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AES Andres B.V. and Subsidiaries(An Indirect Wholly-Owned Subsidiary of The AES

Corporation)

Consolidated Financial Statements as of and for theyears ended December 31, 2013 and 2012 with Report

of Independent Auditors

AES Andres B.V. and Subsidiaries(An Indirect Wholly-Owned Subsidiary of The AES Corporation)Consolidated Financial Statements(Amounts expressed in thousands of US dollars)

CONTENTS PagesConsolidated Financial Statements

Report of Independent Auditors .................................................................................................. 1 - 2

Consolidated Balance Sheets ........................................................................................................ 3 - 4

Consolidated Statements of Income ................................................................................................... 5

Consolidated Statements of Changes in Shareholders’ Equity ........................................................ 6

Consolidated Statements of Cash Flows ...................................................................................... 7 - 8Notes to the Consolidated Financial Statements ..................................................................... 9 - 39

AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2013 AND 2012(Amounts expressed in thousands of US dollars)

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Notes 2013 2012ASSETSCurrent assets:Cash and cash equivalents 1d, 2 44,483$ 63,025$Restricted cash 1e 147 78Short term investment unrestricted 19 15,000 8,600Accounts receivable, net 4 102,939 78,649Accounts receivable – related parties 3 147,751 115,215Derivative instruments 1p - 138Other receivables 5 666 26Other receivable – related parties 3 2,160 2,016Inventories 1f, 6 25,711 46,014Prepaid expenses 7 2,371 3,783Deferred income tax 12 203 318Total current assets 341,431 317,862

Property, plant and equipment, net:Land 7,693 9,083Plant and electricity generating equipment 483,229 474,395Accumulated depreciation (108,542) (97,306)Construction in progress 7,493 3,907Property, plant and equipment, net 1h, 8 389,873 390,079

Other assets:Deferred financing costs – net 1i 2,993 3,284Debt service reserve 1j, 11 7,959 7,959Other assets 9 1,447 3,256Derivative instruments 1p 1,307 -Total other assets 13,706 14,499Total non current assets 403,579 404,578Total assets 745,010$ 722,440$

AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED BALANCE SHEETS (CONTINUED)AS OF DECEMBER 31, 2013 AND 2012(Amounts expressed in thousands of US dollars)

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Notes 2013 2012LIABILITIES AND SHAREHOLDER'SEQUITYCurrent liabilities:Accounts payable and accrued liabilities 10 42,692$ 28,440$Accounts payable and accrued liabilities –

related parties 3 3,277 24,279Income tax payable 1k, 12 10,582 11,777Other liabilities 13 - 11Total current liabilities 56,551 64,507

Long-term liabilities:Deferred income tax 1k,12 47,785 44,669Related party loan 3 413,153 413,153Notes payable 11 167,560 167,560Derivative instruments 1p 1,033 1,154Other liabilities 13 77 74Total long-term liabilities 629,608 626,610

Shareholder's equity:Common stock, EUR 100 par value; 910 shares

authorized; 182 shares issued and outstanding 19 19Additional paid in capital 14 812 779Retained earnings 58,020 30,525Total shareholder's equity 58,851 31,323Total liabilities and shareholder's equity 745,010$ 722,440$

The accompanying notes are an integral part of these consolidated financial statements.

AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED STATEMENTS OF INCOMEFOR THE YEAR ENDED DECEMBER 31, 2013 AND 2012(Amounts expressed in thousands of US dollars)

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Notes 2013 2012Revenues:Electricity sales – contracts 3 178,243$ 197,587$Electricity sales – spot market 106,601 56,759Natural gas sales 3 246,259 225,347Natural gas transportation 3 8,592 8,518Other sales (non-electricity) 6,986 5,772Total revenues 546,681 493,983

Operating costs and expenses:Cost of revenues – electricity purchases and fuel costs used for generation 3, 15 (144,860) (161,040)Cost of revenues – fuel purchased for resale and related costs 3 (191,728) (143,299)Operating, maintenance and general expenses 3, 16 (29,538) (29,399)Depreciation 8 (16,188) (13,745)Gain (loss) on derivative financial instruments 1,428 (514)Total operating costs and expenses (380,886) (347,997)

Operating income 165,795 145,986

Other income (expense):Interest expense – net 17 (15,603) (7,996)Subordinated related party loan interest expense 3 (38,224) (38,329)Deferred financing costs amortization 1i (356) (383)Other (expense) income 18 (346) 65Exchange gain, net 1,152 285Income before income tax 112,418 99,628Income tax expense 12 (55,525) (61,238)Net income 56,893$ 38,390$


AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITYFOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012(Amounts expressed in thousands of US dollars)

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AdditionalNumber of Common Paid in Retained

Notes Shares Stock Capital Earnings TotalBalance as of January 1, 2012 182 19$ 816$ 52,735$ 53,570$Stock based compensation 1n, 14 - - (37) - (37)Dividends paid - - - (60,600) (60,600)Net income - - - 38,390 38,390Balance as of December 31, 2012 182 19 779 30,525 31,323

Stock based compensation 1n, 14 - - 33 - 33Dividends paid - - - (29,398) (29,398)Net income - - - 56,893 56,893Balance as of December 31, 2013 182 19$ 812$ 58,020$ 58,851$


AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012(Amounts expressed in thousands of US dollars)

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2013 2012

Operating activities:Net income 56,893$ 38,390$Adjustments to reconcile net income to net cash provided by

operating activities:Depreciation 16,188 13,745(Gain) loss on derivative financial instruments (1,428) 514Deferred income tax 5,885 22,933Deferred financing costs amortization 356 383Loss on asset disposal 412 1Exchange gain, net (1,152) (285)Long term compensation 54 49Changes in assets and liabilities:

Increase in accounts receivable (25,157) (41,450)(Increase) decrease in accounts receivable – related parties (32,508) 36,425Decrease (increase) in short term derivative 138 (138)(Increase) decrease in other receivable (668) 24(Increase) decrease in other receivable – related parties (172) 1,175Decrease (increase) in inventories 20,303 (27,015)Decrease (increase) in prepaid expenses 1,412 (1,331)Decrease in guarantee deposit 4 35Increase in accounts payable and accrued liabilities 14,621 7,232(Decrease) increase in accounts payable – related parties (21,002) 21,541Decrease in income tax payable (1,195) (6,487)Decrease in other liabilities (42) (30)

Net cash provided by operating activities 32,942 65,711

Investing activities:

Additions to property, plant and equipment (15,155) (17,204)Advances to suppliers in purchase of PP&E (1,377) (3,181)Proceeds from sales of property, plant and equipment 1,000 -(Increase) decrease in restricted cash (69) 4,922Sale of short term investment 8,600 -Purchase of short term investment (15,000) (8,600)Decrease in loan to related party - 555

Net cash used in investing activities (22,001) (23,508)

