AES AES Gener Business Review AES CORPORATION … · Jun-93 Jun-97 Jun-01 Jun-05 US$/MWh Marginal...
Transcript of AES AES Gener Business Review AES CORPORATION … · Jun-93 Jun-97 Jun-01 Jun-05 US$/MWh Marginal...
AES CORPORATION
City or location Month XX, 20XX
AES CORPORATIONAES Gener Business Review
Felipe CeronChief Executive Officer, AES Gener S.A.
March 22, 2006
1www.aes.com
AES Gener Strategic OverviewContains Forward Looking Statements
Financial Goals
Revenue Growth
Gross Margin Growth
Earnings Per Share Growth
ROIC Improvement*
Cash Flow Growth
Subsidiary Distributions*
Restructuring Opportunities
Growth Goals
Platform Expansion
Greenfield Investment
Privatization/M&A
AES Goals AES 2008 Target AES Gener Role
--
$3.5 Billion
13-19% per Year
11%
--
--
--
--
--
--
Above Average
Below Average
Above Average
Average
Above Average
Increasing
Limited
Significant Opportunities
Significant Opportunities
Longer-Term Potential
* Non-GAAP financial measure. See Appendix.
2www.aes.com
Chile Highlights
Chile at a Glance
Currency Exchange Rate (3/14/06)Per Capita GDP (2004)Inflation Rate (2005)Economic DriversCapital Largest CityPopulation (2005 E)Sovereign Credit Rating
Chilean Peso (Ch$)US$1= Ch$527.1
US$7,0773.6%
Copper, Agriculture, Forestry, FishingSantiagoSantiago
16.3 millionA / Baa1
3www.aes.com
31 companies
90% private sector
20% AES share (capacity)
27 generators
Four self and cogenerating
12,253MW installed capacity
41% hydroelectric
59% thermal
Generators free to sell to:
Distribution companies at regulated prices
Large customers at freely negotiated prices
Generation
Five transporters
100% private sector
Transmission (> 23 kV)
Over 15,000 km of lines
Open access transmission
Tolls set every four years
Transportation Distribution Commercial Base
Chile Electricity Market Characteristics
39 companies
4.6 million customers
Distribution companies distribute 54% of the electric consumption of the country
Regulated public service
Exclusive geographic concessions for regulated customers
Responsible for maintenance and investment
More than 100 large users supplied directly by generation companies
Above 2MW:
Data from AES Gener.
Tariffs set every four years based on “model company”
Large customers can purchase energy directly from a generator or distribution company
Freely negotiated prices and conditions
4www.aes.com
Chile Generation Market Profile
www.aes.com
5%20%
19%
42%
14%
Endesa
AES Gener
Colbun
Other
Tractebel-Codelco
Total Installed Capacity = 12,254MW
Capacity Market Share
5www.aes.com
Colombia Generation Profile
24%
25%17%
8%
10%
10%6%
AES-Chivor
ISAGEN
Union Fenosa
EEPPM
www.aes.com
Capacity Market Share
Endesa
CORELCA
EEPPM: Empresas Públicas de MedellínISAGEN: ISAGEN S.A. E.S.P.CORELCA: Corporación Eléctrica de la Costa Atlántica
Total Installed Capacity = 13,348MW
Other
6www.aes.com
Chile Grid Overview
Northern Interconnected System (SING) 2005
Installed Capacity 3,625MW
Maximum Demand 1,533MW
Gross Production 12,657 GWh
Load Factor 86%
% Hydroelectric 1%
% Thermal 99%
% Population 6%
Central Interconnected System (SIC) 2005
Installed Capacity 8,629MW
Maximum Demand 5,764MW
Gross Production 36,344 GWh
Load Factor 76%
% Hydroelectric 57%
% Thermal 43%
% Population 93%
Santiago
Antofagasta
SIC
SING
7www.aes.com
Chile Electricity Demand GrowthU
S$ M
illion
0
20,000
40,000
60,000
80,000
100,000
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
0
10,000
20,000
30,000
40,000
50,000
60,000
GW
h
GDP Energy demand
Correlation between energy demand and GDP growth has increased in recent yearsEnergy demand is expected to continue growing by more than 5% per year
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Colombia Electricity Demand Growth
High historic correlation between energy demand and GDP growth
