2 aes gener in one look 3 · profile associates 2016 chile 1.338 argentina 51 colombia 109...

Annual Report 2016 AES Gener 32 AES Gener in one look

Our strategy06

AES Gener in One Look01Letter of the chairman02

Market context05

About this report03

Our company04

Corporate governance07Our management in 201608

Environmental care09Financial results of AES Gener S.A.10

Appendices11

05 83

103

169

177

191

21

27

31

61

75

TABLE OF CONTENTS


01 l AES Gener in One Look

5.795

1.500

US $3.463

US $7.849

US $3.824

US $778

4.132

MW in construction

(Alto Maipo)

Total

Capitalization of the market

EBITDA 2016

Consolidated debt 2016

Commercial strategy in the long term

Million

Millions

Million

Coal: 3,011 MWHydro: 1,291 MWGas/diesel: 1,459 MWSolar: 21 MWBiomass: 13 MW

Million

Chile (16º)Colombia (16º)Argentina (15º)

By Moody's, S&P Global and Fitch Ratings

Efficient generation hired with a remaining average service life of 11 years.

for generation

for installed capacity

for installed capacity

To March 20, 2017

Acquired by AES Corporation in 2000, currently controlling 66.7% of the company

Founded in 1981

Credit risk

Technology

Share in the marketMember of Dow Jones SustainabilityIndex para Chile

Listed in The Santiago Stock Exchange

Baa3 | BBB- | BBB-

31%6%3%

277 MW coal12 MW energy storage

1,020 MW hydroelectric

643 MW natural gas/diesel



760 MW coal

884 MW coal

379 MW natural gas/diesel100 MW diesel

271 MW (Alfalfal, Queltehues, Maitenes, Volcán)

531 MW hydroelectric unit under construction

13 MW biomass

337 MW diesel (Los Vientos, Santa Lidia and Laguna Verde)

1.Nueva Tocopilla

12.Chivor y Tunjita

13.TermoAndes

410 km of international transmission line (SING-SADI)

14.InterAndes

2.Cochrane

3.Angamos

5.Guacolda

6.Ventanas

7.Nueva Renca

8.Hydroelectric plants

10.Laja

11.Backup plants

Chile

21 MW solar4.Andes Solar

Argentina

Annual Report 2016 AES Gener 7

Colombia

1.020

643

531

1

3

12

13

414

6

5

7

10

11

2

89

9.Alto Maipo

MW of installed capacity Manpower of

PeopleApp

AES GENER IN ONE LOOKImproving lives in Chile, Colombia and Argentina

MAIN ASSETS OF AES GENER GROUP

Total assets 2016

Award GREAT PLACE TO WORK


Main financial results Unidad December 2015 December 2016

Operating Revenues US$ million 2.165 2.286

EBITDA US$ million 691 778

Gross Earnings US$ million 583 625

Net Earnings US$ million 265 261

Liabilities Unidad December 2015 December 2016

Current Liabilities US$ million 4.954 5.290

Total Debt US$ million 3.375 3.824

Net Debt US$ million 3.108 3.354

Indebtedness Rate Unidad December 2015 December 2016

Current Liabilities/Equity (times) 2,12 2,07

Gross Debt/EBITDA (times) 5,5 4,9

Net Debt/EBITDA (times) 4,5 4,3

Financial expenses coverage (times) 3,6 3,3

Balance Unidad December 2015 December 2016

Total Assets US$ million 7.286 7.849

Property, Plant & Equipment, Net US$ million 5.796 6.150

Equity US$ million 2.332 2.559

Main Ratio Unidad December 2015 December 2016

ROA (%) 3,64 3,33

ROE (%) 11,9 10,8

Operating Assets' Performance (%) 10,06 10,17

MAIN FIGURESMain Financial Figures

Annual Report 2016 AES Gener 1110 AES Gener in One Look

COMPANY PROFILE

Associates 2016

Chile 1.338

Argentina 51

Colombia 109

Total 1498

Stock Index Unit Amount

Number of current shares (Quantity) 8.400.318.891

Closing Price 31 Dec. 2016 (Pesos) $239,21

Dividend Return (%) 3,18

Profit / share (Dollars) 0,031

Dividends paid* (Pesos) $63.842.499.174

Gender diversity

Women Men Total

Chile 133 1205 1338

Argentina 3 48 51

Colombia 22 87 109

Total 158 1340 1498

Non-financial data

39%

22%

36%

3%

44%

31%

22%

3%

AES Gener S.A. (AES Gener, the company or organiza-tion) is a publicly traded corporation whose mission is to improve the lives of people by providing safe, reliable and sustainable energy solutions in every market we serve, by meeting commitments made with clients, shareholders, workers, communities, vendors and the like and groups with which we are related to. The company operates a portfolio of generation as-sets in Chile, Colombia and Argentina, with a total ca-pacity of 5,795 MW. It is the second largest generator company in Chile in terms of installed capacity with

4,132 MW in operation by the end of 2016, and the first as for gross electricity generation is concerned with 22,861 GWh distributed in the SIC and the SING. The combination of generation alternatives renders AES Gener competitive advantages in the Chilean electrical market, since it does not exclusively rely on a certain resource for the production of electricity. AES Gener provides electric energy to four indepen-dent markets: The SIC and SING in Chile, the SIN in Colombia and the SADI in Argentina.

EBITDA by Market

YEAR 2015US$ 691 MILLION

YEAR 2016US$ 778 MILLION

SIN: National Interconnected Grid (Colombia)

SADI: National Interconnected Grid (Argentina)

SIC: Central Inteconnected Grid (Chile)

SING: Northern Interconnected Grid (Chile)

*The dividends paid considers both payments made. First, on May 26th, 2016 ($4.21 per share) and the second one on August 29th, 2016 ($3.39 per share); both against the profits from 2015.


OUR HISTORY

Incorporation of the Chilean Electric Tram-way and Light Company, whose assets were merged in 1921 with those of Compañía Na-cional de Fuerza Eléctrica, created in 1919, giving rise to Com-pañía Chilena de Electricidad (Chilectra).

Change of business name to Chilgener S.A., after completing its privatization.

Restructuring of Chilectra, resulting in the transfer of the transmission and gener-ation assets to Chilectra Generación S.A.

The AES Corpo-ration acquires the 95.67% of company shares (including ADRs)

The second stage of its expansion begins, which considers constructing 5 power generation projects for 1,256 MW and an investment near US$4 billion.

Start of the construction of two projects: Cochrane thermoelectric plant (532 MW) in the SING and Alto Maipo hydro-electric plant (531 MW). The beginning of the commercial operation in Ventanas IV in the SIC consolidates AES Gener as a key player in the market, after meeting successfully the growth in the power demand in Chile of 1,256 MW and with an investment near US$4 billion.

Consolidation of the second expansion stage in 1,256 MW, which includes a project port-folio of electric energy generation by using different technologies and more than 8,000 workers, and desalina-tion projects as part of a new line of business begin.

Start of the commercial operation of Unit 5 of Guacolda, desalination plant in Angamos and completion of the Andes solar project.

AES Gener shows the highest EBITDA of its history, reaching US$ 778 million, fostered by the completion of the construction and entry into commercial operation of Cochrane (532 MW), Andes Solar (21 MW) and Tunjita (20MW); and due to a higher availability of the portfolio of generation assets. At the end of the year, the company reaches the consolida-tion again as main pro-ducer of electric energy in Chile, providing 31% of the total generation of the country.

Nationalization of Chilectra, which was then transferred to Corporación de Fomento de la Producción (CORFO).

The busi-ness name is replaced by Gener S.A.

The compa-ny changes its business name to AES Gener S.A. and starts an asset sale process for focus-ing on the electric energy generation business, especially in Chile.

The first stage of its expansion begins, which considers construct-ing and starting the commercial operation of 1,677 MW, with an investment near US$3 billion.

1889 1970 1981 1989 1998 2000 2001 2007 2012 2013

For further information on the history of AES Gener, please visit our website.

2015 2016

AES Gener shows the highest EBITDA of its history, reaching US$ 778 million

14 AES Gener in one look Annual Report 2016 AES Gener 15

Company data

Business name AES Gener S.A.

Taxpayer number 94.272.009-9

Type of company Publicly Traded Company

Registration in the securities record Nº 0176

Address Rosario Norte 532 Piso 19, Las Condes, Santiago, Chile

Telephone (56) 226868900

Web site www.aesgener.cl

Capital issued US$ 2,052 millones

Number of shares 8.400.318.891

Activity Generation and trading of electrical energy

Markets Chile, Colombia y Argentina

Mnemonic in Santiago Stock Exchange AESGENER

ABOUT THE AES CORPORATION

The AES Corporation is currently one of the largest power generation companies in the world. Its great installed capacity of 36,693 MW and manpower of more than 19,000 people, allows it to generate and distribute electricity in 17 countries in 4 continents. The AES Corporation exercises corporate control over AES Gener through Inversiones Cachagua SpA, in which it holds 99.9% Inversiones Cachagua per-formed a final major share modification, selling in the exchange market 4% in November 2015, by reducing its equity up to 66.7% which has not been modified until December 31, 2016.

The AES Corporation is focused on improving the life of the people where it operates through the de-livery of safe reliable and sustainable energy solu-tions. The vision of The AES Corporation is to be a leading company in sustainable power at world-wide level, delivering reliable and affordable energy.

CONSTITUTIONAL DOCUMENTS.

AES Gener S.A ("Gener") is a publicly traded corpora-tion whose shares are traded in the stock exchange: Santiago Stock Exchange, Valparaíso Stock Exchange and the Electronic Stock Exchange of Chile.

It was incorporated through public deed dated June 19th, 1981, granted by the Public Notary of Santiago, Mr. Patricio Zaldívar Mackenna. Its business name was by then Compañía Chilena de Generación Eléc-trica S.A. (Chilectra Generación S.A.). Its bylaws were approved by the Superintendence of Securities and Insurance through Resolution Nº 410-S dated July 17, 1981, published in the Official Gazette Nº 31.023 of July 23 of the same year, The company has been reg-istered in the Registry of Commerce of the Real Estate Register of Santiago, on page 13,107 Nº 7,274 of 1981.

You may find more about AES Corp on the corporate website of the company 1 The entire history of AES Corporation may be found on www.aes.com in the "Our history" tab.

COMPANIES COMPRISING AES GENER*

* As of December 31st, 2016

NOTE: In this chart companies are called according to their business name (i.e. AES Gener S.A and Sociedad Eléctrica Santiago SpA). Hereinafter, except for financial statements, reference will be made in a short form (AES Gener and Eléctrica Santiago). Additionally, Grupo AES Gener will bereferred as AES Gener, its subsidiaries and affiliates.

Affiliates Subsidiaries

Guacolda Energía S.A.

Gasoducto GasAndes S.A.

Gasoducto GasAndes

Argentina S.A.

Empresa Eléctrica

Campinche S.A.

Empresa Eléctrica

Cochrane SpA

Inversiones Termoenergía de Chile Ltda

Genergía S.A.

Alto Maipo Spa

AES Chivor y Cia SCA E. S. P.

Empresa Eléctrica

Ventanas S.A.

Energen S.A.

TermoAndes S.A. Gener Blue Water Ltda

Genergia Power Ltda

Empresa Eléctrica

Angamos S.A.

Gener Argentina S.A.

InterAndes S.A.Inversiones

Nuevas Ventanas Spa

Sociedad Eléctrica

Santiago SpA

0,01%

50,01%

8,82% 47,50%13,01%

91,18%

94%99,9%

0,01%

86,99%

92,04%

7,96%6%

13%13%

5,18%

94,82%

0,01%

99,99%99,99% 60% 99,9% 99,9%

0,01%

99,99%

100%100%60%

99,9%

50,63%

0,63%

0,01%

AES Chivor S.A.


Nogener SpA.


Name Shares Equity Share

Inversiones Cachagua Spa 5.603.012.701 66,70%

Banco Itaú por Cuenta de Inversionistas 247.508.492 2,95%

Banco de Chile por Cuenta de Terceros Ca 242.268.966 2,88%

Fondo de Pensiones Provida C 199.153.979 2,37%

Fondo de Pensiones Habitat C 188.404.420 2,24%

Fondo de Pensiones Habitat A 139.669.751 1,66%

Fondo de Pensiones Cuprum A 115.597.905 1,38%

Fondo de Pensiones Habitat B 112.262.901 1,34%

Fondo de Pensiones Cuprum C 109.104.119 1,30%

Btg Pactual Chile S.A. Corredores de Bolsa 108.388.216 1,29%

Fondo de Pensiones Capital C 106.753.443 1,27%

Fondo de Pensiones Provida A 106.288.847 1,27%

Total of large shareholders 7.278.413.740 86,64%

Other Shareholders 1.121.905.151 13,36%

Total Shareholders 8.400.318.891 100%

66,70%

19,94%

13,36%

AES Corp

Property STRUCTURE

66,70% AES Corp

19,94%Pension Funds

13,36% Other Shareholders

PROPERTY AND CONTROL OF THE COMPANY

AES Gener is a publicly traded corporation whose shares are traded in the stock exchange: Santiago Stock Exchange, Valparaíso Stock Exchange and the Electronic Stock Exchange of Chile.

As of December 31st, 2016, the equity of the company reached US$ 2,559 million, divided by 8,400,318,891

shares, with no face value, all of the same and single series, distributed among 1,459 shareholders.

The American company The AES Corporation controls indirectly AES Gener through its equi-ty of approximately 99.9% in Inversiones Cacha-gua SpA. As of the end of the fiscal year, Inversiones Cachagua SpA. recorded a controlling interest of 66.70% of the company.

