aes gener 6m 2015 results · review of q1 2015 results net income as of june 30 2015, aes gener...

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AES GENER 6M 2015 RESULTS

AES Gener recorded EBITDA of ThUS$310,391 during the first half of 2015, 9% higher

than the EBITDA recorded during the same period in 2014.

Net income recorded as of June 30, 2015 was ThUS$83,265, representing a 20%

increase compared to the first half of the previous year.

The increases of 9% in EBITDA and 10% in gross margin between the first half of 2014 and

2015 were driven by improved results in Chile, due to higher efficient generation in the Central Interconnected Grid (SIC) during the first quarter of 2015 and an increase in the demand from unregulated customers in the Greater Northern Interconnected Grid (SING).

Net income increased by 20% in the six-month period ended on June 30, 2015 compared to

the same period in 2014 principally due to the higher EBITDA and a positive variation in foreign exchange rate. This variation was partially offset by lower equity in earnings of associates related to the one-off gain registered during the first quarter of 2014 from the sale of a transmission line and a one-off amortization of deferred expenses associated to the refinancing of affiliate Guacolda’s debt in April 2015.

CONSOLIDATED FINANCIAL SUMMARY

1 EBITDA is calculated as the sum of gross profit plus depreciation plus other minor adjustments.

FINANCIAL SUMMARY THUS$ %

6M 2015 6M 2014 Var

Revenue 1,073,014 1,184,865 -9%

Gross Profit 245,833 222,997 10%

EBITDA1 310,391 286,057 9%

Net Income 83,265 69,205 20%

Net Operating Cash 42,970 140,009 -69%

Earnings per share 0.010 0.008

Constanza López

(562) 2686 8968

IR Manager

[email protected]

mailto:[email protected]

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HIGHLIGHTS IN 2015 TO DATE

AES Gener, same as in 2014, continued being the leader in energy generation in Chile, contributing with its plants with 28.5% of the total generation during the first half of 2015.

The SIC market registered record EBITDA for the first quarter of US$86.8 million, contributing with 54.3% of total consolidated EBITDA.

Progress of projects under construction: AES Gener continues to consolidate its 2nd phase of expansion with 1,256 MW of diverse generating projects, with direct employment for 9,195 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 98% 1H16

Andes 21 MW Solar 64% 2H15

Desalinization plant

4.800 m3/d

Water Desalinization 84% 2H15

Guacolda V 152 MW Coal 99% 2H15

Cochrane 532 MW Coal 90% 2016

Alto Maipo 531 MW Hydro 16% 2018

At the beginning of February 2015, the Chilean Government announced the authorization for AES Gener to export energy to Argentina, which had been requested by the Company in 2014. In June 2015, the corresponding Decree was published in the Official Gazette by the Ministry of Energy authorizing the export and defining the applicable regulations to start exporting from the SING to the SADI. The energy sales from the SING to the SADI are expected to start in the coming weeks.

On April 23, 2015 the entire Empresa Eléctrica Guacolda’s debt was refinanced through the issuance of a bond with international investment grade (BBB- by Fitch Ratings and Standard & Poor’s) in the international markets for ThUS$500,000 due in 2025 and a syndicated loan for ThUS$330,000 with amortization over a five

year period. The bonds were issued pursuant to 144-A and Regulation S of the U.S. Securities Act.

In July 14, 2015, the refinancing process for Eléctrica Ventanas’ outstanding project finance debt was completed, debt that was already considered as consolidated debt by the credit rating agencies given the fact that AES Gener is the sole off-taker of its energy, the operator, as well as the fuel supplier of the subsidiary, and the partial repurchase of the local Series Q bond due in 2019, through the issuance of an investment grade bond (BBB- by Fitch & Standard & Poor’s, Baa3 by Moody’s) in the international markets at the AES Gener level for a total of ThUS$425,000 due in 2025. The bonds were issued pursuant to 144-A and Regulation S of the U.S. Securities Act. The outstanding amount of Series Q bond is ThUS$39,820.

In July 2015, Standard & Poor’s reaffirmed the Company’s investment grade credit rating of BBB- with stable outlook.

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EXTERNAL FACTORS

REVIEW OF Q1 2015 RESULTS NET INCOME

As of June 30 2015, AES Gener S.A. (hereinafter referred to as AES Gener or the Company) recorded an EBITDA of

ThUS$310,391, 9% higher than the EBITDA of ThUS$286,057 recorded at the close of June 2014. Net income was at

ThUS$83,265 or 20% higher than the ThUS$69,205 recorded in the same period of the previous year. The increase in

EBITDA is mainly explained by the better performance of the operations in Chile, partially offset by lower gross profit in

Colombia and Argentina. In Chile, the efficient plants of the company in the SIC recorded higher generation particularly in

the first quarter, and in the SING, an increase in demand under long-term agreements with mining clients were registered.

From an operational standpoint, gross profit as of June 30, 2015 totaled ThUS$245,833 representing a positive variation of

10% when compared to the ThUS$222,997 recorded at the close of June of the previous year. Main variations in gross

profit were the following:

In the SIC, during the first half of 2015, gross profit increased by ThUS$38,120 principally explained by higher availability of

units at the Ventanas Complex during the first quarter of 2015 and, also, an additional revenue was recorded associated

with the lease of Nueva Renca of ThUS$39,245.

In the SING, gross profit increased by ThUS$8,726 as of June 30, 2015 when compared to the same period in 2014.

Among the most important variations is the increase in volume demand from mining customers, mainly related to long-term

power purchase agreements of Norgener S.A (hereinafter, Norgener).

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$10,588 due to lower average spot prices of 43% driven by the significant reduction of

inflows in April and May 2014, compared to better hydrological conditions during 2015 in the system, impacting spot and

ancillary services sales. It should be noted that lower water inflows were registered during the first quarter in AES Chivor

basin, situation that was reverted from June onwards, when generation almost doubled compared to June of last year.

