aes gener q1 2016 results · 2020-02-03 · aes gener/ 2016 0 aes gener q1 2016 results aes gener...

AES GENER/ 2016

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AES GENER Q1 2016 RESULTS

AES Gener recorded an EBITDA of ThUS$157,603 during the

first quarter of 2016, similar to the EBITDA recorded in the same

period in 2015.

Net income of ThUS$41,033 recorded as of March 31, 2016.

Cochrane Unit 1 (266 MW) and Andes Solar (21 MW) projects

finalized their construction, were synchronized to the SING and

started its commissioning tests.

In February, AES Gener started the energy exports to Argentina,

through its international transmission line.

In December 2015, the Argentine authority partially released the

FX restrictions, allowing the Company to purchase of US dollar

and distribute dividends to parent.

Successful Angamos Liability Management for US$199mn.

CONSOLIDATED FINANCIAL SUMMARY

1 EBITDA is calculated as the sum of gross profit plus administrative expenses, depreciation and other minor adjustments.

FINANCIAL SUMMARY THUS$ %

Q1 2016 Q1 2015 Var

Revenue 555,621 532,535 4%

Gross Profit 121,315 131,125 -7%

EBITDA1 157,603 159,787 -1%

Net Income 41,033 51,330 -20%

Net Operating Cash 97,990 80,447 57%

Earnings per share 0.005 0.006

Tomás Gonzalez

(56 2) 2 686 8813

IR Manager

[email protected]

AES GENER/ 2016

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HIGHLIGHTS IN 2015 TO DATE

AES Gener, same as in 2014 and 2015, continued to be the leader in energy generation in Chile,

contributing with their plants with 28.5% of the total generation during the first quarter of 2016.

During February, Cochrane Unit 1 and Andes Solar projects were synchronized to the SING and started

its commissioning tests. The start of commercial operations for both projects are expected for the

second quarter of 2016.

Progress of projects under construction:

AES Gener continues to consolidate its 2nd phase of expansion with 1,104 MW of diverse generating

projects to be completed, with direct employment for more than 7,500 people, and the start of a new

business, a desalinization plant for the sale to third parties.

Project Capacity Type Progress Start of Operation

Tunjita 20 MW Hydro 99.3% 1H16

Andes Solar

21 MW Solar 99.9% 1H16

Cochrane 532 MW Coal 97.8% 2016

Alto Maipo 531 MW Hydro 28.8% 2H 2018/1H 2019

In February, AES Gener started the energy exports to Argentina, through its transmission line. As of

March 31, 2016, exports reached approximately 44 GWh generated.

By the end of March, the Argentinean Energy Authority updated generation tariffs through Resolution

22/2016, increasing generation prices by approximately in 43% in Argentine pesos.

In December 2015, the Argentine authority partially released the FX restrictions, allowing the Company

the purchase of US dollar in this country. This measure enabled Termoandes to distribute to AES Gener

a total of ThUS$15,422 as of today.

In April, Angamos executed a partial early redemption of its US$800 million 4.875% 144A / Reg S for a

total amount of US$199 million, at 94% of its nominal value. Tendered bonds were refinanced through

banks facilities with the same amount and conditions. With regards to interest rate, the Company

achieved a decrease to 4.5%.

Guacolda Energía S.A.’ (Guacolda) international credit rating was revised downward in April by

Standard & Poors, from BBB- with stable outlook to BB+ with stable outlook.

AES GENER/ 2016

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EXTERNAL FACTORS

Annual Inflation Rate Exchange Rate as of March 31, Twelve month period ended on Dec 31, 2015 2016 2015 Var

Chile 4.2% Chile 669.80 626.58 6.9% Colombia 7.9% Colombia 3,000.67 2,559.62 15.4% Argentina 14.3% Argentina 14.70 8.82 66.7%

GDP

Growth in Electricity Consumption, twelve month period ended on March 31, 2016:

Twelve month period ended on Dec 31, 2015 SIC –Chile 3.1%

Chile 1.4% SING -Chile 7.8% Colombia 0.9% Colombia 3.5% Argentina 3.3% Argentina 4.5%

REVIEW OF 2016 RESULTS

Net Income

As of March 31 2016, AES Gener S.A. (hereinafter referred to as AES Gener or the Company) recorded a

net income of ThUS$41,033, 20% lower than the ThUS$51,330 recorded in the same period of the previous

year. EBITDA as of March 31, 2016 was ThUS$157,603, 1% lower than the EBITDA of ThUS$159,787

recorded at the close of March 2015. The slight decrease in EBITDA is mainly explained by improved

operating results in the SING and in Argentina, compensated by lower gross profit in Colombia and in the

SIC.

From an operational standpoint, gross profit as of March 31, 2016 totaled ThUS$121,315 representing a

negative variation of 7% when compared to the ThUS$131,125 recorded at the close of March of the previous

year. Main variations in gross profit between the first three months of 2016 and 2015 were the following:

In the SIC, gross profit decreased by ThUS$7,028 mainly explained by higher revenues recorded

in the first quarter of 2015 associated to Nueva Renca plant’s short-term leasing agreement.

In the SING, gross profit increased by ThUS$9,645. Among the most important variations is the

improved margins associated to unregulated customers due to the expiration of old contracts and

the start-up of new ones.

In turn, in the National Interconnected Grid (SIN) in Colombia, gross profit at AES Chivor & Cia

S.C.A.E.S.P. (hereinafter, AES Chivor) was lower by ThUS$17,918 due to lower generation during

the first quarter of 2016, given lower reservoir levels at the beginning of 2016, compared with levels

at the beginning of 2015. This resulted in higher spot purchases at higher average prices, in addition

to lower sales to distribution companies. It is important to highlight that during the fourth quarter of

2015, AES Chivor increased its generation to supply the country’s demand during the drought as

the result of the El Niño Phenomenon presence in the system to support the needs of the country.

In the Argentine Interconnected System (SADI), Argentina´s, gross margin increased by

ThUS$5,491 when comparing both periods, as a result of higher generation explained by

maintenances performed during the first quarter of 2015, and higher margins associated to the

recognition of the Resolutions 482/2015 and 22/2016 enacted by the Argentine energy authorities.

Within the non-operating income, a negative variation was registered in exchange rate differences of

ThUS$3,394 due to the FX forwards executed by the Company against the Chilean and the Colombian peso,

which registered lower compensations during the first quarter of 2016, partially compensated by the

appreciation of the Chilean and the Colombian peso during the period, compared to a devaluation in the

same period of 2015. Additionally, lower earnings from associates of ThUS$41,492 were registered as a

result of lower net income at Guacolda Energía S.A. (hereinafter, Guacolda).

AES GENER/ 2016

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Q1 2016 Income Statement

March March Var

Income Statement (ThUS$) 2016 2015 %

Operating Revenue

Energy and capacity sales 495,472 496,966 0%

Other operating revenue 60,149 35,569 69%

Total Operating Revenue 555,621 532,535 4%

Cost of Sales

Fuel consumption (108,548) (149,003) -27%

Fuel cost of sales (30,380) (1,300) 2237%

Energy and capacity purchases (157,222) (99,459) 58%

Transmission tolls (23,082) (27,242) -15%

Other cost of sales (56,644) (68,469) -17%

Depreciation and amortization (58,430) (55,937) 4%

Total Cost of Sales (434,306) (401,410) 8%

Gross Profit 121,315 131,125 -7%

Other operating revenues 408 852 -52%

Selling, general and administrative expenses (23,352) (28,988) -19%

Other operating expense (635) (824) -23%

Other income / (expense) (1,220) 335 -464%

Financial income 2,962 2,844 4%

Financial expense (33,797) (32,394) 4%

Equity in earnings of associates 2,552 8,030 -68%

Foreign currency exchange differences (11,152) (7,758) 44%

Net Income (Loss) before Tax and Non-Controlling Interest 57,081 73,222 -22%

Income tax income (expense) (17,056) (24,947) -32%

Net Income (Loss) After Tax 40,025 48,275 -17%

Income (Loss) Attributable to Shareholders of Parent 41,033 51,330 -20%

Non-controlling interest (1,008) (3,055) -67%

NET INCOME 40,025 48,275 -17%

AES GENER/ 2016

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EBITDA

AES Gener operates in four independent markets, SIC and SING in Chile, the SIN in Colombia and the SADI in Argentina. The following section explains the variations in gross earnings separated in the four markets mentioned above.

