05
COMPANY OVERVIEW
Introduction Letter from the Chairman Identification of the Company
Brief History
The AES Gener Group of Companies Ownership and Control
19
FINANCE AND
ADMINISTRATION
Administration Investment and Financing Policies
Credit Rating Financial Highlights of 2012 Earnings Distribution Dividend Policy Share Transactions
37
COMMERCIAL OPERATIONS
Chilean Electric System Colombian Electric System
79
CORPORATE SOCIAL
RESPONSIBILITY
Corporate Values and Business Ethics Responsibility to the Community
Responsibility to Shareholders and Investors Responsibility to Workers Responsibility to Customers Responsibility to Suppliers and Contractors
55
OPERATIONS AND
MAINTENANCE
Electric Business in Chile International Electric Business
71
BUSINESS DEVELOPMENT
Projects under construction Projects under development
95
FINANCIAL STATEMENTS
Consolidated Financial Statements Discussion and Analysis of Consolidated
Financial Statements Subsidiaries’ Financial Statements,
Summarized
211
ADDITIONAL
INFORMATION
Relevant Events
Information on Related Companies Addresses and Telephone Numbers
of Power Plants Signing and Statement
01
As of December 31, 2012, with all of its plants in operation(1),
the Company provides electricity to the Sistema Interconectado Central (SIC, Central Grid) through four run-of-river hydroelectric plants, one coal-fired thermoelectric plant, five diesel-fired
Through its subsidiaries, it also provides the SIC with electricity from a combined cycle plant that can operate on either natural gas or diesel oil, and from a diesel oil-fired plant, both of which are owned by Sociedad Eléctrica Santiago S.A. (Eléctrica Santiago), as
INTRODUCTION
AES Gener S.A. (AES Gener or the Company) is an open stock corporation whose mission
is to generate electricity in Chile safely, reliably, and sustainably, meeting its commitments
with customers, shareholders, employees, communities, suppliers, and other individual
7
It also supplies the grid with power through its related company Empresa Eléctrica Guacolda S.A. (Guacolda), which operates four coal-fired units on Guacolda Island in Huasco in the Region of Atacama.
Additionally, the Company provides electricity to the Sistema Interconectado del Norte Grande (SING, Northern Grid) through its subsidiaries Norgener S.A. (Norgener) and Empresa Eléctrica Angamos S.A. (Eléctrica Angamos). Norgener has a coal-fired thermoelectric plant in the city of Tocopilla, while Eléctrica Angamos has a plant, also coal-fired, located in the municipality of Mejillones. This combination of electric generation options provides AES Gener with competitive advantages in the Chilean electric market, as it does not depend exclusively on a particular energy source to produce electricity.
In addition to its activities in the Chilean electricity industry, AES Gener produces electricity in Colombia through its subsidiary AES Chivor, which has a hydroelectric plant at the Boyacá reservoir, and in Argentina through its subsidiary TermoAndes S.A. (TermoAndes), which has a natural gas-fired combined cycle plant in Salta.
TermoAndes is also connected to the SING through a transmission line owned by the subsidiary InterAndes, and to the Sistema Argentino de Interconexión, or SADI, the Argentine Grid. AES Gener transports natural gas through its companies GasAndes S.A. and GasAndes Argentina S.A.
At the end of 2012, the Company finished construction on a coal-fired plant, Ventanas IV, which belongs to the subsidiary Empresa Eléctrica Campiche S.A. (Eléctrica Campiche) and is located in Ventanas in Chile’s Region V. Another development in 2012 was the start of construction on the Tunjita hydroelectric plant in Colombia, which belongs to AES Chivor; and on the 5th unit at the Guacolda complex in Huasco, Region III, owned by AES Gener’s related company Guacolda.
As of December 31, 2012, 70.67% of AES Gener stock is owned by Inversiones Cachagua Ltda., a subsidiary of AES Corp (AES), an international power and infrastructure company that does business in 25 countries. Its headquarters is located in Arlington, Virginia, in the U.S.
It gives me great pleasure to report to you on the business activities of AES Gener S.A. (AES Gener) during 2012. This year was marked by major operational, business, and financial achievements that would not have been possible without the professionalism and dedication of our people, or without the strategic vision of our company’s executives.
The efforts of our collaborators have been key to the success of our expansion plan that has been underway in recent years. The plan involves the construction and startup of 10 projects, which have boosted our installed capacity by 49%. It includes Unit 4 at the Ventanas Complex, whose operational testing began at the end of 2012.
Another one of our highlights was the company’s record generation level due to the commissioning of new projects and greater availability at our plants, which reached a yearly rate of 91%. With these figures, the AES Gener Group’s annual generation increased by 52% from 2007 to 2012, helping to support the country’s growth and satisfy its needs.
Innovation and excellence are undoubtedly components essential to the work of our people. These fundamentals add significant value to our company’s operations, and they are the reason behind one of the most important highlights of 2012, the recognition AES Gener received for its successful leadership, construction, innovation, and operational excellence at the Angamos plant. In less than one year, this plant received international recognition twice, winning the International Edison Award from the Edison Electric Institute, as well as the Plant of the Year Award from the specialized periodical Power Magazine.
Our operations would not be top quality if our main concern were
In addition, I am particularly pleased to reaffirm AES Gener’s commitment to the environment. In this context and fully complying with the standards required by the authorities, in 2012 the investments and the installation works of emission control equipment (retrofits) began in units I and II of both the Ventanas and Norgener plants. The consolidated total investment is US$220 million, investment that will be completed during 2014 as required by law.
In commercial matters, I would like to note the company’s successful strategy in attaining today the balance between projected efficient energy from our plants and the supply agreements in the future. In 2012 we had to deal with an “imbalance” on the Central Grid (or SIC) that resulted in a 26% decline in the gross margin compared to that of 2011 due to higher supply contracts than could be met with efficient generation. We were able to correct this situation when the Ventanas IV power plant went into operation in March of 2013. Also, despite this imbalance, AES Gener signed new long-term agreements that started in 2012, knowing that the long-long-term benefits would outweigh the short-term costs under this scenario. In addition, we must not overlook the fact that the company was required to supply contracts signed by Campanario, which went into bankruptcy in 2011.
Looking back over 2012 financial matters, we should note the upgrade in the credit rating assigned to AES Gener by Fitch, from BBB- up to BBB. Another highlight is the financial contribution from our Colombian operations, which reached a record EBITDA of US$245 million.
So, despite the huge hurdles the company faced in 2012, such as the energy imbalance on the SIC and the halting of TermoAndes’
LETTER FROM THE CHAIRMAN
9
I would particularly like to mention the coal-fired Ventanas IV plant, which completed the different processes we had scheduled for 2012. It was synchronized to the SIC in December of 2012, and it was successfully commissioned for commercial operations on March 15, 2012.
We started several new projects in the second phase of our expansion plan in 2012, and we expect to add new projects in 2013. AES Chivor started work on the 20 MW Tunjita run-of-river hydroelectric plant in July, and progress stood at 12.7% by the end of 2012. Construction also got underway on the fifth unit of related company Guacolda’s 152 MW plant in October; works are currently in the leveling, clearing, and surveying stage.
One of our most noteworthy achievements of 2012 is the progress on the 532 MW Cochrane thermoelectric project, which will supply energy to the northern grid (the SING) from its location in the Region of Antofagasta. The preliminary works on Cochrane have begun under the engineering and construction contract with Posco Engineering & Construction. Long-term supply agreements have already been signed with large mining companies for a large portion of the power that will be generated at the plant.
The company was also able to finalize the financing for the project, which will be executed using the project finance model. The Mitsubishi Corporation became a major shareholder in Eléctrica Cochrane after acquiring 40% of its stock in November.
