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AES CORPORATION
City or location Month XX, 20XX
AES CORPORATIONAES Brazil Business Review
Eduardo Bernini Britaldo SoaresCEO CFO
June 28, 2006
1www.aes.com
Safe Harbor Disclosure
Certain statements in the following presentation regarding AES’s business operations may constitute “forward looking statements.” Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute AES’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal or better levels of operating performance and electricity demand at our distribution companies and operational performance at our contract generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see the Appendix to this presentation. Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES’s filings with the Securities and Exchange Commission including but not limited to the risks discussed under Item 1A “Risk Factors” in the Company’s 2005 Annual Report on Form 10-K as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
2www.aes.com
Financial Goals
Revenue Growth
Gross Margin Growth
Earnings per Share Growth
ROIC Improvement (1)
Cash Flow Growth
Subsidiary Distributions (1)
Restructuring Opportunities
Growth Goals
Platform Expansion
Greenfield Investment
Privatization/M&A
AES Goals AES 2008 Target AES Brazil Role
AES Brazil Strategic Overview
--
$3.5 Billion
13-19% per Year
11%
$2.6-2.9 Billion
--
--
--
--
--
Above Average
Above Average
Above Average
Average
Below Average
Limited Until Restructuring
In Process
Limited Until Restructuring
Limited Until Restructuring
Limited Until Restructuring(1) Non-GAAP financial measure. See Appendix.
Contains Forward Looking Statements
3www.aes.com
Brazil Highlights
S&P: BB StableMoody’s: Ba3 PositiveSovereign Credit Rating (Foreign Currency)
188 MMPopulation (July 2006 est.)São Paulo Largest City
Brasilia CapitalAgriculture, Steel and Mining, ServicesEconomic Drivers
5.7%Inflation Rate (2005 est.)US$4,300Per Capita GDP (2005)
US$1 = R$2.24Exchange Rate (6/23/2006)Brazilian real (BRL, R$)Currency
Brazil at a Glance
Sources: IBGE; IPEA; BACEN; S&P; Moody’s.
4www.aes.com
124 companies
16% private sector
1,520 plants
99GW installed capacity
74% hydroelectric
24% thermal
2% nuclear
Two contracting environments - free market and regulated market
Generation
25 companies
Mostly state owned
High voltage transmission (>230 kV)
82,995 km of lines
859 transformers
321 substations
Regulated public service with open access
Regulated transmission tariff (updated every year by inflation – IGP-M)
Transport
64 companies
335 TWh distributed in 2005
54 MM customers
1,851,934 km network
122 thousand people employed
73% private sector (nº of companies)
Tariff adjustment every year
Tariff reset every four or five years
Regulated public service
Exclusive geographic area
Regulated contracting environment
Distribution
535 free clients
Conventional sources:
Above 3 MW
Alternative sources:
At least 500 kW
Large users can purchase energy directly from a generator
Free contracting environment
Free Clients
Brazil Electricity Market Characteristics
Sources: ANEEL; CCEE; ONS; ABRADEE.
5www.aes.com
Brazil Electricity Demand Growth
1.6
1.7
1.8
1.9
2.0
2.1
2000 2001 2002 2003 2004 2005240
260
280
300
320
340
Consumption GDP
GD
P (R
$ Bi
llion)
Con
sum
ptio
n (T
Wh)5.3%
-7.9%3.5%
4.7%
4.5%
4.6%
% Change from Prior Year
Sources: IBGE; EPE.