AES Andres B.V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)FOR THE YEARS ENDED DECEMBER 31, 2013 and 2012 (Amounts expressed in thousands of US dollars)

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2013 2012Financing activities:

Dividend payment (29,398) (60,600)Deferred financing costs (74) (134)Repayment of capital lease obligations (11) (16)

Net cash used in financing activities (29,483) (60,750)

Net decrease in cash (18,542) (18,547)

Cash and cash equivalents at the beginning of the year 63,025 81,572

Cash and cash equivalents at the end of the year 44,483$ 63,025$

Supplemental disclosures of cash flow information:Cash payments for interest, net of capitalized interest 16,566$ 15,068$Cash payments for related party loan interest 38,224$ 38,329$Cash payments for income taxes 50,304$ 44,663$

Supplemental disclosures of non-cash operating activities:Inventory transferred to property, plant and equipment 808$ 506$Property, plant and equipment purchases not paid at year end -$ 954$


AES Andres B.V. and Subsidiary(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)Audited Consolidated Financial StatementsNOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OFDECEMBER 31, 2013 AND DECEMBER 31, 2012 (Amounts expressed in thousands of US dollars)

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1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business – AES Andres B.V. (“the Company” or “Andres”) is an indirectwholly-owned subsidiary of The AES Corporation (“the Parent Company”), with abranch (“the Branch”) registered in the Dominican Republic. The Company was formedand incorporated in 1999 in accordance with the laws of The Netherlands, as a privatelimited liability company.

Andres constructed a 319 MW gas fired combined cycle generation plant (“powerplant”), a liquefied natural gas re–gasification terminal (“LNG facility”), receiving pier,and a pipeline of approximately 35 km to the facilities of Dominican Power Partners(“DPP”), an affiliated entity under common control. The project was constructed inPunta Caucedo, Dominican Republic. Gas operations began in March 2003 and thepower plant began commercial operations in December 2003. Andres is currently theonly entry point for liquefied natural gas or “LNG” in the Dominican Republic. TheLNG received by Andres is regasified and the resulting natural gas is used by Andres tooperate its combined-cycle power generation unit, although a higher portion of thenatural gas is sold to DPP and third parties under long-term natural gas sale andpurchase and transportation contracts. The power facility sells all of its powerproduction in the Dominican Republic, mainly through Power Purchase Agreements(“PPA”) with DPP and Empresa Distribuidora de Electricidad del Este, S. A. (“EDEEste”), a distribution company serving the eastern region of the Dominican Republic,which includes part of the capital city, Santo Domingo.

Andres owns the largest thermal power generation unit in the Dominican Republic andis the third largest thermal power generator in the country based on installed capacity.

In 2005, Andres entered into a ten-year contract with Linea Clave International S.A., or“Linea Clave” (a domestic retail gas company) to sell natural gas at Andres’ LNGfacility for further distribution to industrial users within the Dominican Republic. Thesales under this agreement started in March 2007 and are presented in the consolidatedstatements of income as part of natural gas sales for a total of $19.2 million and $33.7million for the years ended December 31, 2013 and 2012, respectively.

The Company has entered into some contracts with companies in the Dominican marketthat are currently permitted to generate their own electricity or contract directly withgenerators, or the unregulated market (commonly known as “Non-Regulated Users”).As of December 31, 2013 and 2012, the Company has a total of 15 and 24 contractswith Non-Regulated Users, with a total of 109MW and 113MW of contracted capacity,respectively.

AES Andres B.V. and Subsidiary(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)Audited Consolidated Financial StatementsNOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OFDECEMBER 31, 2013 AND DECEMBER 31, 2012 (Amounts expressed in thousands of US dollars)

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1. NATURE OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

On October 27, 2010, the Company created a new entity, AES Andres DominicanaLtd., a tax exempt company of limited liability constituted under the laws of theCayman Islands and the Company holds 100% of the equity interest in AES AndresDominicana, Ltd. AES Andres Dominicana, Ltd. was created as a Special PurposeCompany for the issuance of senior notes of $167,560 as described in Note 11.

On December 2005, Andres created a new entity, AES Dominicana Energia Finance,S.A. (“Finance”), which is a company constituted in conformity with the laws of theCayman Islands and holds the Company 100% of the equity interest in Finance.Finance was constituted only as a Special Purpose Company for the issuance of seniornotes with an original amount of $160 million which were paid in December 2010.After the cancellation of these senior notes, Finance entered into a settlement processwhich ended with the final closure in 2013.

The authorized share capital of the Company is represented by 910 shares, par value of$100 Euros and there are 182 shares issued and outstanding.

Basis of Presentation - The Company maintains its books in U.S. dollars and preparesits consolidated financial statements in accordance with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”).

Significant Accounting Policies – A summary of the significant accounting policiesused in the preparation of the accompanying consolidated financial statements are asfollows:

a. Principles of consolidation – The accompanying consolidated financial statementsinclude the accounts of Andres and its subsidiary, AES Andres Dominicana, Ltd.Intercompany balances and transactions have been eliminated in these consolidatedfinancial statements.

b. Use of Estimates – The preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the consolidated financial statements and the reportedamounts of revenues and expenses during the reporting period. Althoughmanagement believes the estimates and assumptions used in the preparation ofthese consolidated financial statements were appropriate in the circumstances,actual results could differ from those estimates and assumptions.

AES Andres B. V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)Audited Consolidated Financial StatementsNOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OFDECEMBER 31, 2013 AND DECEMBER 31, 2012(Amounts expressed in thousands of US dollars)

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c. Transactions in foreign currency – The functional and reporting currency of theCompany is the U.S. dollar, because the majority of its cash flows are currently,and are expected in the future to be, denominated in U.S. dollars. Transactionsdenominated in other currencies (mainly Dominican Pesos, RD$, local currency ofthe Dominican Republic) are recorded at the rate of exchange in effect at the date ofthe transactions. Monetary assets and liabilities denominated in foreign currenciesare converted into the Company’s functional currency at the rate of exchange ineffect at the consolidated balance sheet dates; the effect of changes in exchangerates is recognized in the consolidated statements of income.

d. Cash and Cash Equivalents – The Company considers all highly-liquidinstruments purchased with an original maturity of three months or less to be cashequivalents.

e. Restricted Cash – Restricted cash includes cash equivalents which are restricted tothe Banco BHD Stand-By Letter of Credit.

f. Inventories – Inventories are stated at the lower of cost or market value. Costs aredetermined using the weighted-average cost method.

g. Concentration of Credit Risk – Empresa Distribuidora de Electricidad del Este,S.A. and DPP (related party) are Andres’ main customers. Therefore, Andres’accounts receivable are exposed to potential credit loss from those entities.Contracted sales to DPP represented 20% and 26% of total revenues for the yearsended December 31, 2013 and 2012, respectively, and contracted sales to EDE Esterepresented 20% and 11% of total electricity sales for the years ended December31, 2013 and 2012, respectively. The Company’s senior management oversees themanagement of this risk with the support of the Financial Risk Committee, whichassesses financial risks and the management framework used, guaranteeing that theidentification, measurement and administration of financial risk is based on thepolicies and procedures established by the Company.

h. Property, Plant and Equipment – Property, plant and equipment, including thecost of improvements, are stated at cost. Cost includes major expenditures forimprovements and replacements, which extend useful lives or increase capacity.

