AES GENER/ 2016
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AES GENER Q1 2016 RESULTS
AES Gener recorded an EBITDA of ThUS$157,603 during the
first quarter of 2016, similar to the EBITDA recorded in the same
period in 2015.
Net income of ThUS$41,033 recorded as of March 31, 2016.
Cochrane Unit 1 (266 MW) and Andes Solar (21 MW) projects
finalized their construction, were synchronized to the SING and
started its commissioning tests.
In February, AES Gener started the energy exports to Argentina,
through its international transmission line.
In December 2015, the Argentine authority partially released the
FX restrictions, allowing the Company to purchase of US dollar
and distribute dividends to parent.
Successful Angamos Liability Management for US$199mn.
CONSOLIDATED FINANCIAL SUMMARY
1 EBITDA is calculated as the sum of gross profit plus administrative expenses, depreciation and other minor adjustments.
FINANCIAL SUMMARY THUS$ %
Q1 2016 Q1 2015 Var
Revenue 555,621 532,535 4%
Gross Profit 121,315 131,125 -7%
EBITDA1 157,603 159,787 -1%
Net Income 41,033 51,330 -20%
Net Operating Cash 97,990 80,447 57%
Earnings per share 0.005 0.006
Tomás Gonzalez
(56 2) 2 686 8813
IR Manager
AES GENER/ 2016
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1
HIGHLIGHTS IN 2015 TO DATE
AES Gener, same as in 2014 and 2015, continued to be the leader in energy generation in Chile,
contributing with their plants with 28.5% of the total generation during the first quarter of 2016.
During February, Cochrane Unit 1 and Andes Solar projects were synchronized to the SING and started
its commissioning tests. The start of commercial operations for both projects are expected for the
second quarter of 2016.
Progress of projects under construction:
AES Gener continues to consolidate its 2nd phase of expansion with 1,104 MW of diverse generating
projects to be completed, with direct employment for more than 7,500 people, and the start of a new
business, a desalinization plant for the sale to third parties.
Project Capacity Type Progress Start of Operation
Tunjita 20 MW Hydro 99.3% 1H16
Andes Solar
21 MW Solar 99.9% 1H16
Cochrane 532 MW Coal 97.8% 2016
Alto Maipo 531 MW Hydro 28.8% 2H 2018/1H 2019
In February, AES Gener started the energy exports to Argentina, through its transmission line. As of
March 31, 2016, exports reached approximately 44 GWh generated.
By the end of March, the Argentinean Energy Authority updated generation tariffs through Resolution
22/2016, increasing generation prices by approximately in 43% in Argentine pesos.
In December 2015, the Argentine authority partially released the FX restrictions, allowing the Company
the purchase of US dollar in this country. This measure enabled Termoandes to distribute to AES Gener
a total of ThUS$15,422 as of today.
In April, Angamos executed a partial early redemption of its US$800 million 4.875% 144A / Reg S for a
total amount of US$199 million, at 94% of its nominal value. Tendered bonds were refinanced through
banks facilities with the same amount and conditions. With regards to interest rate, the Company
achieved a decrease to 4.5%.
Guacolda Energía S.A.’ (Guacolda) international credit rating was revised downward in April by
Standard & Poors, from BBB- with stable outlook to BB+ with stable outlook.
AES GENER/ 2016
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EXTERNAL FACTORS
Annual Inflation Rate Exchange Rate as of March 31, Twelve month period ended on Dec 31, 2015 2016 2015 Var
Chile 4.2% Chile 669.80 626.58 6.9% Colombia 7.9% Colombia 3,000.67 2,559.62 15.4% Argentina 14.3% Argentina 14.70 8.82 66.7%
GDP
Growth in Electricity Consumption, twelve month period ended on March 31, 2016:
Twelve month period ended on Dec 31, 2015 SIC –Chile 3.1%
Chile 1.4% SING -Chile 7.8% Colombia 0.9% Colombia 3.5% Argentina 3.3% Argentina 4.5%
REVIEW OF 2016 RESULTS
Net Income
As of March 31 2016, AES Gener S.A. (hereinafter referred to as AES Gener or the Company) recorded a
net income of ThUS$41,033, 20% lower than the ThUS$51,330 recorded in the same period of the previous
year. EBITDA as of March 31, 2016 was ThUS$157,603, 1% lower than the EBITDA of ThUS$159,787
recorded at the close of March 2015. The slight decrease in EBITDA is mainly explained by improved
operating results in the SING and in Argentina, compensated by lower gross profit in Colombia and in the
SIC.
From an operational standpoint, gross profit as of March 31, 2016 totaled ThUS$121,315 representing a
negative variation of 7% when compared to the ThUS$131,125 recorded at the close of March of the previous
year. Main variations in gross profit between the first three months of 2016 and 2015 were the following:
In the SIC, gross profit decreased by ThUS$7,028 mainly explained by higher revenues recorded
in the first quarter of 2015 associated to Nueva Renca plant’s short-term leasing agreement.
In the SING, gross profit increased by ThUS$9,645. Among the most important variations is the
improved margins associated to unregulated customers due to the expiration of old contracts and
the start-up of new ones.
In turn, in the National Interconnected Grid (SIN) in Colombia, gross profit at AES Chivor & Cia
S.C.A.E.S.P. (hereinafter, AES Chivor) was lower by ThUS$17,918 due to lower generation during
the first quarter of 2016, given lower reservoir levels at the beginning of 2016, compared with levels
at the beginning of 2015. This resulted in higher spot purchases at higher average prices, in addition
to lower sales to distribution companies. It is important to highlight that during the fourth quarter of
2015, AES Chivor increased its generation to supply the country’s demand during the drought as
the result of the El Niño Phenomenon presence in the system to support the needs of the country.
In the Argentine Interconnected System (SADI), Argentina´s, gross margin increased by
ThUS$5,491 when comparing both periods, as a result of higher generation explained by
maintenances performed during the first quarter of 2015, and higher margins associated to the
recognition of the Resolutions 482/2015 and 22/2016 enacted by the Argentine energy authorities.
Within the non-operating income, a negative variation was registered in exchange rate differences of
ThUS$3,394 due to the FX forwards executed by the Company against the Chilean and the Colombian peso,
which registered lower compensations during the first quarter of 2016, partially compensated by the
appreciation of the Chilean and the Colombian peso during the period, compared to a devaluation in the
same period of 2015. Additionally, lower earnings from associates of ThUS$41,492 were registered as a
result of lower net income at Guacolda Energía S.A. (hereinafter, Guacolda).
AES GENER/ 2016
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Q1 2016 Income Statement
March March Var
Income Statement (ThUS$) 2016 2015 %
Operating Revenue
Energy and capacity sales 495,472 496,966 0%
Other operating revenue 60,149 35,569 69%
Total Operating Revenue 555,621 532,535 4%
Cost of Sales
Fuel consumption (108,548) (149,003) -27%
Fuel cost of sales (30,380) (1,300) 2237%
Energy and capacity purchases (157,222) (99,459) 58%
Transmission tolls (23,082) (27,242) -15%
Other cost of sales (56,644) (68,469) -17%
Depreciation and amortization (58,430) (55,937) 4%
Total Cost of Sales (434,306) (401,410) 8%
Gross Profit 121,315 131,125 -7%
Other operating revenues 408 852 -52%
Selling, general and administrative expenses (23,352) (28,988) -19%
Other operating expense (635) (824) -23%
Other income / (expense) (1,220) 335 -464%
Financial income 2,962 2,844 4%
Financial expense (33,797) (32,394) 4%
Equity in earnings of associates 2,552 8,030 -68%
Foreign currency exchange differences (11,152) (7,758) 44%
Net Income (Loss) before Tax and Non-Controlling Interest 57,081 73,222 -22%
Income tax income (expense) (17,056) (24,947) -32%
Net Income (Loss) After Tax 40,025 48,275 -17%
Income (Loss) Attributable to Shareholders of Parent 41,033 51,330 -20%
Non-controlling interest (1,008) (3,055) -67%
NET INCOME 40,025 48,275 -17%
AES GENER/ 2016
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EBITDA
AES Gener operates in four independent markets, SIC and SING in Chile, the SIN in Colombia and the SADI in Argentina. The following section explains the variations in gross earnings separated in the four markets mentioned above.
As of March 31, 2016, EBITDA was ThUS$157,603 compared to the ThUS$159,787 recorded in the same
period in 2015. This negative variation of ThUS$2,184 is mainly explained by higher spot purchases in the
SIN and the additional revenue registered in the SIC during the first quarter of 2015 associated with the short-
term lease of Nueva Renca plant, compensated by improved contract margins in 2016 in the SING and higher
margin in the SADI associated to higher generation and sales under Resolutions 482/2015 and 22/2016. The
table below shows EBITDA by market for 2015 and 2014:
Note: For EBITDA calculation, please see page 27, Consolidated EBITDA.