Another of our emblematic projects is the 531 MW Alto Maipo run-of-river plant located in the Metropolitan Region of Santiago, which received the electricity concession permit from the government in
December of 2012. The company progressed with the preliminary works for this plant in 2012, and three construction agreements were signed for the main works of supplying and assembling the generation equipment for the two plants, as well as for civil and underground works.
We at AES Gener are fully aware that, in order to develop our projects successfully and to obtain favorable results year after year, we must see the whole picture and stick to the company’s values. That is why we have developed a solid policy of corporate social responsibility (CSR) to complement our operational, financial, environmental, and commercial excellence. We have built this policy on the three pillars of education, employability, and infrastructure for the community.
After a thorough analysis of the needs of each city or township that serves as locations for our facilities, present or future, the company has started important social programs that it has implemented hand in hand with the community in order to add social value to the communities where we have operations or are building projects. Our CSR policy works through our Fundación AES Gener foundation, which has brought several programs to fruition that have positioned the company as a key player in the work of community ties. The goal is to develop and contribute to a better quality of life for our neighbors, going far beyond our day-to-day operations.
While it is true that we faced a number of commercial and operational hurdles in Chile in 2012 that decreased our gross earnings in the two Chilean markets this year, we have no doubt
that this has been a year full of operational, commercial, financial, environmental, and developmental achievements. Each and every one of these achievements has gone hand in hand with our commitment to supply reliable energy in a way that is sustainable with the environment and with the communities in which we operate and with which we have worked intensely, trying always to be good neighbors and to contribute solidly to the growth of the entire country.
Therefore, I would like to express my deep gratitude for the trust you have placed in the Board of Directors and in the company in general. I would also like to extend this appreciation to each and every worker at AES Gener who, through their daily efforts, contribute to the growth of our organization. You can rest assured today that AES Gener remains steadfast in its commitment to operating under the highest standards of operational excellence, seeking constant improvement, and never losing sight of our top value: safety. We are certain that this will keep us on the track toward competitive, sustainable development, for the company and for Chile.
11
IDENTIFICATION OF THE COMPANY
COMPANY NAME AES Gener S.A.
CHILEAN TAXPAYER ID NUMBER 94.272.000-9
TYPE OF COMPANY Open Stock Company
REGISTRATION IN THE SECURITIES REGISTRY No. 0176
ADDRESS Rosario Norte 532, Piso 19, Las Condes, Santiago, Chile
TELEPHONE (56-2) 2686 8900
FAX (56-2) 2686 8991
P.O. BOX No. 3514, Santiago
WEB PAGE www.aesgener.com
BRIEF HISTORY
AES Gener S.A. was founded on June 19, 1981 in a public deed registered by Santiago Notary Public Patricio Zaldivar Mackenna. The name of the Company at the time was Compañía Chilena de Generación Eléctrica S.A. (Chilectra Generación S.A.). Its by-laws were approved by the Chilean Securities and Insurance Authority in Resolution 410-S of July 17, 1981 and were published in Diario Oficial No. 31,023 on July 23 of the same year. The Company is registered in the Business Registry of the Santiago Property Registrar on pages 13,107 No. 7,274 of 1981.
The origins of the Company, however, date back to 1889, only eight years after Thomas Alva Edison invented the light bulb. That was when the Chilean Electric Tramway and Light Company was founded in Santiago; its assets later merged in 1921 with those of the Compañía Nacional de Fuerza Eléctrica, created in 1919, to form the Compañía Chilena de Electricidad (Chilectra). This was a privately owned company until 1970, when it was nationalized and taken over by the Corporation for the Development of Production (CORFO). In June 1981, it was restructured into a parent company, Chilectra S.A., and three subsidiaries: Chilectra Metropolitana S.A.,
a distribution company serving the Santiago metropolitan area; Chilectra Quinta Región S.A., a distribution company serving Valparaiso and the Aconcagua Valley; and Chilectra Generación S.A., an electricity generation company and owner of the former Chilectra’s transmission assets.
Chilectra Generación S.A. began operating as an independent company on August 1, 1981. In 1986, CORFO began privatizing the company, and by January 1988, 100% of its ownership had been transferred to the private sector.
At the Annual Shareholders’ Meeting in September 1989, it was agreed to change the Company’s name to Chilgener S.A. At that time, the Company had an installed capacity of 579 MW distributed throughout Chile’s Metropolitan and Valparaiso Regions. Nine years later, in March of 1998, the Company’s shareholders agreed once again to change its name, this time to Gener S.A. The primary reason for the change was to reflect the Company’s new international standing as it expanded its operations to new markets and businesses both in Chile and abroad.
In addition to participating in the electricity generation business in Chile, Argentina, Colombia, and the Dominican Republic, Gener has also expanded into other activities such as the generation of steam; the extraction and sale of coal; the exploration, extraction, and transportation of natural gas; the exploration and production of oil; the production and sale of densified biofuel; shipping and port services; and engineering services provided
13
In April 2000, Gener began the search for a strategic partner or investor that would enable it to continue growing within the industry’s new structure. This decision was based on the growth and development restrictions imposed on the Company by its smaller size and debt capacity as compared to its large international competitors.
At the end of this process, AES Corp, through its subsidiary Inversiones Cachagua Ltda., launched a tender offer for a controlling percentage of the Company. Additionally, it entered into an agreement with the French company TotalFinaElf under which the latter agreed to purchase Gener’s electricity assets in Argentina if the tender offer was successful. Both operations were subject to a due diligence process.
On December 28, 2000, the Santiago Stock Exchange auctioned Gener shares, and Inversiones Cachagua Ltda. purchased 61.11% of the Company’s capital stock. On the following day in the United States, Gener’s ADRs, representing a 34.56% stake in the Company, were exchanged for AES Corp shares. After taking control of the Company, Inversiones Cachagua Ltda. held a second public offering in Chile in February 2001, acquiring an additional 2.87% of the Company’s stock. At this point, Inversiones Cachagua’s ownership equaled 98.54% and would later increase to 98.65% through other minor purchases on the stock market.
As part of the AES group, Gener changed its name to AES Gener S.A. in 2001 and began to sell assets in order to concentrate the Company’s business activities in power generation, primarily in Chile. In 2004, through a capital increase, Inversiones Cachagua’s stake in the Company increased to 98.79%.
In April 2006, Inversiones Cachagua sold 7.59% of its shares in AES Gener to other investors; it sold 0.91% in May 2007, and repeated the operation in October, selling an additional 10.18% and remaining with a 80.11% stake in the Company.
In June 2008, AES Gener concluded the preemptive right period of a capital increase process for approximately US$272 million. Inversiones Cachagua took part in the process and increased its ownership to 80.16% by the end of the preemptive period. However, in November 2008, Inversiones Cachagua sold 9.55% of AES Gener on the stock market, reducing its stake to 70.61%. Finally, AES Gener carried out a new capital increase for approximately US$246 million, whose preemptive right period ended in February 2009. Inversiones Cachagua took part in the process and increased its participation slightly.
As of December 31, 2012, Inversiones Cachagua’s stake in the Company totaled 70.67%.
GROUP OF COMPANIES
99.99% 0.01% 6% 7.96% 50% 13% 13% 99.99% 99.99% 0.01% 0.01% 94% 92.04% 13.01% 33.01% 86.99% 66.99% Sociedad Eléctrica Santiago S.A. Empresa Eléctrica Guacolda S.A Gasoducto GasAndes S.A. Gasoducto GasAndes Argentina S.A. Empresa Eléctrica Ventanas S.A. Empresa Eléctrica Angamos S.A. Gener Argentina S.A. Energen S.A. TermoAndes15
Subsidiaries Related Companies 99.99% 60.00% 99.99% 99.99% 0.01% 47.50% 99.99% 0.01% 0,01% 100% 100% 100% 99.99% 50.63% 0.63% 0.63% Empresa Eléctrica Campiche S.A. Empresa Eléctrica Cochrane SpA Inversiones Termoenergía de Chile Ltda. Genergía S.A. S.A. AES Chivor S.A. Gener Blue Water Ltda. Alto Maipo SpA Inversiones Nueva Ventanas S.A. Genergía Power Ltda. AES Chivor y Cía. SCA E. S. P.AES Gener is an open stock corporation whose shares are traded on three
stock exchanges: the Santiago Stock Exchange, the Valparaiso Securities
Ex-change, and the Chilean Electronic Stock Exchange.
