3. Brasiliana Reorganization
• Reorganization Rationale
• Allow dividends’ distribution to controlling shareholders
• Debt Reduction – early liquidation of Brasiliana’s debentures
• Elimination of dollar denominated debt
• Simplification of Corporate Structure
• Elimination of fiscal inefficiencies
• Secondary Offering – AES Transgás
• 15.83 billion class B preferred shares (38% of Eletropaulo’s total capital)
• Pricing: R$ 85.0 / ‘000 shares, implying a total offering size of R$ 1,345 million
• Free Float increased from 18.3% (R$ 729 million) to 56.2% (R$ 2,233 million)
• Eletropaulo’s PNB shares (ELPL6) increased 11.8% since the pricing (09/21/06) until 11/06/06
• The daily average traded volume increased from R$ 6.0 million in the last twelve months prior to
the pricing (09/21/06) to R$ 19.0 after the pricing (until 11/06/06)
3
4. Brasiliana Reorganization
• Reduction of Brasiliana’s and holdco’s indebtedness from R$ 2,044.0 million (principal as of 09.30.2006) to
R$ 800.0 million
AES Holdings
BNDES
Brasil Ltda
C 49.99% C 50.001%
P 100.00% P 0.00%
T 53.84% T 46.15%
Cia. Brasiliana
De Energia
C 71.27%
C 100.00% C 100.00% C 98.26%
P 32.23%
T 100.00% T 100.00% T 98.26%
T 52.51%
P 7.38%
AES Uruguaiana
AES Infoenergy AES ELPA T 4.44% AES Tietê S.A.
Inc (Cayman)
C 100.00% C 77.81%
T 100.00% P 0.00%
T 30.97% C = Common Shares
P = Preferred Shares
T = Total
AES Uruguaiana
Eletropaulo
Empreend. S.A.
4
5.
6. Highlights
• Adjusted EBITDA of R$ 1,912.4 million in the first 9 months of
2006, 26.0% higher than the first 9 months of 2005
• Net Profit of R$ 274.4 million in the first 9 months of the year,
compared to a loss of R$ 204.1 million in the equivalent period of
3Q06 2005
• Tariff Adjustment – 11.45% (07/04/2006)
• Increase in the average life of FCESP Debt - cash savings of
approx. R$ 633 million until the end of 2008 (08/31/2006)
• Ratings increased by Fitch in national scale from “BBB+” to “A”
Subsequent and in international scale from “B+” to “BB-” (10/05/2006)
Events • Ratings increased by S&P in national scale from “BBB+” to “A-”
and in international scale from “B+” to “BB-” (11/06/2006)
6
7. Consumption Comparison in GWh
Captive Market Evolution (GWh)
Increase of 4.6% (12 months)
7,606 7,519
7,433 7,443
7,119 7,256 7,280
7,033 • All free consumers were excluded from
previous periods.
4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06
2.8%
5.3%
3,195 -1.2% 9,448
9,194
3,033 2.2%
7,882 7,790
-14.8%
2,320 2,372 26.3%
1,915
1,632 1,658
-3.5% 1,312
613 592
Residential Industrial Commercial Public Sector Free Billed Market Total Market
and Others Consumers
NOTE: Charts do not consider own consumption
3Q05 3Q06 7
10. Operating Highlights
Collection Rate -
Loss Evolution (%)
% over Gross Revenue
-5.9%
+1.0%
13.5 12.9 13.0
12.2 99.0 99.2
97.5 98.2