4.4%1.3%
1.9% 0.5%
4.9%2.3%
6www.aes.com
Brazil Electric Sector
Ministry of Mines and Energy (MME)
Implements policiesNational Council of
Energy Policy (CNPE)Formulates policies
Electricity Sector Surveillance Committee (CMSE)Monitors energy supply
Brazilian Electricity Regulatory Agency (ANEEL)
Regulates and supervises
Energy Research Enterprise (EPE)
Planning
GeneratingCompanies
TransportCompanies
Distribution Companies
Free Clients
Electric Energy Commercialization Chamber (CCEE)Coordinates energy commercialization
Electric Systems National Operator
(ONS)Coordinates and
controls interconnected national system
7www.aes.com
Brazil Regulatory Framework
Primarily adjusts for inflationand sharing of market growthgains with consumers
Part A costsNon-manageable costs
– Energy Purchase– Energy Transmission– Sector Charges
Part B costsManageable costs
– O&M– Depreciation– Capital Remuneration
Part B is adjusted by inflation less an “X Factor” in order to share market growth gains with consumers
Annual Tariff Adjustment (IRT) Tariff Resets Energy Contracting
Eletropaulo tariff reset occursevery four years – next July2007
Sul tariff reset occurs everyfive years – next April 2008
Revision % change equals:
Two environments for energycontracting
Regulated contractingApplies to distcosDescending price auctionsGovernment stipulates Total Demand based on distcos’forecasted needsGovernment indicates new power plants to be auctionedPPAs executed between each seller and all the buyers (pool)
Free contractingApplies to free customers and marketersFreely negotiated bilateral agreements
Verified revenue
MWh x tariff
Required revenuePart A +Part B
÷
DepreciationGross Base
xDepreciation
CapitalRemuneration
Net Basex
Pre-tax WACC
Reference Company – O&M
8www.aes.com
AES Brazil: Distribution and Generation
.
Tietê
Uruguaiana
HydroTietê
2,650MW, 10 plants272 employees24% AES ownership
Gas Uruguaiana
639MW, 1 plant47 employees46% AES ownership
HydroelectricNatural gas
Brasilia
Sao Paulo
Porto Alegre
Rio de Janeiro
EletropauloConcession area 4,526 km2
5.3 MM customers4,377 employees34% AES ownership2005 Consumption: 36,499 GWh
SulConcession area 99,512 km2
1.0 MM customers771 employees100% AES ownership (1)
2005 Consumption: 7,011 GWh
Other (46% AES ownership)InfoEnergy (1)
AES CommunicationsEletropaulo Telecom
Utility
Sul
Eletropaulo
(1) Reflects recently announced termination of Sul Option and swap of InfoEnergy to Brasiliana.
9www.aes.com
AES Brazil History
1997
AES starts Uruguaianaproject
AES acquires Sul
1998
Privatization of Eletropaulo
Formation of AES Rio Com and Eletropaulo Telecom
1999
Privatization of Tietê
1997-1999 2000-2002 2003-2004 2005-2006
2000
Operations commence at Uruguaiana
AES Transgasacquires 64% of Eletropaulo’s non-voting shares
2001
AES increases ownership of Tietê
Formation of InfoEnergy
2002
AES increases ownership of Eletropaulo
2003
AES restructures BNDES debt
Brasiliana Energiaholding company created
First Eletropaulo and Sul tariff reset since privatization
2004
Reprofiling of Eletropaulo debt
2005
Tietê secondary offering
Eletropaulo prepaid 72% of reprofiled debt
2006
Brasiliana restructuring launched
Eletropaulo reprofileddebt 100% replaced
Sul restructuring announced
10www.aes.com
COELBA4% ELEKTRO
5%
AMPLA3%
CPFL8%
CEMIG10%
LIGHT8%COPEL
6%CELESC
6%
AES Eletropaulo15%
AES Sul2%
Piratininga3%
Others30%
Brazil Distribution Market Share
2005 Revenues
Eletropaulo and Sul represented approximately 17% of sector revenues in 2005
Source: Abradee.
11www.aes.com
Eletropaulo Overview
Area (thousand km2)
Population (MM)
Consumption (TWh/year)
Brazil
8,547.4
182.8
335.4
Eletropaulo
4.5
16.3
36.5
%
0.1%
8.9%
10.9%
Largest electricity distributioncompany in Latin America byrevenues30 year concession expiresin 2028
Concession area covers SaoPaulo and 23 municipalitiesthat make up greatermetropolitan area
Attractive concession area
Solid economic base and high population purchasing power
Consumption density: 8,065 MWh/km2
Sources: IBGE; EPE; ABRADEE.
12www.aes.com
Eletropaulo Customers
2005 Consumption36,499 GWh
2005 Revenues Before EliminationsUS$3,116 MM
0
10
20
30
40
2000 2001 2002 2003 2004 2005
Free ConsumptionCaptive Consumption
Consumption
TWh
Average Tariff (R$/MWh)
Residential
Industrial
Commercial
Others
Total
2004
287.8
189.3
253.1
185.5
241.3
2005
308.6
225.5
276.6
221.4
271.8
Change
7%
19%
9%
20%
13%
Public / Other7%
Free Clients4% Residential
41%
Industrial18%
Commercial30%
Public / Other7%
Free Clients13% Residential
33%
Industrial21%
Commercial26%
13www.aes.com
Eletropaulo Energy Supply
2005 energy supplyHydro: 98%Thermal: 2%
Contracting strategy: 100% to 103% of total demand
Auctions
Other bilateral contracts
Bilateral contract with Tiete
Initial contracts
Itaipu
0%
20%
40%
60%
80%
100%
2004 2005
14www.aes.com
Eletropaulo Tariff Evolution
2005: Pis/Cofins taxes begin to be charged directly to customer.
