AES & Natural Gas: The Dominican Republic case and next steps January, 2015, San Juan - Puerto Rico

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1 AES & Natural Gas: The Dominican Republic case and next steps January, 2015, San Juan - Puerto Rico Freddy Obando, AES Dominicana Commercial Director

2 Safe Harbor Disclosure This presentation may contain forward-looking statements speculative in nature based on the information, operational plans and forecasts currently available about future trends and facts. As such, they are subject to risks and uncertainties. A wide variety of factors may cause future real facts to differ significantly from the issues presented or anticipated in this presentation, including, among others, changes in general economic, political, government and business conditions. In the event of materializing any of these risks or uncertainties, or if underlying assumptions prove to be mistaken, future real facts may vary significantly. AES Corp. is not bound to update or correct the information contained in this report. 2

3 Agenda AES in Latin America AES in the Dominican Republic Natural Gas in the Dominican Republic Bringing Natural Gas to the Caribbean 3

4 Latin America represents over 50% of AES business 20 years of presence in the region Over 10,500 people 15,168 MW installed capacity 6 distribution companies serving 8.8m clients Oil/Diesel/ Pet Coke 7% Coal 24% Renewa bles 40% Gas 29% 4

5 AES future is interconnected with the future of the markets we serve Our Mission Improving lives by providing safe, reliable and sustainable energy solutions in every market we serve. Our Business definition Leveraging electricity platforms and knowledge to provide energy and infrastructure solutions in our markets of choice. Our commitment to sustainability Delivering results that exceed our stakeholders expectations today by providing innovative resource management and infrastructure solutions to ensure we will meet stakeholder needs in the future. 5

6 Agenda AES Global presence AES in the Dominican Republic Natural Gas in the Dominican Republic Bringing Natural Gas to the Caribbean 6

7 AES has invested in the Dominican Republic since 1997 Over US$1.0 billion invested to support and develop the local energy sector 850MW of base load installed capacity supplies 37% of the country s energy Currently building a brownfield project to add 114 MW with a US$260M additional investment. Development and construction of LNG terminal and AES Andres combined cycle AES Los Mina Natural Gas Conversion and Pipeline development ITABO acquisition and turnaround - international port construction Retail sales of natural gas and third party access to LNG/CNG CAPEX invested in Infrastructure maintenance to date AES en el mundo 7

8 Agenda AES Global presence AES in the Dominican Republic Natural Gas in the Dominican Republic Bringing Natural Gas to the Caribbean 8

9 AES seeks to optimize the use of the AES Andres LNG terminal in the Dominican Republic AES Andres LNG Terminal Only LNG terminal in the Dominican Republic, including: an on-load-pier and jetty one 160,000 m3 LNG tank 3 regas trains x 125 mmscf/d a 34-km gas pipeline A clear and simple strategy based on three fundamental principles: Optimization of the use of the current natural gas infrastructure, Maximization of value in the natural gas supply chain and Guaranteeing sustainable growth of the LNG market by promoting modern regulation 9

10 Since 2003, LNG has saved the Dominican Republic ~$600 million per year The introduction of natural gas resulted in a more competitive wholesale electricity market and a substantially more diversified energy matrix for the power sector. Power Sector Fuel Market Share Natural Gas Demand Evolution 10

11 The AES Andres A Gas LNG Market Terminal created enabled from scratch! AES to create a new market for natural gas Importer Distributors / Wholesale Buyers Retail Market/ End Buyers Industrial / Commercial (65 clients) Third Party Power Plants (4 clients) Transport (NGV) (more than 15,000 vehicles and 27 service stations) 11

12 Agenda AES Global presence AES in the Dominican Republic Natural Gas in the Dominican Republic Bringing Natural Gas to the Caribbean 12

13 Total Potential Demand In the Caribbean estimated in 140 TBTU/yr Energy Mix: Wind Solar Coal Hydro Gas 5% 5% Potential LNG Demand: ~140 Tbtu (excluding DR) % Oil Caribbean Energy Matrix, highly dependent in Oil & Derivate. Direct impact on Oil Price Volatility Potential market identified to convert to an alternative fuel (Natural Gas). 0 Jamaica Martinique Bahamas Guadeloupe Barbados Cayman Haiti Guyana Other 13

14 Re-export from AES Andres can be achieved through multiple options AES Dominicana Mid & Small Scale Vessels LNG Terminal Reloading Opps On board regas by ISO Containers LNG Barges 14

15 The AES Andres infrastructure could serve incremental demand in the DR and the Caribbean Maximizing the use of the current assets provides the most efficient, timely and economic way to increase access to LNG 15

16 AES DR LNG Hub Advantages DR s closer distance to customers allows for smaller inventory and ship size, and offsets DR hub costs. Shipping and Storage Assumptions Andres - Hub USG Direct Roundtrip Voyage (Days) Emergency Inventory (Days) Total Inventory Req (Days) Total Inventory Req (CM) 11,000 17,000 Vessel Size Req (CM) 6,000 11,000 Timing advantage to DR as currently none of the existing or under construction LNG terminals allow small vessels. First Deliveries expected in 1H 2016 By aggregating demand, AES would provide a more efficient and less risky balancing and inventory services, including the ability to divert volumes. Tailor made solutions to be implemented on a costumer by costumer basis. Existing infrastructure in place will allow for a competitive cost structure. 16

17 Several challenges will need to be addressed in order to bring gas to the Caribbean Challenges ahead Market demand agregation: multiple marketing efforts in different markets. Logistics: optimization of existing infrastructure, vessels, port facilities. Regulatory risk: ease of access and taxes structures at the different countries could compromise the strategy Safety risks: largely mitigated by selection of large multinational LNG player Natural gas competitiveness risk: as replacement of diesel, a low probability of occurrence is expected Offtaker credit risk: credit quality of offtakers and host countries impacts pricing and required returns 17

18 Public-Private partnership is critical to realizing the potential of natural gas in the Caribbean Multilaterals can create a bridge between the public and private sectors to accelerate investments LNG Supplier Provides access to gas portfolio Manage logistics and operations AES Provides access to existing infrastructure Invests to expand infrastructure Enables small market access to LNG Receiving Countries Facilitates permitting and consents Encourages gas conversions Customers Provides demand assurance Converts existing infrastructure to natural gas In Example: IDB Could provide guarantees and financing Support government regulation and investment Support regional coordination 18

19 Thanks for your attention Freddy Obando Prestol DR Commercial Director & MCAC Regional Fuel Director Av. Winston Churchill No Ensanche Piantini Torre Citi Group en Plaza Acrópolis, Piso 23 CP Santo Domingo República Dominicana T: (809) ; Ext