Pension Funds Minority Shareholders

Annual Report 2016 AES Gener 2120 Letter of the chairman

02 l Letter of the Chairman

Annual Report 2016 AES Gener 2322 Letter of the Chairman

LUISFELIPE CERÓN

Board Chairman

Dear shareholders,

I hereby address you to inform you about the manage-ment of our company during year 2016. It was a year of major challenges and significant achievements.

In terms of financial issues, in 2016 we recorded the highest EBITDA in the history of the company, reach-ing US$778 million, while our net incomes corre-sponded to US$261 million. These goods results re-flect a good performance and availability of our power plants in markets where we operate and the addition of new generation capacity during the year.

The agreement that AES Gener executed with ENAP for the supply of natural gas to Nueva Renca power plant and the lease we made of this plant to ENDESA during the third/fourth quarter of 2016 contributed to these results.

For the third consecutive year we have been the high-est generator in Chile, providing 31% of the power produced. This result is consistent with our mission of delivering reliable, sustainable and affordable energy solutions in markets where we operate.

In February of 2016 we started exporting electric en-ergy from Chile to Argentina through the only interna-tional transmission line existing in the country, owned by AES Gener. This not only strengthens the regional energetic integration, but also fosters the quality and safety of the service in both countries.

The units 1 and 2 of the power plant Cochrane in Mejillones started the commercial operation in July and October of 2016, respectively. This pow-er plant, located in the Region of Antofagasta, provides 532 MW to the SING.

On the other side, the first stage of 21 MW of our project also started its commercial operation, namely, Andes Solar in the SING and the hydroelectric power plant Tunjita of 20 MW, in Colombia.

Alto Maipo, a 531 MW project, entails the construction of two run-of-the-river hydroelectric plants. Progress of works continues despite difficulties during their construction, which are mainly related to the geology, which has increased costs and the construction term.

This rise of costs was defined among the partners, fi-nancing banks and two prominent international con-sulting agencies, which determined that the overrun could reach up to 22%.

In order to address this situation, the Company de-fined a financing and corporate restructuring process. The overrun defined will be financed by all the parties involved: minority and non-minority shareholders, as well as the financing banks of the project.

We are proud of achieving the 16 place in the ranking Great Place to Work in Chile, the same place in Colombia and number 15 in Argentina.

In terms of safety, the first and core value of the com-pany, we were awarded by the Mutual de Seguridad for reaching 6 million of hours without lost time in-cidents in our plant located in Ventanas, and 7 million without LTIs in the Cochrane project.

Again, the reporting year depicted major recogni-tions for the company. AES Gener was awarded with the Carlos Vial Espantoso award for great work re-lationships in Chile, and also we were awarded with the Buen Ciudadano Empresarial (Good Entrepre-neurial Citizen) of AmCham Chile award for our for-ward-thinking program "Tu Suelo es mi Suelo" (Your soil, my soil); we were recognized by the Stock Ex-change and took part for second consecutive year in the Sustainability Index of the Dow Jones Chile.

Besides, for third consecutive year, we received the Most Innovate Company of the Sector award, in the ranking of the ESE Business School of the University of Los Andes and the Nueva Renca plant became the first company in Chile in obtaining the standard ISO 55,001. Our subsidiary AES Chivor did the right thing to do in Colombia, and units II; III & V of Guacolda, to-gether with unit II of Cochrane and Los Vientos were the first power plants in Chile in implementing an au-tomatic dispatch system.

For the third consecutive year we have been the highest generator in Chile,

providing 31% of the power produced. This result is consistent with our mission

of delivering reliable, sustainable and affordable energy solutions in markets

where we operate.

Together with that, AES Gener and Minera Los Pelam-bres (MLP) signed an agreement stating that we will take over the equity interest of MLP in the project and the entry of Strabag as a new non-controlling partner, with almost 7% of the Alto Maipo property.

Annual Report 2016 AES Gener 2524 Letter of the chairman

LUIS FELIPE CERÓN Chairman of the Board of Directors

" Dear shareholders, results and achievements obtained during 2016 are the outcome of operating, environmental and social excellence with which we operate and comprise each of our

power plants"

We are very pleased for the attainment of the 16th place in the ranking of a Great Place to Work Chile and also in Colombia.

As for social responsibility is concerned, our com-mitment is to participate in the local development of communes where we hold operations through our main programs, which are founded on three fun-damental: Education, employability and community infrastructure. Likewise, as part of our tradition, we have been committed to the country and the commu-nities where we hold operations and projects every time as necessary.

Last week, we supported reconstruction campaigns due to massive fires that affected different sectors of the country, and specifically we have focused on San José de Maipo, where we took a helicopter initially in-tended for firefighting, but later used to rescue people who were isolated due to the mudslides originated in the high mountain, caused by summer rains at high el-evation. Hence, more than 40 people were evacuated by air or land, after the teams from AES Gener and Alto Maipo contractors enabled pathway for reaching the areas where these people were isolated.

In Colombia, apart from the social responsibility ac-tions we carried out in the communities where we operate, which entail land and waterway transpor-tation for the inhabitants from Macanal, Chivor and Almeida, the support to cocoa and coffee produc-tion projects, and also educational stances through the POETA and Escuela plus, AES Chivor delivered 370 acres to the municipality of La Capilla for natu-ral recovery and water protection of the Páramo de Cristales in the Department of Boyacá.

Dear shareholders, the results and achievements obtained during 2016 are the outcome of the op-erating, environmental and social excellence with which we operate and comprise each of our power plants. We are grateful for the support, dedication and excellence of our workers, who have made these achievements possible.

Thank you very much dear shareholders for your confi-dence and support for delivering reliable power to Chile, Colombia and Argentina during the 366 days in 2016.

Annual Report 2016 AES Gener 2726 Nuestra Gestión 2016

03 l About this Report

Annual Report 2016 AES Gener 2928 Nuestra Gestión 2016

PREPARATIONAES Gener prepares its annual report by follow-ing mainly the recommendations of the Interna-tional Integrated Reporting Council and Global Reporting Initiative.

Through this report, AES Gener intends to facilitate information to its shareholders and stakeholders re-garding the company, its activities, business model, strategy, corporate governance structure and results obtained during the fiscal year, in the countries where we operate and from the triple viewpoint of the com-pany: Economic, social and environmental.

AES Gener consults with its stakeholders, personnel, managerial team, analysts, and investors; and it also has been supported by outsourced experts in report-ing and corporate responsibility.

The information and financial and non-financial data contained in the report are referred to the fiscal year starting on January 1 until December 31, 2016; how-ever, the aforementioned includes also references to facts occurred in previous years or after the closure of the fiscal year when it was considered as necessary so that readers of the report may understand the strategy and management principles enforced by AES Gener.

The financial information is corresponded with the total consolidation perimeter of the company. The non-financial information includes subsid-iaries and invested companies in which AES Ge-ner holds a controlling interest and also the control of the management.

CONTACT INFORMATIONFor further information regarding the contents of the document of any of the sections, you may address to:

INVESTOR RELATIONS DEPARTAMENT INVESTORS:

Juan-Luis Carrasco Manager of Investor Relations

Denisse Labarca Abdala Head of Investor Relations Contact: [email protected]

SHAREHOLDER OFFICE

Telephone: +56 22 364 6772

COMMUNICATIONS AND SUSTAINABILITY:

AES Gener corporate communications Contact: [email protected]

You may ask information about AES Gener on the corporate website of the company www.aesgener.cl

Annual Report 2016 AES Gener 3130 Our Company

04 l Our Company


CORPORATE MISSION, VISION AND VALUESAES Gener is a publicly traded corporation whose mission is to improve the lives of people by providing reliable, sustainable and affordable energy solutions in markets where we operate.

AES Gener S.A. (AES Gener, the Company or the Or-ganization) is a publicly traded corporation whose mission is to improve the lives of people by providing safe, reliable and sustainable energy solutions in every market we serve, by meeting commitments made with clients, shareholders, workers, communities, vendors and the like and groups with which we are related to.

OUR COMPANY

We make use of our electricity platforms and knowl-edge to provide energy infrastructure solutions in the markets where we operate.

OUR MISSION

Improve the lives of people by supplying safe, reliable and sustainable energy solutions in the markets we serve.

CORPORATE VALUES AND BUSINESS ETHICS

Throughout history, the company has always shown a permanent commitment towards a chart of values which constitutes the core of its Code of Conduct, rendering proper support in daily activities.

In the same sense, AES Gener fosters the proper ap-plication of these values at work, by developing ac-tivities and materials for fostering reflection on those matters. The Code of Conduct is provided to every as-sociate, contractor, vendor and business partner and they embrace it. Likewise, it is also available on the website of the company.

The main aspects of the chart of values are pointed out as follows:


• Put Safety first. Ensuring safe operations at facil-ities is the cornerstone of every daily activity and decisions involved. The members of the compa-ny must protect the safety and the prevention of work-related risks the personnel, contractors and surrounding communities. In order to preserve this safety culture, several activities are carried out on a periodic basis, including monthly talks at all facilities, where every worker must attend to.

• Act with integrity. The people of the company must be honest, trustworthy and responsible. In-tegrity must be part of the personal essence, aris-ing out of the interaction with others and a bond with third parties at the workplace.

• Honor commitments. Honor the commitments the organization makes to all its stakeholders: em-ployees, clients, communities, shareholders and investors, vendors, contractors and partners.

• Strive for excellence. The members of the compa-ny must endeavor to be the best in what they do and achieve a world-class performance.

• Have fun through work. The members of the or-ganization know that the work is interesting and rewarding. Each associate is called upon to enjoy his work and appreciate the satisfaction of being part of a team which positively makes a difference.

BUSINESS MODEL AND MAIN ASSETSAES Gener operates a power generation asset port-folio, with presence in four independent markets: the SIC and the SING in Chile, the SIN in Colombia and the SADI in Argentina. The business model of the compa-ny is sustained by the following pillars:

• Diversification: AES Gener operates a diversified portfolio of assets in terms of markets, geography, clients and technologies.

• Flexibility: The diversification of assets, technol-ogies, clients and markets provides operational flexibility for fulfilling energy supply commitments in a reliable manner, and using a variety of fuels.

• Innovation: The Company places innovation at the core of its corporate culture, which has al-lowed AES Gener to reach important milestones, such as the installation of the first energy storage solution, through energy batteries, for commer-cial use in electricity generation in Chile. It has pioneered in the industry by exploring the water desalination business.

• Agility: The wide experience and deep knowledge of markets where the company operates allows offering added value solutions to new business opportunities and market challenges. This agility has implied, for instance, a development of new business opportunities, such as the export of power from Chile to Argentina.

• Reliability: The base load plants of AES Gener are essential to provide efficient, reliable and high availability power where it operates.

The company has a world-class history as a reliable power provider, driven by its long-term commitment for supporting growth in markets where it operates.

• Excellence: The experience, proven track and commitment to excellence and best practices of The AES Corporation are transferred to AES Gener. This ongoing effort towards excellence has been recognized with several awards from prominent entities.

4,132 MW Installed capacity Chile

1,020 MW Installed capacity Colombia

643 MW Installed capacity Argentina


Carbón

Gas/Diesel

Hidroeléctrica

Biomasa

Solar

Total

SIN

1.020 100%

1.020 100%

SADI

643 100%

643 100%

3.011 52%

1.459 25%

1.291 22%

13 0%

21 0%

5.795 100%

SIC

1.644 60%

816 30%

271 10%

13 0%

2.744 100%

SING

1.367 98%

21 2%

1.388 100%

Chile Colombia Argentina Total

SIC SING SIN SADI

MW MW MW MW

AES Gener S.A. Ventanas 1 120 Tocopilla 277

Ventanas 2 220

Laguna Verde TV 47

Laguna Verde TG 19

Laja 13

Alfalfal 178

Queltehues 49

Maitenes 31

Volcán 13

Andes Solar 21

Sociedad Eléctrica Santiago SpA Renca 100

Nueva Renca 379

Los Vientos 132

Santa Lidia 139

Guacolda Energía S.A. Guacolda 760

Empresa Eléctrica Ventanas S.A. Ventanas 3 272

Empresa Eléctrica Campiche S.A. Ventanas 4 272

Empresa Eléctrica Angamos S.A. Angamos 558

Empresa Eléctrica Cochrane SpA Cochrane 532

AES Chivor S.A. Chivor 1.020

TermoAndes S.A. TermoAndes 643

Main Subsidiaries and Electric Generation Assets.As of December 31st, 2016, the Company operates, through AES Gener S.A. and its subsidiaries, a portfolio of generation assets with a total capacity of 5,795 MW with presence in Chile, Colombia and Argentina.

In Chile, the company has a generation capacity of 4,132 MW, composed of generation assets in the SIC (Central interconnected grid) and the SING (Northern interconnected grid).

The generation assets that the Company operates in the SIC amount to 2,744 MW that is comprised of hy-droelectric, thermoelectric plants and a biomass-fired plant. The thermoelectric power plants that the com-pany operates in the SIC use as fuel coal, gas and die-sel. The most relevant assets that the company oper-ates in the SIC are: Ventanas Complex, with a total capacity of 884 MW; the Guacolda Complex, with a total capacity of 760 MW; the Renca Complex, with a total capacity of 479 MW; and the hydroelectric assets with a total capacity of 271 MW.

The generation assets that the company operates in the SING total 1,388 MW, composed of thermoelectric plants and a solar plant. Thermoelectric plants that

the company operates in the SING use coal as fuel. The assets that the company operates in the SING are: the Angamos Complex, with a total capacity of 558 MW; the Cochrane complex, with a total capacity of 532 MW, the Nueva Tocopilla Complex, with a total

capacity of 277 MW; and the photovoltaic plant Andes Solar, with a total capacity of 21 MW.