7.9 7.3 7.4 6.6
5.6 5.6 5.6 5.6
2004 2005 9M05 9M06 2004 2005 9M05 9M06
Technical Losses Com m ercial Losses
Fraud Combat and Clandestine Connections (9M06): Collection Rate
Public Sector: 106.0%
367 thousand inspections and 45 thousand frauds detected
Private Sector: 98.7%
56 thousand clandestine connections regularized
Cuts and Reconnections – monthly average (9M05 x 9M06)
Cuts - increase from 77 thousand to 117 thousand
Reconnections – increase from 55 thousand to 75
thousand
10
11. CAPEX 9M06
R$ million
404
49
330
Investments 9M06
(R$ 260.7 million)
33
Customer Service and System
217 16% Expansion
32 Maintenance
355 39%
346
297
6% Loss Recovery
186 81 92 88
11 16 15 Information Technology
76 73 12%
70 Others
12% Self Financed
15%
06
06
06
03
04
05
)
(e
1Q
2Q
3Q
20
20
20
06
20
Capex Self Financed
11
12. Results
R$ million
Gross Revenue Operating Expenses
+6.9% +6.8% -9.5%
2,930.5 2,930.5 2,079.0 +20.4%
2,741.8 2,744.2 1,880.8 1,880.8
745.7 745.7
764.7 737.1 1,561.5
1,145.3
1,143.4 1,143.4
1,055.9
2,184.7 188.9
1,977.1 2,007.1 2,184.7 228.4 228.4
157.6
744.8 509.0 348.0 509.0
3Q05 3Q06 2Q06 3Q06 3Q05 3Q06 2Q06 3Q06
Net Revenue Deductions from Operating Revenue Operating Expenses Sector Charges Electricity +Transport
• Increases in relation to 2Q06 and 3Q05 are • Increase of 20.4% over 2Q06:
explained by: • Increase in provisions for labor and civil contingencies – R$
• The application of the average tariff adjustment since 120.9 million
July 4th, 2006 • Higher expenses with energy purchase and sector charges
(CCC and CDE) due to its readjustments – R$ 291.5 million
• Tariff mix and total market increase of 2.8% in relation
• Reduction of 9.5% over 3Q05:
to 3Q05
• Provision of credits with the Municipal Government of São
Paulo - R$ 346.4 million in 3Q05 – (non-recurring event)
12
13. EBITDA
R$ million
3Q05 x 3Q06 9M05 x 9M06
EBITDA (27.5) 383.2 826.8 1,330.2
RTE 85.3 80.0 251.3 243.5
Pension Fund 60.4 60.5 181.6 181.6
SP Municipal Government 330.5 0 330.5 0
PIS/Pasep taxes’ reversion 0 0 (72.0) 0
Provision - RTE 0 14.3 0 36.1
Provision - Contingencies 0 120.9 0 120.9
ADJUSTED EBITDA 448.6 658.9 1,518.1 1,912.4
ADJUSTED EBITDA
MARGIN 22.7% 30.2% 24.4% 31.0%
Increase of 46.9% Increase of 26.0%
13
14. Consolidated Financial Result
R$ million
Financial Result
The financial result’s improvement is due to:
3Q05 3Q06 2Q06 3Q06
• The reduction of the total debt’s average cost
• The increase of 21.8% of financial revenues in relation to
(53.0) (53.0) 2Q06:
-61.1% -58.0% • Revenues from cash management in 3Q06 (R$ 12.1
(126.1) million)
(136.2)
• Receiving of Eletropaulo Telecom’s dividends in 3Q06
(R$ 5.0 million)
Net Debt - Total Cost
• The gains in translation of financial statements of Overseas
(193.4) II of R$ 5.7 million due to the Real depreciation of 0.5% in
3Q06.