International interconnections are expected to increase energy demand further in the future
US$
Milli
on
80,000
85,000
90,000
95,000
100,000
105,000
1997 1998 1999 2000 2001 2002 2003 2004
30,000
35,000
40,000
45,000
50,000
55,000
GW
h
GDP Energy demand
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Regulated node price + value added cost
Contracts awarded in open season bid processes
Minimum demand requirement > 2 MW
Customers with demand between 0.5 and 2MW may select tariff class every four years
Unregulated freely negotiated price
Economic Dispatch Center
Distribution Companies
Substation1
Unregulated
SpotTransactions
Transmission andDistribution Customers
DistributionTransmission
Substation2
Substation3
Gencogas Gencodiesel
Gencohydro
Toll Payment
Dispatch based on lowest cost of production (marginal cost)
Spot price = marginal cost
Includes energy and capacity payments
Open access transmission
Toll payments for existing installations determined by regulator
Bids held for new expansions
Concessions granted for distribution and tariffs based on model company structure
Chilean Power Market
Gencocoal
Regulated
10www.aes.com
Chilean Power Market Organization
Ministry of Economy
Superintendence of Electricity & Fuels:
Supervises compliance
Unregulated Customers
Economic Dispatch Center:Orders dispatch
Experts Panel:Resolves conflicts
National Energy Commission:
Implements policies
Regulatory Bodies
GenerationCompanies
Transmission Companies
DistributionCompanies
Economic Dispatch Center Members
11www.aes.com
AES Gener History
1970-1981 1982-1989 1990-2000 2001-2005
1986 Corporación de Fomento de la Producción (CORFO) initiates the privatization process
1988 Privatization process completed
1989 Company name changes to Chilgener S.A.
2004 Argentina begins to limit natural gas exports to Chile
2005 New sector law enacted in Chile supporting generation model and regulated tariff increases
2005 Gener launches first new capacity investment since 2002
1996 Chilgener acquires Chivor generation business in Colombia
1998 Company name changes to Gener S.A.
2000 - 2001AES acquires 99% controlling interest in Gener
1970 Compaňía Chilena de Electricidad S.A., created in 1921, is nationalized
1981 Chilectra Generation S.A. is formed as one of three State-owned electricity sector companies
12www.aes.com
AES Gener Business Structure
Chivorhydro (dam
based)(1,000 MW)
100%
Operating assets
40% hydro58% coal
2% oil(682MW)
AES Gener S.A.
SIC SING
EVSAcogeneration
(42 MW)
ESSA79%
combined cycle
21% oil(479 MW)
Guacoldacoal
(304 MW)
Norgenercoal
(277 MW)
TermoAndescombined
cycle(643 MW)
Colombia
100% 100% 90% 50% 100% 100%
Note: Excludes unconsolidated non-Chile generation investments
13www.aes.com
AES Gener in Chile: Balanced Portfolio of Coal, Natural Gas & Hydro
HydroelectricCoalNatural GasOil
AES Gener (Parent)393MW coal271MW hydro19MW oil
Eléctrica Santiago90% AES Gener-owned379MW natural gas100MW oil
Norgener100% AES Gener-owned 277MW coal
TermoAndes (Argentina)100% AES Gener-owned 643MW natural gas
Santiago
Antofagasta
Buenos Aires
Guacolda50% AES Gener-owned304MW coal
Biomass
Energía Verde100% AES Gener-owned17MW forestry waste25MW oil
14www.aes.com
AES in Colombia: Generation
Chivor1,000MW hydro plant (8% of Colombia generation capacity)100% Gener-owned (acquired in 1996)
ChivorBogota
Barranquilla
Hydroelectric
15www.aes.com
SIC Capacity Dependent on Hydro… ...Resulting in Volatile Spot Prices
Gener Balanced Portfolio …Leads to
Total: 1,508MW (1)
Lower risk profile than competitorsAsset portfolio complementary to the system provides assurance of outputCompetitive advantage to capture long-term contracts All the upside of high hydrology years with limited downside
(1) Includes 100% of Electrica Santiago and Guacolda’s capacity.