Interest costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of timeto get ready for their intended use, are added to the cost of those assets, until suchtime as the assets are substantially ready for their intended use.


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Interest cost capitalized for the years ended December 31, 2013 and 2012 amountedto $896 and $864, respectively.

Maintenance and repairs are expensed as incurred. In accordance with the plantmaintenance schedule, which is based on equivalent operating hours (“EOH”), theCompany performs combustion, hot path and major inspections which include theremoval and exchange of certain hot parts (burners, combustor baskets, transitionpieces, vanes, blades, etc.)

All major maintenance disbursements represent the reconditioning of the plant orother assets. These costs are capitalized and then amortized based on the useful lifeof each asset.

Depreciation is computed primarily using the straight-line method over theestimated useful lives of the assets, which are determined on a composite basis.

Capital spare parts, including rotable spare parts, are included in electric generationassets and are depreciated over their useful life after the part is placed in service.

Following are the estimated useful lives of the Company's assets:

EstimatedUseful Life

Generation plant and equipment 5 to 40 yearsLNG facility, pier and pipeline 6 to 50 yearsBuildings and structure 25 to 50 yearsOffice equipment and other 4 to 7 yearsSoftware 4 years

The Company evaluates the impairment of long lived assets whenever events orchanges in circumstances indicate that the carrying amount of an asset maynot be recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to estimated undiscounted futurecash flows expected to be generated by the asset. If the carrying amount of an assetexceeds its estimated future cash flows, an impairment charge is recognized in theamount by which the carrying amount of the asset exceeds the fair value of theasset.


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i. Deferred Financing Costs – Financing costs related to the acquisition of certainlong-term loans are deferred and amortized using the interest method of periodicamortization over the term of such loans. Deferred financing costs are presented netof accumulated amortization of $21,884 and $21,593 as of December 31, 2013 and2012, respectively. The total net balances of the deferred financing cost are$2,993 and $3,284 as of December 31, 2013 and 2012, respectively. During theyears ended December 31, 2013 and 2012, the Company recorded amortizationexpense of $356 and $383, respectively.

j. Debt Service Reserves – Debt service reserves are presented separately from cashand reflect bank deposits that can be used to pay the interest installments inaccordance with the financial debt described in Note 11.

k. Income Taxes – The Company recognizes deferred income tax assets and liabilitiesfor the future consequences of temporary differences between the financialstatement carrying amounts of assets and liabilities and their respective income taxbases, measured using enacted rates. The effects of changes in the statutory ratesare accounted for in the period that includes the enactment date. Deferred incometax assets are also recognized for the estimated future effects of tax losscarryforwards. Deferred income tax assets are reduced to the extent it’s more likelythan not that future benefits will not be realized.

l. Revenue Recognition and Unbilled Revenues – Revenues from the sale ofelectricity and liquefied natural gas are recorded based on physical and contractualdelivery of energy, capacity and liquefied natural gas at the rates specified in therespective contracts or at prevailing market rates. Revenues include income fromenergy and capacity supplied but not billed at each period end, which is accountedfor at the contractual rates or estimated spot market prices existing at eachrespective period end. These amounts are included in current assets as accountsreceivable. The related cost of this energy has been included in operating costs. AtDecember 31, 2013 and 2012, accounts receivable included unbilled revenues of$39 million and $21 million, respectively. The actual amounts subsequently billedsuffered no material changes with respect to the estimates reported as of December31, 2013 and 2012, respectively.

m. Fair Value of Financial Instruments – The fair value of the current financialassets and current financial liabilities are estimated to be equal to their reportedcarrying amounts due to the short-term maturities of these instruments. The fairvalue of affiliate receivables and payables is not practicable to estimate due to therelated party nature.


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The financial debt is arranged at fixed interest rates and exposes the Company tofair value interest rate risk. Management estimates the fair value of the Company’sborrowings by discounting their future cash flows at market rates (Note 11) and isclassified at Level 2 in the hierarchy of fair value (Note 20).

The fair value of the Company’s derivative was determined using an internalvaluation model, based on observable market inputs including forward prices. Thisderivative is considered at Level 3 in the hierarchy of fair value.

n. Stock Plans – Certain Company employees were granted stock options underoption plans created by The AES Corporation (“the AES Plans”). The AES Plansallow issuance of options to purchase common stock of The AES Corporation at aprice equal to 100% of the market price at the date the option is granted. Generally,stock options issued under these plans become exercisable by employees one yearfrom the grant date (100% in one year), and other stock options vest over threeyears from the date of grant (33% each year). The weighted-average exerciseprices of the options were $11.17 and $13.70 for 2013 and 2012, respectively

The weighted average fair value of the options granted under the AES Plans wasestimated as of the grant dates using the Black – Scholes option pricing model withthe following assumptions:

Assumptions 2013 2012Estimates life of the option 6 years 6 yearsRisk-free interest rate 1.13% 1.08%Expected volatility 23.08% 26.29%Dividend yield 1% 1%Date fair value $2.23 $3.04

Cost is measured at the time the option is granted based on the fair value of theoption or liability recorded by the Corporation and an expense is recorded on astraight line basis during the period the employee’s service is required to earn theright to exercise the option, which is recognized as a capital contribution inadditional paid-in capital.


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During the years ended December 31, 2013 and 2012, the Company recordedstock–based compensation expenses of $33 and ($37), respectively, and a relatedcredit to shareholder’s equity.

o. Environmental Costs – The Company may be exposed to environmental costs in theordinary course of business. Expenditures for ongoing compliance withenvironmental regulations that relate to current operations are expensed orcapitalized, as appropriate. Expenditures that relate to an existing condition causedby past operations, and which do not contribute to current and future revenuegeneration, are expensed. Liabilities are recorded when environmental assessmentsindicate that remediation efforts are probable and the costs can be reasonablyestimated. Estimates of the liability are based upon currently available facts,existing technology and presently enacted laws and regulations taking intoconsideration the likely effects of inflation and other societal and economic factors,and include estimates of associated legal costs. As of December 31, 2013 andDecember 31, 2012, there are no known environmental liabilities that the Companyis aware of.

p. Derivative Financial Instruments - The Company records all derivatives on theconsolidated balance sheets at fair value, regardless of the purpose or intent forholding them. The accounting for changes in fair value of the derivatives varies,depending on whether the derivative is considered to be a hedge for accountingpurposes, and whether the hedging instrument is a fair value or a cash flow hedge.