In the three-month period ended on March 31, 2016 and 2015, the contribution to EBITDA from the SIC,
SING, SIN and the SADI was the following:
Q1 2016 Q1 2015
GROSS PROFIT
Gross profit decreased by ThUS$9,810 mainly as a result of decreases in SIC and SIN of ThUS$7,028 and
ThUS$17,918 respectively, partially offset by the reductions by ThUS$9,645 and ThUS$5,491 in the SING
and SADI, respectively. The item “consolidation adjustment” represents intercompany coal sales of AES
Gener to the subsidiaries Norgener and Empresa Eléctrica Angamos (Eléctrica Angamos) in the SING. In
revenues in the SIC, these sales are included in “Other operating revenues”.
Marzo Marzo Var.
EBITDA by Market (ThUS$) 2016 2015 %
SIC 84,161 86,808 -3%
SING 54,762 41,933 31%
SIN 13,417 31,207 -57%
SADI 5,263 (161) -3369%
TOTAL EBITDA 157,603 159,787 -1%
SIC53%
SING 35%
SIN9%
SADI3%
SIC54%SING
26%
SIN20%
AES GENER/ 2016
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Central Interconnected Grid (SIC)
In the SIC, gross profit decreased by ThUS$7,028 or 9% mainly due to higher revenues in the first quarter of
2015 associated with the short-term lease agreement of Nueva Renca plant. The following table presents
gross profit in the SIC for both periods:
The following table shows AES Gener energy sales, purchases and generation by source in the SIC as of
March 31, 2016 and 2015:
March March Var
Gross Profit (ThUS$) 2016 2015 %
OPERATING REVENUE
SIC 302,833 322,563 -6%
SING 148,323 147,795 0%
SADI 24,502 28,293 -13%
Colombia 116,906 96,158 22%
Consolidation adjustments (36,943) (62,274) -41%
Total Operating Revenue 555,621 532,535 4%
COST OF SALES
SIC (231,409) (244,111) -5%
SING (113,237) (122,354) -7%
SADI (25,352) (34,634) -27%
Colombia (101,251) (62,585) 62%
Consolidation adjustments 36,943 62,274 -41%
Total costs of sales (434,306) (401,410) 8%
TOTAL GROSS PROFIT 121,315 131,125 -7%
SIC March March Var
Gross Profit (ThUS$) 2016 2015 %
OPERATING REVENUE
Regulated customer sales 119,858 123,853 -3%
Unregulated customer sales 63,209 70,901 -11%
Spot sales 25,919 41,035 -37%
Other operating revenues 93,847 86,774 8%
Total Operating Revenue 302,833 322,563 -6%
COST OF SALES
Fuel consumption (57,018) (77,016) -26%
Energy and capacity purchases (29,059) (28,335) 3%
Transmission tolls (21,291) (25,954) -18%
Fuel cost of sales (66,823) (56,639) 18%
Depreciation and amortization (27,898) (27,949) 0%
Other cost of sales (29,320) (28,218) 4%
Total Cost of Sales (231,409) (244,111) -5%
TOTAL GROSS PROFIT 71,424 78,452 -9%
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Main variations between the three-month periods ended on March 31, 2015 and 2016:
Sales to regulated customers decreased by ThUS$3,995 due to lower physical sales for 23 GWh in the first
quarter of 2016 when compared to the same period in 2015. In turn, sales to unregulated customers
decreased by ThUS$7,692 as of March 31, 2016, associated with the short-term lease of Nueva Renca
registered in the first quarter of 2015, not present in the two first months of 2016, partially offset by higher
physical sales to unregulated customers of 133 GWh, as a result of higher demand.
Sales in the spot market decreased by ThUS$15,116 between the first quarter of 2015 and the same period
in 2016, mainly due to lower spot prices that decreased from an average of 131.6 US$/MWh in the three-
month period ended on March 31, 2015 to an average of 60.3 US$/MWh in the same period of 2016. In turn,
energy and capacity purchases (including purchases on the spot market, contract purchases to affiliate
Guacolda and other third parties mainly contracts with Non-Conventional Renewable Energy generators,
NCRE) were higher compared to the first three months of 2015 by ThUS$724, due to the increase in volume
terms by 63 GWh during the programmed maintenances performed at AES Gener coal plants.
Other operating revenues mainly include intercompany and third parties coal sales, transmission revenues
and services revenues essentially to affiliates. The positive variation of ThUS$7,073 in principally explained
by higher coal sales, which are compensated in fuel cost of sales, and lower transmission revenue.
Fuel consumption as of March 31, 2016 decreased by ThUS$19,998 compared to the same period in 2015,
mainly associated with lower coal prices, partially offset by higher diesel and Liquefied Natural Gas (LNG)
generation mostly at Eléctrica Santiago.
SIC March March Var
Energy Sales (GWh) 2016 2015 %
Distribution companies 1,296 1,319 -2%
Other customers 713 580 23%
Spot 334 336 -1%
Intercompany 1,137 1,241 -8%
Total energy sales 3,480 3,476 0%
Average monomic price for unregulated customers (US$/MWh) 92 94 -2%
Average monomic price for regulated customers (US$/MWh) 89 122 -27%
March March Var
Energy Purchases (GWh) 2016 2015 %
Other generators 261 198 32%
Intercompany 1,137 1,241 -8%
Total energy purchases 1,398 1,439 -3%
March March Var
Net generation (GWh) 2016 2015 %
Hydro 474 439 8%
Coal 1,388 1,387 0%
LNG 100 76 32%
Diesel 122 124 -2%
Biomass 9 12 -25%
Total 2,093 2,038 3%
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Greater Northern Interconnected Grid (SING)
In the SING, the gross profit increased by ThUS$9,645, equivalent to 38% higher in the first quarter of 2016
as compared to the same period in 2015. This is a consequence of the improved margins associated with
the start-up of new contracts at Norgener, under better conditions, replacing old contracts which expired in
December 2015. Additionally, it is important to mention that the exports of energy to the SADI through AES
Gener transmission line were initiated during the first quarter of 2016. The following table presents gross
profit in the SING for both periods:
The following table shows AES Gener energy sales, purchases and generation by type of fuel in the SING
as at March 31, 2015 and 2016:
SING March March Var
Gross Profit (ThUS$) 2016 2015 %
OPERATING REVENUE
Unregulated customer sales 137,332 135,117 2%
Spot sales 8,569 10,581 -19%
Other operating revenues 2,422 2,097 15%
Total Operating Revenue 148,323 147,795 0%
COST OF SALES
Fuel consumption (37,001) (50,093) -26%
Energy and capacity purchases (35,865) (32,531) 10%
Transmission tolls (1,705) (1,325) 29%
Depreciation and amortization (20,900) (18,491) 13%
Other cost of sales (17,766) (19,914) -11%
Total Cost of Sales (113,237) (122,354) -7%
TOTAL GROSS PROFIT 35,086 25,441 38%
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Main variations between the three-month periods ended on March 31, 2015 and 2016:
Between the first quarter of 2016 and the same period of 2015 an increase in sales to unregulated customers
of ThUS$2,215 was registered mostly due to higher sales volume, increasing from 1,446 GWh in the three-
month period ended on March 31, 2015 to 1,737 GWh at the close of March 2016, or an increase of 20%.
This increase is the result of a larger demand from unregulated customers, and to a lesser extent to energy
exports to the SADI in Argentina, started on February 2016, representing 44 GWh as of March 31, 2016. This
effect is partially offset by lower sales price, fundamentally as a result of lower coal prices.
Energy and capacity sales in the spot market decreased by ThUS$2,012 as a result of lower physical sales,
decreasing by 94 GWh as a result of higher contracted level as of March 2016. Additionally, energy and
capacity purchases increased by ThUS$3,334 between the first quarter of 2016 and the same period in 2016,
explained by energy purchases associated to the exports to the SADI, and a larger volume or physical
purchases mainly as the result of higher unregulated customers demand. The average spot price remained
at 49 US$/MWh in the first quarters of 2015 and 2016.
The cost of fuel consumption decreased by ThUS$13,092 as a result of lower coal average prices, despite
an increase in generation by 157 GWh.
Colombian National Grid (SIN)
In Colombia, gross profit decreased by ThUS$17,918 equivalent to 53% comparing the first three months of
2016 and 2015. This negative variation is mainly explained by a reduction in the generation in the first quarter
of 2016 associated to lower reservoir levels at the beginning of 2016, compared to the same period in 2015.