In Colombia, the company owns generation assets with a capacity of 1,020 MW, comprised mainly by the hydroelectric plants of Chivor, with a capacity of 1,000 MW and Tunjita, with a capacity of 20 MW.

In Argentina the company has the TermoAndes power plant, a combined-cycle with a capacity of 643 MW.

In Argentina the company has the TermoAndes power plant, a combined-cycle with a capacity of 643 MW.

The summary shows the main subsidiaries and affil-iates of the company, together with their respective electricity generation assets.


Power storage assets

The company has a power storage capacity of 52 MW, composed of three units: Andes BESS, next to Sub-station Andes, with a capacity of 12 MW; Angamos BESS next to Angamos plant, with a capacity of 20 MW; and Cochrane BESS next to Cochrane plant, with a capacity of 20 MW.

Electricity transmission assets

AES Gener has transmission lines and substations. In the SIC, the Company has 443 km of transmission lines (including the transmission assets of Guacolda) and 12 substations. In the SING the company has 809 km of transmission lines and 11 substations. In the SADI, the company has one substation.

Additionally, through the subsidiary InterAndes, the Company owns a transmission line of 268 km which connects the SADI in Argentina with the SING in Chile (in Argentine territory).

Gas Transmission Assets

AES Gener is involved in the transmission of natural gas through Gasoducto GasAndes S.A. and Gasoducto GasAndes Argentina S.A.

Water Desalination Assets

AES Gener has in Chile assets for water desalination with a capacity of 437 liters per second (l/s), from which 56 l/s correspond to reverse osmosis, and they are next to Angamos plant. The rest of the desalina-tion capacity operates with different technologies.

PROJECTS UNDER DEVELOPMENT

The company has an electrical project portfolio, which includes renewable power projects and also power storage batteries, solar projects, mini-hydro and wind generation projects. The development and construc-tion of some of them are considered to begin in the medium-term, as in the case of Andes Solar project, which has an environmental permit for expanding its capacity from 21MW to 220 MW.

On the other hand, the company is currently devel-oping a new business area related to the sale of de-salinated water to clients consuming large volumes of water. Currently the possibility of using part of the ex-isting coastal facilities and making use of operational synergies is being studied in order to offer the deliv-ery of desalinated water to clients in their plants or in the sectors where they require such

PROJECTS UNDER CONSTRUCTION

Tunjita Hydroelectric project (SIN-Colombia)

The Tunjita hydroelectric project consisted of the construction of a run-of-the river power plant of 20 MW next to Esmeralda dam of AES Chivor, mak-ing use of the water potential of the water diverted from the Tunjita river and taking advantage of the headrace tunnel diverging water from the river to the dam. The commercial operation of this plant began on June 30, 2016.

Cochrane thermoelectric project (SING-Chile)

In July 9, 2016, the first unit of the Cochrane thermo-electric project started operations, while the second unit was commissioned on October 12, 2016. This project comprised the construction of two coal-fired thermoelectric units of 266 MW (gross) each and 20MW from a Battery Energy Storage System (BESS), located in the northern sector of Antofagasta, in the commune of Mejillones, Region of Antofagasta.

The project received the environmental approval in 2009. The plant entails the use of pulverized coal technology, by using bituminous coal and sub-bitumi-nous coal as fuel and incorporates abatement systems for controlling SO2, NOx and particulate materials.

The Cochrane project has long-term energy sale agreements with SQM, Quebrada Blanca and Si-erra Gorda for the sale of approximately 100% of generated power.

Installation of Emission Control Equipment, Retrofits (SIC and SING – Chile)

In order to prevent and control emissions of particu-late material SO2 (sulfur dioxide), NOx (nitrogen ox-ide) and mercury in areas declared and non-declared as saturated or latent, the Ministry of Environment set out Supreme Decree 13 of 2011 establishing emission standards for thermoelectric power plants. In 2012, AES Gener started the installation of emission control equipment (retrofits) in four existing plants belonging to Ventanas (Units I & II) and Nueva Tocopilla (Units I & II) built between 1964 and 1997.

Likewise, Guacolda Energía S.A., started the installa-tion of emissions control equipment in its Units I, II and IV in August of 2013.

These projects aimed at the reduction of emissions generated in the aforementioned plants and also com-plying with the standards required in Chile for ther-moelectric power plants, with limits for the emission of particles and gases released by fossil fuels, mainly coal. For the existing plants, including those under construction, limits required for particulate material are being required since late 2013, while new limits for sulfur dioxide, nitrogen oxide and mercury are being required from mid-2016, except for those plants oper-ating in areas declared as saturated or latent, in which case this will be required as of June 2015.

The retrofits of the four units of the complexes Venta-nas and Nueva Tocopilla were successfully completed by mid-2015, meeting with the term defined by the new emissions law for power plants located in satu-rated or latent areas.

During 2016, investment and environmental innova-tion projects covered practically all areas related to our main environmental impacts.

On one hand, with the bringing into service of the new abatement systems of particulate material and sulfur dioxide of Units 1, 2 and 4 of Guacolda, and with equipment for addressing nitrogen oxides based on Selective Catalytic Reduction technology in Unit 1 of Guacolda, the investment cycle on abatement equip-ment for air emissions came to a close, started in 2012 for meeting with Supreme Decree N°13/2011.

Therefore, an investment cycle of environmental im-provements aimed at air emissions which exceeded US$ 472.8 million came to a closure.


SIC Installed 17.877 MW Gross (76% of the Chilean System) Total Production of energy 2016 53,906 GWh.

SING Installed 5,688 MW Gross (24% of the Chilean system)Total Production of energy 2016 19,467 GWh.

92% Thermoelectric 8% ERNC

94% Thermoelectric 6% ERNC

36% Hydroelectric 57% Thermoelectric 7% ERNC

37% Hydroelectric 47% Thermoelectric 16% ERNC

TOTAL INSTALLED CAPACITY GENERATION

Alto Maipo Hydroelectric Project (Chile)

The Alto Maipo hydroelectric project considered the construction of two run-of-the river power plants in a hydraulic series at the basin of the Maipo river, called Alfalfal II (264 MW) and Las Lajas (267 MW), with an installed total capacity of 531 MW. The environmental approval was granted in2009 for the project itself, in 2010 for the transmission grid, and during December 2012 the electrical concession was granted.

The project is located in the Metropolitan Region and to February 15, 2017, reported a construction progress of 49%.

The main contracts for providing generation equip-ment and construction of underground works were subscribed with three first tier international contrac-tors in 2012. In the construction of the main civil works and tunnels the Austrian company Strabag SpA, with its Chilean subsidiary Strabag AG, and Constructora Nuevo Maipo SpA (CNM), consortium of the German company Hochtief A.G. and the Italian company CMC Di Ravenna were involved. On one hand, subsidiaries

in Brazil and Chile of the German company Voith Hy-dro are responsible for the supply and assembly of the electromechanical equipment of the plants. It is im-portant to point out that for underground works, two contractors were selected in order to mitigate risks and start construction works simultaneously in two different work fronts.

Alto Maipo provides a significant energy contribution for the SIC through the supply of clean, efficient and economic energy, equivalent to 2.200 – 2.300 GWh per year. Additionally, the project has a low environ-mental impact since it considers 90% of underground works, with no dam and shows relevant advantages for the SIC related to a secured supply to the city of Santiago and the subsequent savings in transmission of electric energy, which involves only 17 km of new transmission lines.

BUSINESS AREASCHILEAN ELECTRIC SYSTEM

Since 1982, the electric system in Chile has been struc-tured based on private initiatives and property, within the framework of market competitiveness for the gen-eration segment and transmission expansions, with regulations based on an efficient company model for distribution and transmission.

In Chile, except for the small isolated grids of Aysén and Punta Arenas, the energy generation activities are developed in line with two independent energy grids: the Central Interconnected Grid (SIC), which covers from the South of the region of Antofagasta (Paposo roadstead) until the region of Los Lagos (commune of Quellón), which supplies approximately 92% of the people in Chile; and the Northern Inter-connected Grid (SING), which covers the regions of Tarapacá, Antofagasta and Arica-Parinacota, whose main users are industrial and mining companies. In both grids, the energy generation is organized by the

Independent Coordinator of the National Electric Sys-tem (CISEN), so as to minimize operating costs and se-cure the most economic efficiency of the whole, while meeting at the same time its quality and safety require-ments of the service defined in current regulations. As of the end of 2016, the total installed capacity for electric supply in Chile, taking into account the pow-er plants of all companies comprising the SIC and the SING, reached 23,565 MW gross.

During 2016, out of the total installed capacity in the SIC and the SING 28% corresponded to hydroelectric capacity, 58% thermoelectric, and 14% to wind and so-lar. From this total, AES Gener contributes with 4,132 MW, equivalent to 18%, considering 3,840 MW of ther-moelectric capacity, 271 MW of hydroelectric capacity and a solar plTant of 21 MW. During 2016, AES Gener was placed as the highest generator of the country and the main thermoelectric generator.

TOTAL INSTALLED CAPACITY FOR THE ELECTRIC SUPPLY

IN CHILE. 23.565 MW GROSS


58 %

28%14%

Thermolectric Hydroelectric Wind and solar

Marginal cost of energy in Alto Jahuel 220 kV.

2010 2011 2012 2013 2014 2015 2016

US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh

January 114,1 174,3 188,3 122,7 152,4 117,7 50,4

February 138,9 242,7 188,8 128,3 142,6 145,3 58,3

March 144,5 260,8 240,1 178,5 200,1 146,1 76,3

April 139,5 223,9 279,3 171,8 146,7 139,7 52,4

May 145,3 246,9 260,3 219,4 148,7 169,3 43,6

June 157,8 257,4 146,8 251,5 175,5 91,1 106,3

July 151,9 196,0 139,4 240,9 202,7 73,7 102,2

August 181,4 167,1 172,0 209,9 74,8 54,5 47,2

September 132,7 165,9 165,3 95,8 90,1 41,3 49,7

October 134,2 136,0 181,1 71,2 76,8 35,9 50,2

November 143,0 153,9 190,5 70,9 90,4 37,5 46,9

December 199,9 171,2 181,7 83,9 116,8 43,2 47,4

Average 148,6 199,7 194,5 153,7 134,8 91,3 60,9

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SIC: Marginal Cost of energy in Alto Jahuel 220 kV.

23,565 MW grossInstalled capacity in 2016

(SIC+SING)

2016 US$/MWh

January 50,4

February 58,3

March 76,3

April 52,4

May 43,6

June 106,3

July 102,2

August 47,2

September 49,7

October 50,2

November 46,9

December 47,4

The total installed capacity for the electric supply in Chile reached, by the end of 2016, 23,565 MW gross.

Central Interconnected Grid (SIC)

The total installed capacity in the SIC by the end of 2016, taking into account plants of all companies com-prising the CDECSIC, reached 17,877 MW gross, equiv-alent to 76% of the total installed capacity of grids SIC and SING in Chile. The 28% of this installed capacity is provided by hydroelectric plants, 58% is provided by thermoelectric plants, and the remaining 14% is com-posed of plants from the ERNC (mostly wind and solar).

The hydrology still remains a relevant factor for the SIC since the condition of tributaries and the initial level of dam determined mostly the dispatch of hydroelectric and thermoelectric plants.

IN term of in water power dammed, 2016 started with an availability of 19.6% higher than the previous year, which reached 3,631.6 GWh on January 1, 2016. By the end of the year, the grid had enough dammed water for generating approximately 1,924.9 GWh, a capacity of 46.9% lower when compared to December 31, 2015.

The annual gross energy generation in the SIC during 2016 was supplied in 36% by hydroelectric plants, 57% by thermoelectric generation and the remaining 7% with generation coming from ERNC plants (mostly wind and solar). The total production of power during 2016 in the SIC reached 53,906 GWh, 1.89% higher to such recorded in 2015.

During 2016, the new entry of efficient energy and the high availability of thermal generation helped to reduce the increase in marginal costs of the grid. Both effects caused that in 2016 an average marginal cost of 60.94 US$/ MWh was recorded, in contrast with 91.3 US$/MWh in average of year 2015 (in node Alto Jahuel).


AES Gener Gross capacity

(MW)

Central Ventanas (1) 340

Central Laguna Verde TV 47

Central Laguna Verde TG 19

Central Laja 13

Empresa Eléctrica Santiago

Central Nueva Renca 379

Central Renca 100

Central Los Vientos TG 132

Central Santa Lidia TG 139

Empresa Eléctrica Ventanas

Nueva Ventanas 272

Empresa Eléctrica Campiche

Campiche 272

Guacolda Energia

Central Guacolda 760

Total 2.473

Thermoelectric Plants of AES Gener in the SIC

AES Gener Energy

(GWh)

Net generation 8.208

Purchases

Third parties 1.033

Spot

Intercompany 4.901

Total purchases 5.934

Sales

Distributors 5.010

Other clients 2.965

Spot 1.229

Intercompany 4.901

Total Sales 14.105


(MW)

Alfalfal 178

Queltehues 49

Maitenes 31

Volcán 13

Total 271

Hydroelectric Plants of AES Gener in the SIC

Balance of energy in the SIC 2016

14.105 GWh

RELEVANT NEWS FROM THE SIC IN 2016

During 2016, the installed capacity of the grid in-creased in 831.1 MW. Out of the capacity incorporated into the SIC, 143 MW corresponding to hydroelectric generation, 72.9 MW to thermal generation, 120.4 MW to wind capacity and 494.8 MW to solar. The most relevant are presented below: Photovoltaic solar farm Luz del Norte (141 MW), Wind farm Renaico (88 MW), Photovoltaic solar farm Conejo (104 MW).