As of March 31, 2016, EBITDA was ThUS$157,603 compared to the ThUS$159,787 recorded in the same

period in 2015. This negative variation of ThUS$2,184 is mainly explained by higher spot purchases in the

SIN and the additional revenue registered in the SIC during the first quarter of 2015 associated with the short-

term lease of Nueva Renca plant, compensated by improved contract margins in 2016 in the SING and higher

margin in the SADI associated to higher generation and sales under Resolutions 482/2015 and 22/2016. The

table below shows EBITDA by market for 2015 and 2014:

Note: For EBITDA calculation, please see page 27, Consolidated EBITDA.

In the three-month period ended on March 31, 2016 and 2015, the contribution to EBITDA from the SIC,

SING, SIN and the SADI was the following:

Q1 2016 Q1 2015

GROSS PROFIT

Gross profit decreased by ThUS$9,810 mainly as a result of decreases in SIC and SIN of ThUS$7,028 and

ThUS$17,918 respectively, partially offset by the reductions by ThUS$9,645 and ThUS$5,491 in the SING

and SADI, respectively. The item “consolidation adjustment” represents intercompany coal sales of AES

Gener to the subsidiaries Norgener and Empresa Eléctrica Angamos (Eléctrica Angamos) in the SING. In

revenues in the SIC, these sales are included in “Other operating revenues”.

Marzo Marzo Var.

EBITDA by Market (ThUS$) 2016 2015 %

SIC 84,161 86,808 -3%

SING 54,762 41,933 31%

SIN 13,417 31,207 -57%

SADI 5,263 (161) -3369%

TOTAL EBITDA 157,603 159,787 -1%

SIC53%

SING 35%

SIN9%

SADI3%

SIC54%SING

26%

SIN20%

AES GENER/ 2016

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Central Interconnected Grid (SIC)

In the SIC, gross profit decreased by ThUS$7,028 or 9% mainly due to higher revenues in the first quarter of

2015 associated with the short-term lease agreement of Nueva Renca plant. The following table presents

gross profit in the SIC for both periods:

The following table shows AES Gener energy sales, purchases and generation by source in the SIC as of

March 31, 2016 and 2015:

March March Var

Gross Profit (ThUS$) 2016 2015 %

OPERATING REVENUE

SIC 302,833 322,563 -6%

SING 148,323 147,795 0%

SADI 24,502 28,293 -13%

Colombia 116,906 96,158 22%

Consolidation adjustments (36,943) (62,274) -41%


COST OF SALES

SIC (231,409) (244,111) -5%

SING (113,237) (122,354) -7%

SADI (25,352) (34,634) -27%

Colombia (101,251) (62,585) 62%

Consolidation adjustments 36,943 62,274 -41%

Total costs of sales (434,306) (401,410) 8%

TOTAL GROSS PROFIT 121,315 131,125 -7%

SIC March March Var


OPERATING REVENUE

Regulated customer sales 119,858 123,853 -3%

Unregulated customer sales 63,209 70,901 -11%

Spot sales 25,919 41,035 -37%

Other operating revenues 93,847 86,774 8%

Total Operating Revenue 302,833 322,563 -6%

COST OF SALES



Transmission tolls (21,291) (25,954) -18%

Fuel cost of sales (66,823) (56,639) 18%


Other cost of sales (29,320) (28,218) 4%

Total Cost of Sales (231,409) (244,111) -5%


AES GENER/ 2016

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Main variations between the three-month periods ended on March 31, 2015 and 2016:

Sales to regulated customers decreased by ThUS$3,995 due to lower physical sales for 23 GWh in the first

quarter of 2016 when compared to the same period in 2015. In turn, sales to unregulated customers

decreased by ThUS$7,692 as of March 31, 2016, associated with the short-term lease of Nueva Renca

registered in the first quarter of 2015, not present in the two first months of 2016, partially offset by higher

physical sales to unregulated customers of 133 GWh, as a result of higher demand.

Sales in the spot market decreased by ThUS$15,116 between the first quarter of 2015 and the same period

in 2016, mainly due to lower spot prices that decreased from an average of 131.6 US$/MWh in the three-

month period ended on March 31, 2015 to an average of 60.3 US$/MWh in the same period of 2016. In turn,

energy and capacity purchases (including purchases on the spot market, contract purchases to affiliate

Guacolda and other third parties mainly contracts with Non-Conventional Renewable Energy generators,

NCRE) were higher compared to the first three months of 2015 by ThUS$724, due to the increase in volume

terms by 63 GWh during the programmed maintenances performed at AES Gener coal plants.

Other operating revenues mainly include intercompany and third parties coal sales, transmission revenues

and services revenues essentially to affiliates. The positive variation of ThUS$7,073 in principally explained

by higher coal sales, which are compensated in fuel cost of sales, and lower transmission revenue.

Fuel consumption as of March 31, 2016 decreased by ThUS$19,998 compared to the same period in 2015,

mainly associated with lower coal prices, partially offset by higher diesel and Liquefied Natural Gas (LNG)

generation mostly at Eléctrica Santiago.

SIC March March Var

Energy Sales (GWh) 2016 2015 %

Distribution companies 1,296 1,319 -2%

Other customers 713 580 23%

Spot 334 336 -1%

Intercompany 1,137 1,241 -8%

Total energy sales 3,480 3,476 0%

Average monomic price for unregulated customers (US$/MWh) 92 94 -2%

Average monomic price for regulated customers (US$/MWh) 89 122 -27%

March March Var

Energy Purchases (GWh) 2016 2015 %

Other generators 261 198 32%

Intercompany 1,137 1,241 -8%

Total energy purchases 1,398 1,439 -3%

March March Var

Net generation (GWh) 2016 2015 %

Hydro 474 439 8%

Coal 1,388 1,387 0%

LNG 100 76 32%

Diesel 122 124 -2%

Biomass 9 12 -25%

Total 2,093 2,038 3%

AES GENER/ 2016

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Greater Northern Interconnected Grid (SING)

In the SING, the gross profit increased by ThUS$9,645, equivalent to 38% higher in the first quarter of 2016

as compared to the same period in 2015. This is a consequence of the improved margins associated with

the start-up of new contracts at Norgener, under better conditions, replacing old contracts which expired in

December 2015. Additionally, it is important to mention that the exports of energy to the SADI through AES

Gener transmission line were initiated during the first quarter of 2016. The following table presents gross

profit in the SING for both periods:

The following table shows AES Gener energy sales, purchases and generation by type of fuel in the SING

as at March 31, 2015 and 2016:

SING March March Var


OPERATING REVENUE

Unregulated customer sales 137,332 135,117 2%

Spot sales 8,569 10,581 -19%

Other operating revenues 2,422 2,097 15%


COST OF SALES



Transmission tolls (1,705) (1,325) 29%




TOTAL GROSS PROFIT 35,086 25,441 38%

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Between the first quarter of 2016 and the same period of 2015 an increase in sales to unregulated customers

of ThUS$2,215 was registered mostly due to higher sales volume, increasing from 1,446 GWh in the three-

month period ended on March 31, 2015 to 1,737 GWh at the close of March 2016, or an increase of 20%.

This increase is the result of a larger demand from unregulated customers, and to a lesser extent to energy

exports to the SADI in Argentina, started on February 2016, representing 44 GWh as of March 31, 2016. This

effect is partially offset by lower sales price, fundamentally as a result of lower coal prices.

Energy and capacity sales in the spot market decreased by ThUS$2,012 as a result of lower physical sales,

decreasing by 94 GWh as a result of higher contracted level as of March 2016. Additionally, energy and

capacity purchases increased by ThUS$3,334 between the first quarter of 2016 and the same period in 2016,

explained by energy purchases associated to the exports to the SADI, and a larger volume or physical

purchases mainly as the result of higher unregulated customers demand. The average spot price remained

at 49 US$/MWh in the first quarters of 2015 and 2016.

The cost of fuel consumption decreased by ThUS$13,092 as a result of lower coal average prices, despite

an increase in generation by 157 GWh.

Colombian National Grid (SIN)

In Colombia, gross profit decreased by ThUS$17,918 equivalent to 53% comparing the first three months of

2016 and 2015. This negative variation is mainly explained by a reduction in the generation in the first quarter

of 2016 associated to lower reservoir levels at the beginning of 2016, compared to the same period in 2015.