As of December 31, 2012, shareholders’ equity stood at US$2.481 billion, divided into 8,069,699,033 shares and distributed among 1,610 shareholders. At the end of the fiscal year, Inversiones Cachagua Ltda. held a 70.67% stake in AES Gener. The American company AES Corp. controls AES Gener indirectly through its approximately 99.9% ownership of Inversiones Cachagua Ltda.
Due to the fact that the ownership of AES Corp is highly disperse, the names of the individuals who own shares of that international corporation are omitted from this report.
NAME SHARES OWNERSHIP
Inversiones Cachagua Limitada 5,703,106,137 70.7% Banco de Chile through other companies 177,028,830 2.2% Celfin Capital S.A. Stock Brokers 171,606,067 2.1%
Provida C Pension Fund 152,964,903 1.9%
Banco Itaú through investors 139,820,959 1.7%
Capital C Pension Fund 105,602,150 1.3%
Provida A Pension Fund 105,179,316 1.3%
Capital A Pension Fund 102,824,086 1.3%
Cuprum A Pension Fund 102,392,718 1.3%
Banco Santander - JP Morgan 94,717,189 1.2%
Habitat C Pension Fund 92,305,117 1.1%
Provida B Pension Fund 88,202,242 1.1%
17
Chilean individual 1,317 29,381,447 0.36%
Foreign individual 1 1,000 0.00%
Foreign legal entity 9 419,202,570 5.20% Chilean legal entity 283 7,621,114,016 94.44%
TOTAL SHAREHOLDERS 1,610 8,069,699,033 100.00% OWNERSHIP BY TYPE 15.4% Pension Funds (AFPs)
As of December 31, 2012, shareholders’ equity stood at
US$2,481
billion,
divided into
8,069,699,033
shares and distributed among
02
AND
ANDRéS GluSkI / CHAIRMAN
Master in Economics, University of Virginia, USA
Ph.D. in Economics and International Finance, University of Virginia, USA Passport No.: 6024620
Venezuelan citizen
ARMINIO BORjAS
Attorney at Law, Universidad Católica Andrés Bello, Venezuela Passport No.: D0259811
Venezuelan citizen
IváN DíAz-MOlINA
Civil Engineer, Universidad Nacional de Córdoba, Argentina Master of Science, Carnegie-Mellon University, USA Chilean ID No.: 14.655.033-9
Argentine citizen
juAN ANDRéS CAMuS
Business Administrator, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: 6.370.841-0
Chilean citizen
RADOvAN RAzMIlIC
Road, Canal, and Port Engineer, Universidad Politécnica Superior de Madrid, Spain RUT: 6.283.668-7
Chilean citizen
TOM O’FlyNN(2)
MBA in Finance, University of Chicago, USA Passport No.: 502095720
U.S. citizen
ADMINISTRATION
BOARD OF DIRECTORS
as of December 31, 2012
AlTERNATE DIRECTORS
EDGARDO CAMPElO
Public Accountant, Universidad de Buenos Aires, Argentina Passport No.: 16171019N
Argentine citizen
FERNANDO PujAlS
Mechanical Engineer, Universidad Nacional de Rosario, Argentina MBA, IMD, Switzerland
Passport No.: 7.685.597M Argentine citizen
GARDNER WAlkuP
Petroleum Engineering, Stanford University, USA
Chemical Engineering, University of California at Davis, USA. U.S. citizen
jOEl ABRAMSON
Bachelor of Arts in International Politics and Economics, Middlebury College, USA Passport No.: 046657322
U.S. citizen
jORGE RAuBER
Electrical Engineer, Universidad Nacional de la Plata, Argentina Passport No.: 20605997N
Argentine citizen
PATRICIO TESTOREllI
Attorney at Law, Universidad Católica Argentina, Argentina Master in Business Law, Universidad Austral, Argentina Passport No.: 16.764.888
Argentine citizen
vARSOvIA vAlENzuElA
Business Administration, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: 6.662.587-7
Chilean citizen
(1)Regular Director Edward C. Hall submitted his resignation on November 19, 2012. Mr. Andrew Vesey was designated as his replacement on February 26, 2013.
(2)Regular Director Victoria Dux Harker submitted her resignation on July 25, 2012, designating Mr. Tom O’Flynn as her replacement under an agreement adopted by the Board on September 26, 2012.
23
Civil Industrial Engineer, Pontificia Universidad Católica de Chile, Chile
Master of Science in Accounting and Finance, The London School of Economics, England Chilean ID No.: 6.375.799-3
Chilean citizen
jAvIER GIORGIO / CHIEF OPERATIONS OFFICER
Electronic Engineer, Universidad Tecnológica Nacional, Argentina MBA, Universidad del Cema, Argentina
Chilean ID No.: 23.202.311-2 Argentine citizen
DANIEl STADElMANN / CHIEF FINANCIAl OFFICER
Bachelor of Science in Administration and Finance, , University of St. Gallen, Switzerland MBA, IMD, Switzerland
Chilean ID No.: 6.921.313-8 Chilean citizen
IváN jARA / CHIEF ENGINEERING AND CONSTRuCTION OFFICER
Civil Mechanical Engineer, Universidad de Chile, Chile MBA, Universidad Adolfo Ibañez, Chile
Chilean ID No.: 12.458.775-1 Chilean citizen
MICHAEl WHITTlE / CHIEF DEvElOPMENT OFFICER
Bachelor of Arts, Claremont McKenna College, USA
Master of Science in Foreign Service, Georgetown University, USA Passport No.: 017095567
U.S. citizen
AlBERTO zAvAlA / lEGAl COuNSEl
Attorney at Law, Pontificia Universidad Católica de Chile, Chile Chilean ID No.: 7.054.225-0
Chilean citizen
MARIANA SOTO / CHIEF CORPORATE AFFAIRS OFFICER
Attorney at Law, Universidad de Chile, Chile Chilean ID No.: 12.240.551-6
2012 2011
Juan Andrés Camus 1,920 1,920
Iván Díaz-Molina 1,920 1,920
Radovan Razmilic 1,920 1,120
Jorge Rodríguez - 800
TOTAl 5,760 5,760
BOARD COMMITTEE REMUNERATIONS (UF)
BOARD OF DIRECTORS
The Board of Directors is the official organization that, in accordance with the Chilean Corporation Law Code and the Company’s by-laws, is responsible for the administration of the Company. It is composed of seven regular members and their respective alternates, all of whom are elected for a three-year term at the ordinary shareholders’ meeting and are eligible for reelection. AES Gener’s by-laws specify that its Directors are not to be remunerated for their duties as such.
During fiscal year 2012, the Company’s Directors did not receive remuneration of any kind for additional duties; for expenses of representation, travel, or gifts; or any other stipend.
However, those Directors that are also Board Committee members received remuneration as detailed in the following section. The Board of Directors did not incur expenses for consultation services in 2012.
REMuNERATIONS AND ACTIvITIES
BOARD COMMITTEE
MEMBERS
The members of the Company’s Board Committee are Mr. Iván Díaz-Molina (Chairman and Independent Director), Mr. Juan Andrés Camus, and Mr. Radovan Razmilic.
REMuNERATIONS AND BuDGET
At the ordinary shareholders’ meeting held on April 27, 2012, it was agreed to set Board Committee members’ fees at 160 UF per month.
The Committee did not make use of the annual expense budget of US$25,000 approved at the ordinary shareholders’ meeting for the 2012 fiscal year.
