Latin Energy 12/2005

Latin Energy 2005December, 2005


• Shareholding Structure

• Concession Area

• Market and Operational Performance

• Tariff Adjustment

• Financial Results

• Conclusion

3

Shareholding StructureShareholding Structure

0.73% PN

100.00%

AESAES BNDESBNDES

BrasilianaBrasiliana

Minorities Fed. Gov.

Minorities

49.99% ON

100.00% PN50.01% ON

98.26%

1.74%

62.85% PN 77.81% ON

AES Transgás AES Elpa

7.38% PN

2.16% ON

29.05% PN

BNDES

20.03% ON

4

Concession AreaConcession Area

• Largest electricity distribution company in Latin America in terms of revenue

• Net Revenue in 2004 – R$ 7,394 million

• Density of billed energy consumption: 7,220 MWh/Km2

• Attractive concession area in Brazil• Demographic density

• Solid economic base

Brazil Eletropaulo %

Km² 8,547,403 4,526 0.05%

Population 184,434,438 16,062,101 8.71%

Energy Distributed (GWh/year) 320,772 35,341 11.02%

5

Consumer Market ProfileConsumer Market Profile

32.0%

24.7%

26.9%

9.3%7.1%

9m 2004 - GWh 9m 2005 - GWh

32.5%

21.1%

26.4%

7.3%

12.7%

40.7%

20.4%

29.9%

1.5%7.5%

41.2%

19.2%

3.3%

29.8%

6.6%

9m 2004 – R$ 9m 2005 – R$

cons

umpt

ion

reve

nue

Residential

Industrial

Commercial

Others

TUSD

Consumption- GWh

1800.0

2200.0

2600.0

3000.0

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

6

Consumption in GWhConsumption in GWh

NOTE: Charts do not consider own consumption

2,433 1,8691,982

3,458

8,417

6,4907,064

8,819

5,7437,175

Residen

tial

Indus

trial

Commerc

ial

Other

TUSD

9m 2004 9m 2005

4.8%

-11.5%1.6%

-18.5%

24,404

27,17826,273

23,720

Market Billed Market Billedwith TUSD

9m 2004 9m 2005

85.0%

3.4%-2.8%

7

Retention of Potentially Free ConsumersRetention of Potentially Free Consumers

3.1%

13.4%

83.5%

Captive Consumers Free Consumers Potentially Free Consumers

Captive Consumers X Free% total load of concession area of 2005 (e) 36,511 GWh

Net Revenues with TUSD - R$ million

1930

3848

54

7884

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

8

Energy SupplyEnergy Supply

2003 2004 2005

Auction

Other bilateral contracts

Bilateral contract withTietê

Initial contracts

Itaipu

2003 2004 2005

Auction

Other bilateral contracts

Bilateral contract withTietê

Initial contracts

Itaipu32%32% 32%32% 31%31%

60%60%

51%51%

19%19%

7%7%15%15%

21%21%

2%2%

27%27%

2%2%1%1%

GWhGWh

• Initial Contracts end by January 2006

9

Loss Reduction Loss Reduction –– YTD 2005YTD 2005

• 370 thousand inspections • Revenue recovery of R$ 86.8 million (billed value) • Annual recovery perspective of 320 GWh (agreements)

Losses

7.93% 7.75% 7.41%

13.01%13.35%13.53%

2004 1H05 3Q05

Commercial Total

10

Tariff AdjustmentsTariff Adjustments

Annual AdjustmentTariff Adjustment Rate

Periodic ReviewTariff Repositioning

VPA + VPB (IGPM +/- X)Revenue

(Required Revenue – Deductions from Required Revenue)Actual Revenue

Review 2003 Review 2007Review 2007Privatization 1998

Annual Adjustment (Factor X = 0 in the first 4 years)

0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8 9 109 10YearYear

Annual Adjustment(Factor X = 0)

2.12%2.12%

11

3.7%6.3% 4.5% 2.5% 3.6% 4.8%

7.5%7.6% 12.1%

11.8% 7.3%1.6%

-4.3%1.7%

16.9%7.1%

-10%

-5%

0%

5%

10%

15%

20%

1999 2000 2001 2002 2003 2004 2005

Parcel B Parcel A PIS/COFINS IGPM

Tariff EvolutionTariff Evolution

Adjustment

2.12%

6.4%

X Factor = 2.43%

18.6%

11.6%

14.3%17.6%

11.1%

13.8%

12

R$ 9,885R 8,275Gross remuneration base

R$ 42TOTAL

R$ 99R$ 426R$ 327Depreciation

R$ 4,771R$5,242Net remuneration base

(R$ 81)R$ 814R$ 895Remuneration

R$ 24R$ 24-Additional O&M costs

4.31%3.95%Depreciation rate

17.07%17.07%Remuneration rate

VariationPresentPreviousItem – R$ thousand

Completion of Tariff Review 2003Completion of Tariff Review 2003

• Authorized increase in adjustment rate from 10.95% to 11.65%• R$ 42 million added to the remuneration granted for tariff year 2003-2004

• The accrued value amounted R$ 106.9 million, with an impact on 2Q05 results

• Recovery of resources will take place during tariff year 2005-2006

R$ 42

R$ 106.9

13

Net Revenues

ResultsResultsin R$ millionin R$ million

Adjusted EBITDA = EBITDA + RTE + all payments made by the Company with respect to pension fund obligations.

