AES EMEA Generation Business Review AES CORPORATION AES CORPORATION. John McLaren Vice President. City or location Month XX, 20XX

Transcription

1 AES CORPORATION AES CORPORATION AES EMEA Generation Business Review John McLaren Vice President City or location Month XX, 20XX March 22, 2006

2 AES EMEA Generation Strategic Overview Contains Forward Looking Statements AES Goals Financial Goals Revenue Growth Gross Margin Growth Earnings Per Share Growth ROIC Improvement* Cash Flow Growth Subsidiary Distributions* Restructuring Opportunities Growth Goals Platform Expansion Greenfield Investment Privatization/M&A * Non-GAAP financial measure. See Appendix. AES 2008 Target $3.5 Billion 13-19% per Year 11% AES EMEA Generation Role Above Average Above Average Below Average Above Average Average New Project Contributions Project Refinancing Significant Opportunities Significant Opportunities Near-term Potential 1

3 Europe Generation Market Characteristics EU Generally Contains Forward Looking Statements Hungary UK Spain EU dominated by large regionally focused integrated players Generators typically sell into power pools or bilateral contracts EU legislation targets liberalization, competition, renewables and environmental improvements EU Emissions Trading commenced in 2005 as a precursor to Kyoto Emissions reduction targets largely born by power generators 8GW of installed capacity Dual market system 80% of power comes from PPA contracted generators Power pool system has begun for uncontracted electricity Privatization of the off-taker MVM underway Reserve margin around 15% Net 12% electricity imported 570MW of coal-fired electricity was retired from Forecasted 3.7% per year GDP growth through 2010 Joined EU in May GW of installed capacity Fully liberalized market with low barriers to entry Low reserve margin around 15% Northern Ireland primarily based on PPA contracted generation Northern Ireland market merging with the Rep of Ireland GDP growth forecasted at 2.4% per year through 2010 UK targets 10% of generation to come from renewables by GW of installed capacity Fully liberalized market dominated by indigenous players Based on power pool system; bilateral contracts allowed Reserve margin over 30% Target 12% of generation to come from renewables by 2010 GDP growth forecasted at 3% per year through 2010 Data from AES EMEA Generation. 2

4 Europe Generation Market Characteristics Netherlands Czech Rep Contains Forward Looking Statements Bulgaria 22GW of installed capacity Fully liberalized sector Next exporter of electricity (16.1%) Dominated by a few integrated players Generation primarily gas-fired Electricity demand slow in recent years Reserve margin above 17% 1.9% per year GDP growth expected through GW of installed capacity Dominated by government controlled utility CEZ 68% of generation Large power exporter Electricity consumers to choose their supplier by % of power is coal fired Reserve margin over 35% 4% per year GDP growth expected through 2010 Joined EU in May GW of installed capacity Focused on rehabilitating generation Of 9,762 MW, 77% was available to meet peak demand in 2004 Privatization plan underway Liberalization targeted for 2007 PPAs will be grandfathered Scheduled to join the EU in 2007 EU Directives incorporated into 2003 Energy Law 4% per year GDP growth expected through 2010 Data from AES EMEA Generation. 3

5 Dependable Reserve Margin in 2004 Peak Demand (GW) Installed Capacity (GW) % Dependable Reserve Margin UK 15% Ireland 15% Netherlands 17% Czech Republic 41% Hungary 13% Spain 33% 38.2 Source: Cambridge Energy Research Associates.

6 Reserve Margin EU Weighted Average 35% Contains Forward Looking Statements % 25% 20% Percent 15% Planning Reserve Margin 15% Gigawatt 10% 5% Dependable Capacity Total Peak Weighted Average Reserve Margin 200 0% Source: Cambridge Energy Research Associates, UCTE. Note: non-coincidental peak. Reserve Margin is (Dependable Capacity minus Peak Demand) divided by Peak Demand. Chart includes plants under construction from 2005 on but for wind and planned retirements. 0 5

7 Capacity Additions EU Nuclear Coal Oil Other Contains Forward Looking Statements History Pipeline Hydro Natural Gas Wind Needed Capacity Gigawatt Equilibrium Need Source: Cambridge Energy Research Associates, Platts. 6

8 Middle East and Africa Generation Market Characteristics Nigeria Oman Contains Forward Looking Statements Qatar Pakistan 6GW of installed capacity 3GW of installed capacity 3GW of installed capacity 19GW of installed capacity Maximum Load is 3GW Demand exceeds firm supply by 69% Ebute provides 8% of generation Government owns the transmission, distribution and 81% of generation Privatization of generation and distribution planned for 2006 GDP growth expected to be 5% per year through 2010 AES provides 16% of the nation s electricity capacity and 20% of its water Generation based on longterm PPAs Government manages the power sector Privatization plans underway Annual growth in peak demand around 5% GDP growth expected to be 3% per year through 2010 State owns transmission and distribution and contracts with generators through long-term PPAs AES first IPP in the country 100% gas-fired generation Annual growth in peak demand 6% GDP growth to be 8% per year through 2015 Demand exceeds firm supply by 3% Generation, transmission, and distribution is undertaken by two vertically integrated utilities: WAPDA (state owned) and KESC (newly privatized) The State owns 70% of Pakistan s installed capacity Privatization of generation and distribution is planned IPPs based on long-term PPAs Data from AES EMEA Generation. 7