In the SADI, Argentina´s, gross earnings decreased by ThUS$13,422 when comparing both periods, as a result of lower

spot sales as a consequence of lower generation by 29% associated with the maintenance of one gas turbine and the

steam turbine during the first quarter of 2015. Additionally, TermoAndes registered lower contract sales under the Energía

Plus methodology related to a lower demand in the market.

Within the non-operating income, a positive variation was registered in exchange rate differences of ThUS$20,966 due to a

lower devaluation of the local currency in Argentina during the first half of 2015 when compared to the same period the

previous year. This effect was partially offset by lower earnings associates of ThUS$20,638 driven by lower results in

Empresa Eléctrica Guacolda S.A. (hereinafter, Guacolda) as a consequence of the sale of a transmission line registered

during the first quarter 2014 and the one-off impact of the amortization of deferred expenses registered as of June 2015,

associated with the refinancing process of Guacolda’s debt.

Annual Inflation Rate Exchange Rate as of June 30, Var (%)

Twelve month period ended June 30, 2015 2015 2014

Chile 4.4% Chile 639.0 552.7 16%

Colombia 4.3% Colombia 2,603.9 1,876.9 39%

Argentina 28.7% Argentina 9.09 8.13 12%

GDP Growth in Electricity Consumption, six month period ended June 30, 2015:

Twelve month period ended Dec 31, 2014 SIC 2.0%

Chile 1.9% SING 6.5%

Colombia 4.2% Colombia 3.3%

Argentina 0.5% Argentina 3.5%

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6M 2015 INCOME STATEMENT

INCOME STATEMENT

6M 2015

THUS$

6M 2014

THUS$

Var

%

Operating Revenue

Energy and capacity sales 1,002,414 1,120,948 -11%

Other operating revenue 70,600 63,917 10%

Total Operating Revenue 1,073,014 1,184,865 -9%

COST OF SALES

Fuel consumption (297,983) (419,947) -29%

Fuel cost of sales (6,056) (5,760) 5%

Energy and capacity purchases (205,518) (235,205) -13%

Transmission tolls (51,283) (45,279) 13%

Other cost of sales (152,881) (143,467) 7%

Depreciation and amortization (113,460) (112,210) 1%

Total Cost of Sales (827,181) (961,868) -14%

GROSS PROFIT 245,833 222,997 10%

Other operating revenues 1,278 2,064 -38%

Selling, general and administrative expenses (51,754) (52,606) -2%

Other operating expense (1,820) (629) 189%

Other income / (expense) 1,260 (2,956) -143%

Financial income 4,393 5,704 -23%

Financial expense (64,720) (73,202) -12%

Equity in earnings of associates 5,400 26,038 -79%

Foreign currency exchange differences (11,578) (32,544) -64%

NET INCOME (LOSS) BEFORE TAX AND NON-CONTROLLING INTEREST 128,292 94,866 35%

Income tax income (expense) (49,240) (29,133) 69%

Net Income (Loss) After Tax 79,052 65,733 20%

Income (loss) from discontinued operations, net of tax - -

Net Income 79,052 65,733 20%

Income (Loss) Attributable to Shareholders of Parent 83,265 69,205 20%

Non-controlling interest (4,213) (3,472) 21%

NET INCOME 79,052 65,733 20%

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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 June 30, 2015, EBITDA was ThUS$310,391 compared to the ThUS$286,057 recorded in the same period in 2014. This positive variation of ThUS$24,334 is mainly explained by higher efficient generation in the SIC due to higher availability of Ventanas units, fundamentally during the first quarter of 2015, and an increase in the demand of mining customers in the SING. This variation was partially offset by lower spot sales in Colombia and lowers spot and contract sales in Argentina.

EBITDA (THUS$) 6M 2015 6M 2014 VAR

%

SIC 155,268 119,010 30%

SING 68,899 53,819 28%

SIN 83,511 97,385 -14%

SADI 2,713 15,843 -83%

TOTAL EBITDA 310,391 286,057 9%

Note: For EBITDA calculation please see page 30, Consolidated EBITDA.

In the six-month periods ended June 30, 2015 and 2014, the contribution to EBITDA from the SIC, SING, SIN and the SADI was the following:

6M 2015 6M 2014

GROSS PROFIT Gross profit increased by ThUS$22,836 mainly as a result of increases in SIC and SING of ThUS$38,120 and ThUS$8,726 respectively, partially offset by the reduction by ThUS$13,422 in the SADI and ThUS$10,588 in the SIN. 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”.

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GROSS PROFIT (THUS$) 6M 2015 6M 2014 VAR

%

OPERATING REVENUE

SIC 619,244 683,912 -9%

SING 297,120 287,349 3%

SADI 65,673 76,095 -14%

SIN 222,439 269,317 -17%

Consolidation adjustments (131,462) (131,808) 0%

Total Operating Revenue 1,073,014 1,184,865 -9%

COST OF SALES

SIC (483,356) (586,144) -18%

SING (263,344) (262,299) 0%

SADI (76,053) (73,053) 4%

SIN (135,889) (172,179) -21%

Consolidation adjustments 131,461 131,807 0%

Total costs of sales (827,181) (961,868) -14%

TOTAL GROSS PROFIT 245,833 222,997 10%

Central Interconnected Grid (SIC)

In the SIC, gross profit increased by ThUS$38,120 or 39% mainly due to higher efficient generation associated with improved availability of AES Gener coal-fired plants, given that during the first quarter of 2014, certain units of Ventanas were under maintenance. The following table presents gross profit in the SIC for both periods:

SIC GROSS PROFIT (THUS$)

6M 2015 6M 2014 VAR

%

OPERATING REVENUE

Regulated customer sales 238,666 256,576 -7%

Unregulated customer sales 159,339 125,584 27%

Spot sales 47,828 123,897 -61%


Total Operating Revenue 619,244 683,912 -9%

COST OF SALES




Fuel cost of sales (117,397) (121,047) -3%

Depreciation and amortization (53,168) (53,847) -1%




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The following table shows AES Gener generation by source in the SIC as at June 30, 2015 and 2014:

SIC NET GENERATION (GWH)

6M 2015 6M 2014 VAR

%

Hydro 657 663 -1%

Coal 2,842 2,870 -1%

LNG 114 208 -45%

Diesel 165 572 -71%

Biomass 21 18 16%

Total 3,799 4,332 -12%

Main variations between the six-month periods ended June 30, 2014 and 2015:

Sales to regulated customers decreased by ThUS$17,910 due to lower physical sales for 228 GWh in the first half of

2015 when compared to the same period 2014 mainly due to the expiration of the contract with CGE Distribución in

2014. In turn, sales to unregulated customers increased by ThUS$33,755 as of June 30, 2015 associated with the

lease of Nueva Renca, despite lower physical sales for 28 GWh.

