November 29 – December 02, 2005November 29 – December 02, 2005
Latin American Small & Mid Cap Forum 2005Latin American Small & Mid Cap Forum 2005
• History and Shareholding Structure
• Concession Area
• Market and Operational Performance
• Tariff Adjustment
• Financial Results
• Conclusion
3
HistoryHistory
......1998 2000 -2001 2002
Privatization of Eletropaulo
(April)
AES Transgás acquired 64% of preference shares (January 2000)
CSN and Reliant sold their interests in Light and Eletropaulo
(December 2000)
Energy Rationing (June 2001)
EDF/AES ConsolidationAES took over Eletropaulo
EDF took over LightCorporate Restructuring
approved by ANEEL(February)
CVM approves public offering for AES ELPA shares
(June)
AES ELPA shares split from Light shares(November)
2003
AES Restructuring Brasiliana was
established to hold, direct or indirect,
control of Eletropaulo, Tietê and Uruguaiana
(December)
New Model of Energy Sector
Federal Government issued
new law for the Electric Energy
Sector - the “New Model” (2004)
Incorporation of AES Elpa debt
and AES Transgás debt by Brasiliana
2004-2005 Next Steps
Consolidation and rationalization of the
shareholding structure
4
Shareholding StructureShareholding Structure
20.03% ON
0.73% PN
100.00%
AESAES BNDESBNDES
BrasilianaBrasiliana
Minorities Fed. Gov./BNDES
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
5
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%
6
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
7
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%
8
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
9
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
10
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
11
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%
12
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%
13
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
14
ResultsResultsin R$ millionin R$ million
8.6499.981
7.228 8.314
2003 2004 9m04 9m05
Billed Energy Other Revenues
Gross Revenue Operating Expenses
3.851
336
1.449
5.637
4.439
555
1.398
6.391
3.231
375
958
4.564
3.607
537
1.483
5.627
2003 2004 9m04 9m05Electricity+Transp. Sector ChargesOperating Expenses
52
1.0601.272
963 827
412400
293 550
22,9% 22,6%23,5%
22,1%
2003 2004 9m04 9m05
AdjustsEBITDAAdjusted EBITDA Margin
EBITDA
1,4721,672
1,2561,377
• 18,6% average tariff adjustment in July 2004
• Conclusion of 2003 Tariff Review, which generated an additional R$ 106.9 million revenue on 2Q05
• Reversal of PIS/PASEP’s allowances in the amount of R$ 72 million in 2Q05 – accounting impact
• An allowance for doubtful debts of R$ 346.4 million based on an agreement signed with the Municipal Government of São Paulo
• 10% raise in cost of energy purchased due to increase in energy supplied by AES Tietê and payment of PIS / Cofinstaxes
• Increase of sector charges
• 41% CCC
• 46% CDE
15%
23%
10%
15
ResultsResultsin R$ millionin R$ million
Financial Result
24
(453) (434)
(319)
2003 2004 9m04 9m05
48
• Reversal of R$ 98 million in 2Q05 due to legal disputes over PIS / Pasep (accounting impact)
• Reversal of R$ 55.2 million in 3T05 resulting from the provision of credits from the Municipal Government of São Paulo
• Appreciation of 16.3% of the Real against the US dollar in 9m05, versus an appreciation of 1.1% in 9m04
Profit / Loss
86
6
(12)
(204)
2003 2004 9m04 9m05
48
• Increase in operating expenses mainly due to extraordinary and non recurring provisions
• Increase in PIS/Cofins taxes on the bilateral contract with AES Tietê
• Other impacts (see next slide)
26%
1,616%
16
Negative Impacts Negative Impacts –– 3Q053Q05
Provision - Agreement signed with MGSP R$ thousandMGSP 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 Tietê R$ thousandPis/Cofins payment to AES Tietê (43,692)Tax Effects (34%) - Credit 14,855