Derivatives that are considered to be hedges from an accounting perspective arerecognized in the consolidated balance sheets at fair value with changes in fair valueeither: (1) offset by changes in fair value of the hedged assets, liabilities or firmcommitments through earnings as a component of the corresponding asset orliability if the derivative is designated as a fair value hedge, or (2) recognized inother comprehensive income until the hedged item is recognized in earnings if thederivative is designated as a cash flow hedge. The ineffective portion of the changein fair value for a hedging derivative is immediately recognized in earningsregardless of whether the hedging derivative is designated as a cash flow or fairvalue hedge.

A derivative is presented as a non-current asset or a non-current liability if theremaining maturity of the instrument goes further than the current period and it isnot expected to be realized or settled within the current period. Other derivativesare presented as current assets or current liabilities.


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Certain derivatives are not designated as hedging instruments. While theseinstruments economically hedge interest rate risk, foreign exchange risk orcommodity price risk, they do not qualify for hedge accounting treatment. Changesin fair value are recognized in earnings in the current period. Beginning in 2008 theCompany recognized a commodity embedded derivative for the LNG supplycontract, for which the fair value was determined to be a liability of $1,033 as ofDecember 31, 2013 and $1,154 as of December 31, 2012. Also in 2013, theCompany recognized a commodity embedded derivative related to a newamendment for the LNG supply contract, for which the fair value was determined tobe an asset of $1,307 as of December 31, 2013.

q. Severance benefits – The Dominican Republic Labor Code requires severancebenefits be paid to employees terminated without justified cause. The Companyrecognizes the expense for these severance benefits as incurred.

r. Reclassifications – The Company in 2012 reclassified $1,130 from additions toproperty, plant and equipment to advances to suppliers in purchase of PP&E topresent the figures in conformity with 2013.

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of December 31, 2013 and 2012 are detailed as follows:

2013 2012

Cash in US dollars 2,759$ 680$Cash in Dominican pesos 1,787 110Cash equivalents:Term deposits and certificates of investment in USdollars and DOP, with maturity less than 3 months,annual interest rate between 0.78% and 0.92% as ofDecember 31, 2013 and 2012, respectively. 39,937 62,235Total 44,483$ 63,025$


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3. RELATED PARTIES

In March 2002, the Company entered into a 20–year LNG supply contract with AtlanticBasin Services, Ltd. (“ABS”), an affiliated entity under common control (“The LNGSales Contract”). Under a take or pay agreement, Andres has agreed to purchase aminimum quantity of LNG. In February 2008, a third amendment was signed wherebythe minimum quantities to purchase were modified starting in 2010 to 33.6 TBtus(trillions of British Thermal Units).

ABS purchases the fuel from a third party and sells it to Andres at cost plus a fixed feeof $10,000 per month. On December 30, 2003, the Company entered into theAmendment No. 1 to the LNG Sales Contract with ABS to change the pricing structureof the contract in order to reflect more properly the variability of the cost of natural gas,by adding $0.20 per MMBtu (millions of British Thermal Units) to the cost of purchase.

The LNG purchase cost associated with this contract is presented in the consolidatedstatements of income as cost of revenues of $275.8 million and $282.6 million for theyears ended December 31, 2013 and 2012, respectively.

In January 2001, the Company granted a 20–year guaranty to BP Gas MarketingLimited (“BP”) in reference to the LNG Sales Contract signed between ABS and BP, inorder to guarantee the payment of all the due and payable liabilities and obligationsunder such contract. The aggregate amount of the guaranty shall not exceed $100million.

In 2002, Andres signed both a natural gas sale and purchase agreement (“the GasPurchase Contract”) and a Natural Gas Transportation Contract with DPP thatcommenced upon completion of the LNG facility and the pipeline in March 2003. Bothcontracts expire in April 2023. An Amendment No. 2 to the Gas PurchaseContract was entered into by and between DPP and the Company, dated December 30,2003, in order to change the pricing structure. In September 2008, Amendment No. 2 ofNatural Gas Transportation Contract was entered into by and between DPP and theCompany, in order to change the transportation services pricing structure. The revenuesassociated with these contracts are presented in the consolidated statements of incomeas natural gas sales and natural gas transportation of $71.5 million and $85.1 million forthe years ended December 31, 2013 and 2012, respectively.

AES Andres B. V. and Subsidiary(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)Audited Consolidated Financial StatementsNOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OFDECEMBER 31, 2013 AND DECEMBER 31, 2012 (Amounts expressed in thousands of US dollars)

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3. RELATED PARTIES (CONTINUED)

In 2003, the Company entered into an actual demand energy and capacity contract withDPP, by means of which DPP purchases its requirements of energy and capacity notcovered by its own generation and firm capacity assigned by the market to honor itscontract. In 2004, this contract expired and the Company entered into a contract withDPP that is in force unless both parties agree on its suspension with 15 days notice. Therevenues associated with this contract consist of energy and capacity sales that areincluded in the consolidated statements of income as electricity sales-contracts of $35.5million and $40.3 million for the years ended December 31, 2013 and 2012,respectively.

As of December 31, 2013, Andres purchased from DPP energy in the spot market for$0.3 million (2012: $1.0 million).

In September 2000, the Company entered into an Operations, Maintenance andAdministrative Services Agreement (“OM&A Contract”) with AES Services, Ltd.(“Services”), an affiliated entity under common control, whereby Services isresponsible for providing advisory and support services necessary to ensure that theCompany has the necessary information and support to perform their obligations arisingout of or in connection with the ownership, management, maintenance and operation ofthe facilities. The term of this agreement is 25 years, starting on the commercialoperation date.

For the years ended December 31, 2013 and 2012, the management fees expensesrelated to this contract amounted to $773 and $760, respectively, and is included in theconsolidated statements of income as operating, maintenance and general expenses.

On December 16, 2002, the Company entered into a loan agreement with Hispanola II.The original principal amount was $288,834. Interest accrues at an annual rate of9.125%. Unpaid accrued interest was capitalized with the principal balance. Theunpaid interest included in the principal balance at December 31, 2013 and 2012amounts to $124,319, which represents the interest accrued during the period fromDecember 2002 until December 2006. In December 2010, an amendment was made tothis contract which established its maturity as December 13, 2020. Interest expenseunder the loan agreement amounted to $38,224 and $38,329 for the years endedDecember 31, 2013 and 2012, respectively.


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3. RELATED PARTIES (continued)

On December 15, 2008, Andres granted a loan to AES Fonseca Energia Ltda. de C.V.,for $1,833 with a maturity of June 15, 2010, and an annual interest rate of 3.36%. Thisloan was not paid on the maturity date. On June 15, 2013, Andres signed a newamendment in which it extended the maturity date until June 15, 2014 and maintains theannual interest rate of 2.2% as amended in 2011. The accrued interest income was $28and $33 for the years ended December 31, 2013 and 2012, respectively.

During the years ended December 31, 2013 and 2012, the Company purchased energyfrom Empresa Generadora de Electricidad Itabo, S.A. (Itabo) in the spot market,totalling $0.4 million and $2.1 million, respectively, and the Company sold energy toItabo a total amount of $6.8 million and $6.4 million, respectively.