(160.4)
(153.7)
(130.2)
(120.4)
3Q05 4Q05 1Q06 2Q06 3Q06
14
15. Net Profit
R$ million
• Reversal of Accumulated Losses from R$ 257.2 million in 12.31.2005 to Accumulated
Earnings of R$ 29.6 million in 09.30.2006
274.4
201.9 -76,6%
47.3 47.3
3Q05 3Q06 2Q06 3Q06 9M05 9M06
(204.1)
(324.1)
15
16. Consolidated Debt
R$ million
Short Term X Long Term Creditors X Indexes – 3Q06
-18.1%
5,280
-5.3% Gross Debt – R$ 4,800 million
4,924 4,800 4,877 4,800
26% 4,256
21% 4,031 23% 21% 4,031
IGP-DI
R$ million
47.7%
74% 79% 77% 79%
Fixed Rate
11.1%
3Q05 3Q06 2Q06 3Q06
Libor
LT ST Net Debt CDI/Selic 2.1%
39.1%
Indebtedness Highlights – last 12 months
• Gross Debt: reduction of 9.1% (R$ 479.6 million) • Pension Fund - R$ 2,288 million
• Net Debt: reduction of 18.1% (R$ 893.7 million) • Private Creditors - R$ 2,033 million
• Foreign Currency: decreased from 9.7% to 2.1% of total
• BNDES - R$ 478 million
debt
16
17. Amortization Schedule
Principal - R$ million
26
181
1,505 Total Debt
26
356
159 26 26
163 181 729
112 144
282 181 181 181
21
234 85 213 267 263
138 138 111
58 36
Pre- Payments 4Q06 2007 2008 2009 2010 2011 2012 2013 2014-22
payments
9M06
9M06
R$ (w/out FCESP) FCESP BNDES US$
1,505 Increase in
average life of the
800
Pension Fund Debt
422 422
282 282
200 200 181 200 181 200 181 200 181
144 163 181
106 36
Payments 4Q06 2007 2008 2009 2010 2011 2012 2013 2014-22
9M06 FCESP (Pre-renegotiation) FCESP (Post-renegotiation)
Cash savings of approximately R$ 633 million until the end of 2008
17
18. Consolidated Debt
R$ million
Interest rates evolution Ratings – Fitch
CDI +
6.84%
-17.4%
% National Scale A
-1.6% BBB+ Oct ‘06
CDI +
-1.4%
%
BB -
2.90% CDI + BBB Jul ‘06
CDI +
2.50%
1.82% B+
BB Dec ‘05
Oct ‘04
B+
Bonds 8th Debenture 9th Debenture CCB B- International Scale
Average Cost and Average Life
5.44 • Last increase in 10/05/06, reflects:
101.9%
100.8% 100.4%
99.7%
• Improvement of Indebtedness Profile
3.81 3.90
3.43 • Strong cash generation
• De-leveraging of Parent Company
3Q05 1Q06 2Q06 3Q06
Avg Cost - %CDI Avg Life - years
18
19. Cash Flow
R$ million
R$ million 1Q06 2Q06 3Q06 9M06
Initial Cash 492 356 617 492
Operating Cash Generation 687 653 725 2.065
Investments (101) (88) (75) (264)
Net Financial Expenses (196) (85) (177) (458)
Net Amortization (245) (45) (158) (448)
Pension Fund Expenses (134) (108) (85) (327)
Income Tax (147) (67) (83) (297)
Free Cash Flow (136) 261 147 272
Final Cash 356 617 764 764
Operating Cash Generation (3Q06)
• Average Tariff Adjustment of 11.45%
• Market increase and tariff mix
Pension Fund Expenses (3Q06)
• Renegotiation of debt contracts
19
20. Conclusion
• Reversal of accumulated losses of R$ 257.2 million in Dec/05 to
accumulated earnings of R$ 29.6 million in Sep/06
• 26% increase of Adjusted EBITDA, R$ 1,518.1 million (9M05), compared to
R$ 1,912.4 million (9M06)
• Reduction of 18.1% in consolidated net debt
• Reduction of 2.1% in the average cost of consolidated debt
• Increase of total debt’s average life from 3.4 years to 5.4 years
• Ratings increased by Fitch Ratings and S&P
• Free float increased from 18.3% to 56.2% of the total capital
20
22. Highlights – 9M06
Jan,06: 100% of assured energy is sold through the bilateral
contract with Eletropaulo
EBITDA = R$ 543 million
1H06 Net Income = R$ 306 million
Dividends: payout of 100% of net income
Jul,06: Readjustment of price of bilateral contract with
Eletropaulo in 0.9%
EBITDA: R$ 276 million in the 3Q06 and R$ 819 million in the
3Q06 9M06
Net Income: R$ 143 million in the 3Q06 and R$ 449 million in
the 9M06
Dividend and interest on capital of R$ 143 million to be paid
Subsequent Events on Nov 30th
22
23. Energy Balance – 9M06
Energy Generated x Billed Energy in GWh
Caconde 2.9%
284.0
Euclides 3.7%
365.1
Limoeiro 1.1%
104.8
Água Vermelha 60.2%
84.7% Eletropaulo - Bilateral
5,912.0
8,311.5
Barra Bonita 4.1%
TOTAL BILLED
402.3
Bariri 4.4% 9,817.8 9,817.8
427.2
15.3% MRE/CCEE*
Ibitinga 5.1% 1,506.3
501.7
Promissão 7.8%
768.4
Nova Avanhandava 10.5%
1,029.0
Mogi Guaçu 0.2%
23.5
*After deducing own consumption and transmission losses, the difference is addressed to the Energy Reallocation Mechanism – MRE
and to the Chamber of Energy Marketing – CCEE. 23
.