This resulted in an increase in volume purchases in the spot market at higher prices, increasing from an

average of 76.1 US$/MWh in 2015 to an average of 209.2 US$/MWh in 2016. Additionally, lower sales to

distribution companies were registered as a result of lower contracted level. It is important to mention that

during the fourth quarter of 2015, AES Chivor increased its generation to supply energy demand in the

country during drought from the presence of the El Niño Phenomenon. The following table presents gross

profit in Colombia for both periods:

SING March March Var


Other customers 1,737 1,446 20%

Spot 193 287 -33%


Average monomic price for unregulated customers (US$/MWh) 79 93 -15%

March March Var


Spot 479 381 26%

Total energy purchases 479 381 26%

March March Var


Coal 1,475 1,318 12%

LNG - 65 -100%

Total 1,475 1,383 7%

AES GENER/ 2016

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The following table shows AES Gener energy sales, purchases and generation in the SIN in the first three

months of 2015 and 2016:


Sales under contracts decreased by ThUS$15,486 primarily explained by lower volume sales of 75 GWh, in

addition to a decrease in average prices in US dollar terms that fell from 60.7 US$/MWh in the first quarter

of 2015 to 50.3 US$/MWh in the same period of 2016, mainly due to the devaluation of the Colombian peso

in comparison with the US dollar. It should be noted that during the same period, gains of ThUS$2,247 were

registered in foreign exchange variations, due to foreign exchange forwards executed to mitigate the impact

from foreign exchange.

Spot energy sales and ancillary service sales increased by ThUS$37,447 as a result of higher average spot

prices that increased from 76.1 US$MWh in 2015 to 209.2 US$/MWh in 2016, as well as higher volume sales

of 96 GWh. In turn, spot energy purchases increased by ThUS$47,022 due to higher physical purchases of

SIN March March Var


OPERATING REVENUE

Contract sales 39,335 54,821 -28%

Spot sales 76,748 39,300 95%

Other operating revenues 823 2,037 -60%


COST OF SALES


Depreciation and amortization (2,382) (3,068) -22%




SIN March March Var


Contract 685 760 -10%

Spot 523 427 22%


Average monomic price for customers (US$/MWh) 57 72 -20%

March March Var


Spot 668 555 20%

Total energy purchases 668 555 20%

March March Var


Hydro 529 621 -15%

Total 529 621 -15%

AES GENER/ 2016

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113 GWh at higher spot prices, which is the result of the lower plant generation in the first quarter of 2016. It

is important to mention that at the beginning of 2016, the reservoir level was 61%, which is lower than the

reservoir level at the beginning of 2015 of 78% due to the support provided to the Colombian system during

the fourth quarter of 2015 given the lower inflows during that period.

With regards to the decrease in other operating revenues of ThUS$7,670, this variance is explained by

distribution and transmission revenues associated to contracts in the unregulated market lower maintenance

costs mainly related to works performed at the Tunjita tunnel at the beginning of 2015.

Interconnected Argentine Grid (SADI)

Gross profit in SADI increased by ThUS$5,491 which represents a positive variation of 87% between the first

quarter of 2016 and the same period in 2015. This positive variance is the result of higher generation by 69%

during 2016 and the recognition from November 2015 of Resolutions 482/2015 and 22/2016 (retroactive from

February 2015), for sales above energy sold under Energía Plus contracts, allowing the Company to capture

higher margins than the previous ones obtained in the spot market. The following table presents gross profit

in the SADI for both periods:

The following table shows AES Gener energy sales, purchases and generation in the SADI in the first

quarters of 2016 and 2015:

SADI March March Var


OPERATING REVENUE

Contract sales 15,651 17,892 -13%

Spot sales 8,851 10,401 -15%


COST OF SALES


Energy and capacity purchases 17 (235) -107%

Transmission tolls (86) 37 -332%




TOTAL GROSS PROFIT (850) (6,341) -87%

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Generation increased by 452 GWh between the first quarter of 2016 and the same period in 2015 mainly

associated with lower maintenance days in the three-month period ended on March 31, 2016, which resulted

in higher volume sales to the spot market of 124%.

Between the three-month period ended on March 31, 2015 and the same period in 2016, contract revenues

decreased by ThUS$2,241 as a result of lower physical sales for 32 GWh equivalent to 13% associated with

a drop in the volume of industrial demand under the Energía Plus methodology.

Sales to the spot market decreased by ThUS$1,550. This variation is associated to the recognition of

Resolutions 482/2015 and 22/2016. Under this regime, gas is directly provided by CAMMESA, registering in

revenue, the margin for these sales. This margin is higher than the margins previously obtained in the spot

market. This also affected cost of fuel consumption, decreasing by ThUS$7,365.

Selling, General and Administrative Expenses

Administration expenses decreased by 19% from ThUS$28,988 as of the close of March 2015 to

ThUS$23,352 in the same period in 2016. The most important variations include lower personnel expenses

by ThUS$2,351, bad debt recovery for ThUS$1,352 associated with EMELCA bankruptcy process and lower

equity taxes in Colombia by ThUS$941.

Financial Results

The non-EBITDA variations between the first quarter of 2016 and the same period of 2015 are listed in the

following table:

SADI March March Var


Contract 217 249 -13%

Spot 825 368 124%

Total energy sales 1,042 617 69%

Average monomic price for customers (US$/MWh) 72 72 0%

March March Var


LNG 1,042 617 69%

Total 1,042 617 69%

Financial Results (MUS$) March March Var

2016 2015 %

Other income / (loss) (1,220) 335 -464%

Finance income 2,962 2,844 4%

Finance expense (33,797) (32,394) 4%

Equity in earnings of associates 2,552 8,030 -68%

Foreign currency exchange differences (11,152) (7,758) 44%

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A negative variation of ThuS$3,394 was recorded in exchange rate differences. This variance is mainly

explained by the FX forwards executed by the Company to mitigate the FX impact of Colombian and Chilean

pesos, which had lower compensations in the first quarter of 2016, partially offset by an appreciation in the

Chilean and Colombian peso during the period, compared to a devaluation of both currencies in the same

period last year.

The following table shows variation in exchange rates in the countries in which AES Gener has operations:

The negative variation of the net finance expenses for ThUS$1,403 as of March 2016 is mainly due to the

higher corporate debt, compensated by a positive effect of valuation of derivative instruments.

In turn, the negative variation of ThUS$5,478 in equity in earnings (losses) of associates is explained by

lower results in Guacolda, mainly due to a decrease in gross profit and higher finance expense associated

to lower capitalization of interests after the start of commercial operations of Unit 5.

Other losses registered a negative variation of ThUS$1,555 as of March 2016 mainly associated with the

loss from spare parts obsolescence provision registered in the first quarter of 2016 for ThUS$902 and higher

loses for assets retirement for ThUS$623.

Income Tax

As of March 31, 2015 the income tax expense was 32% lower in comparison to the same period of 2015,

from ThUS$24,947 as of March 2015 to ThUS$17,056 in the same period of 2016. This variation in

fundamentally explained by lower income before tax in Chile and Colombia.

CASH FLOW

The final balance of cash and cash equivalent as of March 31, 2015 was ThUS$266,268, 7% lower than the

final balance of ThUS$285,811 as of the close of March 2015. The total net flow of the period was negative

for ThUS$3,508 as of March 31, 2016 that negatively compares with the positive flow of ThUS$61,399 as of

March 31, 2015. The net flow of the period is explained by the negative flow in investment activities, partially

offset by positive net flows in financing and operation activities.

Exchange Rate

March

2016

December

2015

Variation

%

March

2015

December

2014

Variation

%

Chile (CLP / US$) 669.80 710.16 -6% 626.58 606.75 3%

Colombia (COP / USD) 3,022.35 3,183.00 -5% 2,599.62 2,376.51 9%

Argentina (ARS / US$) 14.70 13.04 13% 8.82 8.55 3%

March March Var.

Cash Flow (MUS$) 2016 2015 %

Net cash from operating activities 97,990 80,447 22%

Net cash from investing activities (115,995) (376,240) -69%

Net cash from financing activities 14,497 357,192 -96%

Total Net Cash for the Period (3,508) 61,399 -106%

Effects of Foreign Exchange Variations 2,543 (4,279) -159%

Cash at the Beggining of the Period 267,233 228,691 17%

Total Cash at the End of the Period 266,268 285,811 -7%

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Net cash from operating activities recorded a positive variation of ThUS$17,543 as of the close of March

2016 compared with the same period in 2015 mainly due to the higher receipts from AES Chivor of as a

result of higher spot sales in December 2015 collected in January 2016.