PARTICIPATION OF AES GENER IN THE SIC

As of December 31st, 2016, the electricity generation capacity of AES Gener in the SIC was 2,744 MW. AES Gener contributes with 690 MW distributed into four hydroelectric plants and for thermoelectric plants.

Hydroelectric plants Alfalfal, Maitenes, Queltehues and Volcán account for 271 MW, while plants Ventanas with its two units , Laguna Verde TV (steam turbine), Laguna Verde TG (gas turbine), and the co-generation plant Laja, comprise part of the thermoelectric capac-ity of AES Gener with 419 MW of installed capacity.

Eléctrica Santiago, in the meantime, has a total in-stalled capacity of 750 MW and it is comprised of thermoelectric plants Renca and Nueva Renca, the plant Los Vientos TG and the plant Santa Lidia TG. With respect to plants of the other companies belong-ing to AES Gener present in the SIC, the subsidiary Eléctrica Ventanas contributes 272 MW through its coal-fired plant Nueva Ventanas and the subsidiary Eléctrica Campiche contributes 272 MW with its coal-fired Ventanas IV. Besides, the subsidiary Guacolda provides into the grid 760 MW through its thermo-electric plant Guacolda with its five units.

During the year 2016, AES Gener sold to its clients in the SIC and other producers of the grid a total of 14,105 GWh, from which 5,010 GWh were intended for dis-tribution companies. The contractual commitments of AES Gener in the SIC, in force until December 31, 2016, increased in 3.1% with respect to those current to the closure of 2015, especially due to increases in the demand and stronger contractual commitments with Minera Los Pelambres (192 GWh in 2015 to 427 GWh in 2016).

At physical annual level, the 100% of the energy sold to clients was covered with generation from AES Ge-ner and its subsidiaries, plus purchases to other pro-ducers of the grid, in light of long-term current agree-ments that the company has executed with: Masisa Ecoenergía S.A, KDM Energía S.A, Energía Coyanco S.A, Agrícola Ancali Limitada, Eléctrica San Miguel SpA, Empresa Eléctrica Aguas del Melado SpA and Eólico Las Peñas SpA.

During most of the year, Nueva Renca operated through a lease contract which secured the availabil-ity of liquefied natural gas (GNL) for the operation of the plant, to generate 1,204 GWh with LNG. Ad-ditionally, the plant injected into the grid 744 GWh by using its own LNG and in a lower extent liquefied gas (propane) and 88 GWh by using diesel oil. The total production was 50% higher with respect to the generation of 2015.

During 2016, AES Gener plants, Guacolda and Nueva Renca, provided 28% of the gross generation of the SIC.

During 2016, AES Gener plants, Guacolda and Nueva Renca, provided 28% of the gross generation of the SIC.

28% were sold by AES Gener to its clients in the SIC and to other producers of the system.of the gross

generation of the SIC


8%

92%

ERNCThermoelectric Generation

Total installed capacity SING

5,688 MW gross

Northern Interconnected Grid (SING)

The main characteristic of the SING is the limited wa-ter resources it has for electricity generation, so the total installed capacity of the grid by the end of 2016, reached 5,688 MW gross, and it is based on 92% on thermoelectric generation, composed of 43% by nat-ural gas plants, 48.8% by coal-fired plants, 7.8% by oil plants and .4% by co-generation plants. The remaining 8% corresponds to ERNC type generation. Consump-tion centers are separated by large distances and corre-spond mostly to mining companies, and some of them with a high relative weight with respect to the total con-sumption of the grid.

The total production of electric energy during 2016 in the SING reached 19,467 GWh, 3.5% higher to such re-corded in 2015. A 78% of the gross generation of annual energy in the SING was supplied through coal genera-tion, 9% by gas generation, 6% by diesel oil or fuel-oil generation and the remaining 7% by ERNC. On the oth-er hand, the average marginal cost of the grid increased from 57.2 US$/MWh in 2015 to 61.8 US$/MWh in 2016.

The total production of electric energy during 2016 in the SING reached 19,467 GWh, 3.5% higher to such recorded in 2015


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SING: Marginal Cost of Energy in Crucero 220 kV

Marginal cost of energy in Crucero 220 kV

2010 2011 2012 2013 2014 2015 2016

US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh US$/MWh

January 100,6 101,6 64,7 99,2 92,6 49,7 48,5

February 148,2 96,1 88,1 68,8 98,2 49,6 48,5

March 144,5 118,6 78,5 65,8 73,3 48,3 49,6

April 143,9 131,9 112,2 82,1 97,2 53,0 52,3

May 101,0 104,5 112,3 73,6 86,6 46,4 73,4

June 120,6 126,2 132,9 74,5 84,8 76,4 85,0

July 113,9 76,5 74,9 81,9 85,4 50,6 82,2

August 108,0 74,5 67,5 80,0 58,0 59,5 49,7

September 121,7 66,5 71,7 64,3 62,6 57,1 63,8

October 108,7 105,5 69,1 90,1 61,2 72,1 47,5

November 123,8 83,2 81,6 88,3 57,9 73,6 60,4

December 122,9 65,6 84,9 95,0 51,5 50,2 80,7

Average 121,5 95,9 86,5 80,3 75,8 57,2 61,8

2016 US$/MWh

January 48,5

February 48,5

March 49,6

April 52,3

May 73,4

June 85

July 82,2

August 49,7

September 63,8

October 47,5

November 60,4

December 80,7

RELEVANT NEWS OF THE SING IN 2016

Capacity increase

During 2016, the installed capacity of the grid grew by 1,195 MW due to the start of the commercial operation of several projects. Out of the incorporated capacity, 81 MW corresponded to solar generation, 532 MW to coal, 538 MW to GNL and 45 MW to diesel. The most relevant are Cochrane (AES Gener) and Kellar.

PARTICIPATION OF AES GENER IN THE SING

In the SING, AES Gener has a gross generation ca-pacity of 1,388 MW, composed of by the contribution of 277 MW from the plant Nueva Tocopilla, 21 MW from the plant Andes Solar belonging to AES Gener; 558 MW from the plant Angamos with its two units, belonging to the subsidiary Eléctrica Angamos and 532 MW from the plant Cochrane of the subsidiary of the same name.

Coal-fired plants of AES Gener, Nueva Tocopilla, An-gamos and Cochrane, are equipped with a Battery Energy Storage System which allows them to replace a portion of the base reserve, hence increasing the maximum dispatch power. The BESS of the plant Nueva Tocopilla, of 12 MW, was installed in substation Andes of the SING, while the BESS of the plant An-gamos, of 20 MW in total, was installed in substation Angamos. The BESS of Cochrane has a capacity of 20 MW installed in the substation Cochrane.

In May of 2016 the beginning of the commercial op-eration of project Andes Solar (21 MW) was realized; in July the project Cochrane reached the commercial

operation of Unit 1 (266 MW) and in October, Unit 2 (266 MW) and the BESS. These are operations in which AES group increased its installed capacity in the grid in 553 MW.

Besides, in February the first export of electricity towards Argentina was realized. Energy exchanges spread intermittently until July, totaling a net transfer towards the SADI of 102 GW.

In December, the Ministry of Energy modified Supreme Decree N°7 and the main changes were:

• The export of energy not dispatched for the SING from generation units operating a minimum level is allowed.

• The term for informing commercial agreements between generators, prior an export event, from 45 to 7 days, is reduced.

• Higher flexibility in the scheduling of exports.

In operational terms, in 2016 the plants Nueva To-copilla, Angamos and Cochrane contributed into the SING a gross production of 1,952 GWh, 4,403 GWh and 1,633 GWh, respectively. All the above equals 41% of the total gross production of the SING.

In the SING, AES Gener has a gross generation capacity of 1,388 MW


Thermoelectric Plants of the Grupo AES Gener in the SING

US$ / MWh

300.00

250.00

200.00

150.00

100.00

50.00

0

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Energy Price in the Colombian Market (SIN)

AES Gener Gross capacity (MW)

Tocopilla (1)

Nueva Tocopilla 277

Andes Solar 21

Empresa Eléctrica Angamos (2)

Central Angamos 558

Empresa Eléctrica Cochrane(3)

Central Cochrane 532

Energy balance AES Gener in the SING 2016 Energy (GWh)


Purchases

Third parties -

Spot 1.212

Intercompany -


Sales

Non-regulated clients 7.195

Spot 970

Intercompany -

Total Sales 8.165

COLOMBIAN ELECTRIC GRID

From 1994, the Colombian electric grid allows for pri-vate equity in the different segments within a frame-work of market competitiveness for the generation and commercialization of electric energy, in a setting prop-erly regulated for transmission and distribution.

The Electric Colombian Grid is the structure based on a single National Interconnected Grid (SIN), which until December 31, 2016, had an effective installed capac-ity of 16,690 MW. Out of this total, 70% corresponds to hydroelectric capacity, 29% to thermoelectric and 1% to alternatives. The demand of energy during 2016 reached 66,315 GWh, recording a decrease of 0.2% with respect to the demand during 2015.

International Transactions of Energy with Ecuador ren-dered a significant increase in the last year, account-ing for 378.3GWH, due to Colombian imports during the first quarter of the year due to the El Niño phe-nomenon, and exports from Venezuela accounted for 45GWh, corresponding to .07% of the demand for the Colombian energy generation grid.

AES Gener, through its subsidiary AES Chivor has the hydroelectric plant Chivor, with an installed capacity of 1,000 MW and its dam La Esmeralda, and Tunjita with a run-of-the river hydroelectric plant of 20 MW, which to the closure of December 2016, accounted for 6.1% of the total installed capacity in the SIN.

Hydrological year in Colombia

In 2016 there as a strong presence of the El Niño phe-nomenon until March, which generated uncertainty in the domestic setting due to the hydrological be-havior and stock market prices. The Nation Intercon-nected Grid (SIN) during the first and second quarter showed a significant increase in the hydrology, with contributions of 121.7% of the historical average and the third and fourth quarter showed a flow decrease of 70.6% of the historical average. In the case of AES Chivor, the contribution in the first and second quar-ter were 99,6%, then increasing in the third and fourth quarters of the year with flows accounting for 103.0% of the historical average.

Stock market prices decreased by 20.7% with respect to the previous year as a result of the pinnacle of the El Niño phenomenon and a swift transition towards normal hydrological conditions during April until the end of the year with contributions exceeding the average.

(1) Unit 1: 136.3 MW; Unit 2: 141 MW (2) Unit 1: 276.9 MW; Unit 2: 281.3 MW (3) Unit 1: 266 MW; Unit 2: 266 MW



(MW)

Chivor 1.000

Tunjita 20

Balance of energy AES Chivor

Energy (GWh)


Purchases 2.450

Sales

Spot 3.310

Contracts 3.535

Total Sales 6.845

Hydroelectric Plants of AES Chivor


(MW)

Salta 643

Balance of energy TermoAndes

Energy (GWh)


Purchases

Spot 3.809

Contracts 828

Total Sales 4.637

Capacity increase

During 2016, 468.5 MW of the new generation capac-ity were added, which corresponded to 88.8% for hy-drological capacity, 5.1% for thermoelectric capacity, 3.2% to co-generation plants and 2.8% to self-gener-ation plants. As part of the water generation, 20 MW are included from Tunjita, a lower plant of AES Chivor, which started its commercial operation in June 2016.

PARTICIPATION OF THE AES GENER GROUP IN THE SIN

In the SIN, AES Chivor has a gross generation capacity of 1,020 MW comprising the hydroelectric plants of dam Chivor, and by the hydroelectric run-of-the river plant Tunjita, of 20 MW, started its commercial oper-ation during 2016.

Argentinian electric grid

In Argentina, generation and distribution activities are developed through the Argentinian Interconnection Grid (SADI), the main electric energy transmission grid covering the whole country.

As of the end of 2016, the total installed capacity for the electric supply in Argentina, taking into account power plants from companies comprising the SADI reached 33,901 MW from which 61.2% corresponds to conventional thermal electric generation, 31.5% to hydroelectric plants, 5.2% to nuclear generation and the remaining 2.1% to other type of generation.

The demand for electric energy in the SADI during 2016 was of 138,069 GWh, which accounted for 0.88% of increase with respect to 2015. This de-mand was supplied in 65.2% through convention-al thermal sources, 26.2% by hydroelectric power, 5.6% by nuclear power and 3% by imports and oth-er sources of energy. On February 12, 2016, the his-torical record of capacity in the SADI was overcome, reaching a value of 25,380 MW, the same day the historical record of energy demanded was overcome, which reached 523.9 GWh.

PARTICIPATION OF THE AES GENER GROUP IN THE SADI

In the SADI, our subsidiary TermoAndes, through the Salta power plant (a natural gas combined cycle) of 643 MW, is located in the province of Salta and con-nected to the SADI and the SING in Chile. Before the connection to the SADI, the plant only supplied the SING through a transmission line owned by the sub-sidiary InterAndes S.A. (InterAndes).

In September 2007, by following requirements of Argentinian authorities, the steam turbine of Ter-moAndes to the SADI was connected to, with the purpose of exporting power to the SING. During 2008, it connected two gas turbines to the SADI

by keeping the steam turbine unit connected to the Chilean market.

However, in mid-December 2011 and up-to-date, the 100% of the TermoAndes generation has been sold to the SADI since the permit for exporting power from Argentina to Chile was revoked.

During 2016, the plant Salta generated exclusively to-wards the SADI, by injecting 4,637 GWh, from which the 100% was generated by using natural gas. Out of these, 830 GWh were sold to clients as part of the En-ergía Plus framework, and 3,807 GWh were traded in the spot market. During 2016 there were no additions of plants into the Energía Plus market.

