2% 28.3% 39.5% 8.0%
8.5%56.2%19.2%16.1%
Others¹Free Float
Listed Companies Shareholding Composition
1 –
includes Federal Government and Eletrobrás
shares in AES Eletropaulo and AES Tietê, respectively
6
AES Brasil is the second largest group in electric sector
Ebitda1 – 2010 (R$ Billion)
Net Income1 – 2010 (R$ Billion)
1 –
excluding Eletrobrás Source: Companies’
financial reports
CEMIG AES BRASIL CPFL NEOENERGIA TRACTEBEL CESP EDP LIGHT COPEL DUKE
4.54.2
3.43.0 2.6
2.0 1.6 1.6 1.5
0.6
CEMIG AES BRASIL NEOENERGIA CPFL TRACTEBEL COPEL EDP LIGHT DUKE CESP
2.3 2.2
1.81.6
1.21.0
0.6 0.6
0.2 0.1
7
AES TIETÊ DUKE
TRACTEBEL COPEL
PETROBRÁS CEMIG
ITAIPU CESP
ELETRONORTE FURNAS
CHESF OTHERS Source: ANEEL (Regulator) –
BIG (May, 2011)
AES Tietê is the 2nd largest among private
generation companies and 10th largest overall
10 largest gencos correspond to 64% of the total
installed capacity
There are three mega hydropower plants under
construction in the North region of Brazil with 18 GW
in installed capacity
–
Santo Antonio and Jirau
(Madeira River): 7GW
–
Belo Monte (Xingu River): 11GW
Generation Installed Capacity (MW) - 2010Privately held companies
114 GW
AES Tietê is an important player among private energy generators
2% 2%6%
4%
5%
6%
6%
7%
8%8%
9%
36%
8
AES Brasil is the largest distribution group in Brazil
Consumption (GWh) - 2010
Consumers – Dec/2010
•
64 discos in Brazil distributing 419 TWh
•
AES Brasil is the largest electricity distribution group in Brazil:
–
AES Eletropaulo: 43 TWh distributed,
representing 10.3% of the Brazilian
market
–
AES Sul: 9 TWh
distributed,
representing 2.2% of the Brazilian
market
There is a limited opportunity for competition in Brazil as discos are restricted to operate within their concession areas
13%
12%
10%
7%6%6%
6%
40%
12%
12%
12%
16%7%7%
5%
30%
10
AES Tietê Overview
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
328 employees
Concession Area
1 -
Amount of energy allowed to be long term contracted
11
2010 2019
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
1 -
Small Hydro Power Plant * Source: EPE (Energetic Research Company, May/2010)
167 GWAnnual Growth: 4.5% p.a. 112 GW*
Energy sector in Brazil: supply perspectives
Installed Energy Capacity in Brazil
Hydro; 74%
Natural gas; 8%
Biomass; 5%
SHPP; 4%
Oil; 3%
Nuclear; 2%
Coal; 1%Diesel; 1%Wind; 1%Steam; 1%
Others; 9%Hydro; 70%
Natural gas; 7%
Biomass; 5%
SHPP; 4%
Oil; 5%
Nuclear; 2%Coal; 2%Diesel; 1%Wind; 4%Steam; 0%
Others; 14%
12
Distribution CompaniesTrading
Companies
Distribution Companies
Free Clients
Auctions
Energy sector in Brazil: contracting environment
Regulated Market Free Market
Spot Market PPAs1
1 –
Power Purchase Agreement
•
Main auctions (reverse auctions):
–
New Energy (A-5): Delivery in 5 years, 15-
30 years regulated PPA1
–
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
Trading Companies
Free Clients
13
118%
130%125%
143%
136%
2008 2009 2010 1Q10 1Q11
1,512 1,665 1,5991,979
1,612