The Company has comprehensive risk insurance contracted with AES Global InsuranceCorporation, an affiliate subsidiary of The AES Corporation, which covers anyoperating risk including the breaking of machinery and business interruption. For thiscontract, the Company has recognized in operating and maintenance expenses in theconsolidated statements of income, insurance cost of $6.4 million and $6.2 million forthe years ended December 31, 2013 and 2012, respectively, and at the end of the year2013 and 2012, respectively there was still an amount of $1.6 million and $1.6 million,respectively, pending to be amortized and included in the consolidated balance sheets.

The Company has an account payable to its parent, The AES Corporation, of $1,638and $1,552 as of December 31, 2013 and 2012, respectively, for the reimbursement ofsalaries and benefits for executives and other direct costs.


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3. RELATED PARTIES (continued)

As a result of the operations and contracts mentioned above and other less significanttransactions carried out with affiliates, related party accounts receivable and payable asof December 31, 2013 and 2012 are as follows:

2013 2012

Dominican Power Partners 131,661$ 85,405$Empresa Generadora de Electricidad Itabo, S.A. 16,090 29,810Total accounts receivable – related parties 147,751$ 115,215$

AES Fonseca Energia Ltda. 1,311$ 1,283$Atlantic Basin Services, Ltd. 489 489Others 360 244Total other receivables – related parties 2,160$ 2,016$

Empresa Generadora de Electricidad Itabo, S.A. 966$ 353$Atlantic Basin Services, Ltd. 390 13,518AES Global Power Holding B.V. 1,700 1,562Dominican Power Partners 53 8,347Others 168 499Total accounts payable and accrued liabilities –related parties 3,277$ 24,279$

AES Hispanola Holdings II B.V. 413,153$ 413,153$Total - related party loan payable 413,153$ 413,153$

4. ACCOUNTS RECEIVABLE, NET

The accounts receivable balances as of December 31, 2013 and 2012, consist of thefollowing:

2013 2012

Spot and PPA electricity market agents 61,525$ 48,849$Unregulated users 2,506 9,860Others 39,271 20,365Allowance for bad debts (363) (425)Total 102,939$ 78,649$


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4. ACCOUNTS RECEIVABLE, NET (continued)

Accounts receivable generate interest according to regulations in the electric sector andaccording to the terms established in the energy sale contracts.

Other receivables correspond to unbilled revenue (Note 1).

5. OTHER RECEIVABLES

The other receivables balance on as of December 31, 2013 and 2012, consist of thefollowing:

2013 2012Receivable on sale of land 527$ -$Advances to employees 34 16Advances to suppliers 100 -Others 5 10Total 666$ 26$

6. INVENTORIES

Inventories balances as of December 31, 2013 and 2012, consist of the following:

2013 2012

Liquified natural gas 12,058$ 34,872$Supplies and other materials 13,653 11,142Total 25,711$ 46,014$


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7. PREPAID EXPENSES

The prepaid expenses balances as of December 31, 2013 and 2012 consist of thefollowing:

2013 2012

Prepaid insurance 1,941$ 1,690$International suppliers - 1,495Local suppliers 357 560Other prepaid expenses 73 38Total 2,371$ 3,783$

AES Andres B. V. and Subsidiaries(An Indirectly Wholly-Owned Subsidiary of The AES Corporation)Audited Consolidated Financial StatementsNOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS ASOF DECEMBER 31, 2013 AND DECEMBER 31, 2012(Amounts expressed in thousands of US dollars)

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8. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consist of the following:

2012 Additions Reductions Transfers 2013

Original value:Generation plant $ 283,072 $ 484 $ (4,305) $ 100,688 $ 379,939LNG facility, pier

and pipeline 154,003 200 (34) (92,292) 61,877Spare parts 20,595 - (500) 2,760 22,855Buildings 13,053 - - 877 13,930Vehicles - - - 594 594Office equipment

and others 3,212 281 (113) (344) 3,036Software 460 15 (10) 533 998

Subtotal 474,395 980 (4,962) 12,816 483,229

Accumulateddepreciation

Generation plant (57,960) (9,457) 4,811 4,081 (58,525)LNG facility, pier

and pipeline (34,361) (5,209) 17 (2,194) (41,747)Spare parts (1,719) (341) 124 (1,887) (3,823)Buildings (1,272) (584) - (8) (1,864)Vehicles - - - (385) (385)Office equipment

and others (1,770) (449) - 392 (1,827)Software (224) (148) - 1 (371)Subtotal (97,306) (16,188) 4,952 - (108,542)

Subtotal 377,089 (15,208) (10) 12,816 374,687Land 9,083 - (1,390) - 7,693Construction in

progress 3,907 16,402 - (12,816) 7,493Total, net $ 390,079 $ 1,194 $ (1,400) $ - $ 389,873

During the years ended December 31, 2013 and 2012, the Company recordeddepreciation expense of $16,188 and $13,745, respectively.

Due to the implementation of the new accounting system, the Company reviewedthe different categories of fixed assets and determined additional reclassifications.


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9. OTHER NONCURRENT ASSETS

The other assets as of December 31, 2013 and 2012, consist of:

2013 2012

Advances to property, plant and equipmentsuppliers 1,377$ 3,181$Guarantee deposit 70 75Total 1,447$ 3,256$

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The accounts payable and accrued liabilities balances as of December 31, 2013and 2012 consist of the following:

2013 2012

Customer guarantee deposits 23,032$ 15,821$Energy suppliers 11,527 5,682Other accrued liabilities 740 983Local suppliers 1,617 963Accrued interest 2,136 2,374Employee compensation 1,267 1,097International suppliers 1,114 445Legal, tax and accounting fees 134 127Other 1,125 948Total 42,692$ 28,440$


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11. NOTES PAYABLE

As of December 31, 2013 and December 31 2012, Andres’ financial debt consistsof the following:

2013 2012

Senior Notes 9.5% $ 167,560 $ 167,560Total $ 167,560 $ 167,560

Senior Notes

On November 12, 2010, the Company, through its subsidiary AES AndresDominicana, Ltd. (“Dominicana”), issued Senior Notes with a principal amount of$167.6 million with Deutsche Bank Securities Inc., and Credit Suisse Securities(USA) LLC as the original purchasers, with a single installment payment dueNovember 12, 2020, bearing an annual interest rate of 9.50% (the “2020 Notes”).Interest is payable semiannually commencing on May 12, 2011.

Andres and DPP unconditionally and irrevocably guaranteed the timely paymentof capital, interest, and other additional amounts, payable by the issuer (AESAndres Dominicana, Ltd.) to the extent that they are due.

As result of the 2020 Notes issuance, the Company must maintain at all times thedebt service reserve account that at any time, the funds on deposit therein are in anamount sufficient to provide for the payment in full of the next succeedingscheduled interest payment of the 2020 Notes, which amounted to $7.9 million asof December 31, 2013 and December 31, 2012.