Gas22%
Hydro60%
Coal11%
AES Gener SIC Asset Diversity
Hydro18%
Other11%
Gas25%
Coal46%
Price (US$/MWh)Other7%
0
80
160
US
$ / M
Wh
Marginal Cost Node Price1995 1997 1999 2001 2003 2005
16www.aes.com
SING Capacity 100% Thermal… ...Resulting in Less Volatile Spot Prices
Gener Balanced Portfolio …and Market Presence
Diversified thermoelectric fuel supply (gas & coal)Lower gas curtailment riskLong-term contracts with credit-worthy off takersCompany-owned transmission system with direct connection to large customers
Gas58%
Coal33%
AES Gener SING Asset Diversity
Gas70%
Coal30%
Prices (US$/MWh)Oil / Diesel9%
0
20
40
60
Jun-93 Jun-97 Jun-01 Jun-05
US
$/M
Wh
Marginal Cost
Total: 920MW
17www.aes.com
AES Gener Contract Revenue Model
Key CustomersChilectra and Chilquinta represent over 37% and 21% respectively, of AES Gener’s consolidated contracted sales in Chile2004 contract renegotiation with Minera Escondida extended two existing contracts through 2015 (172MW) and the addition of a third contract for up to 80MW
Chilquinta21%
Chilectra37%
Other Contracts15%
Minera Escondida15%
Consolidated ContractRevenue
Colombia12%
18www.aes.com
AES Gener Fuel Sources
Coal Natural Gas Fuel Oil Petcoke Biomass
Sourced From
Colombia, Indonesia,
Canada, New Zealand,
Australia, Chile
ArgentinaInternational
Market / Processed in
ChileUSA, Venezuela Chile
Transportation Method Ship Pipeline Truck Ship Conveyer Belt /
Truck
Distance 4,800-9,500 nautical miles
700 km to Santiago329 km to Salta < 100 km 3,900 nautical
miles < 100 km
Key SuppliersCMC, Noble,
Luscar, Ingesur,Glencore, BHP
Consorico Sierra Chata, YPF and
TecpetrolConsortium
Copec, Shell, YPFOxbow, AIMCOR,
SSM, Valero, Koch
Sawmills & Agricultural Waste
Fuel Flexibility (sulfur, BTU)
HHV, Sulfur, Ash, Moisture, HGI, Volatile
MatterHHV Sulfur, Particulate HHV, Sulfur, Ash
(Ni, Va, Ar), HGI Particulate
19www.aes.com
AES Gener Generation KPIsContains Forward Looking Statements
Key Performance Indicator (KPI)
Safety ExcellenceOSHA rateLost time accidents (LTA)
Equivalent availability factor (EAF)Non-fuel O&M (NFOM) cost per megawatt hourEquivalent net plant heat rate Btu/kWh (ENPHR) –Thermal plants Equivalent forced outage rate (EFOR)
Operational Excellence
20www.aes.com
AES Gener Performance Scorecard
Equivalent Availability Factor Non-Fuel O&M Expense (US$/MWh)
Getting Better
2002-2003 period marked by low dispatch conditions and cost cutting efforts2004-2005 focused steady improvements
94% 93%
85%88%
2002 2003 2004 2005