9 AES EMEA Generation Financial Overview (US$ Million) Nine Months Ending September 30, 2005 Revenue $771 $957 $746 Gross Margin $306 $372 $302 Income Before Tax & Minority Interest (1) $162 $226 $194 Distributions to AES Corporation $202 $129 $121 Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated. (1) Excludes any impact of the partial sale of Barka and Pakistan. 8

10 AES Europe Generation Biomass Coal Gas Oil Borsod, Hungary 96MW 100% AES Owned Tiszapalkonya, Hungary 116MW 100% AES Owned Bohemia, Czech Republic 50MW 100% AES Owned Kilroot, NI UK 520MW 97% AES Owned Cartagena (UC), Spain 1,200MW 71% AES Owned Elsta, Netherlands 630MW 50% AES Owned Kilroot, NI UK 520MW 97% AES Owned Tisza II, Hungary 900MW 100% AES Owned Coal Natural Gas Oil Biomass Tiszapalkonya, Hungary 116MW 100% AES Owned Tisza II, Hungary 900MW 100% AES Owned Maritza (UC), Bulgaria 670MW 100% AES Owned Indian Queens, UK 140MW 100% AES Owned UC under construction 9

11 AES Africa and Middle East Generation Gas Barka, Oman 456MW 35% AES Owned Ras Laffan, Qatar 756MW 55% AES Owned Ebute, Nigeria 305MW 95% AES Owned Oil Lal Pir, Pakistan 362MW 55% AES Owned Pak Gen, Pakistan 365MW 55% AES Owned Natural Gas Oil 10

12 AES EMEA Generation Portfolio Diverse Geography and Impacts of New Capacity Balanced Revenues (% of Total) Impact on Revenue Growth from Capacity Additions (MW) Africa 6% 1,200 1, Middle East 46% Europe 48% Existing Additions Positive future contribution from Cartagena in 2006/07 and Maritza in 2009/10 Data as of September 30,

13 AES EMEA Generation Portfolio Largely Contracted with Fuel Pass Through Portfolio Primarily Contract Generation Fuel Risk as % of Capacity 100% 80% 12% 60% 40% 20% 0% % Contract Generation Competitive Supply Fuel Pass Through Fuel Margin Risk Data as of September 30,

14 EMEA Generation KPIs Key Performance Indicator (KPI) Safety Excellence Lost time accidents (LTAs) Days since last LTA Near-miss reporting Environmental Excellence SO x emissions NO x emissions Opacity CO 2 emissions Operational Excellence Equivalent availability factor Equivalent forced outage rate (EFOR) Non-fuel O&M costs 13

15 Implementing KPIs in EMEA Generation Safety Implementation of a Safety Management System Regular Safety Audits Online Safety System Safety Task Force Safety Walkdowns Environment Regular Environmental Audits Standardized auditing protocols based on ISO Online Environmental System Environmental Task Force Operational Excellence Best practice implementation initiative Heat Rate Task Force Global sourcing Strategic Asset Risk Reviews Peer to peer reviews Safety, protecting the environment and operational excellence are the prime focus of the KPIs within the EMEA group. 14

16 EMEA Generation Safety Performance Lost Time Accidents Safety Statistics 6 Getting Better 3 0 All plants have more than a year without an AES LTA Three plants have more than seven years without an AES LTA 1,461 near misses reported in EMEA Generation s top priority is safety in the workplace as demonstrated by the significant safety performance improvements over the last three years. 15

17 EMEA Generation Environmental Performance SO x Emissions Dust Emissions 70% Improvement 85% Improvement Getting Better Getting Better Favorable trends through a strategy of pursuing alternate fuels and plant improvements. 16

18 EMEA Generation Operational Excellence EAF EFOR 2.3% Improvement 2.8% Improvement 90.0% 86.0% 92.3% 6.0% 5.2% Getting Better 3.2% The drive to operational excellence is key to the success of the plants. 17

19 Ebute Performance Improvement EFOR 22.4% T &D Improvement Reliability 39% Improvement in SAIFI 32.0% Getting Better % % Performance Initiatives Hot Gas Path management Staff training and performance LTSA management Plant Challenges Nine barge mounted Frame 6 CTs Unknown maintenance history Poor availability of technical support Poor local infrastructure Ebute has significantly improved its availability while working in a difficult environment but real benefits are still to be gained. 18