The financial covenants of the 2020 Notes are: (i) the interest coverage ratio mustbe greater than 2.25:1.0 and (ii) the net debt to EBITDA (earnings before interest,income taxes, and depreciation and amortization) must be lower than 3.5:1.0. As ofDecember 31, 2013, the Company was in compliance with these covenants.


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12. INCOME TAX

AES Andres BV is a company registered in the Netherlands. For tax purposes aworldwide income is applied in The Netherlands at a 25% rate. During 2012 and2013, a first income tax bracket up to €200 was established, which is taxed at a rateof 20%; the remainder is taxed at 25%.

AES Andres Dominicana, Ltd. is a tax-exempted company incorporated withlimited liability in the Cayman Islands; therefore, AES Andres Dominicana, Ltd.is not subject to the payment of income taxes.

The Branch is a foreign company for Dominican tax purposes and is thereforesubject to the Dominican tax regime applicable to business activities, which wasestablished by the Law 11–92 of May 31, 1992, plus its subsequent amendments.Even though the Branch has US Dollar as its functional currency, income taxcalculations are determined on the local currency, the Dominican Peso.

Due to the fact that the activities of Andres consist of foreign non-Dutchactivities, which are already taxed in the Dominican Republic, the incomeexclusion method is applied. This method regards a ‘source’, or ‘object’exemption; therefore, foreign permanent establishment’s assets and debts remainpart of the taxpayer’s balance sheet for tax purposes, but the profit allocable to thebranch will, from 2012, be eliminated from the taxable profit. Under thismethodology foreign exchange differences may lead to a mismatch between thetaxable worldwide profit (calculated in Dutch functional tax currency) and thetaxable branch income (calculated in local tax currency and concerted against anaverage rate). This effect can be deferred as far as foreign exchange results can betreated as not realized.

Current income tax

In June 24, 2011, the Government of the Dominican Republic enacted the TaxReform Law 139-11, increasing the income tax rate for legal entities for fiscalyears 2011 through 2013 to 29%. This temporary increase was established for aperiod of two years, however by Law 253-12 of November 13, 2012, this rate wasextended to 2013; for the year 2014 it declines to 28% and for 2015 to 27%. TheCompany was impacted in 2012 recording $1.7 million as additional deferred taxexpense due to this change. Also, said Act established a withholding tax of 10%for profit remittance abroad, for which the Company recorded a deferred tax ofapproximately $21.1 million at December 31, 2012 on retained earnings to themain office.


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12. INCOME TAX (continued)

Tax on assets

The tax on assets corresponds to 1% of the taxable assets. For electricitycompanies, taxable assets correspond to the total fixed assets net of accumulateddepreciation. This tax may be used as a credit against the income tax as follows: ifthe income tax is greater than the tax on assets, there is no obligation to pay thelatter; otherwise, the difference between the income tax due and the tax on assetsmust be paid.

According to Article I of Law No. 557-05, which modifies letter K or Article No.287 of the Tax Code, applicable as of January 1, 2006, losses incurred bycorporations in their economic activities may be compensated during thefollowing fiscal periods, without exceeding five (5) years. The usage of suchcarryforwards is limited to a maximum of 20% of total carryforwards per year. Inaddition, the amount of the carryforwards utilized cannot exceed 80% of taxableincome in the fourth fiscal year and 70% of taxable income in the fifth year.

The income tax payable balance as of December 31, 2013 and 2012 consists of:

2013 2012

Income tax payable at beginning of year $ (11,777) $ (18,263)Income tax payments 50,304 44,663Current income tax expense (49,640) (38,305)Exchange effect 531 128Income tax payable at year end $ (10,582) $ (11,777)


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Deferred income tax is comprised as follows:

2013 2012CURRENTAssets:Provisions $ 203 $ 318Total current deferred income tax Asset $ 203 $ 318

LONG-TERMAssets:Tax basis vs. book basis difference on fixed assets $ 5,596 $ 5,596Total long-term deferred tax asset 5,596 5,596

Liabilities:Accelerated tax depreciation (21,534) (23,266)Withholding of unremitted earnings fromBranch (25,562) (21,113)Other temporary differences (689) (290)Unrealized foreign currency gain (5,596) (5,596)Total long-term deferred tax liability (53,381) (50,265)Net long-term deferred income taxliability $ (47,785) $ (44,669)

The income tax expense is comprised as follows:

2013 2012

Current $ 49,640 $ 38,305Deferred 5,885 22,933Total income tax expense $ 55,525 $ 61,238

In accordance with ASC 740 “Incomes Taxes”, tax positions are recognized infinancial statements if that position is more likely than not to be sustained by thetaxing authority. Any interest and penalties related to income tax exposureswould be recognized within interest expense and other non-operating income(expense), respectively, in the consolidated statements of income. The Company


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has not recorded any liabilities for uncertain tax positions as of December 31,2013 and December 31, 2012.

13. OTHER LIABILITIES

Other liabilities balances as of December 31, 2013 and December 31, 2012consist of the following:

2013 2012

Current Liabilities:Financing lease -$ 11$

Long - term liabilities:Long - term compensation 32$ 24$Long - term contingent legal reserves 45 50Total 77$ 74$

14. STOCK-BASED COMPENSATION

Effective January 1, 2003, The AES Corporation adopted the fair valuerecognition provision of ASC No. 718 prospectively to all employee awardsgranted, modified or settled after December 1, 2001, and pushed-down those coststo the Company, resulting in the stock-based compensation cost for the yearsended December 31, 2013 and 2012 of $33 and ($37), respectively, with a relatedcredit to shareholder’s equity.


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15. COST OF REVENUE – ELECTRICITY PURCHASES AND FUEL COSTS USED FOR GENERATION

The cost of revenues for electricity purchases and fuel costs used for generationfor the years ended December 31, 2013 and 2012, consists of the following:

2013 2012

Fuel and fuel related costs used for generation 107,500$ 124,023$Electricity purchases 25,354 37,017Transmission charges 12,006 -

144,860$ 161,040$

16. OPERATING, MAINTENANCE AND GENERAL EXPENSES

The operating, maintenance and general expenses for the years ended December31, 2013 and 2012 consist of the following:

2013 2012

Salaries, wages and benefits 6,204$ 6,130$Maintenance expenses 7,067 6,460Insurance 7,332 6,910Reimbursable operating costs 2,049 1,222Consultants and legal fees 2,048 2,487Facilities management expenses 960 1,275External affairs and media services 651 967Management fees 773 760Security services 670 708Supplies and consumables used in generation 146 678Safety 210 394Travel and transportation 243 109Other expenses 1,185 1,299Total 29,538$ 29,399$


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17. INTEREST EXPENSE – NET

Net interest expense for the years ended December 31, 2013 and 2012, consists ofthe following:

2013 2012

Interest expense - borrowings 17,706$ 17,186$Interest expenses - commercial 642 1,757Subtotal 18,348 18,943

Interest income - commercial (1,242) (10,130)Interest income - financial (1,503) (817)Subtotal (2,745) (10,947)Total 15,603$ 7,996$

Commercial interest is determined in accordance with the Dominican electricitysector regulation and the terms established in the power purchase agreements.Accounts receivable and accounts payable with the electricity sector spot market,denominated in Dominican Pesos, are subject to the local active interest rate fordomestic currency plus a penalty in accordance with the Sector Agreement (Note4). The average interest rate applied to spot market accounts receivables andpayables in dollars in 2013 was 7.17% (2012: 6.82%) and Dominican pesos in2013 was 14.06% (2012: 12.86%).