Sales in the spot market decreased by ThUS$76,069 between the first six months of 2014 and 2015, associated with

lower physical sales for 380 GWh and lower spot prices that decreased from an average of 155.5 US$/MWh the first

half 2014 to 130.0 US$/MWh in the same period in 2015. It should be noted that the lower volume sale to the spot

market was partially compensated by the lease of Nueva Renca previously mentioned. Also, 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 lower compared to the first half of

2014 by ThUS$9,228 and in volume terms by 105 GWh.

Fuel consumption as of June 30, 2015 decreased significantly by ThUS$96,211 compared to the same period in 2014,

mainly associated with lower diesel and Liquefied Natural Gas (LNG) generation by 407 GWh and 94 GWh,

respectively, mostly in Eléctrica Santiago due to the lease of Nueva Renca, and additionally, lower coal generation of

28 GWh mostly related to the programmed maintenance at units II and IV of Ventanas Complex. It should be noted that

hydroelectric generation decreased by 6 GWh.

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Greater Northern Interconnected Grid (SING)

In the SING, the gross profit increased by ThUS$8,726, equivalent to 35% higher than the first half of 2015 as

compared to the same period in 2014. This is a consequence of the increase of sales to unregulated customers, mostly

associated with the increase in contracted demand of Norgener’s mining customers. This effect was partially offset by

higher volumes of energy and capacity sales. The following table presents gross profit in the SING for both periods:

SING GROSS PROFIT (THUS$)

6M 2015 6M 2014 VAR

%

OPERATING REVENUE

Unregulated customer sales 268,462 235,296 14%

Spot sales 24,181 33,991 -29%


Total Operating Revenue 297,120 287,349 3%

COST OF SALES


Energy and capacity purchases (72,627) (35,824) 103%


Fuel cost of sales - (16,522) -100%

Depreciation and amortization (39,536) (35,479) 11%


Total Cost of Sales (263,344) (262,299) 0%


The following table shows AES Gener generation by type of fuel in the SING as at June 30, 2014 and 2015:

SING NET GENERATION (GWH)

6M 2015 6M 2014 VAR

%

Coal 2,518 2,815 -11%

LNG 242 156 55%

Total 2,761 2,972 -7%


Between the first half of 2015 and the same period 2014 an increase in sales to unregulated customers for ThUS$33,166 was registered mostly due to a larger demand volume. Contract sales increased from 2,403 GWh as of the close of June 2014 to 3,006 GWh in the same period in 2015, which is equivalent to a 25% increase. This effect is mainly explained by higher sales in Norgener associated with the increase of the demand of mining customers.

Energy and capacity sales in the spot market decreased by ThUS$9,810 as a result of lower average spot prices, associated with a reduction of fuel prices. The average spot price decreased from 87.8 US$/MWh as of June 30, 2014 to 54.0 US$/MWh in the same period in 2015. Likewise, physical sales decreased by 102 GWh as a result of lower generation from Angamos and the start of operations of renewable energy projects in the grid. Additionally, energy and capacity purchases increased by ThUS$36,803 between the first half of 2014 and the same period in 2015 as a result of a larger volume or physical purchases mainly in Norgener as the result of a programmed maintenance at unit 2, which increased from 217 GWh as of June 30, 2014 to 874 GWh in the same period in 2015.

The cost of fuel consumption decreased by ThUS$25,414 as a result of lower coal average prices and lower generation by 211 GWh with this fuel comparing both periods. This effect was partially offset by higher generation with LNG by 86 GWh during the first half of 2015. The latest is associated with the lease of units running with such fuel in order to make the generation at minimum technical load more efficient in the case of the most expensive units in the SING and hence reduce the withdrawal costs of the grid.

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Colombian National Grid (SIN)

In Colombia, gross profit decreased by ThUS$10,588 equivalent to 11% comparing the first half of 2015 and the same

period in 2014. This negative variation is mainly explained by a reduction of net sales in the spot market and ancillary

services associated with a decrease in average spot prices and lower generation of the plant particularly during the first

quarter of 2015. Lower generation is the consequence of lower inflows to AES Chivor’s reservoir during the first months

of 2015, however it should be noted that this situation was reverted during the second quarter of the year. The following

table presents gross profit in Colombia for both periods:

SIN GROSS PROFIT (THUS$)

6M 2015 6M 2014 VAR %

OPERATING REVENUE

Contract sales 114,799 112,741 2%

Spot sales 103,253 156,774 -34%

Other operating revenues 4,387 (198) 2,316%


COST OF SALES





TOTAL GROSS PROFIT 86,550 97,138 -11%

The following table shows AES Gener generation in the SIN in the years ended June 30, 2014 and 2015:

SIN NET GENERATION (GWH)

6M 2015 6M 2014 VAR

%

Hydro 1,590 1,570 1%

Total 1,590 1,570 1%


Sales to distribution companies under contract increased by ThUS$2,058 explained by higher volume of physical sales

of 141 GWh, partially offset by lower average prices that fell from 72.5 US$/MWh in the first half of 2014 to 61.3

US$/MWh in the same period 2015 due to the devaluation of the Colombian peso in comparison with the US dollar. It

should be noted that the decrease in tariffs was partially compensated by foreign exchange forwards executed for these

purposes.