As of the end of 2016, the total installed capacity for the electric supply in Argentina, taking into account power plants from companies comprising the SADI reached 33,901 MW


OUR SUSTAINABLE APPROACHAES Gener and its subsidiaries seek to be respected and valued locally after achieving a good economic, social and environmental performance, and also for the contribution towards the sustainable develop-ment of communities it fits in.

The main responsibility of AES Gener is the gen-eration of power, an indispensable tool for homes, stores, industries, schools and health facilities, and subsequently, for the development of countries and their inhabitants. AES Gener seeks to fulfill this role by acting responsibly with every single group of people comprising part of the company or related to it.

In AES Gener, Corporate Social Responsibility (CSR) is understood as the responsible development of the business so that it may benefit every stakeholder. Among them, it is important to highlight the commu-nity since it plays a double role for it is impacted by the activity developed by AES Gener, but also helps the company to be the essentials of its productive activity.

The responsibility towards the community assumes the proper management of environmental impacts, mainly the mitigation of potentially adverse effects, of fostering positive impacts, by meeting rules and appli-cable environmental qualification resolutions, internal environmental policies and additional commitments voluntarily assumed.

Likewise, AES Gener assumes as basic requirements the compliance of every single rule, whether legal and ethical, which are applicable to the company.

As part of the communities as those cited, the com-pany holds the desired of building and maintain-ing harmony through a collaborative relationship with its neighbors, which implies a strong com-mitment for the development of an organization-al culture which supports and fosters and provides feedback to this work approach.

Hence, AES Gener understands that for achieving a harmonious coexistence, it is not only necessary the provision of material resources, but also establishing a bidirectional dialogue process with stakeholders and collect their opinion concerning economic, social and environmental aspects of the corporate management, so programs and communicational and spread tools con-tributing to a good relationship have been devised.

For the development of the ongoing work with the com-munity, three work lines have been defined: Education, Support to the infrastructure of community use and Employability. Through each of these action lines, pro-grams and transparent projects have been developed, consistent with the local reality and depicting fairness. In a few cases the community itself, throughout participa-tion and formal process of dialogue with the company, has defined priority issues to be settled.

Hence, AES Gener understands that for achieving a harmonious coexistence, it is not only necessary the provision of material resources, but also establishing a bidirectional dialogue process with stakeholders.

"AES Gener and its subsidiaries seek to be

respected and valued locally after achieving

a good economic, social and environmental performance, and also for the contribution towards

the sustainable development of

communities it fits in"


Objective Description Results expected

Management of local authorities

Create and foster sustainable, reliable and transparent bonds with local authorities

Maintain good communication and coordination with local authorities.

Management of local leaders

Create and maintain sustainable, reliable and transparent bonds with local leaders.

Maintain good communication and coordination with local leaders

Develop social programsDevelop and manage CSR programs that are carried out in cities where we perform operations.

Develop programs with established objective groups, in the defined terms and budgets

Assess the social programs we develop.

Assess the impact and potential improve-ments to the programs in a participatory way with the beneficiaries.

Generate indicators and information to make better decisions regarding the progress of programs

Increase the coverage Integrate every year beneficiaries that are part of our CSR programs.

Establish "ambassadors" of our actions and legitimize our operation under the assump-tion of "good neighbor"

Existence of plans or strategies related to sustainability

As part of the commitment with ongoing improve-ments, and based on experiences and internal and external learning, and also foreign and domestic, AES Gener is working for completing, improving and ap-plying progressively a set of Sustainability Policies and an Integral Social Responsibility Management System to all stakeholders: the community, shareholders and investors, workers, clients, governmental agencies, partner and vendors.

AES Gener understands that it must generate and maintain a permanent communication with every stakeholder and also fulfill in a balanced manner the interests of all so as to meet responsibly and ethically its corporate role, achieving this way that the busi-ness, as a whole may become a positive contribution to the society.

Particularly, AES Gener defines for itself and for its subsidiaries the general guidelines contained in the Engagement and Relatedness Policy with Local Com-munities with which it interacts with.

These guidelines are intended to move forward to-wards a consistent and integrated scheme for rela-tionships with the people living in the whereabouts,

whether pertinent or adequate to different local re-alities and also sustainable according to results and impacts expected both by local communities and also company operations.

Taking into account construction projects and also improvements in new and existing power plants, and that works related to operations of plants are carried out by contracting companies and not directly by the AES Gener personnel, it is necessary that everyone be outlined to our Engagement and Relatedness Pol-icy. Following this purpose, a community relatedness policy has been drawn up for contractors, which is aimed at assuming responsibilities with respect to community relatedness.

In this regard, the main objective of AES Gener is to achieve its business goals by acting responsibly and making this responsibility acknowledgeable, and giv-ing way to legitimate, efficient and sustainable means for a collaborative relationship allowing the commu-nities to be legitimately benefited due to the produc-tion activity that the company develops.

Hence, AES Gener expects to obtain the "Social Li-cense to Operate" and the "Social License to Thrive" in each community where activities are developed or has been selected for those purposes.

The Engagement and Relatedness Policy with Lo-cal Communities with Local Communities assumes as a requirement the compliance of every applica-ble and current regulation, both legal and ethical. In consequence, the company and its subsidiaries must place emphasis on clarifying that social benefits are complementary to the compliance of such require-ments and in turn are necessary under the business sustainability requirement.

The transparency of criteria and procedures for ac-cessing the social benefits of the company and the performance of local public accountability of benefi-cial actions towards the community weaken consider-ably the risk that supporting and involvement actions be misinterpreted as freedom restrictors of those who are socially benefited.

AES Gener and the Social Responsibility area are sub-ject to a set of rules, standards and initiatives which have been defined from the AES Corp. head office. In this sense there is a set of internal principles which were developed by using as a reference the standard of stakeholders AA1000.

These principles address different aspects, from the identification and definition of priorities of stake-holders and deciding the proper methodology for assuming community commitments and risk as-sessments. In the same fashion as above mentioned, the company follows the Universal Statement of Human Rights and our Policy is consistent with the Principles and Guidelines of the United Nations on Businesses and Human Rights.


RELATION WITH STAKEHOLDERS

Supervising actions of our stakeholder engagement strategy are:

• Periodic meetings with local authorities (major, municipal department heads and councilmen).

• Meetings with national authorities and submis-sion of information to politicians regarding com-pany issues in their area of influence.

• Periodic meetings with social leaders and their organizations.

• Meetings with beneficiaries or participants of our social responsibility programs.

• Coordinate and spread communicational actions (in-terviews, publications) of social responsibility programs.

• On a weekly basis each local manager sends a report containing activities carried out with our stakeholders, addressing the supervision of pro-grams we develop and also different requests re-ceived from the community.

Both managers of each plant and the lead of local com-munity relatedness have as part of their KPI´s (Key Per-formance Indicators) to incorporate at least one objec-tive related to the management of local stakeholders.

The process of categorization and identification of stakeholders is carried out together between the cor-porate team and the local team, so on periodic basis field information becomes available regarding social leaders and their profiles.

The process of categorization and identification of stakeholders is carried out together between the corporate team and the local team

Annual Report 2016 AES Gener 6160 Market Context

05 l Market Context


MAIN MACROECONOMIC ASPECTSDuring 2016 several situations that affected the sta-bility of the global economy took place throughout the world. Armed conflicts in the Middle East, the rise of populism in Europe - where the greatest example has been the vote in favor for the Brexit in the Unit-ed Kingdom - and the change in the administration of the United States of America, are some of the major events and highly influential to international markets.

These circumstances affected the economies of Latin America. On one side, the huge uncertainty observed in the European Union made the dollar a salvage cur-rency, the most stable currency at that time, which caused variations in import prices for Latin American countries. On the other side, measures announced by the new president of the United States of Ameri-ca introduced volatility in the markets of the region and cast doubts over the possible impact on exports of these countries.

All this is added to the internal economic factors of the region, with complex economic situations –in greater or lesser extent– in countries such as Argenti-na, Brazil, Ecuador and Venezuela.

Argentina

In 2016, the Argentinian economy faced, due to grad-ual adjustment policies, an annual estimated contrac-tion of the GDP higher than 2% with an unemploy-ment rate of 8.9%, the highest in more than five years and with an inflation of 42.8% with a reduction both in the consumption and also in private investments. However, the consensus of analysts is that there will be an economic recovery for Argentina in 2017, by es-timating a growth in the GDP ranging between 2 and 3 defined, fostered mainly by the increase in salaries, economic reforms promoted by the government and the improvement in the economic outlook by inves-tors. The strengthening of the regional growth and the devaluation of the currency will also become factors fostering growth.


Colombia

As for Colombia, it recorded a restrained growth in 2016, reaching 2% of the annual growth in the GDP, according to estimates of the DANE (National statis-tics department).

Among the most important internal factors, a long-las-ting strike of truck drivers, a blue global trade and a decrease in fiscal revenues due to a downbeat in the oil industry of the country may be highlighted.

Though indicators such as consumption experience dropped, they were slight when compared to other countries of the region.

As a projection, international analysts forecast an economic growth given the peace agreement sig-ned with the FARC, which may cause an increase in tourism and give way to a more optimistic outlook in the population.

Chile

Chile shows a slowdown in the GDP growth, with res-pect to the previous year, with a growth of 1.6%, accor-ding to Chile’s Central Bank.

The consumption followed the trend downward that has been recorded in the last five years, rea-ching a level of 2.5%, being also the lowest level recorded in this period.

The Chilean economy has been affected throughout the year due to the lower price of the copper, which in 2016 had an average of 220.6 (US¢/lb) which ac-counts for a decrease in 11.5% of the average price

when compared to 2015, in line with the informa-tion provided by COCHILCO (Chilean copper com-mission). This price showed a slight upward just in November due to better perspective in the demand from the United States and the improvement in pro-jections for China, the major importer of this mate-rial, based on the strengthening of such economy beyond expectations.

Both the IMCE (Indicador Mensual de Confian-za Empresarial) published by ICARE and the Universidad Adolfo Ibáñez, and the IPEC (Índice de Percepción de la Economía) drawn up by Adimark GFK, were clearly below 50 points, which is the limit which separates the optimistic perspective from the pessimistic one. In the IMCE, which covers construc-tion, manufacturing industry, and trade and mining sectors, the value obtained was 41.46 point, recording a lower score under the pessimistic perspective in the construction sector. For the IPEC, there is a va-lue ranging 40.1 points in December without pessi-mistic perspective, which has remained the same for more than two years.

REGULATORY FRAMEWORK

Chile

Since 1982 the electrical sector in Chile has been structured based on private property and initiati-ves, in a market competitive framework for genera-tion and transmission expansions, with the regula-tion based on an efficient company for distribution and transmission.

In line with the constitutional order and the current legislation, governmental entities, including those re-lated with the electrical sector, played a regulator and supervising role.

These entities are grouped in the Ministry of Energy and the Ministry of Environment, with different agen-cies in charge of different areas covering the power sector: National Commission of Energy (CNE), Electri-city and Fuels Superintendence (SEC), Environmental Impact Assessment Service, Environmental Superin-tendence, which overseas and inspects the complian-ce of environmental qualification resolutions belon-ging to the Ministry of Environment, environmental tribunals and the Water Authority (DGA), which re-ports to the Ministry of Public Works.

For the construction and commissioning of power plants, environmental permits are required which are governed by the Chilean legislation; and in the case of thermoelectric plants, construction permits, as set out by the law are necessary.

The Chilean electricity authorities, without prejudice of the competence of ordinary justice courts, deems a Penal of Experts as the independent technical agency with the role of knowing and resolving swiftly most of the disputes arising out between electrical sector companies, and between one or more of these com-panies and energy authorities.

The different activities of the electrical sector are re-gulated by the General Law of Electrical Services, DFL Nº 1/1982 of the Ministry of Mining, with its further amendments: Law Nº 19,940/2004, known as Short Law I, and Law Nº 20,018/2005, or Short Law II, which remained the same all essential aspects of the stable Chilean electrical model. The laws were consolidated and systematized by DFL Nº 4/2007 of the Ministry of Economy, Development and Reconstruction. Likewi-se, the activities of the electrical sector are regulated by corresponding technical standards and regulations.

The activity is mostly based on long-term agree-ments between generators and clients, which spe-cify the volume, price and conditions for the sale of energy and capacity. The law sets out two different types of clients for generator companies: free clients and regulated clients.

The activity is mostly based on long-term agreements between generators and clients, which specify the volume, price and conditions for the sale of energy and capacity.


In the SIC and the SING, the electric generation is coordinated by the CISEN, former Load Economic Dispatch Centers (CDEDCs) in order to minimize operation costs and ensure the highest efficiency as a whole, meeting quality and safety requirements of service as defined in the current regulation.

Free clients, mainly and mandatorily, are those con-sumers whose connected capacity is higher than 5 MW, usually industrial or mining type companies, and additionally those with connected capacity be-tween 500 kW and 5 MW which have decided -for a term of at least four years- a free price method. These clients are not subject to price regulations and therefore are able to negotiate freely with the gen-eration companies the price, terms and conditions of the electrical supply.

Regulated clients, in turn, are those with a connected capacity equal or lower than 500 kW and additionally and those clients with connected capacity between 500 kW and 5 MW which have decided for four years a regulated tariff regime. These clients receive the supply from distribution companies, which must de-velop public tendering processes for awarding electri-cal power supply agreements allowing them to meet their consumption.

New agreements awarded by distribution companies for the consumption of their regulated clients must be awarded to generation companies which offer, under regulated tendering process, the lowest supply price. These prices are called long-term node price, and are calculated based on indexing formulae and are valid for the respective term of the agreement.