Remunerations were paid to the Directors who are Board Committee members in the amounts shown in the following table.
25
At the January 5 meeting, the Committee examined the information on the following operations with related companies:
i) The annual renewal of the insurance policy held with AES Global Insurance, an AES Corp related company, covering AES Gener and its subsidiaries against all risk and business interruption. The Board Committee examined the information presented and, wanting more information, unanimously agreed to request that the company’s management recommend three independent consultants to the Committee, from which it will select one to carry out an insurance market study to determine the premiums that could be paid for the coverage needed under current market conditions.
ii) The fees paid in 2010 and 2011 to the parent company AES Corp. for internal auditing services for the company and its subsidiaries. The fees were unanimously approved by the Committee.
iii) Agreement on internal auditing services with the parent company AES Corp. The Committee recommended that the agreement be signed on the condition that it contains efficiency indicators for the internal auditing services to be provided, stating the hours to be used and the maximum fees to be paid.
At the January 25 meeting, the Committee examined the information and approved the renewal of the technical service agreement with AES Servicios América S.R.L., a subsidiary of AES Corp, covering administration of the SAP system.
At the March 28 meeting, the Committee was informed of, examined, and approved the company’s balance sheet and financial statements for the fiscal year ended December 31, 2011, as well as the external auditor’s report. During the meeting, it also agreed:
i) To recommend to the Board that Ernst & Young auditing firm be proposed at the Company’s next ordinary shareholders’ meeting as external auditors for fiscal year 2012.
ii) To approve the hiring of Ernst & Young to provide services other than auditing that are not expressly forbidden, such as tax, legal, and risk consultancy, provided that Ernst & Young report, in each case and on each occasion, that its provision of that particular service will not affect its independence.
ANNuAl REPORT ON BOARD COMMITTEE ACTIvITIES
In accordance with Article 50 bis of the Chilean Corporations Law Code, amended by Law 20,382, the Board Committee met on 7 occasions in 2012 to make decisions regarding the Company’s operations and contracts with related companies in accordance with Title XVI of Law 18,046 governing corporations. It also discussed other matters within its legal capacity and subsequently notified the Board of Directors of its decisions and recommendations. The operations between related companies examined by the Committee were in accord with market conditions and in the interest of the corporation, so the Committee recommended their approval by the Board of Directors.
iii) ii) iii) To recommend to the Board that it request that Ernst & Young auditing company replace the partner in charge of the company’s account every four years as an appropriate control measure. The partner in charge of the AES Gener account should be changed starting with the 2012 fiscal year.
At the same meeting, the Committee examined the information and approved the annual renewal of the insurance policy held with AES Global Insurance, an AES Corp. related company, covering AES Gener and all of its subsidiaries against all risk and business interruption.
At the May 23 meeting, the Committee appointed Iván Díaz-Molina President of the Board Committee.
At the June 27 meeting, the Committee examined the information and approved the corporate restructuring process, which included the merger of Energy Trade and Finance Corporation with AES Chivor y Cía. SCA E.S.P., and the issuance of a loan from the latter company to AES Gener.
At the August 16 meeting, the Committee examined the information and approved the following operations with related companies:
i) Modification of the conditions for signing the agreement selling
ii) Modification of the mercantile account agreement signed between AES Gener and its subsidiary Eléctrica Santiago. The Committee unanimously recommended that the agreement be signed.
At the November 28 meeting, the Committee examined the information and approved the release of the coal purchase agreement between AES Gener and AES Hawaii, a subsidiary of AES Corp.
EXECuTIvES
Total remuneration for the Company’s executive officers during 2012 amounted to US$5,077 million. This includes fixed monthly remuneration and variable bonuses based on corporate earnings and performance, which are also awarded to the other AES Gener employees.
The Company’s incentive plan for its executives consists of an annual variable bonus based on corporate earnings and performance; the amount of the bonus is determined on a yearly basis according to the aforementioned parameters.
It should be noted that Company policy stipulates that AES Gener executives who are members of related companies’ Boards of Directors do not receive remuneration for their duties as directors, or that they may decline the allowance due them as individuals. In 2012, the Company disbursed a total of MUS$262 in severance
27
INvESTMENT AND FINANCING POlICIES
CREDIT RATING
In accordance with the agreement reached at the extraordinary general shareholders’ meeting held on July 4, 2001, the Company’s by-laws make no reference to investment, financing, or commercial policies either for the Company or for its subsidiaries.
Not withstanding the above, the by-laws state that in order for the Company to fulfill its corporate purpose, it may manage the investments that it makes in each and every one of the companies that it forms or to which it makes contributions; it may supervise and coordinate the management of the companies that it forms and to
which it makes contributions; and it may provide, to the companies that it forms or to which it makes contributions, management services; auditing services; financial, commercial, technical, and legal consulting services; and, in general, services of any kind that are deemed necessary for best performance.
The by-laws also state that whenever it forms companies by contributing assets directly related to the generation of electricity, AES Gener will retain at least 51% of the ownership.
In April, Fitch Ratings upgraded AES Gener’s international credit rating from “BBB-” to “BBB” with a stable outlook, and upgraded its national credit rating from “A” to “A+”, also with a stable outlook. Fitch stated in its rating report that the upgrade reflected the improvement in the Company’s operations and financing, the stabilization of its cash flow, and its solid credit metrics. Feller Rate also confirmed the Company’s current local “A” rating in August. The agency did, however, raise its credit outlook from “stable” to “positive” based on expectations that AES Gener’s commercial position will be back in equilibrium after Ventanas IV plant goes into operation, and on the financing structure of projects using
the project finance method, for which AES Gener has not had to provide additional security.
At the end of the fiscal year, both Fitch Ratings and Feller Rate classified the Company’s shares as First Class, level 2.
Standard & Poor’s and Moody’s both held the Company’s current international ratings steady, maintaining their “BBB-” and “Baa3” investment grades, respectively, with stable outlooks.
The following table presents a summary of AES Gener’s national and international credit ratings as of December 31, 2012:
The subsidiary AES Chivor’s 2011 rating with Standard & Poor’s was confirmed in 2012 at investment grade “BBB-” with a stable outlook. Moody’s also held their rating steady at “Ba1” with a stable outlook.
Fitch Ratings upgraded Eléctrica Santiago’s credit rating in January 2013 from “A-” to “A” with a stable outlook as a reflection of both the ongoing improvement in that company’s individual credit
profile as well as the improved rating of controlling company AES Gener. Feller Rate confirmed its “BBB” rating of the company in September 2012, with a stable outlook.
According to the report issued by Fitch Ratings, subsidiary TermoAndes’ local credit rating maintained at “A” with a stable outlook.
Standard & Poor’s BBB- stable outlook Feller Rate A positive outlook
Fitch Ratings BBB stable outlook Fitch Ratings A+ stable outlook
Moody’s Baa3 stable outlook
HEDGING STRATEGy
Since the U.S. dollar is AES Gener’s functional currency, it was decided in 2012 to continue with the strategy for hedging exchange rates, which limits the Company’s exposure to exchange risks with the Chilean peso. Although most of the Company’s power supply agreements have rates denominated in dollars, they are actually paid in Chilean pesos at an exchange rate that is fixed for a specific period of time. Therefore, a strategy was established using exchange rate futures to hedge against the Company’s net exposure to the dollar/peso exchange rate.
Our subsidiary AES Chivor in Colombia, which uses the Colombian peso as its functional currency, also continued with an exchange rate strategy to hedge against the Company’s exposure to the volatility of the Colombian currency. This strategy also uses exchange rate futures, which cover up to 75% of accounts receivable from bilateral power sale agreements, whose tariffs are stated in Colombian pesos once expenses have been deducted in the local currency.