24. Generation and Reliability
9M06: generation was 18% over the assured Plant Period Without
Accidents –Years
energy
Ibitinga 18.2
Failure Index (FI) and Equivalent Availability Mogi-Guaçu 11.6
Factor (EAF) figures exceed the requirements Nova Avanhandava 8.7
established by the National Eclectic Energy Água Vermelha 8.1
Agency - ANEEL: 2.9% for (FI) and 92.8% for EAF Limoeiro 6.1
Barra Bonita 6.0
Average of 7 years of operations without Promissão 4.5
accidents requiring removal of personnel from Caconde 3.4
the worksite Euclides da Cunha 3.1
Bariri 0.7
123% 120% 123% 117% 115% 118%
109% 107%
98% 97.2% 96.8% 96.1%
94.2%
81% 90.9% 92.6%
94.9%
3.0%
1,617 1,619 1,581 1,502 2.8%
1,467 1,498 2.5%
1,258 1,392 1,363 2.2% 2.3%
1,040
1.6% 1.7%
1997 1998 1999 2000 2001 2002 2003 2004 2005 9M06
2000 2001 2002 2003 2004 2005 9M06*
Generation - MW Average Generation / Assured Energy Failure Index Equivalent Availability Factor
24
*Annualized
25. Bilateral Contract
Starting in Jan, 06: 1,268 MW (100% assured energy) is sold through the bilateral
contract with Eletropaulo
Price adjusted by IGP-M variation in July
Maturity: December, 2015
Collateral: receivables
Oct, 03: amendment extending its term of effectiveness until Jun,28
In Aug, 05 ANEEL published the vetoing to the amendment
Eletropaulo has brought a lawsuit against ANEEL’s decision, which is now awaiting judgment
on merits by a trial court
Average Revenue – R$/ MWh
133.9
119.6
94.4
73.6
54.0
48.8
45.9
2000 2001 2002 2003 2004 2005 Bilateral
Contract
25
26. Results
R$ million
Net Revenue Costs and Operational Expenses
899 1,041 272
16%
28%
213 80
62 30
18 37
35
362 5% 343 54 82
42
71
22 16% 26
11 16 12 5
56 71 17
20 22
9M05 9M06 3Q05 3Q06
9M05 9M06 3Q05 3Q06 Power Purchase Royalties
Operational Expenses Provisions
Greater volume of energy sold through bilateral Others*
contract – from 948 MW to 1,248 MW Power purchase:
Transmission fees – increase of R$ 20.5 million:
3Q05: Non-recurring revenue (R$ 50.5 million) greater volume of sales through bilateral
reversion of allowance related to PIS/Cofins contract
of the bilateral CCEE’s fine – re version of allowance of R$ 3.9
Recognition of regulatory asset on PIS/Cofins million booked in 4Q05
of initial contracts 9M06: allowance of R$ 30.2 million: RTE’s monetary
adjustment (R$ 14.8 million) and allowance on PIS /
Jul,06: Price readjustment of bilateral contract Cofins on the initial contracts (R$ 15.3 million)
(0.9%)
26
*Others: R&D, fiscalization fees, insurance, hydro way and others
27. Results
R$ million
EBITDA
81.6% 80.7%
78.7% 84.7%
819
734 12%
307 276
10%
9M05 9M06 3Q05 3Q06
Greater volume of energy sold through bilateral contract - from 948 MW to
1,268 MW
Jul,06: price readjustment of bilateral contract (0.9%)
3Q05: non-recurring revenue (R$ 50.5 million)
Reversion of allowance related to PIS/Cofins on bilateral agreement
Recognition of regulatory asset related to PIS/Cofins on initial contracts
27
28. Results
R$ million
Financial Results Net Income
9M05 9M06 3Q05 3Q06
45.7% 55.5%
6 43.1%
449 41.9%
411 9%
-583%
29%
(29) 201 143
10%
(69)
(76) 9M05 9M06 3Q05 3Q06
Increase in financial expenses due to IGP-M 9M06: net income 9% greater than 9M05
variation:
3Q06: lower net income due to impact of
3Q05 = –1.6% non-recurring revenue in 3Q05
3Q06 = 1.0%
9M05 = 0.6%
9M06 = 2.3%
28
30. CAPEX
Capex – 9M06: R$ 18.8 million