In more specific terms, the long term node price of energy corresponds to the average of prices awarded in the tendering process, while the price of the long-term node price of capacity corresponds to the node price of capacity set in the current node price decree at the time of the tendering process.

Through an adjustment procedure, each distribution company transfers their clients an average node price, different from the price with which the same purchas-es to its supplier, which may not be different than 5% in average of entire node price of the grid. The deter-mination is carried out by the CNE, which through a

technical report, informs the results to the Ministry of Energy which in turn sets prices through the issuance of a decree published in the Official Gazette. Each tendering process establishes, as part of its regulato-ry framework, its own indexing formulae applicable to long-term node prices, whose respective indexes must be verified on a monthly basis in order to check the variation of these prices.

Chilean electrical grids

In Chile, with the exception of small grids of Aysén and Punta Arenas, generation activities are developed based on two electrical grids: Central Interconnected Grid (SIC), which covers from the South of the Antofa-gasta region (Paposo roadstead) until the region Los Lagos (communes of Quellón), supplying the con-sumption of approximately 92% of the domestic pop-ulation; and the Northern Interconnected Grid (SING), which covers the regions of Tarapacá, Antofagasta and Arica-Parinacota, whose main users are mining and industrial companies.

Specifically, in order to meet the demand every time and at the minimum possible cost, the CISEN orders the dispatch of generation power plants based on their variable costs of generation, starting with those with the lowest variable costs, regardless of contractu-al positions of each generation company owing these power plants. Despite generation companies are free from executing supply agreements with free and reg-ulated clients, and are compelled to their fulfillment, the necessary power for fulfilling these agreements is produced by generation units of different members of the CISEN whose variable costs of production are

equal or lower than the marginal cost of the grid at the time of performing the dispatch.

Additionally, the design of the Chilean market entails the existence of payments in terms of capacity (or firm capacity), which correspond to explicit payments received by generators for the contribution to the sufficiency of the grid. These payments are allocated in line with the availability that each generator may secure during critical events of the grid, especially droughts, lack of availability of fuels and failures of power plants, and are transferred to the final price of the electrical supply both to free clients and also the regulated ones.

Based on that, differences between the energy actually produced and the energy contracted for each generator, and between the capacity allocated and such contracted for each one of them become evi-dent, which give place to energy and capacity transfers inside the CISEN among different players. In these spot

transactions, generation companies that, as a result of the economic dispatch carried out by the CISEN, show a self-generation higher than such committed in the agreements (surplus companies), sell energy to those which show production levels lower than the energy contracted with their clients (deficit companies).

An analogue situation takes place with capacity trans-actions, which are determined on an annual basis by the CISEN and generate transfers from such gener-ation companies which have surplus of firm capaci-ty with respect to the other peak capacity commit-ments with their own clients, towards those which otherwise show deficits.


Percentages of energy traded coming from ERNC sources

required by law. 5%2010/ 2015 20%/ 2025

Physical and monetary transfers are determined by the CISEN, and they are valued, in the case of energy, on an hourly basis at the marginal cost resulting from the grid operation. In the case of capacity, the price is the capacity marginal cost, which currently corre-sponds to long-term node price of peak capacity.

The law allows generators and regulated clients to agree temporary and voluntary reductions of the electrical energy consumption through incen-tives. This measure is intended to encourage, in the case of shortage, that these clients be motivat-ed to save electrical energy and make an efficient use of such consumed.

Renewable energies

In 2008 the Act 20,257 was enacted which fosters non-conventional renewable energy sources (ERNC) such as: geothermal, wind, solar, biomass, tidal, mini-hydro and co-generation. In particular, this law required that a percentage of supply agreements of generators executed after August 31, 2007, were sup-plied by using renewable sources. The percentage of energy required started with 5% for the term 2010-2015, and it was gradually increased until reaching a maximum of 10% by 2024. In October 2013 the law Fostering of Non-conventional Renewable Energy (Law 20,698, also known as Law 20/25), which in-creased the requirements of the ERNC, by doubling the goal set out in Act 20,257 and established that towards 2015, 20% of the traded energy must come from ERNC for those agreements entered into after July 1, 2013.

For fostering investments and competitiveness in the electrical market, the Electrical Concessions Law was enacted in October 2013, in order to fasten the processing and terms related to the electrical con-cession. In the essentials, it simplifies the process of provisional concessions and strengthens the pro-cedure for processing the final concession, since it fits processing times, by reducing terms from 700 to 150 days, indicates possible observations and objec-tions; and modifies the notice process, modernizes the real properties valuation procedure; and settles

conflicts between different types of concessions. Therefore, there will be higher certainty for the par-ties involved it will allow to diversify the energy mix, by facilitating the incorporation of the ERNC.

As part of the environmental regulation, it is important to mention Supreme Decree N°13/2011 of the Minis-try of Environment, which establishes an emissions standard for thermoelectric plants, in force since June 2011. This standard regulates the limits for emissions released into the atmosphere concerning Particulate Material (PM), sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury (Hg), and also establishes the lim-its for emissions by making a differentiation between new and existing facilities, and also by the type of fuel used (solid, liquid and gas). The regulation also

sets out compliance terms for the existing facilities, which in the case of particulate matter (PM), after the enactment of this regulation, companies were given thirty-six months to to make all the necessary chang-es to comply with this reform, that is, December 2013. In the case of NOx and SO2, the compliance tem was four years for power plants located in areas declared as latent or saturated zones and five years in the rest of the country.

In 2014, Act 20,780 was enacted, through which a new tax to emissions or green taxes" was set out, which levies emissions into the air of particulate material (PM), sulfur dioxide (SO2), nitrogen oxides (NOx) and carbon dioxide (CO2), produced by turbines or boilers with a capacity equal to or lower than 50 MWt. This new tax will be levied since 2017. For the case of car-bon dioxide emissions, such tax will be equivalent to five dollars per ton of CO2 released.

In 2014 In 2014, a tax reform was approved where a new tax for emissions or "green taxes" was brought into force, which levies emissions into the air of particulate material.

Energy transmission

As for the activity of high voltage electrical energy transmission, the law ensures the owners of transmis-sion grids the right to recover the entirety of capital, operation, maintenance and administration costs.This is done by dividing the transmission grid into subsystems: domestic, composed of transmission lines which are essential for enabling the supply of the electrical grid; zonal, mainly composed of power lines to supply consumption in concession areas of distribution companies; and dedicated, composed of lines aimed essential and mainly to the supply of elec-tric energy to free clients or to evacuate energy from generation power plants. The annual value of domes-tic, zonal transmission facilities and the payment for using dedicated transmission facilities used by users and the price regulation will be determined by the CNE every four year based on valuation studies, which are carried out by independent consultants. Mostly for the case of the domestic grid, the interaction of the market will finally determine which works are to be developed, since the opinion of the CISEN and the CNE are also taken into account, and in the case of controversies or disputes, the matters are subjected to a Panel of Experts' settlement. Works are finally al-located per lower fee (annual fee) in an open bidding processes managed by each CISEN.

In July 2016, Law 20,936 was published (also known as Transmission Law), with sets out, among other is-sues, that transmission grids will be paid by final users through single charges, to be calculated on a bi-quar-terly basis by the CNE in the corresponding technical report, for determining the short term node price. The transfer of the transmission payment towards final users will be carried out gradually, starting in 2019 and ending by 2034. Additionally, the Transmission Law creates the CISEN for replacing the CDECs, by

modifying its internal structure, assigning the coor-dinator new obligations and powers, and making it independent from transmission and generation com-panies. The new law also defines development poles such as areas with high potential for renewable en-ergy generation, whose utilization may be useful for the public. The annual value of development poles is determined by the CNE at the same instances that for other segments of the transmission. Every five years, the Ministry of Energy must develop a long-term en-ergy planning process for different energy settings of generation and consumptions, by taking into account a minimum horizon of 30 years. The result of this pro-cess will provide an input for the annual planning of the transmission carried out by the CNE, which should consider a minimum horizon of 20 years.

Colombia

Since 1994 the electrical sector in Colombia allows the private involvement in different businesses within a market competitiveness framework for generation and trading of electrical power, and a regulated setting for transmission and distribution.

The different activities of the electrical sector are regulated by the Public Service Law, Law 142 of 1994, and the Electrical Law, Law 143 of 1994. Likewise, the activities of the electrical sector are regulated by cor-responding technical standards and regulations is-sued by the Energy and Gas Regulation Commission (CREG). The wholesale energy market started its op-erations in July 1995, and, from that time, generation companies must provide daily price offers and the availability under the competitiveness setting.


In the market there are two types of clients: non-reg-ulated and regulated. Non-regulated clients may carry out negotiations freely with generation, distribution or trading companies. The minimum consumption for these non-regulated clients is 100 kW or 55,000 KWh-month. The consumption of regulated clients may be supplied by trading or distribution companies and their energy must be acquired through public tendering processes which establish bilateral agree-ments which usually last from one to six years.

Argentina

The Argentinian regulatory framework for the electri-cal sector was established according to Act N°15,336 from 1960 and Act N°24,065 from 1992, which to-gether comprise the Argentinian Electrical Act whose activities are divided mostly into three segments: gen-eration, transmission and distribution. According to the Argentinian Electrical Act, the federal government created the Wholesale Electrical Market (MEM) with four types of players: Generators, transmitters, distrib-utors and large clients. The latter may purchase and sale electricity.

In Argentina, the mixed company CAMMESA is re-sponsible for the coordination of dispatch, the ad-ministration of transactions in the MEM and the calculation of spot prices. Players of the market cor-respond to CAMMESA’s shareholders with 80% of the social capital and the Energy Department holds the remaining 20%. The main objective of CAMMESA is to secure that the demand of electricity is supplied at a minimum cost. Due to recent changes in the reg-ulations, fuels are supplied to generators through CAMMESA and units are dispatched taking into ac-count their consumption, price and availability of fuel for each generator.

The Ministry of Federal Planning, Investment and Public Services appoints the president of CAMME-SA. The National Electricity Regulatory Agency or ENRE is responsible for regulating public service activities in the electrical sector and the enforce-ment of jurisdictional decisions. The Ministry of Federal Planning, Investment and Public Services, through the Energy Department, is mainly responsi-ble for the implementation of the Argentinian Elec-

trical Act. Through its main duties, such department regulates the dispatch and activities of the grid in the MEM, and grants concessions or authorizations for each activity in the electrical service. The Ener-gy Department is also responsible for establishing policies in the oil and natural gas industry, which di-rectly impacts on thermoelectric generators and also the general electrical sector.

In Argentina, the generation and distribution activities and other electric energy developments are carried out through the Argentinian Interconnection Grid or SADI, the main grid of electric energy transmission, which covers the whole country.

The generation sector is organized based on a com-petitive base, in which independent generators sell energy in the spot market. The energy supply is highly dependent on fossil fuels, mainly natural gas.

Since 2004, the availability of fuel has become one major issue in the SADI due to a decrease in the pro-duction of natural gas in the country. In order to re-place the production of natural gas, the Argentinian government has increased the volume of LNG, gas oil and fuel oil, whose imports take place mostly during winter season (between May and August).

Regulated and industrial clients in the SADI are de-fined as large users in the electrical market and are categorized according to their consumption level: Major large users (GUMA), with capacity higher than 1 MW and energy consumptions higher than 4,380 MWh/year, Minor large users (GUME) with capacity between 30 KW and 2 MW, and Particular large users (GUPA) with capacity between 30 KW and 100 KW.

Contract prices with industrial clients are nego-tiated through direct bilateral agreements, ex-pressed in American dollars and including payments for energy and capacity.

By the end of 2006 Resolution S.E 1281/06 was pub-lished, which creates the Energía Plus program, estab-lishing a new supply service which may be supplied by generators, co-generators or self-generation, which were not part of the MEM to the publication date of the resolution, or whose capacity or generation units were are not connected into the grid by that date. The purpose of the program was to support the increase in the demand of large clients with consumptions equal or higher than 300 KW.

The execution of the Energía Plus program requires a supply contract between parties and a price agree-ment which considers the costs involved and a profit margin. These agreements and costs involved must be approved by the Ministry of Federal Planning, In-vestment and Public Services, and the income margin must be determined by the Energy Department.

Agreements under the Energía Plus program are short-termed and usually with a duration of up to 18 months. Since these agreements cover the sur-plus of demand from industrial clients, the utili-zation factor of the installed capacity tends to be low. Besides, these agreements are supplied with executed guarantee agreements with other gen-erators for selling non-used contracted energy, rendering a higher load factor.

In March of 2013, the Energy Department issued Res-olution 95/2013 that affected the payment of gener-ators which sell their energy at the spot market. This resolution turned the Argentinian electrical market into a "medium cost" compensation scheme, by in-creasing sales of generators. TermoAndes was not considered for this resolution.

In May 2014, the Energy Department issued Reso-lution 529/2014 that introduced a price update for the previous Resolution 95/2013, due to an increase in costs and adding adjustments for new concepts, such as, a new charge for financing major mainte-nance activities and a differential charge for using biodiesel as fuel.

On July 10, 2015, the Energy Department issued Resolution N ° 482/2015 (“Resolution 482”) which updated prices of Resolution 529/2014 from February 1, 2015, retroactively. This resolution in-cludes the energy of TermoAndes not committed in agreements with Energía Plus; this way the ener-gy and capacity sold at the spot is paid in line with the following aspects:

The generation sector is organized based on a competitive base, in which independent generators sell energy in the spot market.

Agreements under the Energía Plus program are short-termed and usually with a duration of up to 18 months. Since these agreements cover the surplus of demand from industrial clients, the utilization factor of the installed capacity tends to be low.


• O&M variable costs: the price of this charge is de-fined according to the type of technology and MW installed. It is paid according to energy generated.