Spot energy sales and ancillary service sales decreased by ThUS$53,521 as a result of lower average spot prices that

fell from 136.9 US$MWh the first half of 2014 to 78.3 US$/MWh the same period in 2015 partially compensated by

higher physical sales of 139 GWh, mainly in the second quarter of 2015 given the recovery in water inflows in the

reservoir. In turn, spot energy purchases decreased by ThUS$37,900 due to lower average spot prices, partially offset

by higher physical purchases of 251 GWh, which is the result of the lower plant generation particularly in the first

quarter of 2015.

In addition, higher other costs of sale for ThUS$3,326 were recorded in the first half of 2015 associated with the

maintenance of certain units.

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Interconnected Argentine Grid (SADI)

The gross profit in SADI decreased by ThUS$13,422 which represents a negative variation of 441% between the first half of 2015 and the same period in 2014, as a result of lower volumes of energy spot sales and under the Energía Plus methodology, at lower prices. Such effects were slightly offset by lower fuel consumption associated with a decrease generation of Termoandes that in turn relates to the maintenance of two units during the period. The following table presents gross profit in the SADI for both periods:

SADI GROSS PROFIT (THUS$)

6M 2015 6M 2014 VAR

%

OPERATING REVENUE

Contract sales 37,170 40,001 -7%

Spot sales 28,503 36,088 -21%

Other operating revenues - 6


COST OF SALES


Energy and capacity purchases (425) -

Transmission tolls (91) (141) -35%



Total Cost of Sales (76,053) (73,053) 4%

TOTAL GROSS PROFIT (10,380) 3,042 -441%

The following table shows AES Gener generation in the SADI in the years ended December 31, 2013 and 2014:

SADI NET GENERATION (GWH)

Q1 2015 Q1 2014 VAR

%

LNG 1,561 2,209 -29%

Total 1,561 2,209 -29%


Between the first half of 2014 and 2015, contract revenues decreased by ThUS$2,831 as a result of lower physical

sales for 150 GWh equivalent to 23% associated with a drop in the volume of industrial demand and lower contract

prices under the Energía Plus methodology.

Spot sales decreased by ThUS$7,585 as a result of lower physical sales for 489 GWh and lower spot prices in dollars

associated with the exchange rate devaluation. The spot price in Argentina pesos remained at AR$120/MWh and, in

average, the spot price in dollars dropped from 15.3 US$/MWh the first half of 2014 to 13.6 US$/MWh the same period

2015.

The cost of fuel consumption decreased by ThUS$339 associated with a lower gas consumption in Termoandes

explained by a decrease in generation for 648 GWh the first six months of 2015 associated with the maintenance of two

units during the period, the steam turbine and one of the gas turbines.

In addition, higher other costs of sales were recorded for ThUS$3,376 as a result of higher maintenance costs, which

was partially offset by a lower depreciation recorded in the period for ThUS$412.

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Physical energy sales in each market were as follows in the six-month periods ended June 30, 2014 and 2015:

PHYSICAL SALES (GWH) 6M 2015 6M 2014 VAR

%

SIC - Chile 4,189 4,825 -13%

Distribution companies 2,535 2,762 -8%

Other customers 1,219 1,248 -2%

Spot (CDEC) 435 815 -47%

SING - Chile 3,598 3,098 16%

Distribution companies - - -

Other customers 3,006 2,403 25%

Spot (CDEC) 592 694 -15%

SIN - Colombia 2,857 2,577 11%

Distribution companies 1,680 1,539 9%

Spot and other 1,177 1,038 13%

SADI - Argentina 1,575 2,214 -29% Customers 515 665 -23% Spot 1,060 1,549 -32%

TOTAL SALES 12,219 12,714 -4%

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Administration expenses decreased by 2% from ThUS$52,606 as of the close of June 2014 to ThUS$51,754 in the same

period in 2015. Such positive variation is mostly the result of the devaluation of the Chilean peso against the US Dollar.

FINANCIAL RESULTS The non-EBITDA variables which experienced the most important changes comparing the first half of 2014 and the same

period in 2015 include positive variables in exchange rate differences for ThUS$20,966 and in finance expenses for

ThUS$8,482. These effects were partially offset by a negative variation in the earnings of associates for ThuS$20,638.

The following table shows the variations aforementioned:

FINANCIAL RESULTS (THUS$) 6M 2015 6M 2014 VAR

%

Other income / (loss) 1,260 (2,956) 143%

Finance income 4,393 5,704 -23%

Finance expense (64,720) (73,202) 12%

Equity in earnings of associates 5,400 26,038 -79%

Foreign currency exchange differences (11,578) (32,544) 64%

A positive variation of ThuS$20,966 was recorded in exchange rate differences explained mainly by the positive variation in Termoandes due to a lower devaluation of the Argentine peso during the first half of 2015, since the devaluation in the same period 2014 it was approximately by 23%, which affected the value of net tax credits and cash and cash equivalent denominated in Argentine pesos. It is important to mention that Termoandes keeps Argentine Sovereign Bonds payable in dollars for ThUS$32,847 with the purpose of mitigating the exchange rate risk. The negative variation in foreign currency exchange difference was partially offset by a positive variation related to the hedge instruments executed to mitigate the exchange rate effect of prices for regulated customers.

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The following table shows variation in exchange rates in the countries in which AES Gener has operations:

DECEMBER JUNE VAR DECEMBER JUNE VAR

2013 2014 % 2014 2015 %

Chilean Pesos ($) 524.61 552.72 5% 606.75 639.04 5%

Colombian Pesos (Col$) 1,929.51 1,877.44 -3% 2,376.51 2,603.90 10%

Argentine Pesos (Ar$) 6.52 8.13 25% 8.55 9.09 6%

The positive variation of the net finance expenses for ThUS$7,171 as of June 2015 is mainly due to the lower corporate debt due to the payments of the bond of AES Chivor for ThUS$170,000 in December 2014 and the early redemption of the Series O local bonds for ThUS$47,042 in July 2014. This positive variation was partially offset by the increase of corporate debt at lower rates than the paid debts.