Bariri: revamp and modernization of Generating Unit #2 and #3
Reforestation
2006 Revised Capex: R$ 30 million
delay in revamping of Generating Units #2 and #3 of Bariri plant: R$ 5 million
savings on the acquisition of a transformer to Nova Avanhandava plant: R$ 1.5 million
postponement of investment on hydroway: R$ 1.5 million
change on project of splinklers implementation in Ibitinga, Euclides da Cunha and Caconde plants:
R$ 1 million
postponement of investments on reforestation: R$ 2 million
postponement of investment in IT: R$ 1.1 million
Capex – R$ million Capex – 9M06
9.8%
37.5
0.4%
30.5 30.0 20.7%
27.5
21.9 18.8
17.7
12.4
69.0%
2000 2001 2002 2003 2004 2005 9M06 2006
Revised Equipm ent Envirom ent Hydrow ay Others
30
31. Expansion Requirement
Requirement: increase installed capacity by at least 15% (approximately 400 MW), within a period of eight
years, starting from the date of execution of its Concession Contract in December, 1999
Requirement was established by the Privatization Documents and reflected in the “Share Purchase
Agreement”
It can be accomplish through:
increasing the installed capacity in the State of São Paulo; or
energy purchasing from new plants, located in São Paulo, through long term agreements (at least 5
years)
Restriction to increase the capacity:
no hydro resource available in the Sate of São Paulo
environmental restrictions to thermal plants in São Paulo
gas supply
“New Model Law for the Electric Sector” (Law # 10,848/04)
Proposal from AES Tietê to the State Government:
Suspension of the obligation to increase the capacity for 5 years. During this period AES Tietê can
analyze freely any project for investment, regardless the location
After the suspension period, in the case that restriction continue, a AES Tietê will be released of this
obligation
No amount of resources and/or obligation will be paid in compensation
The State Government has not yet responded to this proposal. 31
32. Subsequent Event
On October 23, AES Tietê entered into an agreement to purchase licenses for the exploitation of
hydro potential
This agreement is still subject to the satisfaction of certain precedent conditions and to Aneel’s
approval
After the obtaining the necessary regulatory and corporate approvals, AES Tietê will be entitled to
build 3 PCH (small hydroelectric facilities) in the State of Rio de Janeiro
Installed capacity: 52 MW
Assured energy: 28.97 MW Average
Total estimated Capex: R$ 225 million
Estimated term for construction: 2 years
32
33. Conclusion
Generation was 18% higher than assured energy
Operational excellence: FR and EAF above ANEEL requirements
EBITDA of R$ 819 million in 9M06 – increase of 11.5% compared with the same period
of 2005
Net Income of R$ 449 million in the 9M06 – net margin of 43.1%
Dividends and interest on capital of R$ 143.5 million to be paid in Nov 30th
Payout of 100% of 9M06 net income
33
34. The statements contained in this document with regard to the business prospects, projected
operating and financial results, and growth potential of AES Eletropaulo are merely forecasts
based on the expectations of Company Management in relation to its future performance. Such
estimates are highly dependent on market behavior and on the conditions affecting Brazil‘s
macroeconomic performance as well as the electricity sector and international market, and they are
therefore subject to change.
November 10, 2006