Energy Generation (MW average1) Billed Energy (GWh)
Billed energy growth due to high availability and bilateral contracts
1-
Generated energy divided by the amount of hours 2-
Energy Reallocation Mechanism
AES Eletropaulo MRE Spot market Other bilateral contracts2
2008 2009 2010 1Q10 1Q11
11,138 11,108 11,108
3,015 2,526
1,680 2,331 1,980
566 587
331 1,150 1,340
643 424
117 301
52 108
13,148 14,706 14,729
4,276 3,645
Generation / Physical GuaranteeGeneration - MWAvg
14
Investments1
(R$ million) 2011 Investments
2
Investments in the modernization of Nova Avanhandava, Ibitinga and Caconde
power plants
Investments New SHPPs
1 -
Do not include capitalization of interests during plants modernization and development of projects2 -
Small Hydro Power Plants
2009 2010 2011 (e) 1Q10 1Q11
4370
152
730
13
12
6
1
4
57
82
158
8
35
89%
6%5%
Equipment and Modernization
New SHPPs
IT projects
15
Plant localization (Canas/SP)
• Expected Timetable-
May 26, 2011:
Public hearing-
July/11:
Expectation of issuance of environmental license (expected)
-
2nd
half of 2011:
Power auction realization (expected)
Expansion of 550 MW of installed capacitythrough the Termo SP Project
• Project features
-
Combined cycle using natural gas-
2 gas turbines, 2 heat recovery boilers and 1 steam turbine-
Estimated investment of R$ 1.1 billion-
Natural gas consumption: 2.5 million m3/day
• Project objectives-
Expansion of installed capacity in the State of São Paulo-
Offering competitively energy prices
Project Website: www.aestiete.com.br/termosaopaulo
16
2008 2009 2010 1Q10 1Q11
1,605 1,670 1,754
460 416
2008 2009 2010 1Q10 1Q11
1,254 1,255 1,320
378 338
Ebitda (R$ million)Net Revenue (R$ million)
Financial highlights*
(*) 2009 and
2010 numbers
in IFRS
CAGR: 5% CAGR: 3%
17
100% 110% 117%
12% 11% 11%
Pay-out Yield PN
2008 2009 2010 1Q10 1Q11
692 706 737
220 193
Net income
Net Income and Dividend Pay-out1 (R$ million)
1 –
Gross amount (*) 2009 and
2010 numbers
in IFRS
Practice of 100% pay-outon quarterly basis*
18
0.3x 0.3x 0.3x 0.3x 0.4x
2008 2009 2010 1Q10 1Q11
0.4 0.4 0.4 0.4 0.5
Debt profile
Net Debt (R$ billion) Amortization Schedule – Principal (R$ million)
•
March, 2011:–
Average debt cost in 1Q11 was 114% of CDI1
p.a. or 14% p.a.–
Average debt maturity of 3.1 years–
Net debt: R$ 0.5 billion–
Net debt/EBITDA: 0.4x
1 –
Brazilian
Interbank
Interest
Rate
Net debt / EBITDANet debt
2013 2014 2015
300 300 300
19
80
90
100
110
120
Dec-10 Jan-11 Feb-11 Mar-11
Capital Markets
1 –
Index: 12/31/2010 = 100
AES Tietê X Ibovespa X IEE Daily Avg. Volume (R$ thousand)
•
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
+3%-1%
+10%
1Q111
2008 2009 2010 1Q11
5,468 8,086 9,683 9,979 2,692
2,101 4,239 3,274 8,160 10,187 13,922 13,253
Preferred Common
21
AES Eletropaulo Overview
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
5,629 employees
Concession Area
222004 2005 2006 2007 2008 2009 2010 2019
331 346 358 378 393 388420
633
Energy sector in Brazil: demand perspectives
4.4% p.a.