In turn, the negative variation of ThUS$20,638 in the equity in earnings (losses) of associates is explained by the extraordinary gain for ThUS$32,132 recorded as of June 30, 2014 from the sale of the 2x220 kV 330 km transmission line Maintencillo – Cardones sold for a total of ThUS$54,720, as well as the one-off amortization of deferred expenses associated to the refinancing of Guacolda’s debt registered as of June 2015.

INCOME TAX

As of June 30, 2015 the income tax expense doubled in comparison to the same period in 2014 from ThUS$29,133 in the first half of 2014 to ThUS$49,240 in the same period of 2015 which is mostly explained by an increase in deferred taxes at AES Gener and Eléctrica Campiche, as well as better results in the six-month period ended June 30, 2015 and higher income tax expenses related to the tax rate increase from 20% to 22.5%.

CASH FLOW The final balance of cash and cash equivalent as of June 30, 2015 was ThUS$190,367, 66.3% lower than the final

balance of ThUS$565,588 as of the close of June 2014. The total net flow of the period was negative for ThUS$33,233

as of June 30, 2015 that positively compares with the negative flow of ThUS$125,999 as of June 30, 2014. 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.

Cash Flow (ThUS$) 6M 2015 6M 2014 Variation (%)

Net cash from operating activities 41,997 136,105 -69%

Net cash from investing activities (617,459) (405,794) 52%

Net cash from financing activities 542,227 143,690 277%

Total Net Cash for the Period (33,235) (125,999) -74%

Effects of Foreign Exchange Variations (5,089) (15,929) -68%

Total Cash at the End of the Period 190,367 565,588 -66%

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Net cash from operating activities recorded a negative variation of ThUS$94,108 as of the close of June 2015

compared with the same period 2014 mainly due to higher taxed paid of ThUS$40,966 mainly at AES Chivor and lower

receipts from customers of ThUS$51,188.

Net cash from investment activities showed a negative variation of ThUS$211,665 comparing the close of June 2015

and the same period in 2014. The main variation corresponds to an increase in acquisitions of property, plant and

equipment of ThUS$266,788 associated with the construction works of Cochrane and Alto Maipo and the investments

in emission control equipment in the oldest coal-fired units of AES Gener. This was partially offset by a positive

variation of ThUS$31,981 related to the VAT recovery due to the fixed assets of Cochrane.

Net cash from financing activities represented a positive variation of ThUS$398,537 as of the close of June 2015

compared to the same period in 2014. This is a consequence of the long-term loan increase, such as the disbursement

for ThUS$100,000 made by AES Gener to finance working capital requirements and a disbursement of ThUS$50,000

of uncommitted credit facilities, as well as disbursements to finance projects Cochrane and Alto Maipo. Additionally,

there was a positive variation of ThUS$148,701 mainly associated with the early redemption of the 144-A bonds for

ThUS$147,050 with maturity in March 2014, executed in January 2014. These positive effects were partially

compensated by a negative variation in proceeds from share issuance registered as of June 30, 2015 as the result of a

capital increase executed in April 2014 for a total of ThUS$150,000, compared to the capital contribution from the

partners of Alto Maipo and Cochrane during 2015.

FINANCIAL DEBT

Consolidated financial debt, including principal, interest and issuance costs, increased from ThUS$2,733,750 as of

December 31, 2014 to ThUS$3,186,030 as of June 30, 2015.

As of June 30, 2015, approximately 87.0% of AES Gener’s credit agreements are at a fixed rate, including a significant

portion of the debt held by the subsidiaries Eléctrica Ventanas, Eléctrica Cochrane and Alto Maipo for which interest

rate swap agreements have been executed. The remaining 13.0% of the Company’s consolidated debt maintains a

variable interest rate. It should be noted that the Eléctrica Ventanas’ debt was refinance in July 2015 through a bond

issuance at AES Gener level at a fixed interest rate.

As of June 30, 2015, approximately 97.5% 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, 1.4% was denominated in Chilean UF (Eléctrica Santiago’s bond) and 1.1% in Colombian pesos (the

leasing executed by AES Chivor to finance the Tunjita Project).

On January 27, 2014, the Company used a portion of the proceeds from the ThUS$450,000 subordinated bond issued

in December 2013 to prepay the Senior Bond due in March, 2014 for a total of ThUS$147,050. Additionally, in July

2014, the Company prepaid the Series O Bonds for UF1.2 million with maturity in June 2015. The cross-currency swap

associated to this debt executed to convert UF payments to US dollars was unwound in June 2014. Furthermore, in

November 2014, the Company refinanced the outstanding debt associated with its subsidiary Eléctrica Angamos for

approximately ThUS$780,000, with a Senior Bond issuance for ThUS$800,000 at Eléctrica Angamos level. AES Chivor

paid its Senior Bond for ThUS$170,000 with maturity in December 2014, with cash from operations in addition to an

intercompany loan provided by AES Gener. Finally, as mentioned earlier, Eléctrica Ventanas project finance was

refinanced through the issuance of a 144A / Reg S bond with maturity in 2025. The latter also included the partial

repurchase of the local Series Q bond with maturity in 2019, with outstanding amount of ThUS$39,820 after the

refinancing process.

In December 2014, the Company entered into a three-year credit agreement with Banco Estado, Bank of Nova Scotia,

Misuho and SMBC for a total of ThUS$100,000 which were disbursed during the first half of 2015 to cover the working

capital requirements, plus the disbursement of ThUS$50,000 from uncommitted credit facilities.

The following graph details AES Gener’s consolidated amortization schedule for the outstanding principal of

ThUS$3,319,003 as of June 30, 2015, excluding issuance costs and including non-recourse project finance debt.

14

63 32168 175

290191

589

217 165 1,210

1,265

0

400

800

1,200

1,600

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 +

Total Consolidated Debt (US$ million)

The graph presented above does not take into consideration the recent refinancing transaction that AES Gener

performed during July 2015 with the issuance of a ThUS$420,000 144A Reg S, 10 years bullet bond. The latter

allowed the company to substantially reduce its maturities until 2021 and by extending them.