Net cash from investment activities showed a positive variation of ThUS$260,245 comparing the first quarter

of 2016 and the same period in 2015. The main variations corresponds to a decrease in acquisitions of

property, plant and equipment of ThUS$257,309 associated with the construction works of Cochrane which

is at its final stage and higher investments recovery of ThUS$16,630. These effects were partially

compensated by the negative variance in other cash inflows (outflows) by ThUS$13,927, mainly related to

VAT recovery in the first quarter of 2015.

Net cash from financing activities represented a negative variation of ThUS$342,695 as of the close of March

2016 compared to the same period in 2015. This is a consequence of lower long-term loans obtained

principally related to Cochrane and AES Gener, in addition to lower proceeds from share issuance, mainly

related to lower equity payments for Cochrane and Alto Maipo during the first quarter of 2016.

FINANCIAL DEBT

Consolidated financial debt, including principal, interest and issuance costs, increased from ThUS$3,375,106

as of December 31, 2015 to ThUS$3,429,570 as of March 31, 2016.

As of March 31, 2016, approximately 88.3% of AES Gener’s credit agreements are at a fixed rate, including

a significant portion of the debt held by the subsidiaries Eléctrica Cochrane and Alto Maipo for which interest

rate swap agreements have been executed. The remaining 11.7% of the Company’s consolidated debt

maintains a variable interest rate.

As of March 31, 2016, approximately 97.7% of AES Gener’s long-term debt accruing interests was

denominated in U.S. dollars, including the Chilean bond issued in December 2007 for which a cross-currency

swap was executed. Of the remaining debt, 1.0% was denominated in Chilean UF (Eléctrica Santiago’s bond)

and 1.3% in Colombian pesos (the leasing executed by AES Chivor to finance the Tunjita Project).

In April 2016, Eléctrica Angamos partially refinanced its US$800 million bond through a tender process,

purchasing US$199 million at 94% of its nominal value. The Company refinance this debt with syndicated

loans under the same terms and conditions with local bank facilities at a lower average interest rate of 4.50%.

The following graph details AES Gener’s consolidated amortization schedule for the outstanding principal of

ThUS$3,539,245 as of March 31, 2016, excluding issuance costs and including non-recourse project finance

debt.

AES GENER/ 2016

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MARKET INFORMATION

In Chile, AES Gener does business principally in two large interconnected electric systems: the Central

Interconnected System or SIC, that runs from the southern part of Region II to Region X, and the Greater

Northern Interconnected System or SING, that encompasses Region I and Region XV, as well as part of

Region II. AES Gener’s Colombian subsidiary, AES Chivor, is one of the principal electric generators in the

Colombian National Interconnected System or SIN. AES Gener affiliate, TermoAndes sells electricity to the

Argentine market.

SIC

During the first quarter of 2016, better hydrological conditions allowed reservoir level to show an improvement

compared to the same period of the previous year. This resulted in an increase in hydro generation that,

together with the drop in commodity prices, drove a spot price decrease in the system by 71% when

compared to the first quarter in 2015. As of March 31, 2016, the companies of the Group AES Gener,

including Guacolda, contributed with 24.3% of the net generation in the SIC. The table below shows certain

principal variables in the SIC for the three-month periods ended on March 31, 2016 and 2015.

SING

The average marginal cost remained at the same level when compared to the same period of the previous

year. As of March 31, 2016, the companies of the Group AES Gener contributed with 32,7% of the net

generation in the SING. The table below shows the main variables in the SING in the first quarters of 2015

and 2016:

SIN

Given extreme dry conditions, spot prices exceeding the scarcity price (~ 110 US$/MWh), and thermo plants

not being able to operate as they have variable costs above the scarcity price; in October of 2015 the

government stablished a cap for the spot price at 810 Col$/KWh (~ 268 US$/MWh) as a temporary measure.

Spot prices increased by 260% in Colombian pesos during the first quarter of 2016 compared to the same

period in 2015; while in dollars they increased by 175% due to the devaluation of the Colombian peso. As of

March 31, 2016, the generation of AES Chivor represented 3% of the demand in Colombia. The following

table shows the main variables in the SIN during the three-month periods ended on March 31, 2015 and

2016:

SIC

March

2016

March

2015

Demand growth (%) 3.1 3.1

Monthly Average consumption (GWh) 4,283 4,163

Average annual spot price (Quillota 220 kV) US$/MWh 131.6 159.5

SING

March

2016

March

2015



Average annual spot price (Crucero 220 kV) US$/MWh 49.3 49.3

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SADI

In November 2015, the Argentine Energy authority confirmed that the energy sold by Termoandes, in excess

of what is sold under the Energía Plus program, will receive an extra remuneration determined by Resolution

482/2015, which is higher than the spot price currently received for these sales. By the end of March 2016,

the Undersecretariat of Energy in Argentina issued Resolution 22/2016 replacing, from February 1, 2016

onwards, Annexes from Resolution 482/2015 enacted on July 10, 2015, updating remunerations for fixed

costs, non-fuel variable costs, additional remunerations, non-recurring maintenances, investment resources

for 2015-2018 and availability remunerations. These adjustments benefit Termoandes, improving prices

received for the energy form the gas turbines sold at the spot market.

As of March 31, 2016, the generation of Termoandes in the SADI represented 3% of Argentine demand.

The following table shows the main variables in the SADI for the three-month periods ended on March 31,

2014 and 2015:

RISK ANALYSIS

Market and Financial Risks

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to a

change in market prices. Market risks include the following three categories: foreign currency risk, interest

rate risk and commodity price risk. Financial risk relates to the potential occurrence of events which could

have a negative financial impact on the Company and specifically includes: credit risk and liquidity risk.

Foreign Currency Risk

With the exception of operations in Colombia, the Company’s functional currency is the US dollar given that

its revenue, expenses and investments in equipment and debt are mainly determined based in US dollar.

Also, the Company is authorized to file and pay its income taxes in Chile in US dollars. Exchange rate risk is

associated with any revenue, expenses, investments and debt denominated in any currency other than US

dollars. The main items denominated in Chilean pesos are contract sales and tax credits mainly associated

with VAT. As of March 31, 2016, AES Gener maintained several currency forwards with banks to mitigate its

exposure to foreign exchange variations associated with energy sales, given that even though most of the

Company’s energy supply agreements have prices denominated in US dollars, payments are made in

Chilean pesos at an exchange rate that is fixed for a specific period of time, and VAT payments. Given the

Company's net asset position in Chilean pesos as of March 31, 2016, the impact of 10% devaluation in the

exchange rate of the Chilean peso with respect to the US dollar could have resulted in a realized negative

impact of approximately ThUS$11,699 in AES Gener net income.

SIN

March

2016

March

2015



Average annual marginal cost US$/MWh 209.2 76.1

SADI

March

2016

March

2015



Average annual marginal cost US$/MWh 8.3 13.8

AES GENER/ 2016

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During the three-month period ended on March 31, 2016 approximately 77.5% of operating revenue and

91.0% of the Company’s costs of sales were denominated in US dollars compared to 80.5% of operating

revenue and 85.8% of costs of sales during the first quarter of 2015.

The functional currency of Chivor, the Company’s Colombian subsidiary, is the Colombian peso since the

majority of its revenue, particularly contract and spot sales and operating costs are linked to the Colombian

peso. For the period ended on March 31, 2016, sales in Colombian pesos represented 20.9% of the

Company’s consolidated operating revenue, while they represented 17.5% in the same period of 2015.

Additionally, AES Chivor’s dividends are determined in Colombian pesos, although financial hedge

instruments are used to fix the amount to be distributed in US dollars. Given AES Chivor's net liability position

in US Dollars as of the close of March 2016, a 10% devaluation in the exchange rate of the Colombian peso

with respect to the US dollar could have generated a negative impact of approximately ThUS$5,041 in AES

Gener’s net income.

Spot prices in the Argentine market are denominated in Argentinean pesos. Argentine-peso denominated

sales represented 1.6% of the Company’s consolidated operating revenue for the first quarter of 2016,

representing 2.0% for the year ended on March 31, 2015. Given TermoAndes' net asset position in Argentine

pesos as of March 31, 2016, a 10% devaluation in the exchange rate of the Argentine peso with respect to

the US dollar could have generated a negative impact of approximately de ThUS$1,519 in AES Gener’s net

income. It is worth mentioning that the Argentine government devalued the Argentinean peso by

approximately 35%, the fastest devaluation since 2002, resulting in a non-material impact on results given

the limited exposure Termoandes had to the Argentine peso at that time. A weaker Argentinean peso and

economy could cause significant volatility in TermoAndes' operating income and cash flows.