7551.060 1.272

963 827

1.3771.2561.343 1.4721.672

23,2% 22,9% 22,6% 23,5% 22,1%

2002 2003 2004 9m04 9m05

Adjusts EBITDA Adjusted EBITDA Margin

(871)

86 6

(12)

(204)

2002 2003 2004 9m04 9m05

(1.265)

24

(453) (434)(319)

2002 2003 2004 9m04 9m05

5.8006.462

7.430

5.370

6.257

2002 2003 2004 9m04 9m05

Adjusted EBITDA Margin

Financial Results Profit / Loss

490

400412

293 550

14

Negative Impacts Negative Impacts –– 3Q053Q05

Provision - Agreement signed with MGSP R$ thousand

MGSP debt balance provision (346.369)Financial Expenses - Present Value Adjustment Reversal 55.227Tax Effects (34%) - Credit 98.988Reversal of Tax Credit (36.143)

Net Effect on the Result (228.297)

increase in Pis/Cofins' taxes - Agreement with AES Tiet R$ thousand

Pis/Cofins payment to AES Tietê (43.692)Tax Effects (34%) - Credit 14.855


Other impacts - 3Q05 R$ thousand

Allowance for doubtful debts - Other Municipal Governments (23.953)Present Value Adjustment - Other Municipal Governments (9.102)IPTU tax – MGSP – Monetary Correction (9.444)Diferred Amortization - Debt downpayment (15.992)Tax Effects (34%) - Credit 19.887Reversal of Tax Credit (14.810)


Total - Net Effect on the Result (310.548)

2005 results were also affected by the recognition of R$256 million (9 months) in connection with ourpension fund obligations

In 2006, our results will still be affected by the remaining recognition of approximately R$340 million

15

186

370

203

297

33

3236

2003 2004 YTD 2005 2005

Capex Self Financed

Total 203

Total Recorded 239

Capex – YTD05

88

23

Loss Recovery 12

Personnel 53

Others 26

Customer Service and System Expansion

Maintenance

Self Financed 36

CAPEX CAPEX –– YTD 2005 YTD 2005 R$ millionR$ million

16

Consolidated IndebtednessConsolidated IndebtednessR$ millionR$ million

5,278 5,284 5,280

71%

23% 26%

29%

77% 74%

0%

50%

100%

2003 2004 3Q05ST LT

Short Term vs. Long Term

2,338

Debentures

BondsReprofilingOthers

Debt Evolution

46970

335 522 367

1,972

159

132

905506

474

144

444

43

9956

158285

9349

Dow-npayments

YTD05 4Q05 2006 2007 2008 2009 2010-17

R$ BNDES US$ *

Effective payments

Amortization Schedule

0%

50%

100%

2003 2004 3Q05

Local Currency Hedge Foreign Currency

3%

35%

62%

17%

83%

R$5,278 R$5,284

8%

90%

R$5,2802%

Hedging Strategy

1.4241.779 1.993

762

1.102 949

765

501

3.0912.403

253

819

2003 2004 3Q05

FCESP CVA/RTE Private Creditors

5,278 5,284 5,280

* Conversion rate on 09/30/2005 US$ 1,00 = R$2,2222

17

BONDS (June 2005)

2005 Debt Issuances2005 Debt Issuances

• Principal: R$ 474 million

• Tenor: 5 years

• Interest rate: 19.125% p.a.

• Interest and Amortization:

• semiannual interes, bullet principal

Debentures (September 2005)

• Principal: R$ 800 million

• Tenor: 5 years

• Interest rate: CDI +2.90% p.a.

• Interest and Amortization:

• Semiannual interest, Annual Principal

• Grace period: 23 months

Down payments made to banks

• Bonds: 50% R$237,030,000

• Debentures: 90% R$720,000,000

Basis: September 2005

DEBENTURES (September 2005)

Before Issuances

After Issuances

Before Issuances

After Issuances

Private Creditors’ Debt

128.1% CDI 126.7% CDI 1.58 years 2.75 years

Total Debt w/o FCESP

117.8% CDI 117.0% CDI 1.41 years 2.05 years

Total Debt 102.1% CDI 101.9% CDI 3.12 years 3.43 years

Average Cost Average Life

18

Financial StrategyFinancial Strategy

D2003

B2005

Ratings – International Scale

B –2004

• Successful issuances

• Estimates of growth in operating revenues and cash flow

• Expected decrease in debt servicing

• Better outlook for the electric sector

S&PFitch Ratings

19

ConclusionConclusion

• Affected by extraordinary events, the company had a loss of R$ 204 million on the 9 months of 2005

• Future Upsides: • Reduce in commercial losses

• Financial Strategy: Increase duration and decrease costs of debt

• Better results:

• No recurring provisions in regards to the City Government of São Paulo

• In 2007 the Pension Fund liability will be fully recognized in the Balance Sheet

The statements contained in this document relative to the Company’s business prospects, operating and financial result projections, and growth potential are mere forecasts based on the expectations of Company Management about the future. Such expectations are highly dependent on market shifts and on the performance of Brazil’s economy, the electricity sector and the international market. They are therefore subject to change.



Documents

Latin Energy 12/2005