AES GENER GROUP OPERATING STATISTICS

6M 2015

6M 2014

GENERATION (GWH) 6M

2015 6M

2014

Installed Capacity SIC 5,789 6,728

SIC (1) MW 2,617 2,618 Gener Hydro 657 663

SING (2) MW 822 822 Gener Thermal 740 885

Colombia MW 1,000 1,000 Eléctrica Campiche 1,056 940

SADI MW 643 643 Eléctrica Ventanas 1,066 1,063

Total MW 5,082 5,083 Eléctrica Santiago 279 780

Guacolda 1,989 2,397

SING 2,761 2,972

Norgener (3) 1,052 1,172

Net Generation Eléctrica Angamos 1,709 1,800

SIC (1) GWh 5,789 6,728 SIN - Colombia 1,590 1,570

SING (2) GWh 2,761 2,972 AES Chivor 1,590 1,570

Colombia GWh 1,590 1,570 SADI – Argentina 1,561 2,209

SADI - Argentina GWh 1,561 2,209 TermoAndes 1,561 2,209

Total GWh 11,700 13,480 Total 11,700 13,480

(1) Includes AES Gener, Eléctrica Ventanas, Eléctrica Santiago and Guacolda (2) Includes Norgener and Angamos (3) Includes CTM3 generation

15

AES GENER CONSOLIDATED 6M 2015

ENERGY GENERATION, PURCHASES & SALES

SIC

SING SADI SIN

ENERGY (GWH) AES GENER

ELÉCTRICA SANTIAGO

ELÉCTRICA VENTANAS

ELÉCTRICA CAMPICHE NORGENER

ELÉCTRICA ANGAMOS TERMOANDES AES CHIVOR TOTAL

GENERATION

Hydro 657 -

-

-

-

-

- 1,590 2,247

Thermo 740 279 1,066 1,056 1,052 1,709 1,561 - 7,464

TOTAL GENERATION 1,397 279 1,066 1,056 1,052 1,709 1,561 1,590 9,711

PURCHASES

Spot - - - - 874 - - 1,240 2,114

Other generators 389 - - - - - - - 389

Intercompany 2,402 - - - - - - - 2,402

TOTAL PURCHASES 2,791 -

-

- 874

-

- 1,240 4,904

Losses 1 -

-

- (16) (21) 14 28 6

SALES

Regulated 2,535 - - - - - - 1,680 4,215

Unregulated 1,219 - - - 1,910 1,097 515 - 4,740

Spot 435 - - - - 592 1,060 1,177 3,264

Intercompany - 279 1,066 1,056 - - - - 2,402

TOTAL SALES 4,189 279 1,066 1,056 1,910 1,689 1,575 2,857 14,621

16

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 The first half of 2015 had better hydrological conditions that allowed the levels of the reservoirs to show an

improvement in comparison with the same period last year. This helped to increase hydroelectric generation, which,

along with the drop of fuel prices at the end of 2014, helps reducing the average marginal costs by 16% compared to

the first half of 2014. As of June 30, 2015, the companies of the Group AES Gener, including Guacolda, contributed

with 22.6% of the net generation in the SIC. The table below shows certain principal variables in the SIC for the periods

ended June 30, 2015 and 2014.

SIC 6M 2015 6M 2014

Demand growth (%) 2.0 2.3

Annual consumption (GWh) 4,117 4,037

Average annual spot price (Quillota 220 kV) US$/MWh 130.0 155.5

SING The average marginal cost decreased by 34% compared to the same period the previous year associated with the fuel

price drop and the commissioning of renewable energy projects that had no contracts so they sold their generation in

the spot market. As of June 30, 2015, the companies of the Group AES Gener contributed with 32,5% of the net

generation in the SING. The table below shows the main variables in the SING in the first half of 2014 and the same

period in 2015.

SING 6M 2015 6M 2014


Annual consumption (GWh) 1,371 1,287

Average annual spot price (Crucero 220 kV) US$/MWh 54.0 87.8

Colombia With the moderate El Niño, hydrology in AES Chivor basin for the first half of 2015 has been high compared to the

same period the previous year, as well as for the system. Hydrological conditions in March were below expected, in

AES Chivor reservoir, however they improved substantially from June. Thus, average spot prices expressed in

Colombian pesos decreased by 27% in average during the first half of 2015 compared to the same period in 2014;

while in dollars they decreased by 43% due to the devaluation of the Colombian peso. As of June 30, 2015, the

generation of AES Chivor represented 5% of the demand in Colombia. The following table shows the main variables in

the SIN during the first half of 2014 and the same period in 2015:

17

COLOMBIA 6M 2015 6M 2014


Annual consumption (GWh) 5,368 5.197

Average annual marginal cost US$/MWh 78.3 136.9

SADI As of the closing of June 2015 the spot price remained at 120 AR$/MWh. However, the devaluation of the Argentine

peso has reduced the average marginal cost in dollars by 11%. In turn, the energy generation increase was a

consequence of higher availability of thermo plants in the system, partially offset by a decrease in hydro generation. As

of June 30, 2015, the generation of Termoandes in the SADI represented 3% of the demand in Argentina. In March

2015 the Undersecretariat of Energy in Argentina changed the Incremental Mean Charge of Excess Demand in the

SADI, which changed from 320 AR$/MWh for GUME/GUMA to 450 AR$/MWh and from 455 Ar/MWh for GUDI to 550

Ar/MWh. Users with the non-contract plus type of demand have to pay these new amounts on top of the 120 Ar/MWH

of spot price and 27 Ar/MWh for capacity and sustainability charge. The following table shows the main variables in the

SADI for the six-month periods ended June 30, 2014 and 2015:

SADI 6M 2015 6M 2014

Demand growth (%) 3,5 5,1

Average monthly consumption (GWh) 9.768 9.468

Average annual marginal cost US$/MWh 13,6 15,3

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 December 31, 2014, 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 June 30, 2015, 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$5,604 in AES Gener net income.