• Generator margin: the price of this charge is de-fined according to the type of technology and MW installed. It is paid according to energy generated.

• Trust margin: the price of this charge is defined according to the type of technology and MW in-stalled. It is paid according to the energy gener-ated and is retained by CAMMESA to be restored to the generator when the latter submits an infra-structure project to be built using these funds.

• Non-recurring maintenance: the price of this charge is defined according to the type of tech-nology and MW installed. It is paid according to energy generated. This charge is also retained by CAMMESA to be restored to the generator when the latter performs major maintenance activities prior approval of the Energy Department.

• “Resources for investments of the FONINVEMEM 2.015 until 2.018”: it is created so as to invest in new generation plants. This charge is paid based on energy generated.

• Fixed costs: the price of this charge is defined according to the type of technology and MW installed. It is paid in line with the capacity of-fered, not committed in agreements. The price of this charge is affected in the case that the generator does not fulfill with the availability defined by CAMMESA.

On March 30, 2016, the Energy Department issued Resolution S.E.E. N° 22/2016 which updates retroac-tively to February 2016 the prices published in Reso-lution 482, without introducing changes to the pay-ment method or covered plants.

On February 2nd, 2017, the Energy Department is-sued Resolution 19/2017 which modifies the energy and capacity payment scheme to generators includ-ed in Resolution S.E. 95/2013 and its amendments. In

the case of TermoAndes, it includes the capacity and energy not committed in Energía Plus agreements. From this resolution going forward, prices are set in USD and will be converted into pesos at the closing exchange rate of the month of the corresponding transaction. All concepts determined in the resolution will be debited to the maturity date of the transaction. It also removed withheld concepts.

Transmission activities

As for transmission activity, it corresponds to a public service supplied by several companies to which the fed-eral government has granted concessions. Nowadays, a concessionaire operates and holds high voltage facilities and eight concessionaires operate and hold high and medium voltage facilities, to which generation units, dis-tribution grids and large clients are connected to.

International interconnection transmission grids also require concessions granted by the Energy Department. Transmission companies are authorized to charge tolls for their services. Moreover, distribution is a public ser-vice granted to companies to which distribution has also been granted through concessions. Distribution compa-nies have the obligation of making electricity available to final users inside the concession area, regardless where the client holds an agreement with the distributor or di-rectly with a generator.

Consequently, these companies have regulated tar-iffs and are subject to specifications in the service quality. Distributors receive the electricity from the MEM through spot markets at prices in accordance with the season.These seasonal prices, set by the Energy Department, correspond to the ceiling elec-tricity costs acquired by distributors and transferred to regulated clients.

The regulation establishes that, in the event of deficits at generation level relative to the consumption of clients, generators involved in the Energía Plus market must purchase energy at marginal cost, which is much higher than the price set in the agreements. This risk is mitigat-ed by guarantee agreements among generators, whose sale prices are lower than the marginal cost, but higher than the spot price.

06 l Our Strategy

Annual Report 2016 AES Gener 7776 Our Strategy

STRATEGIC AND FINANCIAL PRIORITIESCommercial strategy of AES Gener

The commercial policy of the Company seeks to min-imize the volatility of the flow cash, by managing risks according to market and industry reality. For this pur-pose, we consider the level of hiring, the composition of different types of clients in the portfolio, agreement terms, as well as the regulatory framework and par-ticular features of the different markets and countries where we operate.

In its commercial studies, AES Gener draws up growth estimates for the demand, projections of marginal costs and grid prices. Therefore, the company determines the level of contracts necessary to stabilize flows with an acceptable risk level.

Chile

A relevant commercial factor for the Company refers to the condition of being the main thermoelectric gen-erator in Chile, which grants a high level of security of supply, regardless the hydrological conditions. In this sense, as part of the search for alternatives to expand the actual and efficient generation capacity of the com-pany, the feasibility of such is analyzed on a permanent basis, and some short-term agreements have been exe-cuted for the use of liquefied natural gas in the back-up plant Nueva Renca at competitive prices.

Colombia

The commercial strategy of AES Chivor seeks to max-imize the commercial margin by reducing the volatil-ity of such. For this purpose a comprehensive man-agement of the commercial risk is carried out, for every year at a desirable level of bilateral agreements in line with the generation profile of the plant and a client credit risk policy.

Argentina

The commercial strategy of TermoAndes, currently one of the leaders in terms of sales in the Energía Plus mar-ket seeks to maximize incomes and increasing business margins through an increase in the average price and contracted capacity under the Energía Plus program. TermoAndes is authorized to sell a portion of its energy generation to clients of the Energía Plus program, while the rest is sold at the spot market. Likewise, it is essen-tial to keep availability of the gas supplied at low costs and guarantee the technical availability of the commit-ted equipment so as to secure Energía Plus agreements.

Hence, the objective is to increase the average price and the contracted capacity under the Energía Plus program. It is important to point out that current-ly TermoAndes is one of the sale leaders in the SADI. Likewise, it is essential to keep the availability of the gas supplied at low costs and guarantee the technical availability of the committed equipment so as to secure Energía Plus agreements.

" The Commercial Policy of the Company seeks to minimize the volatility of the flow cash, by managing risks according to market and industry reality"


INNOVATION AND TECHNOLOGY FOR PROJECTIONS INTO THE FUTUREAES Gener acknowledges innovation as one of the strategic pillars in the accomplishment of business objectives. In this respect, during 2016, new developments of business lines such as the sale of solar roof services based on photovoltaic panels, the study of alternative fuel projects, and also the assessment and implementation of energy efficiency systems aimed at optimizing ancillary consumptions of power plants were carried out.

The use of state-of-the-art technologies that render the most efficient solutions to production processes is an ongoing concern for AES Gener, both in terms of the update of systems and operating equipment of plants and supporting areas, such as information technology. The innovation as a regular process in AES Gener has been assessed and recognized, being in the first place in the segment of energy companies, in the ranking of the Most Innovative Companies 2016, prepared by the ESE Business School.

AES Performance Excellence (APEX)

APEX is an ongoing improvement program, introduced by The AES Corporation in every business under operation. The program includes a set of consistent tools and methodologies, ordinary and stringent, such as Lean and Six Sigma, to improve our business processes and take our operational excellence to the next level.

Our people are trained for developing skills related to project management and the improvement of corporate performance. They also participate in regional and global sessions so as to share experiences so that others, as part of the organization, may replicate best practices. As our people improve business processes, they create actual benefits, including savings, both for the company and our clients while developing their own skills.

The APEX tools and methodologies help us to improve our operations. By improving our operations, we can better fulfill our mission of improving life quality. Since 2006, our people have used a common way to approach ongoing improvement, from identifying problems and defining solutions and proceeding for implementing improvements.

Remote submarines for inspection

In the search of technically reliable and safe solutions, AES Gener started using Remote Operated Vehicles (ROV) in the process of adduction tunnel inspections in our hydroelectric plant Alfalfal. The implementation of this idea has simplified tasks that before implied a high human and technical risk, and also long-lasting shutdowns. Currently, tunnel inspections, which used to take 28 days, nowadays may be performed in only two days.

Besides, with this tool, it was possible to reduce the tunnel emptying frequency to perform maintenance activities, from 10 to 40 years. This initiative sorted out a series of difficulties because the vehicle batteries for remote inspection went dry before completing the route of the tunnels to be inspected. Our team used ongoing improvement technologies; APEX, for finding a forward thinking solution to this problem, which consisted of using a controlled water flow for displacing the remote inspection vehicle, hence reducing the power consumption of such.

Drones for transmission line inspections.

The use of drones by AES Gener in the process of inspecting transmission lines started with the use in preliminary inspections of conducting lines and towers. This way support on-site inspections for the early detection of conditions that may require a more comprehensive review in towers, anchoring points or conductors. The evolution of this practice led to the use of drones in the inspection of high risk works such as the assembly of towers as a means for having a third viewpoint of maneuvers and safety conditions applied by our associates. Current uses include, among others, inspection of supporting structures, and supporting conditions and integrity of towers in our access areas, inspection to the condition of conductors from upper views and assessment of connection quality of conductors.

Improvements in the hydraulic profile of Pelton runners to increase capacity and durability in hydroelectric facilities.

This initiative was developed to improve the performance of Alfalfal Power Plant, which feeds its flow rate with melted snow from the mountains so it receives a considerable level of sediments in the water that moves the runners, which in turn causes high concentrations of plagioclase and quartz, being the latter the cause of abrasion in components with a classification of 7 in the Mohs scale (where the diamond is the highest with Nº 10). Thus, as a result of years of developments, researches and projects fostered by technical challenges aligning with the growing need of innovation, AES Gener managed to improve the performance and durability of runners through the creation of strategic alliances with the manufacturer of Alfalfal turbines.

In this context, several initiatives have been implemented, mostly aimed at the application of hard coatings on the active surface in the buckets of runners, which has expanded the service life of runner between repairs. Apart from the optimization in the type of coatings and the implications they have had in increasing the durability, other initiatives sustaining an ongoing improvement regarding these topics may also be cited. The addition of robotic technology in the process of applying hard coatings has allowed a process homogenization, then reducing deviations caused by human errors. This project, developed between 2009 and 2013, became a milestone in the Chilean industry.

Tools and methodologies of APEX help us to improve our operations. By improving our operations, we can better fulfill our mission of improving life quality.

The use of drones by AES Gener in the process of inspecting transmission lines started with the use in preliminary inspections of conducting lines and towers.


Today, all improvements developed in this field constitute the standard for the runners of Alfalfal power plant. Projects related to improving the application of hard coatings continue to encourage the plant’s staff, whose technical level and knowledge has become more extensive on this topic. The next challenges in the investigatory line go through different paths, from the robotic automated line of other activities comprising the bundle of processes required for repairing a Pelton runner, to improvements in sintering powders that improve the incident factors related to better application of the coating.

The results of some tests in Alfalfal indicate that nano-technology of these products would set a substantial difference in the future. In time, Alfalfal Power Plant has become a real-scale laboratory for turbine manufacturers, being this feature of paramount interest for the development of innovation projects.

Generation control systems at plants

The IT department, together with the instrumentation areas of the plants, carries out a joint work for keeping the equipment and the necessary software updated for the reliability of plant operations.

In 2016 a new monitoring and efficiency system of Heat Rate was added to Ventanas III & I, Angamos Units I & II and Nueva Tocopilla Units I & II. This experience will be replicated in the rest of the AES Gener plants and its subsidiaries during the next years with the purpose of having the most efficient plants in Chile where AES Gener develops its operations. Also during 2016, with the involvement of the engineering and operations team of the Company, it was possible to progressively incorporate the AGC and EDAG systems in several plants in Chile, by complying with the requirements of the regulatory agency.

All these elements provided by the Information Technology to the sustainability of our organization are recognized again in 2016 in the measurement of the Sustainability Index that the Santiago Stock Exchange and Dow Jones Sustainability Index Chile grant to the most prominent companies in the matter, milestone which was accomplished by following every single requirement stated by this Index.

In time, the plant Alfalfal has become a real laboratory at actual scale for turbine manufacturers, being this feature of paramount interest for the development of innovation projects.


07 l Corporate Governance

Annual Report 2016 AES Gener 8584 Corporate Governance

STRUCTURE OF THE CORPORATE GOVERNANCEObjects of the Company

The current objects clause of the company was approved in the extraordinary shareholder meeting dated October 3rd, 2013, whose minute was transferred to public deed in the Notary of Santiago of Iván Torrealba Acevedo, dat-ed November 8th, 2013. An excerpt of such modification was published in the Official Gazette dated November 25th, 2013, which was recorded in the Commerce Regis-try of the Real Estate Registrar on page 90,278 under N° 58,879 corresponding to 2013.

Exploitation of generation, transmission, purchase, distribution and the sale of electric energy and that of any other nature; the purchase, extraction, exploitation, processing, distribution and sale of solid, liquid and gas fuels; processing, treatment, desalination and trade of desalinated water; sale and provision of project engi-neering services, and maintenance; execution and ex-ploitation of civil and whatsoever nature infrastructure works; provision of management services, audit, finan-cial, commercial, technical and legal consulting; port and waterfront services: exploitation of docks, cargo terminals, storage areas, warehouses and of any class of vessels, whether owned or from third parties in any mat-ter; act as ship-owner and forwarding agent in any form as allowed by the law; cargo transportation whatsoever nature whether domestic or foreign, by sea or land, mul-timode or any other means; obtain, transfer, purchase, lease, levy and in broad terms exploit in anyhow conces-sions referred in General Law of Electrical Services, ma-rine concessions, public works concessions in the water rights use of any nature; invest in movable and immov-able property; organize and incorporate companies of any nature as subsidiaries, affiliates or not, whose objects are related to energy whatsoever forms for the supply of public services of having as main consumption the use of electric energy, or corresponding to any of activities previously defined, being able to manage, supervise and coordinate its operations. In the event of incorporating

companies providing assets directly related to power generation, the organization will hold at least 51% of the property of such.

GOVERNMENTAL ENTITIES Ordinary shareholders meeting

AES Gener shareholders meet at least once a year in ordinary meeting, and when necessary, they hold ex-traordinary meetings. The first are carried out once a year, within the first quarter after the general balance in order to decide matters. In the ordinary meetings, the shareholders are entitled to participate and exer-cise their right of voice and vote for shares properly registered in the Shareholders Registry to the mid-night of the fifth business day prior to the celebra-tion date of the meeting. Shareholders with no right to vote, and also directors and managers which are not shareholders may participate in the meeting with the right to voice.

Meetings are constituted in the first call with absolute majority of shares issued with right to vote, and in the second call with those present or represented, whatev-er the number may be, and agreements will be made by absolute majority of shares present or represented with the right to vote, unless the law or bylaws of the compa-ny entail a higher majority. In 2016 the ordinary meeting was held on April 26.