This resulted in an increase in volume purchases in the spot market at higher prices, increasing from an
average of 76.1 US$/MWh in 2015 to an average of 209.2 US$/MWh in 2016. Additionally, lower sales to
distribution companies were registered as a result of lower contracted level. It is important to mention that
during the fourth quarter of 2015, AES Chivor increased its generation to supply energy demand in the
country during drought from the presence of the El Niño Phenomenon. The following table presents gross
profit in Colombia for both periods:
SING March March Var
Energy Sales (GWh) 2016 2015 %
Other customers 1,737 1,446 20%
Spot 193 287 -33%
Total energy sales 1,930 1,733 11%
Average monomic price for unregulated customers (US$/MWh) 79 93 -15%
March March Var
Energy Purchases (GWh) 2016 2015 %
Spot 479 381 26%
Total energy purchases 479 381 26%
March March Var
Net generation (GWh) 2016 2015 %
Coal 1,475 1,318 12%
LNG - 65 -100%
Total 1,475 1,383 7%
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The following table shows AES Gener energy sales, purchases and generation in the SIN in the first three
months of 2015 and 2016:
Main variations between the three-month periods ended on March 31, 2015 and 2016:
Sales under contracts decreased by ThUS$15,486 primarily explained by lower volume sales of 75 GWh, in
addition to a decrease in average prices in US dollar terms that fell from 60.7 US$/MWh in the first quarter
of 2015 to 50.3 US$/MWh in the same period of 2016, mainly due to the devaluation of the Colombian peso
in comparison with the US dollar. It should be noted that during the same period, gains of ThUS$2,247 were
registered in foreign exchange variations, due to foreign exchange forwards executed to mitigate the impact
from foreign exchange.
Spot energy sales and ancillary service sales increased by ThUS$37,447 as a result of higher average spot
prices that increased from 76.1 US$MWh in 2015 to 209.2 US$/MWh in 2016, as well as higher volume sales
of 96 GWh. In turn, spot energy purchases increased by ThUS$47,022 due to higher physical purchases of
SIN March March Var
Gross Profit (ThUS$) 2016 2015 %
OPERATING REVENUE
Contract sales 39,335 54,821 -28%
Spot sales 76,748 39,300 95%
Other operating revenues 823 2,037 -60%
Total Operating Revenue 116,906 96,158 22%
COST OF SALES
Energy and capacity purchases (92,315) (45,293) 104%
Depreciation and amortization (2,382) (3,068) -22%
Other cost of sales (6,554) (14,224) -54%
Total Cost of Sales (101,251) (62,585) 62%
TOTAL GROSS PROFIT 15,655 33,573 -53%
SIN March March Var
Energy Sales (GWh) 2016 2015 %
Contract 685 760 -10%
Spot 523 427 22%
Total energy sales 1,208 1,187 2%
Average monomic price for customers (US$/MWh) 57 72 -20%
March March Var
Energy Purchases (GWh) 2016 2015 %
Spot 668 555 20%
Total energy purchases 668 555 20%
March March Var
Net generation (GWh) 2016 2015 %
Hydro 529 621 -15%
Total 529 621 -15%
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113 GWh at higher spot prices, which is the result of the lower plant generation in the first quarter of 2016. It
is important to mention that at the beginning of 2016, the reservoir level was 61%, which is lower than the
reservoir level at the beginning of 2015 of 78% due to the support provided to the Colombian system during
the fourth quarter of 2015 given the lower inflows during that period.
With regards to the decrease in other operating revenues of ThUS$7,670, this variance is explained by
distribution and transmission revenues associated to contracts in the unregulated market lower maintenance
costs mainly related to works performed at the Tunjita tunnel at the beginning of 2015.
Interconnected Argentine Grid (SADI)
Gross profit in SADI increased by ThUS$5,491 which represents a positive variation of 87% between the first
quarter of 2016 and the same period in 2015. This positive variance is the result of higher generation by 69%
during 2016 and the recognition from November 2015 of Resolutions 482/2015 and 22/2016 (retroactive from
February 2015), for sales above energy sold under Energía Plus contracts, allowing the Company to capture
higher margins than the previous ones obtained in the spot market. The following table presents gross profit
in the SADI for both periods:
The following table shows AES Gener energy sales, purchases and generation in the SADI in the first
quarters of 2016 and 2015:
SADI March March Var
Gross Profit (ThUS$) 2016 2015 %
OPERATING REVENUE
Contract sales 15,651 17,892 -13%
Spot sales 8,851 10,401 -15%
Total Operating Revenue 24,502 28,293 -13%
COST OF SALES
Fuel consumption (14,529) (21,894) -34%
Energy and capacity purchases 17 (235) -107%
Transmission tolls (86) 37 -332%
Depreciation and amortization (7,250) (6,429) 13%
Other cost of sales (3,504) (6,113) -43%
Total Cost of Sales (25,352) (34,634) -27%
TOTAL GROSS PROFIT (850) (6,341) -87%
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Main variations between the three-month periods ended on March 31, 2015 and 2016:
Generation increased by 452 GWh between the first quarter of 2016 and the same period in 2015 mainly
associated with lower maintenance days in the three-month period ended on March 31, 2016, which resulted
in higher volume sales to the spot market of 124%.
Between the three-month period ended on March 31, 2015 and the same period in 2016, contract revenues
decreased by ThUS$2,241 as a result of lower physical sales for 32 GWh equivalent to 13% associated with
a drop in the volume of industrial demand under the Energía Plus methodology.
Sales to the spot market decreased by ThUS$1,550. This variation is associated to the recognition of
Resolutions 482/2015 and 22/2016. Under this regime, gas is directly provided by CAMMESA, registering in
revenue, the margin for these sales. This margin is higher than the margins previously obtained in the spot
market. This also affected cost of fuel consumption, decreasing by ThUS$7,365.
Selling, General and Administrative Expenses
Administration expenses decreased by 19% from ThUS$28,988 as of the close of March 2015 to
ThUS$23,352 in the same period in 2016. The most important variations include lower personnel expenses
by ThUS$2,351, bad debt recovery for ThUS$1,352 associated with EMELCA bankruptcy process and lower
equity taxes in Colombia by ThUS$941.
Financial Results
The non-EBITDA variations between the first quarter of 2016 and the same period of 2015 are listed in the
following table:
SADI March March Var
Energy Sales (GWh) 2016 2015 %
Contract 217 249 -13%
Spot 825 368 124%
Total energy sales 1,042 617 69%
Average monomic price for customers (US$/MWh) 72 72 0%
March March Var
Net generation (GWh) 2016 2015 %
LNG 1,042 617 69%
Total 1,042 617 69%
Financial Results (MUS$) March March Var
2016 2015 %
Other income / (loss) (1,220) 335 -464%
Finance income 2,962 2,844 4%
Finance expense (33,797) (32,394) 4%
Equity in earnings of associates 2,552 8,030 -68%
Foreign currency exchange differences (11,152) (7,758) 44%
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A negative variation of ThuS$3,394 was recorded in exchange rate differences. This variance is mainly
explained by the FX forwards executed by the Company to mitigate the FX impact of Colombian and Chilean
pesos, which had lower compensations in the first quarter of 2016, partially offset by an appreciation in the
Chilean and Colombian peso during the period, compared to a devaluation of both currencies in the same
period last year.
The following table shows variation in exchange rates in the countries in which AES Gener has operations:
The negative variation of the net finance expenses for ThUS$1,403 as of March 2016 is mainly due to the
higher corporate debt, compensated by a positive effect of valuation of derivative instruments.
In turn, the negative variation of ThUS$5,478 in equity in earnings (losses) of associates is explained by
lower results in Guacolda, mainly due to a decrease in gross profit and higher finance expense associated
to lower capitalization of interests after the start of commercial operations of Unit 5.
Other losses registered a negative variation of ThUS$1,555 as of March 2016 mainly associated with the
loss from spare parts obsolescence provision registered in the first quarter of 2016 for ThUS$902 and higher
loses for assets retirement for ThUS$623.
Income Tax
As of March 31, 2015 the income tax expense was 32% lower in comparison to the same period of 2015,
from ThUS$24,947 as of March 2015 to ThUS$17,056 in the same period of 2016. This variation in
fundamentally explained by lower income before tax in Chile and Colombia.
CASH FLOW
The final balance of cash and cash equivalent as of March 31, 2015 was ThUS$266,268, 7% lower than the
final balance of ThUS$285,811 as of the close of March 2015. The total net flow of the period was negative
for ThUS$3,508 as of March 31, 2016 that negatively compares with the positive flow of ThUS$61,399 as of
March 31, 2015. The net flow of the period is explained by the negative flow in investment activities, partially
offset by positive net flows in financing and operation activities.
Exchange Rate
March
2016
December
2015
Variation
%
March
2015
December
2014
Variation
%
Chile (CLP / US$) 669.80 710.16 -6% 626.58 606.75 3%
Colombia (COP / USD) 3,022.35 3,183.00 -5% 2,599.62 2,376.51 9%
Argentina (ARS / US$) 14.70 13.04 13% 8.82 8.55 3%
March March Var.