3.7%6.3% 4.5% 2.5% 1.7%
4.8%
1.6%
-4.3%
16.9%
11.8%
12.1%7.6%
7.5% 11.7%
1999 2000 2001 2002 2003 2004 2005
Part B Part A Pis/Cofins Tariff Reset IGP-M
11.2%13.9%
16.6%14.3%
18.6%
6.4%
Netadjustment
2.1%
(1) Revenue is recalculated at the tariff reset.
(1)
15www.aes.com
Sul Overview
30 year concession expires in 2027
Concession area represents one third of Rio Grande do Sul State(RS)
RS is one of the largest producersand exporters of grains
Industrial base:40.6% of economy concentrated in the industrial sector
Income per capita: 39% higher than Brazilian average
Consumption density: 70 MWh/km2Area (thousand km2)
Population (MM)
Consumption (TWh/year)
Brazil
8,547.4
182.8
335.4
AES Sul
99.5
4.2
7.0
%
1.2%
2.3%
2.1%
Sources: IBGE; EPE; ABRADEE.
16www.aes.com
Sul Customers
2005 Consumption7,011 GWh
2005 Revenues Before EliminationsUS$536 MM Average Tariff (R$/MWh)
Consumption
Residential
Industrial
Commercial
Others
Total
2004
363.1
177.3
330.3
160.5
235.7
2005
405.9
204.8
370.4
175.7
270.6
Change
12%
16%
12%
9%
15%
0
5
10
2000 2001 2002 2003 2004 2005
Free ConsumptionCaptive Consumption
TWh
Public / Other15%
Free Clients1% Residential
38%
Industrial29%
Commercial17%
Public / Other23%
Free Clients2% Residential
25%
Industrial37%
Commercial13%
17www.aes.com
Sul Energy Supply
2005 energy supplyHydro: 73%Gas: 20%Coal: 7%
Contracting strategy: 100% to 103% of total demand
0%
20%
40%
60%
80%
100%
2004 2005
Auctions
Bilateral contracts with Uruguaiana
Initial contracts
Itaipu
Other bilateral contracts
18www.aes.com(1) Revenue is recalculated at the tariff reset.
Sul Tariff Evolution
2005: Pis/Cofins taxes begin to be charged directly to customer.
2.4% 3.6% 6.0% 3.5% 3.4% 1.1%1.5%
-5.1% 0.4%2.7%
3.5%6.0%7.7%
17.2%
6.0%6.7%
1.9%
15.9%
1998 1999 2000 2001 2002 2003 2004 2005 2006
Part B Part A Pis/Cofins Tariff Reset IGP-M
4.3%
10.3%
12.0% 11.1%7.1%
3.9%
Netadjustment
- 0.9%
20.7%
4.2%(1)
19www.aes.com
Brazil Generation Market Share
2005 Installed Capacity
Tietê is the 9th largest generator in Brazil and the 2nd largest private generator.Uruguaiana is the 7th largest thermal plant in Brazil.
Source: ANEEL; Gasnet.