Net Effect on the Result (28,837)
Other impacts - 3Q05 R$ thousandAllowance 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)Net Effect on the Result (53,414)
Total - Net Effect on the Result (310,548)
17
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
18
Consolidated IndebtednessConsolidated IndebtednessR$ millionR$ million
71%
23% 26%
29%
77% 74%
0%
50%
100%
2003 2004 3Q05
ST LT
1,424.51,778.8 1,992.6
762.5
1,102.0 948.6
2,338.62,402.73,090.8
2003 2004 3Q05
FCESP CVA/RTE Private Creditors
5,278 5,284 5,280 5,278 5,284 5,280
ST ST vsvs LTLT Debt EvolutionDebt Evolution
19
Hedging StrategyHedging Strategy
0%10%20%30%40%50%60%70%80%90%
100%
2000 2001 2002 2003 2004 3Q05
Local Currency Hedge Foreign Currency
41%
41%
18% 14%
61%
25%
42%
4%
54%
3%
35%
62%
17%
83%
86% of foreign currency debt is
hedged, considering the financial costs
R$3,473 R$4,490 R$5,902 R$5,278 R$5,284
million
8%
90%
R$5,2802%
20
469
70335
522367
1,972
159
132
905
506
474
144
444
43
99
56
158285
9349
Downpayments** YTD05 4Q05 2006 2007 2008 2009 2010-17
R$ BNDES US$ *
Amortization ScheduleAmortization ScheduleR$ millionR$ million
Effective payments
* Conversion rate on 09/30/2005 US$ 1,00 = R$2,2222
** Amortization of debts with creditors included in the Company’s Debt Reprofile Agreement, paid on 01/12/2005 with the third tranche of the rationing loan
Amortization of debts with creditors included in the Company’s Debt Reprofile Agreement, paid in two installments: R$ 175.9 million on 06/29/2005, plus US$ 25.6 million on 07/28/2005 using 50% of the proceeds from the R$ 474.1 million bond issue
Amortization of debts with creditors included in the Company’s Debt Reprofile Agreement, paid in two installments: R$ 550.1 million paid on 09/27/2005, and US$ 75.2 million paid on 10/27/2005 using 90% of the proceeds from the R$ 800.0 million issue of debentures.
21
BONDS (June 2005)
• Principal: R$ 474 million
• Tenor: 5 years
• Interest rate: 19.125% p.a.
• Interest and Amortization:
• bullet
• semiannual interest
Debentures (September 2005)
• Principal: R$ 800 million
• Tenor: 5 years
• Interest rate: CDI +2.90% p.a.
• Interest and Amortization:
• Semiannual interest
• Grace period: 23 months
• Annual payments
• Down payments made to creditor banks:
• Bonds: 50% R$237,030,000
• Debentures: 90% R$720,000,000
2005 Issues2005 Issues
2.75 years1.58 yearsAverage Life
126% CDI128% CDIAverage Cost
After issues
Before issues
Private Creditors debt
Basis: September 2005
22
Financial StrategyFinancial Strategy
D2003
B2005
Ratings – International Scale
B –2004
• Successful issues
• Estimates of growth in operating revenues and cash flow
• Expected decrease in debt servicing
• Better outlook for the electric sector
S&PFitch Ratings
23
ConclusionConclusion
• Affected by extraordinary events, the company had a loss of R$ 204 million on the 9 months of 2005
• The R$ 474 million bonds and R$ 800 million debentures allowed:
• A down payment of R$ 957 million to private creditors (most expensive debt), reducing the average cost of debt from 128% CDI to 126% CDI and increasing the average life of debt from 1.58 years to 2.75 years, as of September 2005
• A reduction of 36% of the total foreign currency debt from March 2005 to September 2005
• Fitch Ratings raised Company’s international scale credit rating from “B-” to “B” and national scale credit rating from “BB” to “BB+
• Tariff Adjustment of 2.12%, effective as of July 4, 2005 and conclusion of Tariff Review 2003
Financial Strategy:
• Increase duration and decrease costs of debt
November 29 – December 02, 2005November 29 – December 02, 2005Latin American Small & Mid Cap Forum 2005Latin American Small & Mid Cap Forum 2005
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.