CREDIT lINE
In order to give the Company greater liquidity and flexibility, it was decided to maintain the UF 6,000,000 five-year credit line taken out in October 2011 with a syndicate of Chilean banks. At the end of 2012, this credit line has not been used.
INvESTOR RElATIONS
During 2012, AES Gener carried out and took part in a number of activities aimed at maintaining an ongoing flow of accurate, reliable communications with current and potential shareholders and investors, market analysts, and other interested parties. The Company also continued with its biannual meetings to present its results, as well as on-site visits to provide thorough information on our operations on the market. AES Gener also participated in various national and international conferences.
FINANCING OF COCHRANE AND
AlTO MAIPO PROjECTS
AES Gener has continued in 2012 with developing the Cochrane coal-fired thermoelectric project (532 MW, SING Grid) and the Alto Maipo hydroelectric project (531 MW, SIC Grid), and has thoroughly analyzed the options to choose the best financing structure to build these projects. These projects should be financed under the Project Finance structure, which is a non-recourse loan for the Company. This structure was used successfully to finance the Nueva Ventanas and Angamos plants. It should be noted that the financing agreement for the Cochrane project, using the project finance method, was finalized in March of 2013.
29
DIvIDEND POlICy
“It is the intention of the Board of Directors to distribute up to 100% of the net income generated during 2012 in dividends among its shareholders. The Board also agreed to expressly state its intention to distribute interim dividends during the 2012 fiscal year. At the same time, the Board also stated expressly that compliance with the aforementioned dividend policy will be subject to the net income actually earned, the results of periodic projections made by the Company, the need for Company funds to finance investment projects, and restrictions on dividends in the Company’s by-laws as well as those contained in existing loan
agreements, which consist largely of being in compliance with the negative covenants of those loans agreements and with Company cash and investment policy. Regarding dividends in upcoming years, the Board agreed to maintain a dividend policy similar to the above over the medium term.”
This policy was approved at the AES Gener ordinary shareholders’ meeting held on April 27, 2012.
The previous year’s divided policy is stated below:
As instructed in Chilean Securities and Insurance Authority (SVS)
Bulletin No. 687
, the
Board of Directors, at meeting 575 held on March 28, 2012, agreed on the
dividend policy
it considers suitable for the Company’s 2012
fiscal year
.
This policy is stated below.
EARNINGS DISTRIBuTION Thousands of
uS$
Net income attributable to parent company shareholders,
2012 fiscal year 202,933
Less: Interim dividends paid (71,000)
Balance of net income attributable to parent company shareholders, 2012 fiscal year
131,933
Retained earnings (IFRS) as of 12-31-2011 642,666
Reserves for proposed dividends as of 12- 31-2011 218,757 Final 2011 dividends paid and charged to 2011 earnings (228,169)
Minimum dividend provision for fiscal year 2012
-Retained Earnings and Proposed Dividend Reserves Accumulated for Distribution 633,254
At the ordinary shareholders’ meeting held on April 27, 2012, it was agreed to distribute US$326,083,626.40 or approximately 100% of fiscal year 2011 net income, by distributing:
(a) A minimum mandatory dividend of US$0.0121225 per share for a total of US$97,824,926.52,
or 30% of fiscal year 2011 net income. This was reduced from the interim dividend paid in September 2011, which amounted to US$0.009790 per share for a total of US$79,002,353.53 and equivalent to 24.228% of 2011 fiscal year net income. This resulted in a dividend of US$0.0023325 per share, for a total of US$18,822,572.99, or 5.772% of 2011 fiscal year net earnings, which was paid starting on May 8, 2012.
2011 DIvIDEND POlICy
As instructed in Chilean Securities and Insurance Authority (SVS)
Bulletin No. 687
, the
Board of Directors, at meeting 563 held on March 29, 2011, agreed on the
dividend policy
it considers suitable for the Company’s
2011 fiscal year.
This policy is stated below.
DIvIDENDS PAID AGAINST FISCAl yEAR 2011
EARNINGS
“It is the intention of the Board of Directors to distribute up to 100% of the net income generated during 2011 in dividends among its shareholders. In addition, the Board agreed to state expressly that it intends to distribute interim dividends during the 2011 fiscal year. The Board also stated expressly that compliance with this dividend policy is subject to net income actually earned, the results of periodic projections made by the Company, the need for Company funds to finance investment projects, and restrictions on dividends in the Company’s by-laws as well as those in existing loan
agreements, which consist largely of being in compliance with the negative covenants of those loans agreements and with Company cash and investment policy. Regarding dividends in upcoming years, the Board agreed to maintain a dividend policy similar to the above over the medium term.”
This policy was reported at the AES Gener S.A. ordinary general shareholders’ meeting held on April 26, 2011.
31
(b) A first additional dividend of US$0.0093160 per share for a total of US$75,177,316.19, equivalent to 23.055% of fiscal year 2011 net income, paid starting on May 8, 2012.
(c) A second additional dividend of US$0.0189699 per share for a total of US$153,081,383.69, or 46.945% of fiscal year 2011 net income, which was paid starting on August 8, 2012.
Then, in accordance with the dividend policy approved at the ordinary shareholders’ meeting held on April 27, 2012, the Board of Directors, at meeting N°. 582 of October 24, 2012, agreed to distribute US$70,999,633 in interim dividends of US$0.0087983 per share, to be charged to fiscal year 2012 net income. This interim dividend amounts to 35% of fiscal year 2012 net income.
DIvIDEND
NO. DIvIDENDTyPE OF PAyMENTDATE OF PER SHAREAMOuNT CHARGED TO FISCAl yEAR PROFITS % OF
86 Final 05/07/09 0.005662 2008 30% 87 Additional final 07/07/09 0.005011 2008 25% 88 Interim 12/15/09 0.004960 2009 12% 89 Final 05/11/10 0.008709 2009 21% 90 Additional final 07/07/10 0.005558 2009 14% 91 Additional final 10/07/10 0.005558 2009 14% 92 Interim 01/05/11 0.00905 2010 43% 93 Final 05/06/11 0.011988 2010 57% 94 Eventual 05/06/11 0.008922 2010 25% 95 Interim 09/14/11 0.009790 2011 24% 96 Final 05/08/12 0.002333 2011 6% 97 Additional final 05/08/12 0.009316 2011 23% 98 Additional final 08/08/12 0.018970 2011 47% 99 Interim 11/15/12 0.008798 2012 35%
DIVIDENDS DISTRIBUTED IN RECENT YEARS, IN DOLLARS PER SHARE:
NO. OF SHARES TOTAl (CH$) AvERAGE PRICE (CH$) 1st Quarter 321,179,658 76,736,307,370 238.9 2010 2nd Quarter 222,505,531 51,567,340,027 231.8 3rd Quarter 396,584,164 106,511,298,877 268.6 4th Quarter 375,235,875 99,793,287,577 265.9 1st Quarter 364,174,066 91,103,061,271 250.2 2011 2nd Quarter 221,673,099 61,191,560,693 276.0 3rd Quarter 236,609,288 63,967,944,621 270.4 4th Quarter 275,198,339 74,687,727,581 271.4 1st Quarter 339,443,867 97,709,144,640 287.9 2012 2nd Quarter 314,993,767 91,064,794,160 289.1 3rd Quarter 263,658,271 72,191,759,761 273.8 4th Quarter 251,986,261 75,025,937,773 297.7
SHARE TRANSACTIONS
(1)33
Ch$ US$SHARE PRICE
January 147,211,975 41,184,914,860 280.4 February 98,642,033 28,943,023,082 293.4 March 79,511,567 23,496,074,043 295.5 April 67,329,054 20,378,320,439 303.1 May 88,395,334 25,313,614,139 286.4 June 133,357,681 37,961,869,438 284.6 July 58,873,126 16,544,437,827 281.0 August 126,659,008 33,716,657,149 266.3 September 53,903,974 15,297,381,524 283.8 October 54,072,842 15,404,599,739 284.9 November 100,549,261 29,943,608,874 297.8 December 72,380,199 22,293,604,733 308.0 AvERAGE 90,073,838 25,873,175,487 287.2 350 300 250 200 0 JAN-12 Ch$ 0.7 0.6 0.5 0.4 0 US$SuMMARy OF SHAREHOlDERS’
COMMENTS AND PROPOSAlS
INSuRANCE
During 2012, the Company did not receive comments or proposals regarding the management of the Company from shareholders or their representatives owning 10% or more of shares with voting rights, in accordance with Article 74 of Law No. 18,046 governing Chilean stock corporations and Article 13 of that law’s regulations.