3.53 3.393.30 3.15
2002 2003 2004 2005
21www.aes.com
KPI - Generation EFOR Improvement
Cordillera Hydroelectric Complex2003 - YTD 2005
Top Decile
Getting Better
EFO
R
0.0%
0.5%
1.0%
2002 2003 2004 2005 YTD
Cordillera Complex
EFOR Improvement
Cordillera Complex sources of improvement:Implementation of new training program for plant operatorsImprovement in cooling systems
Results:98.6 % improvement
0.02%
0.42%
5.14%
0.04%
22www.aes.com
AES Gener Capital Structure ObjectivesContains Forward Looking Statements
Capital Structure Elements Target
Financial Debt to Capital Ratio
Credit Rating Objectives
S&P
Fitch
Moody’s
Interest Coverage
Fixed to Floating Rate
Average Maturity
50% to 55%
BB+ to Investment Grade
BB to Investment Grade
Ba3 to Investment Grade
> 3.0 x
85% fixed rate/15% floating rate
7 years
23www.aes.com
AES Gener Debt Summary
US Dollar88%
Colombian Peso8%
Chilean UF4%
Currency BreakdownSeptember 30, 2005
Interest Rate BreakdownSeptember 30, 2005
VariableRate21%
FixedRate79%
Amortization ScheduleAs of September 30, 2005
0
100
200
300
400
500
600
700
2006 2008 2010 2012 2014+
US
$ M
illio
n
24www.aes.com
Reprofiled Balance Sheet
Short Term vs. Long Term Debt(US$ Million)
Foreign Currency vs. Local Currency(US$ Million)
(1) 2005 data as of September 30, 2005
9421,2551,512 1,3841,884 891
34% 29%
8% 7% 7% 12%
66% 71%
92% 93% 93% 88%
0%
50%
100%
2000 2001 2002 2003 2004 2005 (1)
Short-term Long-term
1,2551,512 1,3841,884 891942
95% 98% 98% 98%
87% 88%
5% 2% 2% 2%
3% 4%
8%10%
0%
100%
2000 2001 2002 2003 2004 2005 (1)
USD Chilean UF Col$
50%
25www.aes.com
Gener Credit Rating Improvement
A-/A3
BBB+/Baa1
BBB/Baa2
BBB-/Baa3
B+/B1
B/B2
B-/B3
BB+/Ba1
BB/Ba2
BB-/Ba3
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q2001 2002 2003 2004 2005
September 2005: S&P revised outlook
to positive October 2005: Moody’s places Gener & Chivor under review for
potential upgrade
Fitch Moody’s S&P Target
26www.aes.com
AES Gener Portfolio Diversified by Geography
Revenue Trend
$609$636$543$475
Balanced Revenues (1)
SIC51%
Colombia21%
SING21%
Other7%
0100200300400500600700
US
$ M
illio
n
2002 2003 2004 2005 (1)
SIC SING Colombia Other
(1) 2005 data as of September 30, 2005
27www.aes.com
AES Gener Financial Overview
(US$ Million)Nine Months
Ending September 30,
20052004
$636
$177
$65
$151
2003
$543
$183
$88
$0
$609
$148
$102
$11
Revenue
Gross Margin
Income Before Tax &Minority Interest
Distributions to AES Corporation
Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated.