Argentina defaulted on its public debt in 2001, when it stopped making payments on about $100 billion amid

a deep economic crisis. In 2005 and 2010, Argentina restructured its defaulted bonds into new securities

valued at about 33 cents on the dollar. Between the two transactions, 93% of the bondholders agreed to

exchange their defaulted bonds for these new bonds. The remaining 7% did not accept the restructured deal.

Since then, a certain group of such bondholders has been in judicial proceedings with Argentina regarding

payment. In June 2014, the United States District Court ruled that Argentina would need to make payment

to all bondholders, according to the original applicable terms. After on July 30, 2014 the parties failed to reach

a settlement agreement, as referred by S&P and Fitch, Argentina fell into a selective default resulting from

failure to make interest payments on its Discount Bonds maturing in December 2033. Since then, Argentina

has advanced in negotiations with bondholders, reaching a preliminary agreement with some of them,

involving the payment of approximately $900 million in defaulted notes and has already secured US$5bn in

loans from international banks to pursuit a final agreement with 100% of them. The current proposal is to pay

approximately about US$6.5bn in cash to US holdouts. Main holdouts stated that they reject the proposal,

expecting the payment of full US$9,000 million claimed. S&P raised the country’s local credit rating by one

notch from CCC- to B- as they consider the new administration presents a credible plan to face the macro

economical imbalance. This situation has not caused any significant changes that impact our current

exposures other those that are discussed above in regards to the macroeconomics within the country.

In consolidated term, investments in new plants and maintenance of equipment are principally denominated

in US dollars. Short-term investments are also mostly held in U.S. dollars. As of March 31, 2016, 92.2% of

short-term investments and current account balances were in US dollars, 5.4% in Chilean pesos, 0.9% in

Colombian pesos and 1.5% in Argentine pesos. Cash balances in Argentine pesos are subject to exchange

restrictions and exchange rate volatility particular to the Argentine market. As of March 2015, 71.8% of

investments and balances were in US dollars, 16.4% in Colombian pesos, 6.0% in Chilean pesos and 5.8%

in Argentinean pesos.

With regard to debt (bank loans and bonds payable) denominated in currencies other than the U.S. dollar,

AES Gener has executed coverage in the form of cross-currency swaps to reduce exchange rate risk. AES

Gener executed a cross-currency swap for the UF-denominated bonds issued in 2007 for approximately

ThUS$219,527 and the swaps extend throughout the duration of the debt. It should be noted that a portion

of this swap was unwound in June, 2014, associated to the Series O Bonds with maturity in 2015, and the

swap related to the Series N Bonds, with maturity in 2028 for ThUS$172,264 remained in force. As of March

31, 2016, 97.7% of AES Gener and its subsidiaries’ debt was denominated in U.S. dollars, including the local

bonds mentioned above and the associated swaps. The following table shows the composition of debt by

currency as of March 31, 2016 and December 31, 2015:

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Currency March 2016

(%)

December 2015

(%)

US$ 97,7 97,9

UF 1,0 0,9

Col$ 1,3 1,2

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest

rates relates primarily to the Group’s long-term debt obligations with variable interest rates.

AES Gener manages its interest rate risk by having an important percentage of its debt at fixed rate or with

interest rate swaps, to fix it. Additionally, AES Gener has entered into interest rate swaps to mitigate interest

rate risk for long-term obligations. Currently, AES Gener has interest rate swaps for an important part of the

debt associated with subsidiaries Eléctrica Cochrane and Alto Maipo. It should be noted that in July 14, 2015

Eléctrica Ventanas’ project finance was refinanced through the issuance of a 144A / Reg S bond in the

international markets at the AES Gener level, which also included the partial repurchase of the local Series

Q of AES Gener, allowing this debt to be at fixed rate from July 2015 onwards. A 10% increase in variable

interest rates would not have a significant impact on net income as 88.3% of the Group's debt is at fixed rates

or rate swaps. The following table shows the composition of debt by type of interest rate as of March 31,

2016 and December 31, 2015:

Rate March 2016

(%)

December 2015

(%)

Fixed or with Swap 88,3 88,5

Variable 11,7 11,5

It should be noted that the subordinated bond issued in December 2013 for a total of ThUS$450,000 with

tenor of 60 years, is at a fixed interest rate of 8.375% until year 5.5 from the issuance. From that period

onwards, the interest rate is recalculated based on the 5-year swap rate published by Bloomberg plus a

margin (spread) established in the offer and subsequently recalculated, based on the same conditions, every

5 years to maturity of debt.

Commodity Price Risk

The Group is affected by the volatility of certain commodity prices. The fuels used by the Company, mainly

coal, diesel and liquefied natural gas (LNG), are commodities with international prices set by market factors

outside of the Company’s control. In Argentina, the Company’s subsidiary TermoAndes purchases natural

gas at a fixed price under short-term contracts, which is reflected in the energy contract price fixation.

The price of fuel is a key factor in plant dispatch and spot prices both in Chile and Colombia. Since AES

Gener is a company based mainly on thermal generation, fuel costs represent a significant portion of the cost

of sales.

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Currently, the majority of the Company’s power purchase agreements include indexation mechanisms that

adjust prices based on the increase and decrease in the price of coal in accordance with the indexes and

adjustment periods specified under each contract, in order to mitigate major variations in the fuel cost.

Currently, AES Gener’s contracted energy is balanced with energy generation of facilities with high probability

of dispatch (efficient generation) and the remaining facilities (back-up facilities) which utilize diesel or LNG

are expected to generate only during periods with limited market supplies such as dry hydrological conditions

in the SIC, selling energy on the spot market. Currently, diesel and LNG purchases are not hedged as spot

market sales allow variations in fuel prices to be transferred to the sale price. However, the price of fuel

(particularly LNG or diesel) directly affects the spot price and plant dispatch.

Credit Risk

Credit risk relates to the credit quality of counterparties with which AES Gener and its subsidiaries establish

relationships. These risks are reflected primarily in accounts receivables and financial assets including bank

and other deposits and other financial instruments.

With regard to accounts receivable, AES Gener’s counterparties in Chile are mainly distribution companies

and industrial customers of elevated solvency and over 90% of these customers or their parent companies

have local and/or international investment grade credit ratings. Necessarily, sales made by the AES Gener

Group companies in the spot market must be made to other generators, members of the CDEC, in

accordance with the economic dispatch determined by this entity.

In Colombia, AES Chivor performs risk assessments of its counterparties based on an internal credit quality

evaluation, which in some cases may include guarantees. In 2010, also in low hydrological conditions, AES

Chivor suffered collection problems with an energy trader and eventually registered a loss of ThUS$1,300.

In this case, the trader was suspended from participating in the Bolsa or spot market and AES Chivor

presented actions to recover the outstanding amount. During 2015, under a new period of dry hydrological

conditions, a thermo generator accumulated penalties and debts with the Colombian market, including AES

Chivor, owing the Company approximately ThUS$7,500. This member of the market was intervened by the

Colombian authority, freezing its debt as of the date of the intervention. It is expected that payments will be

managed over a period to be shortly determined.

In Argentina, the principal counterparties are CAMMESA (Compañía Administradora del Mercado Mayorista

Eléctrico S.A.) and large unregulated consumers with contracts under the Energía Plus program.

TermoAndes carries out internal credit evaluations of its unregulated customers and therein include

guarantees to secure payments.

Financial investments by AES Gener and its subsidiaries such as mutual funds, time deposits and derivatives,

are executed with local and foreign financial institutions which have national and/or international credit ratings

greater than or equal to “A” under the S&P and Fitch scale and “A2” under the Moody’s scale. Similarly,

derivatives for financial debt are executed with first class international entities. Cash, investment and treasury

policies direct the management of the Company's cash portfolio and minimize credit risk.

Liquidity Risk

Liquidity risk relates to the funding requirements to meet payment obligations. The Company's objective is to

maintain a balance between continuity of funding and financial flexibility, through internally generated cash

flows, bank loans, bonds, short-term investments, committed credit lines and uncommitted credit lines.