18

During the six-month period ended on June 30, 2015 approximately 86.6% of operating revenue and 87.6% of the Company’s costs of sales were denominated in US dollars compared to 87.4% of operating revenue and 89.7% of costs of sales during the period ended June 30, 2014. The functional currency of Chivor, the Company’s Colombian subsidiary, is the Colombian peso since the majority of its revenue, particularly contract sales and operating costs are linked to the Colombian peso. For the period ended June 30, 2015, sales in Colombian pesos represented 10.7% of the Company’s consolidated operating revenue, while they represented 9.5% in the same period of 2014. 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 June 2015, 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$14,500 in AES Gener’s net income. Spot prices in the Argentine market are denominated in Argentinean pesos. Argentine-peso denominated sales represented 2.7% of the Company’s consolidated operating revenue for the first half of 2015, compared to 3.1% for the period ended June 30, 2014. Given TermoAndes' net asset position in Argentine pesos as of June 30, 2015, 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$1,838 in AES Gener’s net income. It is worth mentioning that the Argentine government devalued the Argentinean peso by approximately 22% in January 2014, the fastest devaluation since 2002, which implied a negative impact for approximately US$16.7 million in the Company’s results due to the reasons aforementioned. 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 new bond at 33% of their original face value. 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, including the ones that declined to accept the exchanges of 2005 and 2010, such “hold-out” bondholders according to the original applicable terms. Despite intense negotiations with such bondholders, mediators and the U.S. District Court appointed Special Master, on July 30, 2014 the parties failed to reach a settlement agreement and consequently (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. Argentina publicly expressed its intention to reach a satisfactory agreement to solve the current situation. This default 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 June 30, 2015, 86.8% of short-term investments and current account balances were in US dollars, 4.4% in Colombian pesos, 7.7% in Chilean pesos and 1.2% in Argentine pesos. Cash balances in Argentine pesos are subject to exchange restrictions and exchange rate volatility particular to the Argentine market. As of June 2014, 73.2% of investments and balances were in US dollars, 20.5% in Chilean pesos, 4.9% in Argentinean pesos and 1.4% in Colombian 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 December 31, 2014, 97.5% 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 June 30, 2015 and December 31, 2014:

19

CURRENCY %

JUNE

2015

DECEMBER

2014

US$ 97.5 97.2

UF 1.4 1.3

Col$ 1.1 1.5

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 Ventanas, 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 87.0% 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 June 30, 2015 and December 31, 2014:

RATE (%)

JUNE

2015

DECEMBER

2014

Fixed or with Swap 87.0 92.4

Variable 13.0 7.6

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.

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.

20

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. It is estimated that a 10% increase in the cost of diesel would have resulted in a negative

impact on the Company's consolidated gross profit of approximately ThUS$13,262 for the period ended June 30, 2015.

It is worth noting that Eléctrica Santiago’s Nueva Renca plant can use either diesel or LNG and acquires defined

volumes of LNG volumes using short-term contracts when the LNG price is more competitive than diesel.

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. It should be noted that one generator participant of the CDEC was declared in bankruptcy in

September 2011 as a result of the financial losses caused by the low hydrological conditions experienced in the SIC. In

the proceedings, AES Gener and Eléctrica Santiago presented evidence of the outstanding debt owed by such

generator, of which the Company and Eléctrica Santiago received ThUS$3,000, approximately 30% of the associated

receivables. At the end of 2013, a distribution company was declared in bankruptcy after the non-payment of electricity

purchase invoices. Given this situation, AES Gener initiated legal procedures against the distribution company to

recover at least a portion of the receivables, provisioning for this purpose the amount of ThUS$1,626.

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.

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 June 30, 2015, AES Gener had available liquid funds of ThUS$190,367 registered as cash and cash equivalent. Meanwhile, as of the closing of December 2014, the balance in liquid resources amounted to ThUS$228,691 included in cash and cash equivalent. 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.

21

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

75% to 85% 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

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, including

construction, investment on equipment, 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.

Additionally, as of June 30, 2015, AES Gener has committed and uncommitted credit lines for

approximately ThUS$234,567 and uncommitted and unused credit lines for approximately

ThUS$170,500.

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.

22

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 there are still some tax and operating issues

pending for this new system 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 to change the way that plants not centrally dispatched participate in the market, in which there are currently

incentives and, if adopted, makes AES Chivor future developments of new projects below 20 MW 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. 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

23

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 will go into effect in June 2015. In order to comply with the new emission standards, between 2012 and 2015, AES Gener will invest approximately US$251

million, at a consolidated level, in emission reduction equipment in four older coal plants (constructed between 1964 and 1997)

and approximately US$110 million in the coal units owned by the equity-method investee Guacolda. Both AES Gener and

Guacolda have already executed contracts with equipment suppliers and initiated works in order to comply within the required

timeframe. It should be noted that works at AES Gener Group are currently underway, in compliance with current regulation.

AES Gener initiated these investments in 2012, and the total investment reached approximately ThUS$221,900 million as of

June 30, 2015. Additionally, in 2013, Guacolda initiated the installation of emission control equipment at Units I, II and IV,

totaling, as of June 30, 2014, an investment of ThUS$166,800. 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.

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.

24

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.

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.

25

AES GENER AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2015 AND DECEMBER 31, 2014

INTERNATIONAL FINANCIAL REPORTING STANDARDS

ASSETS 06-30-2015 12-31-2014

THUS$ THUS$

Current Assets

Cash and Cash Equivalents 190,367 228,691 Other Current Financial Assets 8,313 7,205

Other Current Non-Financial Assets 11,007 18,359

Trade and Other Receivables 487,017 384,596

Related Party Receivables 36,971 3,631

Inventory 123,039 116,820

Taxes Receivables 40,765 43,794

Non-current assets available for sale 2,418 -

Total Current Assets 898,933 803,096

Non-Current Assets

Other Non-Current Financial Assets 40,373 39,429

Other Non-Current Non-Financial Assets 42,142 38,367

Trade and other Receivables 18,713 50,632

Investments in Associates 321,042 343,502

Intangible Assets 49,189 53,308

Goodwill 7,309 7,309

Property, Plant and Equipment 5,767,975 5,432,043

Deferred Taxes 73,539 69,211

Total Non-current Assets 6,320,282 6,033,801

TOTAL ASSETS 7,219,215 6,836,897

26

AES GENER AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2015 AND DECEMBER 31, 2014