In 2013, the Company, Sector Companies and CDEEE agreed to eliminate the18% penalty fee for 2012 and 2013 as established in Article 355 of the GeneralLaw of the Electricity Sector. Such agreement was formalized on January 30,2014, through the “Acuerdo General Sector Eléctrico Dominicano”. TheCompany reversed during 2013 interest income - commercial a net loss of $7.4million.


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18. OTHER (EXPENSE) INCOME

Other (expense) income for the years ended December 31, 2013 and 2012 consistsof the following:

2013 2012

Loss on asset disposal (412)$ (1)$Gain on sale of scrap 66 66Total (346)$ 65$

19. COMMITMENTS AND CONTINGENCIES

As of December 31, 2013, the Company has the following commitments andcontingencies:

a. Contract for the purchase – sale of energy EDE Este PPA – In March 2002,Andres signed a contract for the sale of energy PPA with EDE Este with amaturity date of December 31, 2018. Andres was awarded the PPA in acompetitive bidding process supervised by the Superintendent of Electricity.In accordance with the terms of the contract, Andres provides capacity toEDE Este at a base price per KW denominated in U.S. dollars, with amonthly escalation based on U.S. inflation and also the Company sells energyto EDE Este at a base price per KW hour, adjusted by fuel cost and U.S.inflation on a monthly basis. The revenues associated with this contractconsist of energy and capacity sales were $87.1 million and $54.6 million forthe years ended December 31, 2013 and 2012, respectively.

On September 7, 2011, Andres signed a second addendum to the PPAmentioned above, the purpose of the addendum includes additional blocks ofcapacity for the duration of the original contract.

b. Energy sale contract-Falconbridge Dominicana, S.A. PPA – In October,2010, Andres signed an energy and power sale contract for 3 years withFalconbridge, effective on January 1, 2011.

The January 17, 2013, Andres signed a new contract of sale of energy andcapacity for 1 year with Falconbridge, to be effective from January 1, 2014and ending December 31, December 2014.


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19. COMMITMENTS AND CONTINGENCIES (continued)

In accordance with the terms of the contract, Andres provides capacity toFalconbridge at a price which is determined on a monthly basis by theElectric Coordinator in the Dominican Republic. Additional, the Branchprovides energy required by Falconbridge at a base price of $145.00 perMWh, adjusted by the consumer price index of the United States and thevariation in the base price of the Nymex Henry Hub Natural Gas asestablished in the contract.

c. Envirogold Limited (“Las Lagunas”) PPA – On January 3, 2012, theCompany signed a third addendum to the contract of energy and capacity salewith Las Lagunas in order to agree on a new term for the contract, and also toagree on new amounts and price. From this new addendum to originalcontract signed on January 4, 2010, the contract will expire on December 31,2017.

d. Gas Purchase and Natural Gas Transportation Contracts – As described inNote 3, the Company has natural gas purchase and natural gas transportationcontracts with DPP.

e. Gas Sale and Natural Gas Transportation – Effective August 17, 2010, AESAndres signed a contract for transportation of LNG with its clientTranscontinental Capital Corporation (Bermuda) LTD., ending on December31, 2017, with a periodic renewal option after agreement by the parties.Andres agrees to advise and coordinate with the client the design andconstruction of a gas pipeline and the interconnection structures between theCompany and Transcontinental. Andres will charge the client a fee for the useof gas transportation to the valve located on the facilities of DPP.

Effective August 17, 2010, AES Andres signed a separate contract for thesale of LNG to Transcontinental Capital Corporation, (Bermuda) LTD.,ending on December 31, 2017. Through this contract, Andres has committedto deliver 100,000 MMBTU in 2011, 2.0 TBTU in 2012 and dailyamounts not exceeding 19,600 MDQ (Maximum Daily Quantities) for therest of the contract. The client may request additional amounts, subject to theCompany’s approval.

Effective November 8, 2013, AES Andres, B.V. (“Andres” or the“Company”) amended the Regasified LNG Purchase Agreement and theRegasified LNG Transportation Agreement with Transcontinental CapitalCorporation (Bermuda), Ltd. Through these amendments, Andres confirmed


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that it will provide 3.0 TBTU of regasified LNG for the contract year 2014 ata price based on Brent plus a spread between FO6 and Brent. Additionally,the pipeline toll for the periods after 2014 was modified.

f. Contract of sale of LNG (various) – Effective on October 13, 2011, theCompany signed new contracts for the sale of LNG with the followingclients: Soluciones en Gas Natural, Línea Clave International,Transcontinental Capital Corporation – SEABOARD, Platter Investment,Tropigas Dominicana, S.R.L. and Propanos y Derivados S.A. Through thesecontracts, Andres promises to provide LNG to these clients until December31, 2014. The price for these contracts is variable.

g. Operating Lease Contract – In October 2010, the Company signed anamendment for the extension of the term and price of an operating leasecontract. On May 22, 2013, the Company signed a fifth amendment thatextends the term of the contract until June 1, 2014. The rental expense underthis lease was $168 and $155 for the years ended December 31, 2013 and2012, respectively. The payment commitment for next year is as follows:

YearOperating

Leases2014 $ 70

h. Purchase Obligation – The Company has a 20-year LNG purchase contractwith BP Gas Marketing Limited (“BP”), through ABS. The amounts set forthin the following table represent the total contract amounts through 2023(undiscounted) for the term of the LNG Contract based on the NYMEX priceon December 31, 2013. The probability of incurring a net loss related to thetake-or-pay obligation is considered low. The Company has guaranteed atotal of $100 million under the LNG Contract and it is valid for the durationof the contract (Note 3).

With effective date of December 11, 2013, ABS signed a Side LetterAgreement in relation to its LNG Supply Contract originally signed 2001with BP Gas Marketing Limited (BP) (“the Contract”). The main purpose ofthe letter agreement is to request a delivery of two LNG cargoes in additionto the base quantity agreed for 2014. The cargoes are expected to bedelivered between May and September 2014.


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The amounts presented in the following table represent the contractualamounts until 2023 based on the NYMEX price as of December 31, 2013.