Cash Flow (MUS$) 2016 2015 %
Net cash from operating activities 97,990 80,447 22%
Net cash from investing activities (115,995) (376,240) -69%
Net cash from financing activities 14,497 357,192 -96%
Total Net Cash for the Period (3,508) 61,399 -106%
Effects of Foreign Exchange Variations 2,543 (4,279) -159%
Cash at the Beggining of the Period 267,233 228,691 17%
Total Cash at the End of the Period 266,268 285,811 -7%
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Net cash from operating activities recorded a positive variation of ThUS$17,543 as of the close of March
2016 compared with the same period in 2015 mainly due to the higher receipts from AES Chivor of as a
result of higher spot sales in December 2015 collected in January 2016.
Net cash from investment activities showed a positive variation of ThUS$260,245 comparing the first quarter
of 2016 and the same period in 2015. The main variations corresponds to a decrease in acquisitions of
property, plant and equipment of ThUS$257,309 associated with the construction works of Cochrane which
is at its final stage and higher investments recovery of ThUS$16,630. These effects were partially
compensated by the negative variance in other cash inflows (outflows) by ThUS$13,927, mainly related to
VAT recovery in the first quarter of 2015.
Net cash from financing activities represented a negative variation of ThUS$342,695 as of the close of March
2016 compared to the same period in 2015. This is a consequence of lower long-term loans obtained
principally related to Cochrane and AES Gener, in addition to lower proceeds from share issuance, mainly
related to lower equity payments for Cochrane and Alto Maipo during the first quarter of 2016.
FINANCIAL DEBT
Consolidated financial debt, including principal, interest and issuance costs, increased from ThUS$3,375,106
as of December 31, 2015 to ThUS$3,429,570 as of March 31, 2016.
As of March 31, 2016, approximately 88.3% of AES Gener’s credit agreements are at a fixed rate, including
a significant portion of the debt held by the subsidiaries Eléctrica Cochrane and Alto Maipo for which interest
rate swap agreements have been executed. The remaining 11.7% of the Company’s consolidated debt
maintains a variable interest rate.
As of March 31, 2016, approximately 97.7% of AES Gener’s long-term debt accruing interests was
denominated in U.S. dollars, including the Chilean bond issued in December 2007 for which a cross-currency
swap was executed. Of the remaining debt, 1.0% was denominated in Chilean UF (Eléctrica Santiago’s bond)
and 1.3% in Colombian pesos (the leasing executed by AES Chivor to finance the Tunjita Project).
In April 2016, Eléctrica Angamos partially refinanced its US$800 million bond through a tender process,
purchasing US$199 million at 94% of its nominal value. The Company refinance this debt with syndicated
loans under the same terms and conditions with local bank facilities at a lower average interest rate of 4.50%.
The following graph details AES Gener’s consolidated amortization schedule for the outstanding principal of
ThUS$3,539,245 as of March 31, 2016, excluding issuance costs and including non-recourse project finance
debt.
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MARKET INFORMATION
In Chile, AES Gener does business principally in two large interconnected electric systems: the Central
Interconnected System or SIC, that runs from the southern part of Region II to Region X, and the Greater
Northern Interconnected System or SING, that encompasses Region I and Region XV, as well as part of
Region II. AES Gener’s Colombian subsidiary, AES Chivor, is one of the principal electric generators in the
Colombian National Interconnected System or SIN. AES Gener affiliate, TermoAndes sells electricity to the
Argentine market.
SIC
During the first quarter of 2016, better hydrological conditions allowed reservoir level to show an improvement
compared to the same period of the previous year. This resulted in an increase in hydro generation that,
together with the drop in commodity prices, drove a spot price decrease in the system by 71% when
compared to the first quarter in 2015. As of March 31, 2016, the companies of the Group AES Gener,
including Guacolda, contributed with 24.3% of the net generation in the SIC. The table below shows certain
principal variables in the SIC for the three-month periods ended on March 31, 2016 and 2015.
SING
The average marginal cost remained at the same level when compared to the same period of the previous
year. As of March 31, 2016, the companies of the Group AES Gener contributed with 32,7% of the net
generation in the SING. The table below shows the main variables in the SING in the first quarters of 2015
and 2016:
SIN
Given extreme dry conditions, spot prices exceeding the scarcity price (~ 110 US$/MWh), and thermo plants
not being able to operate as they have variable costs above the scarcity price; in October of 2015 the
government stablished a cap for the spot price at 810 Col$/KWh (~ 268 US$/MWh) as a temporary measure.
Spot prices increased by 260% in Colombian pesos during the first quarter of 2016 compared to the same
period in 2015; while in dollars they increased by 175% due to the devaluation of the Colombian peso. As of
March 31, 2016, the generation of AES Chivor represented 3% of the demand in Colombia. The following
table shows the main variables in the SIN during the three-month periods ended on March 31, 2015 and
2016:
SIC
March
2016
March
2015
Demand growth (%) 3.1 3.1
Monthly Average consumption (GWh) 4,283 4,163
Average annual spot price (Quillota 220 kV) US$/MWh 131.6 159.5
SING
March
2016
March
2015
Demand growth (%) 7.8 6.3
Monthly Average consumption (GWh) 1,417 1,348
Average annual spot price (Crucero 220 kV) US$/MWh 49.3 49.3
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SADI
In November 2015, the Argentine Energy authority confirmed that the energy sold by Termoandes, in excess
of what is sold under the Energía Plus program, will receive an extra remuneration determined by Resolution
482/2015, which is higher than the spot price currently received for these sales. By the end of March 2016,
the Undersecretariat of Energy in Argentina issued Resolution 22/2016 replacing, from February 1, 2016
onwards, Annexes from Resolution 482/2015 enacted on July 10, 2015, updating remunerations for fixed
costs, non-fuel variable costs, additional remunerations, non-recurring maintenances, investment resources
for 2015-2018 and availability remunerations. These adjustments benefit Termoandes, improving prices
received for the energy form the gas turbines sold at the spot market.
As of March 31, 2016, the generation of Termoandes in the SADI represented 3% of Argentine demand.
The following table shows the main variables in the SADI for the three-month periods ended on March 31,
2014 and 2015:
RISK ANALYSIS
Market and Financial Risks
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to a
change in market prices. Market risks include the following three categories: foreign currency risk, interest
rate risk and commodity price risk. Financial risk relates to the potential occurrence of events which could
have a negative financial impact on the Company and specifically includes: credit risk and liquidity risk.
Foreign Currency Risk
With the exception of operations in Colombia, the Company’s functional currency is the US dollar given that
its revenue, expenses and investments in equipment and debt are mainly determined based in US dollar.
Also, the Company is authorized to file and pay its income taxes in Chile in US dollars. Exchange rate risk is
associated with any revenue, expenses, investments and debt denominated in any currency other than US
dollars. The main items denominated in Chilean pesos are contract sales and tax credits mainly associated
with VAT. As of March 31, 2016, AES Gener maintained several currency forwards with banks to mitigate its
exposure to foreign exchange variations associated with energy sales, given that even though most of the
Company’s energy supply agreements have prices denominated in US dollars, payments are made in
Chilean pesos at an exchange rate that is fixed for a specific period of time, and VAT payments. Given the
Company's net asset position in Chilean pesos as of March 31, 2016, the impact of 10% devaluation in the
exchange rate of the Chilean peso with respect to the US dollar could have resulted in a realized negative
impact of approximately ThUS$11,699 in AES Gener net income.
SIN
March
2016
March
2015
Demand growth (%) 4.5 3.3
Monthly Average consumption (GWh) 5,537 5,297
Average annual marginal cost US$/MWh 209.2 76.1
SADI
March
2016
March
2015
Demand growth (%) 3.6 7.6
Monthly Average consumption (GWh) 10,432 10,065
Average annual marginal cost US$/MWh 8.3 13.8
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During the three-month period ended on March 31, 2016 approximately 77.5% of operating revenue and
91.0% of the Company’s costs of sales were denominated in US dollars compared to 80.5% of operating
revenue and 85.8% of costs of sales during the first quarter of 2015.
The functional currency of Chivor, the Company’s Colombian subsidiary, is the Colombian peso since the
majority of its revenue, particularly contract and spot sales and operating costs are linked to the Colombian
peso. For the period ended on March 31, 2016, sales in Colombian pesos represented 20.9% of the
Company’s consolidated operating revenue, while they represented 17.5% in the same period of 2015.
Additionally, AES Chivor’s dividends are determined in Colombian pesos, although financial hedge
instruments are used to fix the amount to be distributed in US dollars. Given AES Chivor's net liability position
in US Dollars as of the close of March 2016, a 10% devaluation in the exchange rate of the Colombian peso
with respect to the US dollar could have generated a negative impact of approximately ThUS$5,041 in AES
Gener’s net income.