LIABILITIES AND SHAREHOLDERS' EQUITY 06-30-2015 12-31-2014

THUS $ THUS$

Current Liabilities

Other Current Financial Liabilities 160,979 103,533

Trade and Other Payables 370,208 495,432

Related Party Payables 32,423 28,256

Provisions 3,255 3,541

Taxes Payable 161 40,451

Employee Benefits 1,493 2,684

Other Current Non-Financial Liabilities 29,108 36,952

Total Current Liabilities 597,627 710,849

Current Liabilities

Other Non-Current Financial Liabilities 3,251,374 2,869,307

Trade and Other Payables 57,817 46,223

Related Party Payables 173,348 158,169

Provisions 123,846 120,741

Deferred Taxes 539,657 522,001

Employee Benefits 35,266 34,320

Other Non-Current Non-Financial Liabilities 10,640 10,928

Total Non-Current Liabilities 4,191,948 3,761,689

Net Equity

Issued Capital 2,052,076 2,052,076

Retained Earnings (Losses) 367,016 358,103

Share premium 49,864 49,864

Other Components of Equity 236,069 224,791

Other Reserves (399,794) (372,282)

Total Equity Attributable to Shareholders of Parent 2,305,231 2,312,552

Non-Controlling Interest 124,409 51,807

Total Net Equity 2,429,640 2,364,359

TOTAL LIABILITIES AND EQUITY 7,219,215 6,836,897

27

AES GENER AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE PERIOD

JUNE 30, 2015 AND 2014


INCOME STATEMENT

6M 2015 6M 2014

THUS$ THUS$

Operating Revenue 1,073,014 1,184,865

Cost of Sales (827,181) (961,868)

GROSS PROFIT 245,833 222,997

Other Operating Revenues 1,278 2,064

Selling, general and administrative Expenses (51,754) (52,606)

Other Operating Expenses (1,820) (629)

Other Income / (Loss) 1,260 (2,956)

Financial Income 4,393 5,704

Financial Expense (64,720) (73,202)

Equity Participation in Net Income of Associates 5,400 26,038

Foreign Currency Exchange Differences (11,578) (32,544)

NET INCOME (LOSS) BEFORE TAXES 128,292 94,866

Income Tax Income (Expense)

(49,240)

(29,133)

Income (Loss) from Discontinued Activities - -

NET INCOME (LOSS) 79,052 65,733

INCOME ATTRIBUTABLE TO SHAREHOLDERS OF PARENT 51,330 69,205

Income (Loss) Attributable to Non-Controlling Interests (4,213) (3,472)

NET INCOME (LOSS) 79,052 65,733

28

AES GENER AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENTS

AS OF JUNE 30, 2015 AND 2014


CONSOLIDATED CASH FLOW STATEMENT FROM JAN 1, 2015 TO JUNE 30, 2015

THUS$

FROM JAN 1, 2014 TO JUNE 30, 2014

THUS$

Net Cash Flows provided by (used in) Operating Activities

Receipts from Customers 1,383,084 1,434,272

Other Receipts from Operating Activities 5,519 4,784

Payments to Suppliers (1,065,441) (1,071,443)

Payments made to Employees (36,032) (28,350)

Other Payments for Operating Activities (23,714) (23,282)

Payments of Dividends (63,503) (62,139)

Receipt of Dividends 445 736

Payment of Interests (74,345) (81,210)

Receipt of Interests 918 4,894

Income Taxes Paid (77,241) (36,275)

Other Operating Outflows from Operating Activities (7,693) (5,882)

NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 41,997 136,105

Net Cash Flows provided by (used in) Investing Activities

Loss of Control over a Subsidiary or other business - 731,180

Other Payments to purchase equity -

Other receipts for sale of equity or debt instruments of other entities - -

Purchase of Non-Controlling Interest - (728,000)

Proceeds from Sale of Property, Plant and Equipment 1,595 36

Purchases of Property, Plant and Equipment (642,195) (375,407)

Purchases of Intangible Assets (591) (648)

Purchase of Long –Term Assets - (24,706)

Other Outflows from Investing Activities 23,732 (8,249)

NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (617,459) (405,794)

29

AES GENER AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT

AS OF JUNE 30, 2015 AND 2014


CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) FROM JAN 1, 2015 TO JUNE 30, 2015

THUS$

FROM JAN 1, 2014 TO JUNE 30, 2014

THUS$

Net Cash Flows provided by (used in) Financing Activities

Proceeds from Share Issuance 79,880 160,836

Proceeds from Long –Term Borrowings 421,447 225,894

Proceeds from Short –Term Borrowings 50,000 700,000

Proceeds from Related Parties Borrowings 12,000 -

Repayments on Loans (13,454) (881,356)

Payments on Financial Leasing Liabilities (1,055) (1,092)

Other Inflows (Outflows) of Cash and Cash Equivalent (6,591) (60,592)

NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 542,227 143,690

INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENT (33,235) (125,999)

Effects of Foreign Exchange Variations on Cash and Cash Equivalents

(5,089) (15,929)

Increase (Decrease) in Net Cash and Cash Equivalents (38,324) (141,928)

Cash and Cash Equivalents at the Beginning of Period 228,691 707,516

CASH AND CASH EQUIVALENT AT THE END OF PERIOD 190,367 565,588

30

CONSOLIDATED EBITDA

EBITDA (ThUS$) 6M 2015 6M 2014 Var %

Gross Profit 245,833 222,997 10%

Depreciation and amortization (-) 113,459 112,212 1%


Selling, general and administrative expenses (51,754) (52,606) -2%

Other operating expense (1,820) (629) 189%

Other costs not included in EBITDA 3,395 2,019 68%

TOTAL EBITDA 310,391 286,057 9%

31

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 3,439 MW composed of 3,168 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.

http://www.aesgener.com/

http://www.aes.com/

aes gener 6m 2015 results · review of q1 2015 results net income as of june 30 2015, aes gener...

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