Tractebel7%
AES Tietê3%Itaipu
7%Cemig7%
CHESF11%CESP
8%Copel
5%Furnas10%
Eletronorte8%
AES Uruguaiana1%
Others31%
Duke Energy2%
20www.aes.com
Tietê Overview
30 year concession expires in2029
10 hydro plants on the Tietê,Pardo, and Mogi Guaçu rivers
100% of assured energy issold under long-term contract
PPA with Eletropaulo through December 2015
Price adjusted annually for inflation (IGP-M)
21www.aes.com
Tietê Hydrology
Annual GenerationMW Average
Stored Energy – Southeast(% of Max)
During the last 20 years, AES Tietê has generated, on average, 18% above its Assured Energy
0%
25%
50%
75%
100%
Jan Apr Jul Oct
2000 2001 2005
1,3631,392 1,467
115%109% 107%
2003 2004 2005Generation - MW AverageGeneration / Assured Energy
22www.aes.com
Uruguaiana Overview
2005 Revenues by Customer Combined cycle natural gas
fired thermal plant
Installed capacity of 640MW
554MW sold under long-termcontracts
PPAs expire:
Eletropaulo – 2009
AES Sul – 2020
CEEE – 2020
RGE – 2020
Opportunistic exports mainlyto Uruguay and Argentina
AES Sul31%
Exports7% CEEE
27%
RGE25%
AES Eletropaulo
10%
23www.aes.com
Uruguaiana Gas Supply
Energy Sold versus GenerationLong-term gas supply agreement
with Sulgas, a Brazilian companythat sources gas from YPF Argentina
However, Argentina began rationinggas supply in 2004
Currently no gas available from Mayto September due to curtailments
Uruguaiana meets its PPAcommitments by purchasing energy
Spot market (CCEE)
Short and medium term bilateral agreements
4.1
1.7
4.5
2.3
5.0
1.7
2003 2004 2005
Energy Sold - TWh Generation - TWh
24www.aes.com
AES Brazil KPIs
Key Performance Indicators (KPI)
Safety Excellence
Technical and commercial losses ratesCollection rateEquivalent availability factor (EAF)
Operational Excellence
Contains Forward Looking Statements
Accident frequency rateAccident severity rateSafety Excellence
Service Excellence
System average interruption duration index (SAIDI)System average interruption frequency index (SAIFI)
25www.aes.com
21.0
31.7
16.4
2003 2004 2005
AES Brazil Safety Performance
Accident Severity Rate
Safety InitiativesAcceleration of collective learning through knowledge sharing and interactions across companies
Implementation of OHSAS 18001
Completion of regular audits and improvements; corrective action plans put in place
Focus on leadership training and continuous improvements in work procedures
Implementing behavior-based safety programs for AES people and contractors
Accident Frequency Rate
1.1
0.50.6
2003 2004 2005
Getting Better
Getting Better
26www.aes.com
Getting Better
AES Brazil Service Excellence
Eletropaulo Sul
SAIDI (hours) SAIFI (times) SAIDI ANEEL Standard SAIFI ANEEL Standard
6.9 6.88.98.2 9.16.4
12.412.812.6
9.0 8.7 8.7
2003 2004 2005
13.3 12.521.018.9 14.1 10.5
19.922.4
20.7
16.316.817.9
2003 2004 2005
27www.aes.com
Getting Better
AES Brazil Operating Excellence
97.2% 97.3% 98.3%
2003 2004 2005
98.5% 97.5% 99.0%
2003 2004 2005
4.4%
1.2%
4.6%
0.8%
6.1%
1.1%
5.5%
0.8%
2002 2003 2004 2005
Technical Losses Commercial Losses
Losses (%)
Ele
tropa
ulo
Sul
Collection RateAs % of Gross Revenues
Ele
tropa
ulo
Sul
5.6%
7.3%
5.6%
7.6%
5.6%
7.9%
5.6%
7.3%
2002 2003 2004 2005
Technical Losses Commercial Losses
28www.aes.com
88.9% 93.8%78.6%
2003 2004 2005
AES Brazil Operating Excellence
Tietê
Equivalent Availability Factor
96.1% 90.9% 92.6%
2003 2004 2005
Uruguaiana (1)
(1) Not considering gas supply interruptions.
29www.aes.com
100% V 100% E
100% V 100% E
AES Brazil Structure
AES BNDES
Brasiliana
Transgas Elpa
Sul (1) Eletropaulo Tietê Uruguaiana
InfoEnergy(1) EletropauloTelecom
AESCommunication
50.1% V 46.2% E100% V 100% E
49.9% V 53.8% E
100% V 100% E
V = VotingE = EconomicNet AES ownership
100% V 100% E 98.3% V 98.3% E
0% V 37.8% E 77.8% V 31.0% E
71.3% V 52.5% E 100% V 100% E
100% V 100% E
50.1% V 46.2% E 50.1% V 46.2% E 49.2% V 45.4% E
50.1% V 46.2% E38.2% V 31.5% E 35.7% V 24.3% E
Holding company
Intermediary holding co.
Operating company
(1) Reflects recently announced termination of Sul Option and swap of InfoEnergy to Brasiliana.