Insurance is an integral part of the Company’s risk management. AES Gener’s focus in insurance is on mitigating financial losses and guaranteeing the continuity of its business activities. Among its relevant insurance coverage are all-risk policies covering the operation and construction of all of its plants, including coverage for material damage and financial losses resulting from business interruption due to machinery breakdown, fire, acts of nature,
that must be imported such as coal, replacement and spare parts, and other supplies are covered under all-risk maritime, land, or air shipping policies. In addition, AES Gener has general liability insurance coverage for itself and its employees, as well as its contractors and subcontractors. It also provides insurance policies for its workers that exceed the coverage required under Chilean law, including life insurance.
35
BRAND NAMES AND INTERNET DOMAINS
The Company has duly registered trademarks ortrademark applications in process for all of its brand names and those of its subsidiaries, including registration of the different company names and corporate slogans. The Company has also registered its brands’ Internet domain names to protect its intangible interests and assets.
03
In accordance with the country’s constitution and current legislation, certain government agencies, including those related to the electricity sector, perform a regulatory and oversight role. These agencies are grouped under the Ministries of Energy and the Environment, and include, among others, the Comisión Nacional de Energía (the National Energy Commission or CNE), which establishes, regulates, and coordinates energy policy. It also publishes the semi-annual indicative investment plan for generation and transmission activities, whose reports provide important data which the industry’s companies use in their decision making. Other agencies include the Superintendencia de Electricidad y Combustibles (Electricity and Fuels Commission or SEC), the agency that oversees and supervises compliance with regulations governing the quality and reliability of service provided to people and/or assets; the Servicio de Evaluación de Impacto Ambiental (Environmental Impact Assessment Service), which carries out an environmental assessment of investment projects prior to their execution to ensure that the projects meet applicable environmental standards and that they handle properly any environmental impacts they may have; and other Environmental Ministry agencies still being implemented that administer the environmental assessment
CHILEAN ELECTRIC SYSTEM
OVERVIEW
Since 1982, the Chilean electricity industry has been based on a private initiative and
property structure, with a competitive framework for the generation market and new
transmission facilities, and a regulated framework for distribution and transmission based
on an efficient company model.
The Dirección General de Aguas (General Water Authority, DGA), an agency in the Ministry of Public Works, issues and regulates the water-use rights for hydroelectric generation, while the Ministry of Energy grants the concessions for generating, transmitting, and distributing electricity for public use. The construction and commissioning of hydroelectric and thermoelectric plants require environmental permits regulated by Chilean law, and legislation requires that thermoelectric plants be granted a construction permit as well.
While the Chilean electric system is subject to the ordinary courts of law, it also has a Panel of Experts, an independent technical agency whose role is to study and promptly resolve controversies that may arise between companies within the electricity sector, or between one or more of these companies and the energy authorities. The electricity sector’s different activities are regulated by the General Electricity Services Law, DFL 1/1982 enacted by the Mining Ministry, with its subsequent amendments, Law No. 19,940/2004, known as Short Law I, and Law No. 20,018/2005, or Short Law II, which did not modify the fundamentals of Chile’s
39
stable electricity sector model. These laws were redrafted and systematized under DFL 4/2007 of the Economy, Development, and Reconstruction Ministry. The sector’s activities are also governed by the corresponding technical regulations and standards.
The activity is based primarily on long-term contracts between generation companies and customers that specify the volume, price, and conditions for the sale of energy and capacity. The law recognizes two types of generation company customers: unregulated and regulated customers:
Unregulated customers are principally and obligatorily customers whose connected capacity is higher than 2 MW, generally industrial or mining customers, and those with a connected capacity of between 500 kW and 2 MW who have opted for the unregulated pricing mechanism for a period of at least four years. These customers are not subject to price regulation and are therefore free to negotiate the prices and conditions for supplying electricity with the generation companies.
Regulated customers are those whose connected capacity is less than or equal to 500 kW, as well as those with a connected capacity of 500 kW to 2 MW who have selected the regulated
pricing system, also for a four-year period. These customers receive electricity from distribution companies, which must hold public bids to award electricity supply contracts to meet their consumption needs.
New supply contracts assigned by distribution companies for their customers’ consumption must be awarded to generation companies offering the lowest supply price in regulated public bid processes. These prices, termed long-term node prices, include indexation formulas and are valid for the entire term of the respective contract. More precisely, the long-term node price for energy under a particular contract is the lowest energy price offered by the generation companies participating in the respective public bid, while the long-term node price for capacity is that set in the node price decree in effect at the time of the bid process. Through an adjustment process, each distributor transfers an average node price to its customers that is different from the price that it pays when purchasing from its supplier; this price may not vary more than 5% from the average node price throughout the system. This average price is determined by the CNE, which issues a Technical Report informing the Ministry of Energy of the results. The Ministry of Energy then proceeds to set the prices
in a decree that is published in the Official Gazette. Within the regulatory framework, each bid process establishes specific indexation formulas applicable to the long-term node prices, and the respective indices are verified monthly to confirm the price variations.
In Chile, except for the small isolated grids of Aysén and Punta Arenas, electricity is generated by two major systems: the Central Interconnected Grid (known as the SIC), which covers the country from the southern area of Region II (the Paposo roadstead) to Region X (the town of Quellón) and supplies electricity to approximately 92% of the national population; and the Northern Interconnected Grid (the SING), which covers Regions I, II, and XV and whose primary customers are mining and industrial companies. In each of these large grids, electricity generation is coordinated by the respective independent Economic Load Dispatch Center, or CDEC, to minimize operational costs and to ensure the highest economic efficiency of the system while meeting all service quality and reliability requirements established by law.
Specifically, in order to satisfy demand at all times and at the lowest possible cost, each CDEC orders dispatch from generation plants based strictly on their variable generating costs, starting with the
lowest variable cost, and does so regardless of the contracts held by the generation company that owns each plant. Thus, while the generation companies are free to enter into supply contracts with unregulated and regulated customers and are obliged to comply with such contracts, the energy needed to satisfy demand is generally produced by the CDEC member whose variable production costs are lower than the system’s marginal cost at the time of dispatch. In addition, the Chilean market is designed to include payments for capacity (or firm capacity), which are explicitly paid to generation companies for contributing to the system’s sufficient availability. These payments are assigned according to the output each generation company can guarantee during critical events, particularly droughts, fuel shortages, and plant failures, and are added to the final electricity price paid by both unregulated and regulated customers. As a result, differences arise between the energy actually produced and the energy under contract by each generation company, and between the capacity assigned and that under contract by each generator, which gives rise to energy and capacity transfers among the different CDEC members. In these spot transactions, the companies which, as a result of the CDEC’s economic dispatch, have generation levels higher than their contractual energy sales (companies with generation surpluses) sell energy to those companies with production levels lower than their contractual energy sales (companies with generation deficits). A similar situation occurs with capacity transactions, which are determined annually by the CDEC and result in transfers from generation companies that have firm capacity surpluses with respect to their peak capacity commitments to their own customers, to those companies which, in contrast, are experiencing capacity deficits.
The physical and financial transfers are determined by the CDEC and are valued, in the case of electrical energy, at the hourly marginal cost of the system’s operation. For capacity, the price is to the marginal cost of capacity, which currently corresponds to the short-term peak capacity node price.