As of March 31, 2016, AES Gener had available liquid funds of ThUS$266,268 included in cash and cash

equivalent. Meanwhile, as of the closing of December 2015, the balance in liquid resources amounted to

ThUS$295,242 including cash and cash equivalent of ThUS$267,233 and short-term time deposits for

ThUS$28,009 included in other current financial assets. It should be noted that the balance of cash and cash

equivalents includes cash, term deposits with expiration of less than 90 days, securities, low risk immediately

available mutual funds in U.S. dollars and re-sale and fiduciary agreements.

AES GENER/ 2016

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Additionally, as of March 31, 2016, AES Gener has committed and uncommitted credit lines for approximately

ThUS$231,222 and uncommitted and unused credit lines for approximately ThUS$176,000.

With regard to the amortization schedule, the Company seeks to maintain an adequate debt profile. More

detail of the current debt profile, please see Financial Debt on page 13.

Operational Risks

Operational risks relate to the possibility of future outages or deficiencies that can negatively affect the

Company’s strategic operational and/or financial objectives.

Hydrology

AES Gener’s operations in the SIC and Colombia may be affected by hydrological conditions, as hydrology

is key to plant dispatch and prices in both grids. The Company uses its own statistical models to evaluate the

risks associated with its contractual commitments. In general terms, AES Gener’s commercial strategy in

Chile is to execute long-term contracts for its efficient generation plants, reserving other more expensive

units for sales in the spot market. In Colombia, the commercial strategy focuses on optimal use of the

reservoir with the general objective of contracting on average 75% of expected generation.

Currently, efficient generation of AES Gener’s facilities in the SIC is balanced with contracted volume, which

mitigates most of the exposure to hydrology variations, and additionally, the Company has back-up facilities

which allow to limit maximum exposure.

Natural Gas Supply

The combined cycle plants in Chile, including Eléctrica Santiago’s Nueva Renca plant, currently operate with

diesel or LNG alternatively. Eléctrica Santiago does not have long–term LNG contracts and acquires volumes

on the spot market or under short–term contracts according to dispatch projections. In Argentina,

TermoAndes holds natural gas supply contracts with Argentine producers and the Company estimates that

in the case of potential gas supply restrictions, TermoAndes has certain alternatives to mitigate the impact

of gas supply interruptions which include contract price indexation mechanisms, spot gas purchases and

back-up supply from other generators.

Operational Failures and Maintenance

Mechanical failures, accidents or planned and unplanned maintenance affecting the availability of the

Company’s efficient capacity could have a material adverse effect on results.

Although the Company performs regular maintenance and operational enhancements to guarantee the

commercial availability of its generation plants and operational insurance policies remain in effect,

mechanical failures or accidents could result in periods of commercial unavailability. Significant periods of

unavailability of AES Gener’s efficient plants as a result of mechanical failure or maintenance (planned or

unplanned) would require the Company to meet its contractual obligations by using more expensive back up

generation or by purchasing energy on the spot market, both of which could result in higher costs that would

adversely affect operating results. In the SIC, the maximum exposure to this risk is limited by variable costs

of our back-up facilities.

Investment Projects

The execution of the investment projects being developed by the Company depends on numerous factors

that could defer from the originally projected. Among these factors, projects can experience increases in

costs of construction or investment on equipment, potential delays, difficulty in finding skilled labor, financing

costs, and the effect of potential delays or difficulties in the regulatory authorization and permitting process,

including potential litigation or lawsuits. It should be noted that adequate project development includes

making investments related to diverse project areas such as studies, easements, land preparation and

construction of roads, among others, before the approval and final execution of the project.

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Currently, generation projects are facing a high opposition from organized groups or communities located

next to them. The Company cannot ensure that this opposition will not affect projects under construction.

AES Gener, in its interest of being a good neighbor and through its “Policy on Ties and Relations with Local

Communities”, works to be locally respected and to be valued by its good economic, social and environmental

performance and by its contribution to the sustainable development to the communities where the Company

is inserted.

Decoupling Risk

Given certain transmission restrictions in Chile due to the concentration of energy renewable plants, there

may be differences between prices of injection and withdrawal (decoupling), which should be assumed by

the generation companies and can, in turn, affect their operating margins. Currently, there are contracts in

which this risk cannot be pass-through, although in new contracts with non-regulated customers, clauses to

mitigate this risk are being negotiated.

Regulatory Risks

AES Gener, its subsidiaries and related companies are subject to regulation in diverse aspects of their

businesses in the countries in which they operate. Regulatory risk is related to potential modifications in

existing legislation that could adversely affect the Company’s financial results.

Regulatory Framework

As electric generation companies, AES Gener, its subsidiaries and related companies are subject to

regulation in diverse aspects of their business. The current regulatory framework, which governs all electricity

supply companies, has been in effect in Chile since 1982 and in Colombia since 1994.

Recently, in Chile there was a regulatory risk associated with the lack of energy supply contracts for

distribution companies (distcos.), a situation that was not addressed by the regulation. In January 2015, the

Government approved a law modifying the bidding process of distribution companies that incorporates an

allocation mechanism for the energy without contract for each operation hour, pro rata of the effective

injection from each generator in the same period, at a price determined as the maximum between the short

term node price and the variable cost, plus the difference between the price of injection and withdrawal.

Additionally, it includes the alternative for certain distcos to transfer a portion of its unused supply to others

with lack of contracts, which means that a generation company that signs an agreement with a distco might

end-up supplying another. Furthermore, in early 2014, the Independent Electric Systems Interconnection

Law was enacted, with the aim of promoting the SIC-SING interconnection through a 600 kilometers

transmission line connecting both systems. The regulation on the repayment mechanism for this project

investment is not yet enacted, and there is uncertainty whether an important modification in tolling assignment

would take place, particularly in the SIC.

In the past few years, Colombian authorities are developing certain regulatory changes. Among the most

important issues under development is the review of an implementation of a standardized market for

contracts with distribution companies replacing or complementing the current bid processes, however no

major progress was registered during 2015. During 2015, the regulator developed the regulations to

implement of Law 1715 from 2014 with regards to the participation of renewable energy in the system as well

as energy surplus sales from self-generators, and also rules for the Distributed Generation and demand

participation. In turn, the Government issued a regulatory proposal that could affect current incentives to

plants with effective capacity equal or below 20 MW that, if adopted, makes AES Chivor future developments

of these kind of projects more difficult. Finally, the monitoring of indicators of the "Shortage Risk Statute” was

implemented, developed for energy emergencies, promulgated by the regulator in 2014, however there have

not been interventions in reservoirs yet as the market has reacted properly to the signs of scarcity and

reliability of the system has remained adequate. Additionally, although the regulation proposal is not known

yet, the regulator stated that it will soon announce the new rules for the next bid for the reliability charge,

giving the signs for future expansions. Recently, due to the drier hydrology present in Colombia, spot price

exceeded the scarcity price (110 US$/MWh) reaching ~300 US$/MWh in September and ~600 US$/MWh in

October. This situation resulted in certain measures taken by the Government to alleviate financial situation

AES GENER/ 2016

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of thermo plants using liquid fuel with potential risk of not being able to have its firm energy available, as

variable costs are higher than revenue recognized for these plants (scarcity price). Moreover, a cap of ~270

US$/MWh was determined for spot prices as a temporary measure. All potential regulatory changes could

affect AES Chivor’s results.

In Argentina, since 2001, significant modifications have been introduced to the electricity regulatory

framework. These modifications include tariff conversion to Argentine Pesos, freezing of tariffs, the

cancelation of inflation adjustment other mechanisms and the introduction of a complex pricing system, which

have materially affected electricity generators and market agents, and generated substantial price differences

within the market. On March 26, 2013, the Argentine government introduced a resolution (Resolution 95-

2013), which amended the current regulatory framework and is to be applied to electric generation companies

with certain exceptions. In accordance with this regulation, a new compensation system moving from a

“marginal cost” to “average cost” market, which is based on compensating fixed costs, variable non-fuel costs

and an additional margin. On May 20, 2014, the Argentine Government published the resolution (RES SE

529/14) under which the additional margin to compensate generators is updated. On July 10th 2015,

Resolution 482/15 was published, updating figures previously published in Resolutions 95/13 and 529/14.