28www.aes.com
AES Gener Scenario Planning
Strategic IssuesFuel swapsAdditional purchases in Argentine marketAlternative use of diesel oil Generation toll agreements
Mitigation of Argentina Gas
Restrictions
Optimized commercial policy (reduction in contract levels and indexed prices)Development of back-up peaking plants (current turbine project)
Hydrology Risk
Strategic Opportunities
Development of new coal and hydro plants supported by long-term PPAs
Strong Demand Growth
Increase in regulated node pricesPublic bid processes for distribution demand with long-term fixed price contracts to promote new investmentProgressive phase-out of regulated prices
Favorable Regulatory
Environment
29www.aes.com
ESSA Gas Supply RestrictionsContains Forward Looking Statements
ESSA Fuel Supply 2004 – YTD 2006
Proactive Response
0%
20%
40%
60%
80%
100%
2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
Contract Purchases Swaps Gas Restriction Diesel
Fuel swap agreements
Gas purchase agreements
Utilization of diesel oil
Generation toll agreements
30www.aes.com
Chile Platform Expansion Opportunities
www.aes.com
Ventanas Plant, Chile 120MW diesel-fired power plant$37 million capital costStart-up second quarter 2006Supports peaking, fuel diversification and hydrology risk management strategiesFits existing generation tariff structure
Proposed coal-fired power plants200-250MW plants at existing Guacolda and Ventanas sites2009 Start-UpCombined capital costs $600 millionParticipating in Chilean RFP process
Contains Forward Looking Statements
Platform expansion revenue potential $175 million by 2010 (combined basis)Strong subsidiary dividends can continue
3www.aes.com
Appendix - Assumptions
Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: 1) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; 2 ) businesses continue to operate in a manner consistent with or better than prior operating performance, including achievement of planned productivity improvements including benefits of global sourcing, and in accordance with the provisions of their relevant contracts or concessions; 3) new business opportunities are available to AES in sufficient quantity so that AES can capture its historical market share; 4) no major disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; 5) negative factors do not combine to create highly negative low-probability business situations; 6) business-specific risks as described in the Company’s SEC filings do not occur.
In addition, benefits from global sourcing include avoided costs, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. These benefits will not be fully reflected in the Company’s consolidated financial results.
4www.aes.com
Appendix - DefinitionsFree Cash Flow - Net cash from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures.Lost Time Accident (LTA) - An incident in which the injured person is kept away from work beyond the day of the incident.Near Miss - An incident that occurred but did not result in any injury. In AES, we have expanded this to include unsafe conditions that have been observed.O&M - Operation and maintenance.Reliability Centered Maintenance (RCM) - An integrated maintenance methodology that optimizes among reactive, interval-based, condition-based, and proactive maintenance practices to take advantage of their respective strengths in order to maximize facility and equipment reliability while minimizing life-cycle costs. Return on invested capital (ROIC) - Defined as net operating profit after tax (NOPAT) divided by average capital. NOPAT is defined as income before tax and minority expense plus interest expense less income taxes less tax benefit on interest expense at effective tax rate. Average capital is defined as the average of beginning and ending total debt plus minority interest plus stockholders’ equity less debt service reserves and other restricted deposits.System Average Interruption Duration Index (SAIDI) - A measure of the cumulative duration of electric service forced and sustained interruptions experienced by customers each year, excluding “force majeure” events. SAIDI is calculated as the total number of customer minutes of sustained interruption divided by the number of customers served.System Average Interruption Frequency Index (SAIFI) - A measure of the number of outages per customer per year. SAIFI is calculated by dividing the total number of customer-sustained interruptions by the number of customers served.
5www.aes.com
Appendix – Reconciliation of Subsidiary Distributions(US$ Millions) Nine Months
EndedSep. 30,
2005
Quarter EndedYear EndedDecember 31,
$1905
195
2
--
2
197
(5)
$192
Mar. 31,2005
$170--
170
37
13
50
220
(13)
$207
Jun. 30,2005
$274
$274
Sep. 30,2005
$1,00846
1,054
242
0
242
1,296
(46)
$1,250
2003
$99113
1,004
116
11
127
1,131
(24)
$1,107
2004
Subsidiary distributions to parentNet distributions to/(from) QHCsTotal subsidiary distributions
Returns of capital distributions to parent
Net returns of capital distributions to/(from) QHCs
Total returns of capital distributions
Combined distributions & returns of capital received
Less: combined net distributions & returns of capital to/(from) QHCs
Total subsidiary distributions & returns of capital to parent
--274
--
--
--
274
--
$6345
639
39
13
52
691
(18)
$673
Note: On the regional financial slides included subsequently in this presentation series, subsidiary distributions to parent, which exclude returns of capital and project financing proceeds, have been referred to as “Distributions to AES Corporation.”