Spot prices in the Argentine market are denominated in Argentinean pesos. Argentine-peso denominated
sales represented 1.6% of the Company’s consolidated operating revenue for the first quarter of 2016,
representing 2.0% for the year ended on March 31, 2015. Given TermoAndes' net asset position in Argentine
pesos as of March 31, 2016, a 10% devaluation in the exchange rate of the Argentine peso with respect to
the US dollar could have generated a negative impact of approximately de ThUS$1,519 in AES Gener’s net
income. It is worth mentioning that the Argentine government devalued the Argentinean peso by
approximately 35%, the fastest devaluation since 2002, resulting in a non-material impact on results given
the limited exposure Termoandes had to the Argentine peso at that time. A weaker Argentinean peso and
economy could cause significant volatility in TermoAndes' operating income and cash flows.
Argentina defaulted on its public debt in 2001, when it stopped making payments on about $100 billion amid
a deep economic crisis. In 2005 and 2010, Argentina restructured its defaulted bonds into new securities
valued at about 33 cents on the dollar. Between the two transactions, 93% of the bondholders agreed to
exchange their defaulted bonds for these new bonds. The remaining 7% did not accept the restructured deal.
Since then, a certain group of such bondholders has been in judicial proceedings with Argentina regarding
payment. In June 2014, the United States District Court ruled that Argentina would need to make payment
to all bondholders, according to the original applicable terms. After on July 30, 2014 the parties failed to reach
a settlement agreement, as referred by S&P and Fitch, Argentina fell into a selective default resulting from
failure to make interest payments on its Discount Bonds maturing in December 2033. Since then, Argentina
has advanced in negotiations with bondholders, reaching a preliminary agreement with some of them,
involving the payment of approximately $900 million in defaulted notes and has already secured US$5bn in
loans from international banks to pursuit a final agreement with 100% of them. The current proposal is to pay
approximately about US$6.5bn in cash to US holdouts. Main holdouts stated that they reject the proposal,
expecting the payment of full US$9,000 million claimed. S&P raised the country’s local credit rating by one
notch from CCC- to B- as they consider the new administration presents a credible plan to face the macro
economical imbalance. This situation has not caused any significant changes that impact our current
exposures other those that are discussed above in regards to the macroeconomics within the country.
In consolidated term, investments in new plants and maintenance of equipment are principally denominated
in US dollars. Short-term investments are also mostly held in U.S. dollars. As of March 31, 2016, 92.2% of
short-term investments and current account balances were in US dollars, 5.4% in Chilean pesos, 0.9% in
Colombian pesos and 1.5% in Argentine pesos. Cash balances in Argentine pesos are subject to exchange
restrictions and exchange rate volatility particular to the Argentine market. As of March 2015, 71.8% of
investments and balances were in US dollars, 16.4% in Colombian pesos, 6.0% in Chilean pesos and 5.8%
in Argentinean pesos.
With regard to debt (bank loans and bonds payable) denominated in currencies other than the U.S. dollar,
AES Gener has executed coverage in the form of cross-currency swaps to reduce exchange rate risk. AES
Gener executed a cross-currency swap for the UF-denominated bonds issued in 2007 for approximately
ThUS$219,527 and the swaps extend throughout the duration of the debt. It should be noted that a portion
of this swap was unwound in June, 2014, associated to the Series O Bonds with maturity in 2015, and the
swap related to the Series N Bonds, with maturity in 2028 for ThUS$172,264 remained in force. As of March
31, 2016, 97.7% of AES Gener and its subsidiaries’ debt was denominated in U.S. dollars, including the local
bonds mentioned above and the associated swaps. The following table shows the composition of debt by
currency as of March 31, 2016 and December 31, 2015:
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Currency March 2016
(%)
December 2015
(%)
US$ 97,7 97,9
UF 1,0 0,9
Col$ 1,3 1,2
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest
rates relates primarily to the Group’s long-term debt obligations with variable interest rates.
AES Gener manages its interest rate risk by having an important percentage of its debt at fixed rate or with
interest rate swaps, to fix it. Additionally, AES Gener has entered into interest rate swaps to mitigate interest
rate risk for long-term obligations. Currently, AES Gener has interest rate swaps for an important part of the
debt associated with subsidiaries Eléctrica Cochrane and Alto Maipo. It should be noted that in July 14, 2015
Eléctrica Ventanas’ project finance was refinanced through the issuance of a 144A / Reg S bond in the
international markets at the AES Gener level, which also included the partial repurchase of the local Series
Q of AES Gener, allowing this debt to be at fixed rate from July 2015 onwards. A 10% increase in variable
interest rates would not have a significant impact on net income as 88.3% of the Group's debt is at fixed rates
or rate swaps. The following table shows the composition of debt by type of interest rate as of March 31,
2016 and December 31, 2015:
Rate March 2016
(%)
December 2015
(%)
Fixed or with Swap 88,3 88,5
Variable 11,7 11,5
It should be noted that the subordinated bond issued in December 2013 for a total of ThUS$450,000 with
tenor of 60 years, is at a fixed interest rate of 8.375% until year 5.5 from the issuance. From that period
onwards, the interest rate is recalculated based on the 5-year swap rate published by Bloomberg plus a
margin (spread) established in the offer and subsequently recalculated, based on the same conditions, every
5 years to maturity of debt.
Commodity Price Risk
The Group is affected by the volatility of certain commodity prices. The fuels used by the Company, mainly
coal, diesel and liquefied natural gas (LNG), are commodities with international prices set by market factors
outside of the Company’s control. In Argentina, the Company’s subsidiary TermoAndes purchases natural
gas at a fixed price under short-term contracts, which is reflected in the energy contract price fixation.
The price of fuel is a key factor in plant dispatch and spot prices both in Chile and Colombia. Since AES
Gener is a company based mainly on thermal generation, fuel costs represent a significant portion of the cost
of sales.
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Currently, the majority of the Company’s power purchase agreements include indexation mechanisms that
adjust prices based on the increase and decrease in the price of coal in accordance with the indexes and
adjustment periods specified under each contract, in order to mitigate major variations in the fuel cost.
Currently, AES Gener’s contracted energy is balanced with energy generation of facilities with high probability
of dispatch (efficient generation) and the remaining facilities (back-up facilities) which utilize diesel or LNG
are expected to generate only during periods with limited market supplies such as dry hydrological conditions
in the SIC, selling energy on the spot market. Currently, diesel and LNG purchases are not hedged as spot
market sales allow variations in fuel prices to be transferred to the sale price. However, the price of fuel
(particularly LNG or diesel) directly affects the spot price and plant dispatch.
Credit Risk
Credit risk relates to the credit quality of counterparties with which AES Gener and its subsidiaries establish
relationships. These risks are reflected primarily in accounts receivables and financial assets including bank
and other deposits and other financial instruments.
With regard to accounts receivable, AES Gener’s counterparties in Chile are mainly distribution companies
and industrial customers of elevated solvency and over 90% of these customers or their parent companies
have local and/or international investment grade credit ratings. Necessarily, sales made by the AES Gener
Group companies in the spot market must be made to other generators, members of the CDEC, in
accordance with the economic dispatch determined by this entity.
In Colombia, AES Chivor performs risk assessments of its counterparties based on an internal credit quality
evaluation, which in some cases may include guarantees. In 2010, also in low hydrological conditions, AES
Chivor suffered collection problems with an energy trader and eventually registered a loss of ThUS$1,300.
In this case, the trader was suspended from participating in the Bolsa or spot market and AES Chivor
presented actions to recover the outstanding amount. During 2015, under a new period of dry hydrological
conditions, a thermo generator accumulated penalties and debts with the Colombian market, including AES
Chivor, owing the Company approximately ThUS$7,500. This member of the market was intervened by the
Colombian authority, freezing its debt as of the date of the intervention. It is expected that payments will be
managed over a period to be shortly determined.
In Argentina, the principal counterparties are CAMMESA (Compañía Administradora del Mercado Mayorista
Eléctrico S.A.) and large unregulated consumers with contracts under the Energía Plus program.
TermoAndes carries out internal credit evaluations of its unregulated customers and therein include
guarantees to secure payments.
Financial investments by AES Gener and its subsidiaries such as mutual funds, time deposits and derivatives,
are executed with local and foreign financial institutions which have national and/or international credit ratings
greater than or equal to “A” under the S&P and Fitch scale and “A2” under the Moody’s scale. Similarly,
derivatives for financial debt are executed with first class international entities. Cash, investment and treasury
policies direct the management of the Company's cash portfolio and minimize credit risk.