30www.aes.com
AES Brazil Debt Structure
Brasiliana$553 MM
100% USD, 0% BRL
AES TietêEmpr.No debt
Principalas of December 31, 2005
Energia Paulista$79 MM
0% USD, 100% BRL
Eletropaulo$1,155 MM
11% USD, 89% BRL
Tietê$616 MM
0% USD, 100% BRL
UruguaianaNo debt
InfoEnergy (1)
No debtTelecom
$2 MM0% USD,100% BRL
Sul (1)
$318 MM30% USD, 70% BRL
IHB$294 MM
100% USD, 0% BRL
Average life:3.1 years
Average cost:16.9% p.a.
60% denominatedin local currency
BRL USD
Functional Currency
(1) Reflects recently announced termination of Sul Option and swap of InfoEnergy to Brasiliana.
31www.aes.com
304
70
297
63
238
106
184
183397
177
158
152
154
130
84
320
2006 2007 2008 2009 2010 2011 2012 2013-2028
Local Currency Foreign Currency
AES Brazil Current Debt Profile
Amortization Schedule as of December 31, 2005
USD
Milli
ons
Fixed rate debt 37%
Floating rate debt 41% Tied to Brazilian interest rates and Libor
22% Tied to inflation index (IGP-M and IGP-DI)
$374 $360 $344 $367
$574
$310 $284
$405
32www.aes.com
AES Brazil Maintenance Capital Expenditures
Maintenance Capital ExpendituresUSD Millions
2005 Maintenance Capital Expenditures
Distribution90.3%
Telecom4.9%
Generation4.8%
Commercialization0.01%
$107
$143
$217
2003 2004 2005
33www.aes.com
AES Brazil Currency Effects - 2005
Effect of the conversion of thefinancial statements ofEletropaulo, Sul, and Tietê toUSD (average rate)Approximate contribution ofFX translation to 2005financial results:
Revenue: US$590 MMGross margin: US$146 MMIBT&MI: US$56 MM
Translation Impacts
Effect of USD transactions on companies with BRL asfunctional currency
USD-denominated debt at Eletropaulo and SulTietê: investment in USD
Effect of FX rate on BRL assets and liabilities of companieswith USD as functional currency
Brasiliana and UruguaianaBreakdown of 2005 FX transaction losses of US$96 MM
80% USD-denominated debt16% companies with USD functional currency4% USD-denominated investments
Transaction Gain/Loss Impacts
0.0
1.02.0
3.0
4.0
12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03 12/03 6/04 12/04 6/05 12/05
Mon
thly
Ave
rage
BR
L/U
SD
34www.aes.com
AES Brazil Financial Overview
Revenue
Gross Margin
Income Before Tax &Minority Interest
Distributions to AES Corporation
2003
$2,528
$511
$195
$40
2004
$2,925
$722
$282
$3
(US$ Million)
Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated.
2005
$3,823
$913
$552
$3
35www.aes.com
AES Brazil 2005 Financial Detail
Revenue
Gross Margin
Income Before Tax &Minority Interest
RegulatedUtilities (1)
$3,735
$489
$288
ContractGeneration (2)
$715
$423
$338
(US$ Million)
Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated.(1) Regulated Utilities includes Eletropaulo, Sul, InfoEnergy, AES Communications and Eletropaulo Telecom.(2) Contract Generation includes Tietê and Uruguaiana.
Brasiliana
--
$1
($74)
Eliminations
($627)
--
--
Total
$3,823
$913
$552
36www.aes.com
AES Brazil Scenario Planning
Investments in new generation plants will determine if the future energy supply will meet the growing demandEnvironmental licenses and adequate returns on investments (new energy auctions) are essential to support demand growth
Assures dividend flow to shareholdersSimplifies structuresMinimizes FX exposure
Strategic Issues
Future energy supply & demand
Brasiliana restructuring
Contains Forward Looking Statements
2007 and 2008 tariff resetsRegulatory relations
Strategic Opportunities
Brazilian macroeconomic scenario
GDP growth is closely linked to Eletropaulo’s and Sul’s demand growthDeclining interest rates and inflation in Brazil should decrease the companies’ cost of debt
Eletropaulo replaced 100% of the reprofiled debt, reducing the average cost and increasing the average life of debt AES Sul’s debt restructuring being concluded – 100% BRLMinimizes FX exposure
Strengthen capital structure