Based on Note 2053, sent by the Ministry of Energy in March 2013, it is understood that TermoAndes’ units

are not affected by the resolution. As a result, the Company does not expect this amendment to have an

impact on TermoAndes’ operations. On March 13th, 2015, the Argentine Undersecretary of Energy increased

by approximately 40% the Incremental Mean Charge of Excess Demand in the SADI, which corresponds to

part of the charge the large users and large clients must pay in Argentina when they buy energy in the spot

market, which changed from 320 Ar/MWh to 450 Ar/MWh for certain users. With this change, users with non-

contracted plus type of demand that purchase their energy requirements on the spot market would have an

incentive to contract their demand with an Energía Plus generator.

AES Gener cannot guarantee that the laws or regulations in the countries in which it operates or has

investments will not be modified or interpreted in a manner which could adversely affect the Company or that

governmental authorities will effectively grant any approval requested. AES Gener actively participates in the

development of the regulatory framework, submitting comments and proposals to the proposed regulations

presented by authorities.

Environmental Regulation

AES Gener is also subject to environmental regulations, which, among others, require that it perform

environmental impact studies for its future projects and obtain regulatory permits. AES Gener cannot

guarantee that governmental authorities will effectively grant any environmental approval requested.

It should be noted that in June 2011, a new regulation on air emission standards was enacted, which

established new emission limits for particulate matter and gases produced of thermoelectric power

generation. For existing plants, including those currently under construction, the new limits for particulate

matter emission will go into effect by the end of 2013 and the new limits for SO2, NOX and mercury emission

will begin to be applied by mid-2016, with the exception of plants that operates in zones declared as latent

or saturated, where the limits went into effect in June 2015.

In order to comply with the new emission standards, between 2012 and 2015, AES Gener completed

investments for approximately ThUS$229,000 million, at a consolidated level, in emission reduction

equipment in four older coal plants (constructed between 1964 and 1997) and is investing approximately

US$110 million in the coal units owned by the equity-method investee Guacolda. In 2013, Guacolda initiated

the installation of emission control equipment at Units I, II and IV, totaling, as of March 31, 2016, an

investment of ThUS$189,500. AES Gener’s coal plants that initiated operations in recent years (Nueva

Ventanas and Ventanas IV in the SIC and Angamos Units I and II in the SING) will not require additional

investments.

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Tax Regulation

AES Gener, its subsidiaries and affiliates are subject to existing tax legislation in each country where they

operate. Amendments to laws or modification in tax rates may have a direct effect on earnings.

In Chile, in September 2014, the new tax reform was passed, which, among others, will gradually increase

the first category corporate tax rate from the current 20% to a rate that will depend on the regime chosen

considering two alternatives: (i) Attributed Profits Income (API) gradual increase in the rate to 25% in 2017

and (ii) Partially Integrated System (PIS) gradual increase in the rate to 27% in 2018. According to a Chilean

Securities and Insurance Authority (SVS) resolution, the impact on deferred taxes related to the tax reform

will not be registered in the net income, but it will be registered in the equity. It should be noted that in January

2016, the Chilean Government approved the “reform of the reform” which prevents Corporations to opt for

the API regime. This last reform had no impact on the Company as it has opted for the PIS regime from the

beginning. Additionally, the tax reform incorporates an emission tax for thermo plants effective from 2017. A

great portion of the Company’s PPAs have clauses that allow to pass-through the costs arising from new

laws, which mitigates the negative impact from this new tax. However, the estimated negative impact is near

Th$30,000 from 2017 to 2020, and from 2021 the impact decreases gradually reaching cero in 2025.

In Colombia, on December 23, 2014, the Colombian Government approved a Tax Reform including, among

others, an increase in the tax rate in four years of 5% in 2015, 6% in 2016, 8% in 2017 and 9% in 2018, and

a wealth tax of 1.15% in 2015, 1% in 2016 and 0.4% in 2017, disappearing in 2018. Additionally, a tax on

transactions will be maintained until 2018, decreasing to 0.3% in 2019, 0.2% in 2020 and 0.1% in 2021. With

regard to this tax reform, a negative impact of ThUS$2,900 on deferred taxes was registered in 2014.

Currently the Colombian government is analyzing a new reform with the objective of unifying the direct taxes

and determine taxes on dividends. This reform is expected for the second half of 2016.

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AES GENER AND SUBSIDIARIES

Consolidated Balance Sheet

As of March 31, 2016 and December 31, 2015

International Financial Reporting Standards

ASSETS March 31, 2016 December 31, 2015

ThUS$ ThUS$

Current Assets

Cash and Cash Equivalents 266,268 267,233

Other Current Financial Assets 9,334 40,161

Other Current Non-Financial Assets 24,143 5,787

Trade and Other Receivables 387,916 362,558

Related Party Receivables 17,360 13,213

Inventory 135,806 122,853

Taxes Receivables 45,408 42,149

Total Current Assets 886,235 853,954

Non-Current Assets

Other Non-Current Financial Assets 22,547 34,359

Other Non-Current Non-Financial Assets 37,272 29,764

Trade and other Receivables 8,536 14,832

Investments in Associates 404,299 402,178

Intangible Assets 51,040 53,238

Goodwill 7,309 7,309

Property, Plant and Equipment 5,919,412 5,795,506

Deferred Taxes 71,038 94,893

Total Non-current Assets 6,521,453 6,432,079

TOTAL ASSETS 7,407,688 7,286,033

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Consolidated Balance Sheet

As of March 31, 2016 and December 31, 2015


LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2016 December 31, 2015

ThUS$ ThUS$

Current Liabilities

Other Current Financial Liabilities 165,890 159,552

Trade and Other Payables 313,500 288,589

Related Party Payables 24,358 18,392

Provisions 3,511 3,455

Taxes Payable 45,705 45,595

Employee Benefits 3,476 3,689

Other Current Non-Financial Liabilities 28,268 34,086

Total Current Liabilities 584,708 553,358

Current Liabilities

Other Non-Current Financial Liabilities 3,560,056 3,456,919

Trade and Other Payables 23,853 26,283

Related Party Payables 232,398 229,788

Provisions 108,312 106,599

Deferred Taxes 515,124 542,540

Employee Benefits 30,485 27,960

Other Non-Current Non-Financial Liabilities 10,209 10,352

Total Non-Current Liabilities 4,480,437 4,400,441

TOTAL LIABILITIES 5,065,145 4,953,799

Net Equity

Issued Capital 2,052,076 2,052,076

Retained Earnings (Losses) 418,158 377,125

Share premium 49,864 49,864

Other Components of Equity 236,827 236,567

Other Reserves (509,017) (492,188)

Total Equity Attributable to Shareholders

of Parent 2,247,908 2,223,444

Non-Controlling Interest 94,635 108,790

TOTAL NET EQUITY 2,342,543 2,332,234

TOTAL LIABILITIES AND EQUITY 7,407,688 7,286,033

AES GENER/ 2016

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Consolidated Income Statement for the periods ended on

March 31, 2016 and 2015


INCOME STATEMENTMarch 31, 2016 March 31, 2015

ThUS$ ThUS$

Operating Revenue 555,621 532,535

Cost of Sales (434,306) (401,410)

GROSS PROFIT 121,315 131,125

Other Operating Revenues 408 852

Selling, general and administrative Expenses (23,352) (28,988)

Other Operating Expenses (635) (824)

Other Income / (Loss) (1,220) 335

Financial Income 2,962 2,844

Financial Expense (33,797) (32,394)

Equity Participation in Net Income of Associates 2,552 8,030

Foreign Currency Exchange Differences (11,152) (7,758)

NET INCOME (LOSS) BEFORE TAXES 57,081 73,222

Income Tax Income (Expense) (17,056) (24,947)

Net Income (Loss) from Current Operations 40,025 48,275

Income (Loss) from Discontinued Activities - -

NET INCOME (LOSS) 40,025 48,275

Income Attributable to Shareholders of Parent 41,033 51,330

Income (Loss) Attributable to Non-Controlling Interests (1,008) (3,055)

NET INCOME (LOSS) 40,025 48,275

AES GENER/ 2016

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Consolidated cash flow statements

As of March 31, 2016 and 2015


March 31,

2016

March 31,

2015

CONSOLIDATED CASH FLOW STATEMENT MUS$ MUS$

Net Cash Flows provided by (used in) Operating Activities

Receipts from Customers 571,592 654,787

Other Receipts from Operating Activities 2,548 4,473

Payments to Suppliers (392,729) (507,562)

Payments made to Employees (22,891) (20,761)

Other Payments for Operating Activities (17,914) (21,027)

Payments of Dividends - -

Receipt of Dividends - -

Payment of Interests (24,110) (17,574)