5.0% p.a
Macroeconomic Scenario
Brazilian Consumption Evolution (TWh)
EPE’s1 Assumptions:
•
Global financial sector recovery will not
take longer;
•
Brazilian economic growth will outpace
global average growth, even in an
international context of moderate
expansion;
•
Emerging markets – especially China –
will grow faster than developed
economies, positively affecting industrial
sector in Brazil;
•
Income elasticity of energy demand (2010-
2019): 1.04
•
Households growth: 2.2% p.a
1 -
Source: EPE (Energetic Research Company)
2004-2008 2010-2014 2015-2019
World 4.6 4.2 4.0
Brazil 4.7 5.2 5.0
GDP - Annual growth
23
Reference Company(PMSO)
Investment Remuneration
Depreciation
Energy Purchase
TransmissionSector Charges
Tariff Reset and Readjustment
•
Tariff Reset is applied each 4 years for AES Eletropaulo −
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
RemunerationAsset Base
X Depreciation
X WACC
Regulatory Ebitda
Parcel A - Non-Manageable Costs
Parcel B - Manageable Costs
•
Remuneration Asset Base:–
Applicable investments used to calculate the Investment Remuneration (applying WACC) and Depreciation
•
Reference Company:–
Efficient cost structure, determined by ANEEL (National Electricity Agency)
•
Parcel A Costs−
Non-manageable costs that totally pass-
through to the tariff−
Losses reduction improve the pass-
through effectiveness
(1) X Factor: index that capture productivity gains
Energy sector in Brazil: regulatory methodology
24
Consumption Evolution
Total Market1 (GWh) 1Q11 Consumption Share1 (GWh)
36%
14%
18%
26%
6%CAGR: 3%
1 –
Net of own consumption
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2008 2009 2010 1Q10 1Q11
32,577 33,860 35,434
8,544 9,078
7,355 7,383 7,911
1,813 2,041
39,932 41,243 43,345
10,35711,119
Free Clients Captive Market
36%
27%
18%
13%
6%
Residential
Commercial
Free Clients
Industrial
Others
25
Investments amounted R$ 156 million in 1Q11
Investments Breakdown (R$ million) Investments 1Q11
0
100
200
300
400
500
600
700
800
2009 2010 2011(e) 1Q10 1Q11
410
654 684
88 152
47
28 36
105
457
682 720
98156
Capex Paid by Customers
57
37
37 9
8 5 3
Maitenance
Customer Service
System Expansion
Losses Recovery
IT
Paid by the Clients
Others
26
SAIFI - System Average Interruption Frequency Index SAIDI - System Average Interruption Duration Index
SAIDI & SAIFI
8th
Sources: ANEEL, AES Eletropaulo and ABRADEE
ABRADEE ranking position among the 28 utilities with more than 500 thousand customers
►
2011 SAIDI ANEEL Reference: 8.68 hours ►
2011 SAIFI ANEEL Reference: 6.93 times
5th 7th1st
8.49 7.87
7.39
SAIFI Aneel Reference
2008 2009 2010 1Q10 1Q11
5.64 6.17 5.43 6.29 5.44
SAIFI (times)
2008 2009 2010 1Q10 1Q11
9.20 11.86 10.68 12.66 9.91
SAIDI (hours)
10.92 10.09
9.32
SAIDI Aneel Reference
27
Losses (%)
1 –
Current technical losses used retroactively as a reference
Collection rate (% over Gross Revenues)
2008 2009 2010 1Q10 1Q11
98.5 101.1102.4 102.5 99.6
Operational Indexes
2008 2009 2010 1Q10 1Q11
6.5 6.5 6.5 6.5 6.5
5.1 5.3 4.4 5.0 4.3
11.6 11.810.9 11.5 10.8
Technical Losses Commercial Losses¹
28
Ebitda (R$ million)Net Revenues (R$ million)
CAGR: 10%
Financial Highlights*
CAGR: 15%
(*) 2009 and
2010 numbers
in IFRS
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2008 2009 2010 1Q10 1Q11
7,193
8,7869,697
2,260 2,423
0
500
1,000
1,500
2,000
2,500
2008 2009 2010 1Q10 1Q11
1,5661,775
2,413
498 549
291 –
Gross amount
Net Income and Dividend Payout1 (R$ million)
Practice of 95% pay-outon semi-annually basis*
(*) 2009 and
2010 numbers
in IFRS
2008 2009 2010 1Q10 1Q11
1,027 1,1561,348
223 282
Net Income
101.5%93.4%
114.4%
20.3% 20.4%
28.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Pay-out Yield PN
30
Amortization Schedule – Principal (R$ million)
¹
Brazilian Interbank Interest Rate
²
Pension Fund
•
March, 2011:–
Average debt cost in 1Q11 was 108% of CDI1
or 13.9% p.a.–
Average debt maturity of 6.9 years–
Net debt: R$ 2.4 billion –
Net debt/EBITDA of 0.9x adjusted with Pension Fund
Debt ProfileNet Debt (R$ billion)
1.1x0.9x
Net Debt/Ebitda Adjusted with Fcesp2008 2009 2010 1Q10 1Q11
3.0 2.7 2.4 2.4 2.4
Net Debt (R$ billion)
1.8x
1.4x
0.9x
2011 2012 2013 2014 2015 2016 2017 2018 from 2019 to
2028
244 273 294526
221 331 222 373179
64 46 49
53
5660
6469
926309 319 343
578
277391