Liquidity Risk
Liquidity risk relates to the funding requirements to meet payment obligations. The Company's objective is to
maintain a balance between continuity of funding and financial flexibility, through internally generated cash
flows, bank loans, bonds, short-term investments, committed credit lines and uncommitted credit lines.
As of March 31, 2016, AES Gener had available liquid funds of ThUS$266,268 included in cash and cash
equivalent. Meanwhile, as of the closing of December 2015, the balance in liquid resources amounted to
ThUS$295,242 including cash and cash equivalent of ThUS$267,233 and short-term time deposits for
ThUS$28,009 included in other current financial assets. It should be noted that the balance of cash and cash
equivalents includes cash, term deposits with expiration of less than 90 days, securities, low risk immediately
available mutual funds in U.S. dollars and re-sale and fiduciary agreements.
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Additionally, as of March 31, 2016, AES Gener has committed and uncommitted credit lines for approximately
ThUS$231,222 and uncommitted and unused credit lines for approximately ThUS$176,000.
With regard to the amortization schedule, the Company seeks to maintain an adequate debt profile. More
detail of the current debt profile, please see Financial Debt on page 13.
Operational Risks
Operational risks relate to the possibility of future outages or deficiencies that can negatively affect the
Company’s strategic operational and/or financial objectives.
Hydrology
AES Gener’s operations in the SIC and Colombia may be affected by hydrological conditions, as hydrology
is key to plant dispatch and prices in both grids. The Company uses its own statistical models to evaluate the
risks associated with its contractual commitments. In general terms, AES Gener’s commercial strategy in
Chile is to execute long-term contracts for its efficient generation plants, reserving other more expensive
units for sales in the spot market. In Colombia, the commercial strategy focuses on optimal use of the
reservoir with the general objective of contracting on average 75% of expected generation.
Currently, efficient generation of AES Gener’s facilities in the SIC is balanced with contracted volume, which
mitigates most of the exposure to hydrology variations, and additionally, the Company has back-up facilities
which allow to limit maximum exposure.
Natural Gas Supply
The combined cycle plants in Chile, including Eléctrica Santiago’s Nueva Renca plant, currently operate with
diesel or LNG alternatively. Eléctrica Santiago does not have long–term LNG contracts and acquires volumes
on the spot market or under short–term contracts according to dispatch projections. In Argentina,
TermoAndes holds natural gas supply contracts with Argentine producers and the Company estimates that
in the case of potential gas supply restrictions, TermoAndes has certain alternatives to mitigate the impact
of gas supply interruptions which include contract price indexation mechanisms, spot gas purchases and
back-up supply from other generators.
Operational Failures and Maintenance
Mechanical failures, accidents or planned and unplanned maintenance affecting the availability of the
Company’s efficient capacity could have a material adverse effect on results.
Although the Company performs regular maintenance and operational enhancements to guarantee the
commercial availability of its generation plants and operational insurance policies remain in effect,
mechanical failures or accidents could result in periods of commercial unavailability. Significant periods of
unavailability of AES Gener’s efficient plants as a result of mechanical failure or maintenance (planned or
unplanned) would require the Company to meet its contractual obligations by using more expensive back up
generation or by purchasing energy on the spot market, both of which could result in higher costs that would
adversely affect operating results. In the SIC, the maximum exposure to this risk is limited by variable costs
of our back-up facilities.
Investment Projects
The execution of the investment projects being developed by the Company depends on numerous factors
that could defer from the originally projected. Among these factors, projects can experience increases in
costs of construction or investment on equipment, potential delays, difficulty in finding skilled labor, financing
costs, and the effect of potential delays or difficulties in the regulatory authorization and permitting process,
including potential litigation or lawsuits. It should be noted that adequate project development includes
making investments related to diverse project areas such as studies, easements, land preparation and
construction of roads, among others, before the approval and final execution of the project.
AES GENER/ 2016
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Currently, generation projects are facing a high opposition from organized groups or communities located
next to them. The Company cannot ensure that this opposition will not affect projects under construction.
AES Gener, in its interest of being a good neighbor and through its “Policy on Ties and Relations with Local
Communities”, works to be locally respected and to be valued by its good economic, social and environmental
performance and by its contribution to the sustainable development to the communities where the Company
is inserted.
Decoupling Risk
Given certain transmission restrictions in Chile due to the concentration of energy renewable plants, there
may be differences between prices of injection and withdrawal (decoupling), which should be assumed by
the generation companies and can, in turn, affect their operating margins. Currently, there are contracts in
which this risk cannot be pass-through, although in new contracts with non-regulated customers, clauses to
mitigate this risk are being negotiated.
Regulatory Risks
AES Gener, its subsidiaries and related companies are subject to regulation in diverse aspects of their
businesses in the countries in which they operate. Regulatory risk is related to potential modifications in
existing legislation that could adversely affect the Company’s financial results.
Regulatory Framework
As electric generation companies, AES Gener, its subsidiaries and related companies are subject to
regulation in diverse aspects of their business. The current regulatory framework, which governs all electricity
supply companies, has been in effect in Chile since 1982 and in Colombia since 1994.
Recently, in Chile there was a regulatory risk associated with the lack of energy supply contracts for
distribution companies (distcos.), a situation that was not addressed by the regulation. In January 2015, the
Government approved a law modifying the bidding process of distribution companies that incorporates an
allocation mechanism for the energy without contract for each operation hour, pro rata of the effective
injection from each generator in the same period, at a price determined as the maximum between the short
term node price and the variable cost, plus the difference between the price of injection and withdrawal.
Additionally, it includes the alternative for certain distcos to transfer a portion of its unused supply to others
with lack of contracts, which means that a generation company that signs an agreement with a distco might
end-up supplying another. Furthermore, in early 2014, the Independent Electric Systems Interconnection
Law was enacted, with the aim of promoting the SIC-SING interconnection through a 600 kilometers
transmission line connecting both systems. The regulation on the repayment mechanism for this project
investment is not yet enacted, and there is uncertainty whether an important modification in tolling assignment
would take place, particularly in the SIC.
In the past few years, Colombian authorities are developing certain regulatory changes. Among the most
important issues under development is the review of an implementation of a standardized market for
contracts with distribution companies replacing or complementing the current bid processes, however no
major progress was registered during 2015. During 2015, the regulator developed the regulations to
implement of Law 1715 from 2014 with regards to the participation of renewable energy in the system as well
as energy surplus sales from self-generators, and also rules for the Distributed Generation and demand
participation. In turn, the Government issued a regulatory proposal that could affect current incentives to
plants with effective capacity equal or below 20 MW that, if adopted, makes AES Chivor future developments
of these kind of projects more difficult. Finally, the monitoring of indicators of the "Shortage Risk Statute” was
implemented, developed for energy emergencies, promulgated by the regulator in 2014, however there have
not been interventions in reservoirs yet as the market has reacted properly to the signs of scarcity and
reliability of the system has remained adequate. Additionally, although the regulation proposal is not known
yet, the regulator stated that it will soon announce the new rules for the next bid for the reliability charge,
giving the signs for future expansions. Recently, due to the drier hydrology present in Colombia, spot price
exceeded the scarcity price (110 US$/MWh) reaching ~300 US$/MWh in September and ~600 US$/MWh in
October. This situation resulted in certain measures taken by the Government to alleviate financial situation
AES GENER/ 2016
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of thermo plants using liquid fuel with potential risk of not being able to have its firm energy available, as
variable costs are higher than revenue recognized for these plants (scarcity price). Moreover, a cap of ~270
US$/MWh was determined for spot prices as a temporary measure. All potential regulatory changes could
affect AES Chivor’s results.
In Argentina, since 2001, significant modifications have been introduced to the electricity regulatory
framework. These modifications include tariff conversion to Argentine Pesos, freezing of tariffs, the
cancelation of inflation adjustment other mechanisms and the introduction of a complex pricing system, which
have materially affected electricity generators and market agents, and generated substantial price differences
within the market. On March 26, 2013, the Argentine government introduced a resolution (Resolution 95-
2013), which amended the current regulatory framework and is to be applied to electric generation companies
with certain exceptions. In accordance with this regulation, a new compensation system moving from a
“marginal cost” to “average cost” market, which is based on compensating fixed costs, variable non-fuel costs
and an additional margin. On May 20, 2014, the Argentine Government published the resolution (RES SE
529/14) under which the additional margin to compensate generators is updated. On July 10th 2015,
Resolution 482/15 was published, updating figures previously published in Resolutions 95/13 and 529/14.