20 Platform Expansion Opportunities Lal Pir Pakistan Contains Forward Looking Statements Construction of a 400MW CCGT New PPA being negotiated with WAPDA Tiszapalkonya Hungary 400MW CCGT A tolling agreement to be negotiated Kilroot N. Ireland 400MW CCGT Negotiate a tolling agreement Cloghan Point N. Ireland Creation of a strategic oil reserve Negotiations in progress with a European Govt. Ebute Nigeria Installation of an additional MW Negotiations in progress with the PHCN 19

21 Platform Extension - Kilroot Biomass Trials Contains Forward Looking Statements Biomass is now being co-fired at the Kilroot power station in Northern Ireland In burning biomass the business is able to generate a revenue stream through its generation of renewables credits In addition, the energy produced does not require the allocation of CO 2 allowances With a minimal capital investment from AES, the station can now burn up to 6% biomass by volume This initiative is expected to contribute positively from 2006 The business is exploring the possibility of increasing its biomass % consumption by burning palm oil Fast Growing Coppice For Biomass Production 20

22 Greenfield Example: Bulgaria Contains Forward Looking Statements 670MW lignite-fired power plant $1.4 billion project cost 15 year contract with NEK (national utility) 15 year lignite supply agreement minimizes energy supply risks Letter of government support 790 million non-recourse financing closed in December with commercial and multilateral banks Completing site acquisition and permitting Target early 2006 start of construction $300 million+ new revenues expected by 2010 Proposed AES Maritza Plant, Bulgaria (artist rendition) 21

23 Greenfield Example: Cartagena Contains Forward Looking Statements 1,200MW gas-fired CCGT power plant $860 million project cost 21 year contract with Gaz de France International (GDFi) for fuel and the purchase of power Fuel and electricity off-take contracts insulate AES from market risks GDFi to provide fuel through LNG terminal 1.5 km away Non-recourse commercial financing closed and construction began in November 2003 Construction contractor delays have pushed back start-up date Commissioning planned for Q $130 million+ revenues expected annually beginning late 2006 AES Cartagena Power Plant Cartagena, Spain 22

24 Appendix - Assumptions Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: 1) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; 2 ) businesses continue to operate in a manner consistent with or better than prior operating performance, including achievement of planned productivity improvements including benefits of global sourcing, and in accordance with the provisions of their relevant contracts or concessions; 3) new business opportunities are available to AES in sufficient quantity so that AES can capture its historical market share; 4) no major disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; 5) negative factors do not combine to create highly negative lowprobability business situations; 6) business-specific risks as described in the Company s SEC filings do not occur. In addition, benefits from global sourcing include avoided costs, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. These benefits will not be fully reflected in the Company s consolidated financial results. 0

25 Appendix - Definitions Free Cash Flow - Net cash from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures. Lost Time Accident (LTA) - An incident in which the injured person is kept away from work beyond the day of the incident. Near Miss - An incident that occurred but did not result in any injury. In AES, we have expanded this to include unsafe conditions that have been observed. O&M - Operation and maintenance. Reliability Centered Maintenance (RCM) - An integrated maintenance methodology that optimizes among reactive, interval-based, condition-based, and proactive maintenance practices to take advantage of their respective strengths in order to maximize facility and equipment reliability while minimizing life-cycle costs. Return on invested capital (ROIC) - Defined as net operating profit after tax (NOPAT) divided by average capital. NOPAT is defined as income before tax and minority expense plus interest expense less income taxes less tax benefit on interest expense at effective tax rate. Average capital is defined as the average of beginning and ending total debt plus minority interest plus stockholders equity less debt service reserves and other restricted deposits. System Average Interruption Duration Index (SAIDI) - A measure of the cumulative duration of electric service forced and sustained interruptions experienced by customers each year, excluding force majeure events. SAIDI is calculated as the total number of customer minutes of sustained interruption divided by the number of customers served. System Average Interruption Frequency Index (SAIFI) - A measure of the number of outages per customer per year. SAIFI is calculated by dividing the total number of customer-sustained interruptions by the number of customers served. 1

26 Appendix Reconciliation of Subsidiary Distributions (US$ Millions) Year Ended December 31, Mar. 31, 2005 Quarter Ended Jun. 30, 2005 Sep. 30, 2005 Nine Months Ended Sep. 30, 2005 Subsidiary distributions to parent $1,008 $991 $190 $170 $274 $634 Net distributions to/(from) QHCs Total subsidiary distributions 1,054 1, Returns of capital distributions to parent Net returns of capital distributions to/(from) QHCs Total returns of capital distributions Combined distributions & returns of capital received 1,296 1, Less: combined net distributions & returns of capital to/(from) QHCs (46) (24) (5) (13) (18) Total subsidiary distributions & returns of capital to parent $1,250 $1,107 $192 $207 $274 $673 Note: On the regional financial slides included subsequently in this presentation series, subsidiary distributions to parent, which exclude returns of capital and project financing proceeds, have been referred to as Distributions to AES Corporation. 2