YearCommitment

(in 000’s)

2014 $ 252,1172015 140,4692016 190,616

Thereafter 1,341,281Total $ 1,924,483

i. Letters of Credit – On May 22, 2013, the Company negotiated a new Letterof Credit with Scotiabank. The guarantee consists of certificates of timedeposit, which are not restricted.

- Amount: $15,000- Expiration: May 22, 2014- Cash collateral: $15,000- Interest rate on cash collateral deposit: 0.60%- Terms of the cash collateral: The cash collateral may be canceled andthe funds withdraw at any time with the correspondent payment of the feedifferential between a secured and a non secure Stand-By Letter of Creditfor the remaining term, based on the initial quoted fees.

On May 2, 2014, the Company negotiated a new Letter of Credit with TheScotiabank. The guarantee consists of certificates of time deposit, which arenot restricted.

- Amount: $15,000- Expiration: May 22, 2015- Cash collateral: $15,000- Interest rate on cash collateral deposit: 0.50%- Terms of the cash collateral: The cash collateral may be canceled andthe funds withdraw at any time with the correspondent payment of the feedifferential between a secured and a non secure Stand-By Letter of Creditfor the remaining term, based on the initial quoted fees.


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j. Litigations and Claims – The Company is involved in two civil lawsuitsseeking repair of damages. The total claim amount is RD$10.3 million(approximately $240). Based on the opinion of the Company’s legal advisors,as of December 31, 2013 and 2012, management decided to include in thefinancial statements an accrual of $45 and $50, respectively (see Note 13), forthis contingency.

k. Fiscal commitment – The Company income tax returns are subject to reviewby the tax law authorities for the past three years including the year endedDecember 31, 2013, according to the current tax regulations.

l. Guarantees – The Company, along with its related DPP, has givenunconditional and irrevocable guarantee for the payment of the capital,interest and other additional payable amounts of 2020 Notes issued for $167.6million by its subsidiary AES Andres Dominicana, S.A.

20. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company established a process to determine fair value. The determination offair value takes into consideration the quoted market price of financialinstruments; however, in many cases, quoted market prices are not available forvarious financial instruments of the Company. In cases where a market quote isnot available, the fair values are based on estimates using the present value orother valuation techniques. These techniques are significantly affected by theassumptions used, including the discount rate and the future cash flows.

Nevertheless, in many occasions no quoted market prices exist for several of theCompany’s financial instruments. In cases in which market quoted prices are notavailable, the fair value is based on estimates using current value or othervaluation techniques. These techniques are affected significantly by theassumptions employed, including the discount rate and future cash flows.

(a) Financial Instruments with Book Value Approximating to Fair Value

Due to their short-term nature, the book value of certain financial assets,including cash, accounts receivable and related accounts receivable, as well ascertain financial liabilities including accounts payable and related accountspayable, are considered to be their fair value.


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20. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The Company follows FASB ASC No. 820 provision of Fair ValueMeasurements. This standard provides a consistent definition of fair value andestablishes a framework for measuring fair value in accordance withaccounting principles generally accepted in the United States and requiresmore extensive disclosures about fair value measurements. Prior to the rules,the definition of fair value and guidance to apply these definitions under USGAAP was limited. Additionally, the guidance was dispersed among the manyaccounting pronouncements that require fair value measurements.

This standard defines fair value as the price that would be received to sell anasset or paid to transfer to a liability ("exit price") in the principal or mostadvantageous market for an asset or liability in an orderly transaction betweenparticipants market at the measurement date. Additionally, the rule establisheda hierarchical framework that prioritizes and directs the level of observablemarket price used to measure investments at fair value. The observables areaffected by a number of factors, including the type of investment and thespecific characteristics to the investment. Investments with readily availablequoted prices or for which fair value can be measured based on activelyquoted prices generally will have a higher level of observable market priceand a lower level of criteria to measure fair value.

To increase consistency and enhance disclosure of fair value, the fair valuemeasurement accounting guidance creates a fair value hierarchy to prioritizethe inputs used to measure fair value into three categories. An asset orliability’s level within the fair value hierarchy is based on the lowest level ofinput significant to the fair value measurement, where Level 1 is the highestand Level 3 is the lowest. The three levels are defined as follows:

Level 1 – unadjusted quoted prices in active markets accessible by thereporting entity for identical assets or liabilities. Active markets are those inwhich transactions for the asset or liability occur with sufficient frequency andvolume to provide pricing information on an ongoing basis.

Level 2 – pricing inputs other than quoted market prices included in Level 1which are based on observable market data that are directly or indirectlyobservable for substantially the full term of the asset or liability. Theseinclude quoted market prices for similar assets or liabilities, quoted marketprices for identical or similar assets in markets that are not active, adjustedquoted market prices, inputs from observable data such as interest rate andyield curves, volatilities or default rates observable at commonly quoted


38


intervals or inputs derived from observable market data by correlation or othermeans. The fair value of most over-the-counter derivatives derived frominternal valuation models using market inputs and most investments inmarketable debt securities qualify as Level 2.

Level 3 – pricing inputs that are unobservable, or less observable, fromobjective sources. Unobservable inputs are only used to the extent observableinputs are not available. These inputs maintain the concept of an exit pricefrom the perspective of a market participant and should reflect assumptions ofother market participants. An entity should consider all market participantassumptions that are available without unreasonable cost and effort. These aregiven the lowest priority and are generally used in internally developedmethodologies to generate management’s best estimate of the fair value whenno observable market data is available. The fair value of implied goodwilland long–lived assets determined using discounted cash flows valuationmodels for impairment evaluation purposes qualify as Level 3.

Any transfers between all levels within the fair value hierarchy levels arerecognized at the end of the reporting period. There were not transfers during2013.

Bonds Payable

The estimated fair value as of December 31, 2013 and 2012, is based oninformation available as of the date of the balance sheets. The Company doesnot have knowledge of any factor that might significantly affect the estimatesof fair value as of that date. For bonds payable with a fixed rate, the Companyestablished a process to determine fair value.

The assumptions used by the Company to calculate the fair value of SeniorNotes fall under Level 2 of the hierarchy as of December 31, 2013 and 2012.

Therefore, the Company has not made reclassifications of levels. Anydifference between the balance as of December 31, 2013 and 2012 onlyrepresents changes in the fair value of the Senior Notes.


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The fair values estimated for such debt as of December 31, 2013 and 2012 are asfollow:

2013 2012 2013 2012

a. Long Term: Senior Notes 167,560$ 167,560$ 178,952$ 178,282$

Book Value Fair Value

21. SUBSEQUENT EVENT

On January 30, 2014 was signed a second agreement “Acuerdo General SectorEléctrico Dominicano”, between CDEEE and all Sector Companies in which theyagreed to not pay the penalty fee of eighteen percent (18%) from January 1, 2014through December 31, 2014, established in Article 355 of the General Law ofElectricity Sector.

Subsequent events were assessed by Management through to May 29, 2014, thedate when the financial statements were authorized to be issued.

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