41
The law permits generation companies and regulated customers to agree voluntarily to temporary reductions in electricity consumption through the use of incentives. The purpose is to encourage these customers to conserve electricity and to make efficient use of their consumption, particularly during shortages.
In addition, Law 20,257 enacted in 2008 promotes non-conventional renewable energy sources such as solar, wind, mini-hydro, and biomass generation. Specifically, this law requires that a certain percentage of generation companies’ supply contracts signed after August 31, 2007 be supplied by renewable sources. The percentage of renewable energy required starts at 5% for the years 2010 to 2015 and gradually increases to a maximum of 10% in 2024. A noteworthy development in environmental regulations is the Environmental Ministry’s Executive Decree No. 13/2011, which went into effect on June 23, 2011 and sets an emissions standard for thermoelectric plants. This standard sets limits for atmospheric emissions of particulate matter (PM), sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg), with different emissions limits for new and existing plants and for different types of fuel (solid, liquid, and gas). The standard also sets deadlines for existing facilities’ compliance; for PM, the compliance deadline is 36 months after the standard was enacted, or December of 2013, and the deadline for NOx and SO2 compliance is four years after enactment for plants located in areas declared as latent or saturated (in terms of pollution) and five years for the rest of the country.
For high voltage transmission, the law guarantees transmission line owners the right to recover all of their capital, operating, maintenance, and administrative costs. This is done by dividing the transmission network into three subsystems: the trunk line, comprised of transmission lines that are essential to keeping the entire system supplied; sub-transmission lines, which are primarily power lines that satisfy consumption in distribution companies’ licensing areas; and additional lines consisting of those that mainly provide electricity to unregulated customers or evacuate electricity from generation plants.
The CNE sets regulated tariffs every four years for the trunk and sub-transmission line systems based on studies done by independent consultants on the investment value and expansion of each of these networks. These studies appraise the value of existing facilities and recommend works to be carried out over the next ten years. However, and principally for the trunk line system, it is market interaction that finally determines which works are undertaken since the opinions of the CDEC and the CNE are also taken into account, and when controversies arise, the issue is submitted to the Panel of Experts for resolution. The works are finally assigned to the company offering the lowest annual charge in public bids held by each CDEC..
COMMERCIAL POLICY
The Company’s commercial policy seeks to minimize cash flow volatility, managing its risks based on market and industry conditions. In order to do so, the following factors are among those analyzed: contract levels, proportion of unregulated and regulated customers that make up AES Gener’s and its subsidiaries’ client portfolio, and contract terms.
In its commercial analyses, AES Gener estimates demand growth and projects marginal costs and prices within the system. Based on this information, the Company determines the level of contractual sales that will allow it to stabilize cash flow and manage an acceptable level of risk.
A business factor that is particularly relevant for the Company is the fact that it is the SIC’s principal thermoelectric generation company, which provides it with a highly reliable supply regardless of hydrological conditions.
OVERALL PARTICIPATION IN THE SIC AND THE SING
Total installed capacity for electricity supply in Chile, including the plants owned by all CDEC-SIC and CDEC-SING members, amounted to 18,462 MW at the close of 2012. Of this capacity, 32.5% was hydroelectric generation, 66.4% was thermoelectric, and 1.1% was wind and solar generation. The AES Gener Group contributed 3,810 MW, or 20.6%, to this total, including 3,539 MW of thermoelectric and 271 MW of hydroelectric capacity. In 2012, the AES Gener Group continued to be the country’s second-largest generation company overall, as well as its largest thermoelectric generator.
MAIN ENERGY AND CAPACITY SALES CONTRACTS ENERGY [GWH]
REGULATED CUSTOMERS
Chilectra S.A. 2,689.1
Chilquinta Energía S.A. 1,164.1 Empresa Eléctrica Melipilla Colchagua y Maule S.A. 673.8 Empresa Eléctrica Atacama S.A. 352.0 Empresa Eléctrica de Talca S.A. 67.5 Empresa Eléctrica Puente Alto Ltda. 66.7
LuzLinares S.A. 54.2
Compañía Eléctrica del Litoral S.A. 40.6
LuzParral S.A. 39.5
Energía de Casablanca S.A. 25.3 Empresa Eléctrica de Antofagasta S.A. 10.5 Empresa Eléctrica de Casablanca S.A. 9.9
UNREGULATED CUSTOMERS
Minera Escondida Ltda. (1) 3,073.2
Anglo American Sur S.A. 961.0
Minera Spence 507.6
Compañías Contractuales Minera Candelaria
y Minera Ojos del Salado 379.4
Papeles Bio Bio Ltda. 231.2
Sociedad Química y Minera de Chile (SQM) 229.4
Cemento Polpaico S.A. 144.1
Cristalerías Chile S.A. 68.1
Proacer Ltda. 63.5
Mantos de la Luna S.A. 63.2
Corporación Nacional del Cobre 31.3
CMPC Maderas S.A. 28.4
Fundición Talleres Ltda. 24.1
Chilquinta Energía S.A. 21.3
Puerto Ventanas S.A. 6.7
Minera Río Colorado S.A. 0.8
Minera Lo Valdés Ltda. 0.4
MAIN POWER AND CAPACITY SALES CONTRACTS ENERGY [GWh]
AES Gener has several contracts with companies that use its transmission systems, including agreements with La Higuera, Puntilla, GNL Quintero, and others. In turn, the Company also has contracts with Chilectra and Transelec for the use of their transmission systems and facilities.
AES GENER’S AND SUBSIDIARIES’ CONTRACTS
FOR TRANSMISSION SYSTEM USE
MAIN ENERGY AND CAPACITY PURCHASE CONTRACTS
Empresa Eléctrica Ventanas S. A. (2) 2,085.2
Empresa Eléctrica Guacolda S.A. 601.7
KDM Energía S.A. 72.9
Energía Coyanco S.A. 54.7
Masisa Ecoenergía S.A. 39.5
CMPC Maderas S.A. 2.4
Enorchile S.A. 0.1
(1) Includes energy redirected to the spot market (2) Inter-company agreement with AES Gener
ENERGY [GWh]
THE CENTRAL GRID (SIC)
Total installed capacity in the SIC, including the plants owned by all the CDEC members, amounted to 13,718 MW at the close of 2012, which accounts for 74.3% of all installed capacity in the SIC and SING grids in Chile. Of the total, 43.6% is hydroelectric, 54.9% is thermoelectric, and 1.5% is wind and solar generation. Precipitation continues to be a relevant factor for the SIC, given that the river flow volumes and initial water levels in reservoirs largely determine the dispatch from the grid’s hydroelectric and thermoelectric plants.
The year 2012 began with 14.2% more hydroelectric energy available in reservoirs than in the previous year, with 2,551.5 GWh available on January 1, 2012. By the end of the year, the system had sufficient water in reservoirs to generate some 1,684.4 GWh, 34.9% less than on December 31, 2011. However, it is important to consider that the water in reservoirs in 2011 included 500 GWh
of reserves as required under energy rationing Decree No. 26 published on February 27, 2011, and extended under Decree No. 58 through August 31, 2011 due to the drought in the central and south regions in 2011.
Of the total demand for energy in 2012, 41.1% was supplied by hydroelectric plants, 58.1% by thermoelectric generation, and the remaining 0.8% was supplied by wind and solar generation. Total energy production in the SIC in 2012 was 48,952 GWh, 6.0% higher than in 2011.
Reservoir levels continued to be low due to little rainfall in 2012; this was offset in part by the entry of new efficient plants onto the grid. The overall result was an average marginal cost of US$193.9/ MWh, compared to the 2011 average of US$200.8/MWh.