286442
1,105
Local Currency (ex FCesp) Fcesp²
31
Average Daily Volume (R$ thousand)
Capital Markets
AES Eletropaulo X Ibovespa X IEE
•
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: 12/31/2010 = 100
Ibovespa IEE AES Eletropaulo PN
0
0
0
0
0
0
0
2008 2009 2010 1Q11
25,677
21,960
24,49623,009
90
95
100
105
110
115
Dec-10 Jan-11 Feb-11 Mar-11
1Q11 1
+ 10%
- 1,0%
+12%
Social Responsibility
33
•
300 benefited children between 1 and 6 years old
•
Own investments amounting R$ 2.1 million in 2010
•
Units: Santo Amaro and Guarapiranga
•
Over 5.2 thousand children, teenagers,
and adults have been benefited
•
Own and incentive investments:
approximately R$ 17 million in 2010
•
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
“Casa da Cultura e Cidadania” Project
“Centros Educacionais Infantis Luz e Lápis” - Project
Social Responsibility
34
Social Responsibility
•
Launched in December, 2008;•
Objective: to get the co-workers committed to the transformation of low income communities and development of non-governmental institutions;
•
1,199 volunteers
Volunteering Program
Acting to Transform
Distributing Energy of
Good
Specific social mobilization or emergency campaign.
Winter clothes, Christmas campaign, among others.
Opportunities for volunteering in social organizations, which are
partners of AES Brazil
Co-workers can enroll in volunteer activities available at AES Brazil volunteering portal
since September/09www.energiadobem.com.br
Attachments
36
Costs and Expenses
Costs and operational expenses1 (R$ million)
1 –
Do not include depreciation and amortization 2 -
Personnel, Material, Third Party Services and Other Costs and Expenses
2
2008 2009 2010 1Q10 1Q11
239 214 246
48 49
112 201 187
34 29
351 415 433
82 78
Energy Purchase, Transmission and Connection Charges, and Water Resources
Other Costs and Expenses
37
Costs and Expenses
Costs and operational expenses1 (R$ million)
1 –
Do not include depreciation and amortization 2 -
Personnel, Material, Third Party Services and Other Costs and Expenses
2008 2009 2010 1Q10 1Q11
4,0975,125 5,490
1,323 1,359
1,440
1,3061,255
342 348
5,537
6,431 6,745
1,665 1,707
Energy Supply and Transmission Charges PMS and Others Expenses²
38
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)
39
Next Steps:
1 -
The auditing procedure will be concluded in at least 6 months
2 -
After conclusion of the
expert work, the 1st
level of court decision will be
released
3 -
Appealing to the 2nd
level of court
4 -
Appealing to the 3rd
level of court
Eletrobras Lawsuit
Nov/86
Stated-owned Eletropaulo
borrowed money from Eletrobras
Dec/88
State-owned Eletropaulo and
Eletrobras disagreed on how
to calculate interest over that loan and a lawsuit
was started
Sep/03
The 2nd
level of court excluded AES Eletropaulo
from the discussion based
on the spin-off agreement
Jun/06
The SCJ decided to send the
Execution Suit back to the 1st
level of court
May/09
Eletrobras requested the 1st
level of court judge to appoint
an expert
Jan/98 Oct/05
Eletrobras and CTEEP appealed
to the Superior Court of Justice
(SCJ)
Feb/10
The Judge appointed the expert who will
indicate the amount and the debtor
Sep/01
Eletrobras, after winning the
interest calculation
discussion, filed an Execution Suit to collect the due
amount
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
Privatization event . State-
owned Eletropaulo
became AES Eletropaulo
Apr/98
Eletrobras
requested the beginning of the
appraisal procedure , which is under 5th
Civil Court analysis.
AES Eletropaulo and CTEEP should be notified during
next months
Dec/10
40
Any party with an intention to dispose its shares should first provide the other party the right to buythat participation at the same price offered by a third party
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
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 shares–
AES Tietê: Tag along of 80% in its common shares–
AES Elpa: Tag along of 80% in its common shares
Shareholders AgreementOn 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
Drag alongrights
Tag alongrights
41
Brazilian Main Taxes
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
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
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.
Contacts:
+ 55 11 2195 7048