Based on Note 2053, sent by the Ministry of Energy in March 2013, it is understood that TermoAndes’ units
are not affected by the resolution. As a result, the Company does not expect this amendment to have an
impact on TermoAndes’ operations. On March 13th, 2015, the Argentine Undersecretary of Energy increased
by approximately 40% the Incremental Mean Charge of Excess Demand in the SADI, which corresponds to
part of the charge the large users and large clients must pay in Argentina when they buy energy in the spot
market, which changed from 320 Ar/MWh to 450 Ar/MWh for certain users. With this change, users with non-
contracted plus type of demand that purchase their energy requirements on the spot market would have an
incentive to contract their demand with an Energía Plus generator.
AES Gener cannot guarantee that the laws or regulations in the countries in which it operates or has
investments will not be modified or interpreted in a manner which could adversely affect the Company or that
governmental authorities will effectively grant any approval requested. AES Gener actively participates in the
development of the regulatory framework, submitting comments and proposals to the proposed regulations
presented by authorities.
Environmental Regulation
AES Gener is also subject to environmental regulations, which, among others, require that it perform
environmental impact studies for its future projects and obtain regulatory permits. AES Gener cannot
guarantee that governmental authorities will effectively grant any environmental approval requested.
It should be noted that in June 2011, a new regulation on air emission standards was enacted, which
established new emission limits for particulate matter and gases produced of thermoelectric power
generation. For existing plants, including those currently under construction, the new limits for particulate
matter emission will go into effect by the end of 2013 and the new limits for SO2, NOX and mercury emission
will begin to be applied by mid-2016, with the exception of plants that operates in zones declared as latent
or saturated, where the limits went into effect in June 2015.
In order to comply with the new emission standards, between 2012 and 2015, AES Gener completed
investments for approximately ThUS$229,000 million, at a consolidated level, in emission reduction
equipment in four older coal plants (constructed between 1964 and 1997) and is investing approximately
US$110 million in the coal units owned by the equity-method investee Guacolda. In 2013, Guacolda initiated
the installation of emission control equipment at Units I, II and IV, totaling, as of March 31, 2016, an
investment of ThUS$189,500. AES Gener’s coal plants that initiated operations in recent years (Nueva
Ventanas and Ventanas IV in the SIC and Angamos Units I and II in the SING) will not require additional
investments.
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Tax Regulation
AES Gener, its subsidiaries and affiliates are subject to existing tax legislation in each country where they
operate. Amendments to laws or modification in tax rates may have a direct effect on earnings.
In Chile, in September 2014, the new tax reform was passed, which, among others, will gradually increase
the first category corporate tax rate from the current 20% to a rate that will depend on the regime chosen
considering two alternatives: (i) Attributed Profits Income (API) gradual increase in the rate to 25% in 2017
and (ii) Partially Integrated System (PIS) gradual increase in the rate to 27% in 2018. According to a Chilean
Securities and Insurance Authority (SVS) resolution, the impact on deferred taxes related to the tax reform
will not be registered in the net income, but it will be registered in the equity. It should be noted that in January
2016, the Chilean Government approved the “reform of the reform” which prevents Corporations to opt for
the API regime. This last reform had no impact on the Company as it has opted for the PIS regime from the
beginning. Additionally, the tax reform incorporates an emission tax for thermo plants effective from 2017. A
great portion of the Company’s PPAs have clauses that allow to pass-through the costs arising from new
laws, which mitigates the negative impact from this new tax. However, the estimated negative impact is near
Th$30,000 from 2017 to 2020, and from 2021 the impact decreases gradually reaching cero in 2025.
In Colombia, on December 23, 2014, the Colombian Government approved a Tax Reform including, among
others, an increase in the tax rate in four years of 5% in 2015, 6% in 2016, 8% in 2017 and 9% in 2018, and
a wealth tax of 1.15% in 2015, 1% in 2016 and 0.4% in 2017, disappearing in 2018. Additionally, a tax on
transactions will be maintained until 2018, decreasing to 0.3% in 2019, 0.2% in 2020 and 0.1% in 2021. With
regard to this tax reform, a negative impact of ThUS$2,900 on deferred taxes was registered in 2014.
Currently the Colombian government is analyzing a new reform with the objective of unifying the direct taxes
and determine taxes on dividends. This reform is expected for the second half of 2016.
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AES GENER AND SUBSIDIARIES
Consolidated Balance Sheet
As of March 31, 2016 and December 31, 2015
International Financial Reporting Standards
ASSETS March 31, 2016 December 31, 2015
ThUS$ ThUS$
Current Assets
Cash and Cash Equivalents 266,268 267,233
Other Current Financial Assets 9,334 40,161
Other Current Non-Financial Assets 24,143 5,787
Trade and Other Receivables 387,916 362,558
Related Party Receivables 17,360 13,213
Inventory 135,806 122,853
Taxes Receivables 45,408 42,149
Total Current Assets 886,235 853,954
Non-Current Assets
Other Non-Current Financial Assets 22,547 34,359
Other Non-Current Non-Financial Assets 37,272 29,764
Trade and other Receivables 8,536 14,832
Investments in Associates 404,299 402,178
Intangible Assets 51,040 53,238
Goodwill 7,309 7,309
Property, Plant and Equipment 5,919,412 5,795,506
Deferred Taxes 71,038 94,893
Total Non-current Assets 6,521,453 6,432,079
TOTAL ASSETS 7,407,688 7,286,033
AES GENER/ 2016
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24
AES GENER AND SUBSIDIARIES
Consolidated Balance Sheet
As of March 31, 2016 and December 31, 2015
International Financial Reporting Standards
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 2016 December 31, 2015
ThUS$ ThUS$
Current Liabilities
Other Current Financial Liabilities 165,890 159,552
Trade and Other Payables 313,500 288,589
Related Party Payables 24,358 18,392
Provisions 3,511 3,455
Taxes Payable 45,705 45,595
Employee Benefits 3,476 3,689
Other Current Non-Financial Liabilities 28,268 34,086
Total Current Liabilities 584,708 553,358
Current Liabilities
Other Non-Current Financial Liabilities 3,560,056 3,456,919
Trade and Other Payables 23,853 26,283
Related Party Payables 232,398 229,788
Provisions 108,312 106,599
Deferred Taxes 515,124 542,540
Employee Benefits 30,485 27,960
Other Non-Current Non-Financial Liabilities 10,209 10,352
Total Non-Current Liabilities 4,480,437 4,400,441
TOTAL LIABILITIES 5,065,145 4,953,799
Net Equity
Issued Capital 2,052,076 2,052,076
Retained Earnings (Losses) 418,158 377,125
Share premium 49,864 49,864
Other Components of Equity 236,827 236,567
Other Reserves (509,017) (492,188)
Total Equity Attributable to Shareholders
of Parent 2,247,908 2,223,444
Non-Controlling Interest 94,635 108,790
TOTAL NET EQUITY 2,342,543 2,332,234
TOTAL LIABILITIES AND EQUITY 7,407,688 7,286,033
AES GENER/ 2016
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25
AES GENER AND SUBSIDIARIES
Consolidated Income Statement for the periods ended on
March 31, 2016 and 2015
International Financial Reporting Standards
INCOME STATEMENTMarch 31, 2016 March 31, 2015
ThUS$ ThUS$
Operating Revenue 555,621 532,535
Cost of Sales (434,306) (401,410)
GROSS PROFIT 121,315 131,125
Other Operating Revenues 408 852
Selling, general and administrative Expenses (23,352) (28,988)
Other Operating Expenses (635) (824)
Other Income / (Loss) (1,220) 335
Financial Income 2,962 2,844
Financial Expense (33,797) (32,394)
Equity Participation in Net Income of Associates 2,552 8,030
Foreign Currency Exchange Differences (11,152) (7,758)
NET INCOME (LOSS) BEFORE TAXES 57,081 73,222
Income Tax Income (Expense) (17,056) (24,947)
Net Income (Loss) from Current Operations 40,025 48,275
Income (Loss) from Discontinued Activities - -
NET INCOME (LOSS) 40,025 48,275
Income Attributable to Shareholders of Parent 41,033 51,330
Income (Loss) Attributable to Non-Controlling Interests (1,008) (3,055)
NET INCOME (LOSS) 40,025 48,275
AES GENER/ 2016
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26
AES GENER AND SUBSIDIARIES
Consolidated cash flow statements
As of March 31, 2016 and 2015
International Financial Reporting Standards
March 31,
2016
March 31,
2015
CONSOLIDATED CASH FLOW STATEMENT MUS$ MUS$
Net Cash Flows provided by (used in) Operating Activities
Receipts from Customers 571,592 654,787
Other Receipts from Operating Activities 2,548 4,473
Payments to Suppliers (392,729) (507,562)
Payments made to Employees (22,891) (20,761)
Other Payments for Operating Activities (17,914) (21,027)
Payments of Dividends - -
Receipt of Dividends - -
Payment of Interests (24,110) (17,574)
Receipt of Interests 8,220 590
Income Taxes Paid (13,184) (6,706)
Other Operating Outflows from Operating Activities (13,542) (5,773)
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 97,990 80,447
Net Cash Flows provided by (used in) Investing Activities
Loss of Control over a Subsidiary or other business - -
Purchase of Non-Controlling Interest - -
Other receipts for sale of equity or debt instruments of other entities - -
Proceeds from Sale of Property, Plant and Equipment - 1
Purchases of Property, Plant and Equipment (149,792) (407,101)
Proceeds from sale of Intangible Assets - -
Purchases of Intangible Assets (54) (288)
Proceeds from other Long-Term Assets 16,630 -
Purchase of Long –Term Assets - -
Other Outflows from Investing Activities 17,221 31,148
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (115,995) (376,240)
Net Cash Flows provided by (used in) Financing Activities
Proceeds from Share Issuance 5,200 65,200
Proceeds from Long –Term Borrowings 23,800 297,047
Proceeds from Short –Term Borrowings - -
Proceeds from Related Parties Borrowings - -
Repayments on Loans - -
Payments on Financial Leasing Liabilities (453) (524)
Other Inflows (Outflows) of Cash and Cash Equivalent (14,050) (4,531)
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 14,497 357,192
INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENT (3,508) 61,399
Effects of Foreign Exchange Variations on Cash and Cash Equivalents 2,543 (4,279)
Cash and Cash Equivalents at the Beginning of Period (965) 57,120
Cash and Cash Equivalents at the Beginning of Period 267,233 228,691
CASH AND CASH EQUIVALENT AT THE END OF PERIOD 266,268 285,811
AES GENER/ 2016
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27
AES GENER CONSOLIDATED EBITDA
March March Var.