MARGINAL ENERGY COST AT ALTO JAHUEL 220 KV
2007 2008 2009 2010 2011 2012 [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh]
January 56.29 251.99 117.76 114.18 175.87 194.30 February 121.37 281.42 145.45 138.87 241.84 192.81 March 142.39 338.82 138.11 144.97 260.80 235.72 April 145.72 290.14 124.28 139.46 223.88 275.95 May 173.71 259.93 96.82 145.34 235.30 244.63 June 262.28 178.98 111.13 158.09 257.40 148.71 July 227.56 197.39 102.17 152.07 196.00 142.17 August 215.66 138.03 97.18 181.51 167.10 171.94 September 180.12 130.56 67.42 132.64 165.80 166.00 October 153.88 150.51 103.04 134.89 135.30 179.80 0 100 200 300 400
jan - 06 jul - 06 jan - 07 jul - 07 jan - 08 jul - 08 jan - 09 jul - 09 jan - 10 jul - 10 jan - 11 jul - 11 jan - 12 jul - 12
US$/MWh
45
The AES Gener Group’s electricity generation capacity in the SIC was 2,345 MW as of December 31, 2012. The parent company AES Gener contributes 965 MW, produced by four hydroelectric and seven thermoelectric plants. The Alfalfal, Maitenes, Queltehues, and Volcán hydroelectric plants generate 271 MW; while the two units at the Ventanas plants, the Laguna Verde TV (steam turbine), the Laguna Verde TG (gas turbine), the Los Vientos TG, the Santa Lidia TG, the Mostazal plant (gas turbine) and the Laja cogeneration plant account for the Company’s thermoelectric generation, with 694 MW of installed capacity.
The Renca thermoelectric complex has an installed capacity of 479 MW and is composed of the Renca and Nueva Renca thermoelectric plants, both owned by subsidiary Eléctrica Santiago. Of the plants belonging to the Group’s other companies operating in the SIC, subsidiary Eléctrica Ventanas contributes 272 MW through its coal-fired Nueva Ventanas plant, while related company Guacolda contributes 608 MW to the grid with its four-unit Guacolda thermoelectric plant.
During 2012, the AES Gener Group sold a total of 7,357 GWh to its customers on the SIC and to other generators in the system, 5,413 GWh of which was sold to distributing companies. AES Gener’s contractual commitments in the SIC as of December 31, 2012 had increased by 23% compared to those at the close of 2011 due to increased consumption in some contracts.
AES GENER GROUP THERMOELECTRIC PLANTS ON
THE SIC
AES GENER GROSS CAPACITY (MW)
Ventanas Plant (1) 340.0
Laguna Verde TV Plant 47.0
Laguna Verde TG Plant 18.8
Los Vientos TG Plant 132.0
Santa Lidia TG Plant 139.0
Laja Plant 12.7
San Francisco de Mostazal TG Plant 25.0
ELECTRICA SANTIAGO
Nueva Renca Plant 379.0
Renca Plant 100.0
ELECTRICA VENTANAS
Nueva Ventanas Plant 272.0
GUACOLDA
Guacolda Plant (2) 608.0
TOTAL 2,073.5
(1) Unit No. 1: 120 MW; Unit No. 2: 220 MW (2) 4 units, 152 MW each
AES GENER GROUP HYDROELECTRIC PLANTS ON
THE SIC
AES GENER GROSS CAPACITY (MW)
Alfalfal 178.0
Queltehues 49.0
Maitenes 31.0
Volcán 13.0
TOTAL 271.0
During the year, 85% of total energy sold to customers was covered by the efficient generation of AES Gener and its subsidiaries plus purchases from other producers in the system under long-term contracts that the Company has with EnorChile, Coyanco, Guacolda, Masisa and KDM. The remaining 15% was covered with purchases on the spot market.
The energy generated at the Nueva Renca plant was important to the central part of the country in 2012 due to the system’s water shortage and restrictions on transmission; the plant was able to lend greater reliability to the SIC’s energy supply during this time. Short-term liquefied natural gas (LNG) purchase agreements with various suppliers guaranteed the availability of this fuel for the plant from January to mid-May, and it delivered 1,483 GWh to the grid using LNG generation and an additional 314 GWh using diesel oil. Total production was 10% lower than in 2011.
The AES Gener Group plants, including Guacolda, contributed 24% of the SIC’s gross generation in 2012.
AES GENER’S ENERGY BALANCE ON THE SIC, 2012
ENERGY (GWh) GENERATION 5,584.4 Purchases Eléctrica Santiago 792.7 Other companies 754.6 CDEC-SIC 202.7 Total Purchases 1,750.0 Sales CDEC-SIC 202.5 Distribution companies 5,151.1 Unregulated clients 1,944.1 Total Sales 7,297.7 SYSTEM LOSSES 36.7ELÉCTRICA SANTIAGO’S ENERGY BALANCE ON
THE SIC, 2012
ENERGY (GWh) GENERATION 1,796.8 Purchases CDEC-SIC 10.4 Total Purchases 10.4 Sales CDEC-SIC 943.5 Inter-company sales 792.7 Distribution companies 70.9 Total Sales 1,807.1 SYSTEM LOSSES 0.0RECENT DEVELOPMENTS ON THE SIC
NEW SUPPLY CONTRACTS
During 2012, AES Gener began providing energy supply under the following contracts with unregulated customers: Cristalerías Chile in April, and Minera Candelaria and Minera Ojos del Saldo starting in July. It was also awarded a supply contract for 2013 and 2014 with the distribution company CGE Distribución.
INCREASED CAPACITY IN THE SIC
The grid’s installed capacity grew by 1,032 MW due to the completion of other generating companies’ projects, of which 82 MW is hydroelectric generation, 933 is thermal, and 1.2 MW is solar generation. Of particular importance are Endesa’s Bocamina
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THE NORTHERN GRID (SING)
The SING is characterized by having very scarce water resources for electricity generation. Therefore, 99.7% of the system’s total installed capacity, which was 4,744 MW at the close of 2012, comes from thermoelectric generation. Of this, 43.8% comes from natural gas plants, 47.3% from coal plants, and 8.6% from oil-fired plants. The remaining 0.3% is generated by hydroelectric plants. The consumption areas, primarily mining companies, are far apart, and some have demand levels that account for a relatively high proportion of the grid’s total consumption.
A total of 16,755.7 GWh was generated in the SING in 2012, 5.5% higher than in 2011. Coal generated 82.9% of the SING’s energy demand for the year, while 13.6% was generated by natural gas and 2.3% by diesel or fuel oil; the remaining 0.7% was generated using hydraulic generation and cogeneration. The grid’s average marginal cost declined from US$95.80 per MWh in 2011 to US$86.60 per MWh in 2012 primarily as a result of new coal-fired plants that went into operation in 2011 and were available throughout most of 2012.
MARGINAL ENERGY COST AT CRUCERO 220 KV
2007 2008 2009 2010 2011 2012
[US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh] [US$/MWh]
January 35.5 204.5 111.8 100.6 101.6 64.8 February 63.1 174.2 89.9 148.2 96.1 88.2 March 71.9 163.9 91.8 144.5 118.6 78.4 April 64.9 201.1 104.7 143.9 131.9 112.2 May 100.5 230.1 104.9 101.0 104.5 112.0 June 100.9 231.8 120.4 120.6 126.2 133.2 July 139.9 240.6 123.1 113.9 75.4 75.9 August 143.3 290.8 127.4 108.0 74.5 67.6 September 139.0 235.7 140.1 121.7 66.1 71.7 October 141.3 181.1 110.3 108.7 105.9 69.1 November 194.0 163.8 120.9 123.8 83.0 81.6 December 163.1 106.2 89.3 122.9 65.5 84.6 AVERAGE 113.1 202.0 111.2 121.5 95.8 86.6
SING: MARGINAL ENERGY COST AT CRUCERO 220 kV
0 50 100 150 200 250 300 US$/MWh