Receipt of Interests 8,220 590

Income Taxes Paid (13,184) (6,706)

Other Operating Outflows from Operating Activities (13,542) (5,773)

NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 97,990 80,447

Net Cash Flows provided by (used in) Investing Activities

Loss of Control over a Subsidiary or other business - -

Purchase of Non-Controlling Interest - -

Other receipts for sale of equity or debt instruments of other entities - -

Proceeds from Sale of Property, Plant and Equipment - 1

Purchases of Property, Plant and Equipment (149,792) (407,101)

Proceeds from sale of Intangible Assets - -

Purchases of Intangible Assets (54) (288)

Proceeds from other Long-Term Assets 16,630 -

Purchase of Long –Term Assets - -

Other Outflows from Investing Activities 17,221 31,148

NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (115,995) (376,240)

Net Cash Flows provided by (used in) Financing Activities

Proceeds from Share Issuance 5,200 65,200

Proceeds from Long –Term Borrowings 23,800 297,047

Proceeds from Short –Term Borrowings - -

Proceeds from Related Parties Borrowings - -

Repayments on Loans - -

Payments on Financial Leasing Liabilities (453) (524)

Other Inflows (Outflows) of Cash and Cash Equivalent (14,050) (4,531)

NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 14,497 357,192

INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENT (3,508) 61,399

Effects of Foreign Exchange Variations on Cash and Cash Equivalents 2,543 (4,279)

Cash and Cash Equivalents at the Beginning of Period (965) 57,120

Cash and Cash Equivalents at the Beginning of Period 267,233 228,691

CASH AND CASH EQUIVALENT AT THE END OF PERIOD 266,268 285,811

AES GENER/ 2016

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27

AES GENER CONSOLIDATED EBITDA

March March Var.

EBITDA (ThUS$) 2016 2015 %

Gross Profit 121,315 131,125 -7%

Depreciation (-) 58,430 55,936 4%

Other Operating Revenues 408 852 -52%

Administrative Expenses (23,352) (28,988) -19%

Other Operating Expense (635) (824) -23%

Other Costs not included in EBITDA (-) 1,437 1,686 -15%

TOTAL EBITDA 157,603 159,787 -1%

AES GENER/ 2016

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ANNEX 1: GUACOLDA ENERGÍA S.A

Summarized income statement for the period



Income Statement (ThUS$)

March

2016

March

2015

Var

%

Operating Revenue

Contract Sales 62,669 95,900 -35%

Spot Sales 14,187 16,176 -12%

Other Revenue 8,697 16,423 -47%


Cost of Sales


Energy and capacity purchases (912) (32,293) -97%

Transmission tolls (4,633) 3,931 -218%


Depreciation (16,803) (11,651) 44%


Gross Profit21,223 35,725 -41%

Selling, general and administrative Expenses (3,626) (3,230) 12%

EBITDA 34,400 44,146 -22%

Financial Expense (11,089) (8,291) 34%

Net Income (Loss) Before Taxes 6,934 21,795 -68%

Income Tax Income (Expense) (1,831) (5,901) -69%

Net Income (Loss) Before Taxes 5,103 15,894 -68%

Balance Sheet Information (ThUS$)

Cash and Cash Equivalents 66,409 18,685 255%

Property, Plant and Equipment 1,646,782 1,566,105 5%

Other Current Financial Liabilities (72,707) (108,436) -33%

Other Non-Current Financial Liabilities (768,933) (629,033) 22%

Total Financial Liabilities (841,640) (737,469) 14%

AES GENER/ 2016

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29

Energy Generation, purchases and sales

As of March 31, 2016, the decrease of ThUS$14,702 in gross profit is mainly explained by a negative impacts

in transmission revenues and costs, associated to transmission settlements registered in both quarters,

resulting in lower profit registered in the first quarter of 2016. Additionally, lower volume sales of 211 GWh to

regulated and unregulated customers were registered, mainly explained by lower mining production during

the first three months of 2016. These negative effects are partially compensated by lower energy purchases

associated to higher generation and lower cost of fuel consumption associated to lower coal prices.

From a non-operational standpoint, main variances include a positive effect in deferred taxes related to the

reorganization process between Empresa Eléctrica Gaucolda S.A. and Guacolda Energía S.A. completed in

2015, partially offset by an increase in finance expenses due to lower capitalization interest after the start of

commercial operations at Unit 5.

Energy (GWh)

March

2016

March

2015

Var

%

Generation

Thermo 1,144 1,081 6%

Purchases

Spot

Other generators 7 19 -63%

Total Purchases 7 19 -63%

Sales

Distribution Companies 206 566 -64%

Other customers 654 505 30%

Spot 296 29 921%

Total Sales 1,156 1,100 5%

AES GENER/ 2016

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30

ANNEX 2: EMPRESA ELÉCTRICA ANGAMOS S.A

Summarized income statement for the period



Income Statement (ThUS$)

Marzo

2016

Marzo

2015

Var

%

Operating Revenue

Contract Sales 62,059 58,577 6%

Spot Sales 13,159 9,397 40%

Other Revenue 1,427 204 600%


Cost of Sales


Energy and capacity purchases (7,279) (690) 955%

Transmission tolls (561) (520) 8%


Depreciation (12,080) (11,674) 3%


Gross Profit20,537 15,650 31%

Selling, general and administrative Expenses (1,447) (1,975) -27%

EBITDA 31,636 25,918 22%

Financial Expense (10,903) (10,804) 1%

Net Income (Loss) Before Taxes 11,429 3,550 222%

Income Tax Income (Expense) (1,847) (942) 96%

Net Income (Loss) Before Taxes 9,582 2,608 267%

Balance Sheet Information (ThUS$)

Cash and Cash Equivalents 73,487 36,536 101%

Property, Plant and Equipment 930,727 974,748 -5%

Other Current Financial Liabilities (14,259) (14,336) -1%

Other Non-Current Financial Liabilities (781,246) (779,523) 0%

Total Financial Liabilities (795,505) (793,859) 0%

AES GENER/ 2016

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31

Energy Generation, purchases and sales

As of March 31, 2016, the increase by ThUS$4,887 in Angamos’ gross profit compared to the same period

of 2015, is mainly explained by higher volume sales to unregulated customers of 239 GWh in the first quarter

of 2016. This effect was partially offset by higher net spot purchases as a result of lower volume sales of 94

GWh.

From a non-operational standpoint, main variances include an increase in net finance income of ThUS$2,103

as a result of higher interest received from AES Gener for an intercompany loan, partially compensated by

higher income taxes of ThUS$905.

Energía (GWh)

March

2016

March

2015

Variación

%

Generación

Termo 974 833 17%

Ventas

Clientes Libres 769 530 45%

Ventas Spot 193 287 -33%

Total Ventas 962 817 18%

AES GENER/ 2016

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32

ABOUT AES GENER

AES Gener generates and sells electricity in four markets: the Central Interconnected Grid (SIC) and the

Greater Northern Interconnected Grid (SING) in Chile and the National Interconnected Grid (SIN) in

Colombia. Additionally, the Company sells electricity to the Argentine Interconnected Grid (SADI). In Chile,

AES Gener is the second largest electricity generation group in terms of generation capacity, with installed

capacity of 3,579 MW composed of 3,308 MW of thermoelectric and 271 MW of hydroelectric capacity. The

Company is the principal thermoelectric generator in Chile, with a diversified plant portfolio that utilizes coal,

natural gas, diesel and biomass as fuel. AES Gener also owns a dam-based hydroelectric plant in Colombia

with a total nominal operating capacity of 1,000 MW and a natural gas –fired combined cycle plant in

Argentina with an installed capacity of 643 MW. AES Gener possesses an attractive portfolio of development

projects. AES Gener is 70.71% owned by The AES Corporation (AES). To learn more about AES Gener,

please visit www.aesgener.com.

ABOUT AES

The AES Corporation (NYSE: AES) is a Fortune 200 global power company. AES provides affordable,

sustainable energy to 18 countries through its diverse portfolio of distribution businesses as well as thermal

and renewable generation facilities. AES' workforce of 18,500 people is committed to operational excellence

and meeting the world’s changing power needs. AES' 2014 revenues were US$17 billion and AES owns and

manages US$39 billion in total assets. To learn more, please visit www.aes.com. Follow AES on Twitter

@TheAESCorp.

http://www.aesgener.com/

http://www.aes.com/

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