EBITDA (ThUS$) 2016 2015 %
Gross Profit 121,315 131,125 -7%
Depreciation (-) 58,430 55,936 4%
Other Operating Revenues 408 852 -52%
Administrative Expenses (23,352) (28,988) -19%
Other Operating Expense (635) (824) -23%
Other Costs not included in EBITDA (-) 1,437 1,686 -15%
TOTAL EBITDA 157,603 159,787 -1%
AES GENER/ 2016
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28
ANNEX 1: GUACOLDA ENERGÍA S.A
Summarized income statement for the period
As of March 31, 2016 and 2015
International Financial Reporting Standards
Income Statement (ThUS$)
March
2016
March
2015
Var
%
Operating Revenue
Contract Sales 62,669 95,900 -35%
Spot Sales 14,187 16,176 -12%
Other Revenue 8,697 16,423 -47%
Total Operating Revenue 85,553 128,499 -33%
Cost of Sales
Fuel consumption (28,536) (34,377) -17%
Energy and capacity purchases (912) (32,293) -97%
Transmission tolls (4,633) 3,931 -218%
Other cost of sales (13,446) (18,384) -27%
Depreciation (16,803) (11,651) 44%
Total Cost of Sales (64,330) (92,774) -31%
Gross Profit21,223 35,725 -41%
Selling, general and administrative Expenses (3,626) (3,230) 12%
EBITDA 34,400 44,146 -22%
Financial Expense (11,089) (8,291) 34%
Net Income (Loss) Before Taxes 6,934 21,795 -68%
Income Tax Income (Expense) (1,831) (5,901) -69%
Net Income (Loss) Before Taxes 5,103 15,894 -68%
Balance Sheet Information (ThUS$)
Cash and Cash Equivalents 66,409 18,685 255%
Property, Plant and Equipment 1,646,782 1,566,105 5%
Other Current Financial Liabilities (72,707) (108,436) -33%
Other Non-Current Financial Liabilities (768,933) (629,033) 22%
Total Financial Liabilities (841,640) (737,469) 14%
AES GENER/ 2016
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29
Energy Generation, purchases and sales
As of March 31, 2016, the decrease of ThUS$14,702 in gross profit is mainly explained by a negative impacts
in transmission revenues and costs, associated to transmission settlements registered in both quarters,
resulting in lower profit registered in the first quarter of 2016. Additionally, lower volume sales of 211 GWh to
regulated and unregulated customers were registered, mainly explained by lower mining production during
the first three months of 2016. These negative effects are partially compensated by lower energy purchases
associated to higher generation and lower cost of fuel consumption associated to lower coal prices.
From a non-operational standpoint, main variances include a positive effect in deferred taxes related to the
reorganization process between Empresa Eléctrica Gaucolda S.A. and Guacolda Energía S.A. completed in
2015, partially offset by an increase in finance expenses due to lower capitalization interest after the start of
commercial operations at Unit 5.
Energy (GWh)
March
2016
March
2015
Var
%
Generation
Thermo 1,144 1,081 6%
Purchases
Spot
Other generators 7 19 -63%
Total Purchases 7 19 -63%
Sales
Distribution Companies 206 566 -64%
Other customers 654 505 30%
Spot 296 29 921%
Total Sales 1,156 1,100 5%
AES GENER/ 2016
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30
ANNEX 2: EMPRESA ELÉCTRICA ANGAMOS S.A
Summarized income statement for the period
As of March 31, 2016 and 2015
International Financial Reporting Standards
Income Statement (ThUS$)
Marzo
2016
Marzo
2015
Var
%
Operating Revenue
Contract Sales 62,059 58,577 6%
Spot Sales 13,159 9,397 40%
Other Revenue 1,427 204 600%
Total Operating Revenue 76,645 68,178 12%
Cost of Sales
Fuel consumption (24,678) (27,438) -10%
Energy and capacity purchases (7,279) (690) 955%
Transmission tolls (561) (520) 8%
Other cost of sales (11,510) (12,206) -6%
Depreciation (12,080) (11,674) 3%
Total Cost of Sales (56,108) (52,528) 7%
Gross Profit20,537 15,650 31%
Selling, general and administrative Expenses (1,447) (1,975) -27%
EBITDA 31,636 25,918 22%
Financial Expense (10,903) (10,804) 1%
Net Income (Loss) Before Taxes 11,429 3,550 222%
Income Tax Income (Expense) (1,847) (942) 96%
Net Income (Loss) Before Taxes 9,582 2,608 267%
Balance Sheet Information (ThUS$)
Cash and Cash Equivalents 73,487 36,536 101%
Property, Plant and Equipment 930,727 974,748 -5%
Other Current Financial Liabilities (14,259) (14,336) -1%
Other Non-Current Financial Liabilities (781,246) (779,523) 0%
Total Financial Liabilities (795,505) (793,859) 0%
AES GENER/ 2016
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31
Energy Generation, purchases and sales
As of March 31, 2016, the increase by ThUS$4,887 in Angamos’ gross profit compared to the same period
of 2015, is mainly explained by higher volume sales to unregulated customers of 239 GWh in the first quarter
of 2016. This effect was partially offset by higher net spot purchases as a result of lower volume sales of 94
GWh.
From a non-operational standpoint, main variances include an increase in net finance income of ThUS$2,103
as a result of higher interest received from AES Gener for an intercompany loan, partially compensated by
higher income taxes of ThUS$905.
Energía (GWh)
March
2016
March
2015
Variación
%
Generación
Termo 974 833 17%
Ventas
Clientes Libres 769 530 45%
Ventas Spot 193 287 -33%
Total Ventas 962 817 18%
AES GENER/ 2016
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32
ABOUT AES GENER
AES Gener generates and sells electricity in four markets: the Central Interconnected Grid (SIC) and the
Greater Northern Interconnected Grid (SING) in Chile and the National Interconnected Grid (SIN) in
Colombia. Additionally, the Company sells electricity to the Argentine Interconnected Grid (SADI). In Chile,
AES Gener is the second largest electricity generation group in terms of generation capacity, with installed
capacity of 3,579 MW composed of 3,308 MW of thermoelectric and 271 MW of hydroelectric capacity. The
Company is the principal thermoelectric generator in Chile, with a diversified plant portfolio that utilizes coal,
natural gas, diesel and biomass as fuel. AES Gener also owns a dam-based hydroelectric plant in Colombia
with a total nominal operating capacity of 1,000 MW and a natural gas –fired combined cycle plant in
Argentina with an installed capacity of 643 MW. AES Gener possesses an attractive portfolio of development
projects. AES Gener is 70.71% owned by The AES Corporation (AES). To learn more about AES Gener,
please visit www.aesgener.com.
ABOUT AES
The AES Corporation (NYSE: AES) is a Fortune 200 global power company. AES provides affordable,
sustainable energy to 18 countries through its diverse portfolio of distribution businesses as well as thermal
and renewable generation facilities. AES' workforce of 18,500 people is committed to operational excellence
and meeting the world’s changing power needs. AES' 2014 revenues were US$17 billion and AES owns and
manages US$39 billion in total assets. To learn more, please visit www.aes.com. Follow AES on Twitter
@TheAESCorp.