Summary of comments and proposal of shareholders

During 2016 the company did not receive comments or propositions related to the status of company busi-nesses from shareholders having or representing 10% or more of shares issued with the right to vote, in ac-cordance with article 74 of Act N° 18,046 on Limited Companies and article 13 of this law regulation.

Main decisions made in the 2016 shareholders meet-ing may be checked in the company website.

Board of directors

The board of directors is a collegiate body, to which, according to stock corporations act and Company bylaws, is responsible for the management of such. It is composed by seven full members in their respec-tive substitutes, elected by the shareholders meeting.

The members of the board exercise such position for three years, with the possibility of being reelected. In accordance with provisions contained in AES Gener bylaws, directors do not receive any payment what-soever. Consequently, during the fiscal year 2016, di-rectors of the company did not receive any payments other than those relate dto their positions, nor repre-sentation expenses, travel allowances, benefits or any other allowance; the aforementioned, without preju-dice to the payment received by such directors which are members of the Board Committee and whose fig-ures are detailed in the following section.

The board of directors is a collegiate body, to which, according to limited companies law and Company bylaws, is responsible of the management of such.

88 Corporate Governance

6024620

Venezuelan

6.283.668-7

Chilean

9.954.477-5

Chilean

6.375.799-3

Chilean

037105150

Venezuelan

6.053.904-9

Chilean

498340129

American

E4088685L

Singaporean

D0259811

Venezuelan

6.948.688-6

Chilean

530656201

American


6.703.799-5

Chilean

555048108

American

MEMBERS OF THE BOARD

LUIS FELIPE CERÓN Chairman 1. Industry civil engineer, Pontificia Universidad Católica de Chile, Chile.

Master of Science in Accounting and Finance, The London School of Economics, England.

REGULAR MEMBERS

ANDRÉS GLUSKI Director

Master in Economics, University of Virginia, USA.

Ph.D. in Economics and International Finance, University of Virginia, USA.

RADOVAN RAZMILIC Director

Road, channels and port engineer, Universidad Politécnica Superior de Madrid, Spain.

BERNERD DA SANTOS Director

Business administration degree, Universidad José María Vargas, Venezuela.

Master in finance and corporate management, Universidad José María Vargas, Venezuela.

MICHAEL CHILTON Director

Chemical engineer, University of Missouri- Rolla

MBA, University of Ar-kansas, USA; JD, Kaplan University, USA

GONZALO PAROT Independent Director

Industrial city engineer, Universidad de Chile, Chile.

CLAUDIA BOBADILLA Independent Director

Lawyer, Universidad Diego Portales. Chile.

(1) Luis Felipe Cerón assumed as director replacing di-rector Mr. Stephen Coughlin and his acting Mr. Daniel Stadelmann Rojas, and as chairman of the company in replacement of Mr. Andrés Gluski, dated June 23, 2016, whose resignation to directive positions, in the case of Messrs. Coughlin and Stadelmann, and to the president position of the company, in the case of Mr. Gluski, were informed to the board of the directors of the company in the meeting held on the same June 23, 2016.

PAYMENT OF THE BOARD

In accordance with AES Gener bylaws, directors do not receive payment for exercising their positions, without prejudice to the payment received by those directors which are members of the Board Committee and whose figures are detailed in the following sec-tions. Without prejudice to the foregoing, during the fiscal year 2016 Mr. Luis Felipe Cerón Cerón, president of the board of directors of the company, received the amount of US$ 343 thousand for advisory fees as part of advisory agreements executed by Mr. Cerón with the company and its subsidiaries.

ALTERNATE DIRECTORS

VINEET MOHAN Alternate director

MBA Edinburg Business School .

Bachelor of Technology (Hons.), Mechanical Engi-neering Indian Institute of Technology, Kharagpur.

KRISTINA LUND Actin Director

Bachelor of Arts, Eco-nomics, Wellesley College, USA.

MBA, Harvard Business School, USA.

ARMINIO BORJAS Alternate director

Lawyer, Universidad Católica Andrés Bello, Venezuela.

MARGARET TIGRE Alternate director

Bachelor of Science in Accounting, George Ma-son University, USA.

ANTONIO KOVACEVIC Substitute Director

Business engineer, Pontificia Universidad Católica de Chile. Chile.

LUIS PALACIOS Alternate Director

Business engineer, Uni-versidad de Chile. Chile.

CONSULTANCY BUDGET

The Board of Directors has a budget for hiring experts for providing advisory services in taxation, finan-cial, and legal matters, or any other, which is set on an annual basis by the shareholders meetings of the company. The hiring of different experts required is discussed by the board and the hiring is defined by a required quorum for enforcing such agreements.

The annual budget for advisory of the board of direc-tors for the corresponding fiscal year 2016 amounts US$25,000 which was approved by the ordinary shareholders meeting held on April 26, 2016.

During the corresponding fiscal year 2016, the board of directors retained Indecs Consulting Ltd, charged to the budget for advisory for conducting an in-dependent insurance market study with regard to the value of premiums which may be obtained for covering operational insurances, which implied a cost of US$ 9,500.


23.202.311-2

Argentinian

21.535.942-5

Argentinian

MARIANA SOTO Vicepresidente de Asuntos Corporativos

Lawyer, Universidad de Chile, Chile

12.240.551-6

Chilean

6.130.443-6

Chilean

11.261.393-5

Chilean

14.642.201-2

Belgian

7.054.225-0

Chilean

Payment of the Directors Committee (UF)

2016 2015Iván Diaz-Molina 640 1.920

Radován Razmilic 1.920 1.920

José Pablo Arellano 640 1.920

Claudia Bobadilla 1.280

Gonzalo Parot 1.280

Total 5.760 5.760

General Manager Vicente Javier Giorgio

Finance vicepresident Ricardo Falú

Engineering and construction vicepresident Luis Knaak

Development vicepresident

Valerie Barnich

Attorney Alberto Zavala

Corporate affairs vicepresident Mariana Soto

Operations vicepresident Fidel Venegas

MAIN OFFICERS

VICENTE JAVIER GIORGIO Chief Executive Officer

Electronic Engineer, Universidad Tecnológica Nacional, Argentina.MBA, Universidad del CEMA, Argentina

RICARDO FALÚ Finance Vice-president

Public accountant, Universidad Nacional de Salta, Argentina. MBA, IAE Business School, Argentina.

LUIS KNAAK Engineering and Con-struction Vice-president

Mechanical engineer, Universidad Santa María, Chile. Master in industrial engi-neer, PUCV, Chile.

VALERIE BARNICH Development Vice-president

Industrial civil engineer, Université Libre de Brux-elles, Belgium.

FIDEL VENEGAS Operations vice-president

Electrical civil engineer, Master in electrical engi-neering Universidad Federico Santa María, Valparaíso, Chile. MBA, Pontificia Universidad Católica de Chile, Chile.

ALBERTO ZAVALA Legal Counsel of Development

Lawyer, Pontificia Universidad Católica de Chile, Chile.

Payment for Main Officers

The global compensation of the main officers of the company during 2016 amounted to US$ 6.0 million. This amount includes a monthly payment and vari-able bonuses according to performance and corporate management, which are also granted to other employ-ees of AES Gener.

The benefit plan of company officers comprises a vari-able annual bonus according to performance and cor-porate management, and the figure is determined every year based on referred parameters.

It is important to highlight that according to compa-ny policies, AES Gener officers who are members of Boards of Director of related companies do not receive

payment or they may waive the corresponding pay-ments, accordingly.

During 2016 the company paid for indemnities to main officers an amount of US$0.9 millions.

BOARD COMMITTE Members

In accordance to the provisions contained in articles 50 bis of the stock corporations Act N°18,046, the Company has a Board Committee composed of three members, which exercises and enforces the duties set out by the law.

In extraordinary meeting of the board held on April 28th, 2016, Mr. Gonzalo Parot Palma (Chairman of the committee), and director Mrs. Claudia Bobadilla Ferrer; and Mr. Radovan Razmilic Tomicic were ap-pointed as members of the Board Committee.

PAYMENT FOR THE MEMBERS OF THE BOARD COMMITTEE (UF)

In the ordinary shareholders meetings held on April 26th, 2016, it was agreed to define as payment for members of the Board Committee members the amount of UF 160 on a monthly basis.

CONSULTANCY BUDGET FOR THE BOARD COMMITTEE

The Board Committee has a budget for hiring experts who provide advisory in taxation, financial and legal matters, which is set annually by the company share-holders. The hiring of different experts is discussed inside the Board Committee and the hiring is defined by a required quorum for enforcing agreements.

The yearly budget for advisory of the Board Commit-tee for the corresponding fiscal year 2016 amounts US$25,000 which was approved by the ordinary shareholders meeting dated April 26, 2016.

During the corresponding fiscal year 2016, the Board Committee did not make use of the annu-al budget for advisory services as agreed by the ordinary shareholders meeting dated April 16, 2016 amounting US$25,000.


MANAGEMENT OF THE BOARD COMMITTEE

In compliance with provisions contained in article 50 bis of the stock corporations act, amended by Act 20,382, during year 2016 the Board Committee met fourteen times to decide about operations and agreements of the company with related individuals in accordance with rules of Title XVI of Law N° 18,046 on limited companies and also for addressing other legal matters, by informing the board of directors its agreements and recommendations. Operations be-tween related parties addressed by the committee are adjusted to fairness conditions governing the market which contributed to social interest, so the approval of such was recommended to the board of directors.

In Board Committee session N° 137, dated January 29, the committee

• Analyzed the information available and agreed, unan-imously by the members present, to recommend the board the approval, for operational considerations, for the Company to sell 350,000 metric tons of coal to the subsidiary Empresa Eléctrica Cochrane, under CIF and similar conditions to those agreed between the company and the original suppliers.

• Analyzed the information available and agreed, unanimously by the members present, to recom-mend the board the approval, for technical con-siderations, of a transaction by which the com-pany would sell AES Hawaii from its own supply, and AES Hawaii would sell in turn to AES Gener a coal shipment from its Australian supplier, un-der the terms that the transaction would allow a cost saving of US$300,000 to be shared equally between both companies, making extensive such recommendation, until up to 11 operations, to be subscribed between the same parties, under the same conditions.

• Acknowledged and approved updated figures of the company budget , especially in the matter re-lated to exchange rates, commodity prices, dam levels and accumulated snow for meltdown.

In Board Committee session N° 138 dated February 18, the committee

• Acknowledged and analyzed the information and agreed, unanimously by the members pres-ent, to issue a favorable report with regard to the balance and financial statements of the company corresponding to fiscal year ended on December 31, 2015, and also with respect to the outsourced auditors report.

• Became aware of the report submitted by the ad-ministration regarding actions executed aimed at incorporating a new partner in the subsidiary Em-presa Eléctrica Angamos;

• Became aware of the report submitted by the Administration regarding the status of the hydro-electric project Alto Maipo;

• Became aware of the arrangements made by the Administration regarding the eventual hiring of AES Servicios América, a company related to The AES Corporation, for transactional services concerning human resources. Such services would be provided under similar terms to those provided by such company in financial matters to that date, which would imply significant sav-ings as a consequence of using lower recourses and increasing productivity;

• Became aware of the report submitted by the Administration regarding the updated budget of project development area of the company;

• Analyzed the information and agreed, unani-mously by the members present, to recommend the board of directors to propose for 2016 the appointment of Fitch Ratings and Feller Rate, as a private entity for domestic credit rating, and Standard & Poor’s, Fitch Ratings and Moody’s as international private credit rating agencies in the following ordinary shareholders meeting of the company;

• Analyzed the information and agreed, unani-mously by the members present, to recommend the board to adopt the proposition submitted by the Administration to appoint as members of the council of the AES Gener Foundation the senior officers and staff of the company, Mrs. Mariana Soto, Karin Niklander and Mariangel Mandio-la and Messrs. Cristóbal Groetaers, Daniel Scali Abritta, Marcelo Grifferos and Rodrigo Osorio.

In Board Committee session N° 139, dated March 20, the committee

Reviewed the background and resolved, unanimous-ly by the members present, to recommend the board the approval of this Corporate Governance Policies Report and sent it to the Superintendence of Securi-ties and Insurance in line with provisions contained in General Rule N° 385 of the Superintendence of Secu-rities and Insurance.

In Board Committee session N° 140, dated May 4, the committee

• Agreed, unanimously by the members present, to appoint as president of the committee the inde-pendent Director Mr. Gonzalo Parot Palma;

• Acknowledged the information received and an-alyzed the financial statements of the company as of March 31st, 2016; its reasoned analysis and contingency notes.


• Acknowledged the information received and it approved unanimously by the members present to recommend the board of directors the approval of the sales operation of four shipments of coal of 70,000 metric tons each, those already acquired from Trafigura Pte Ltd, to the company AES Ma-sinloc, a company related to The AES Corporation, the controlling interest. Such shipments would be delivered during the second semester of 2016, with the option of deferring the delivery of the last for the first semester of 2017; all the rest, under similar conditions to those in which the organiza-tion acquired such shipments from its providers.

Additionally the Company, as part of a tendering process, would acquire four shipments in replace-ment of those sold to AES Masinloc; all the above would imply lower costs estimated in 275,000 for Masinloc, and an estimated income of US$560,000 for the organization.


Became aware of the proposal regarding the commit-tee activities calendar submitted by the administra-tion which, after review, requested the administration to make some modifications to be submitted again for further approval.

In Board Commitee session N° 143, dated June 16, the committee

• Decided, unanimously by the members present, as part of changes intended to be introduced to the company administration, to recommend the board of directors the execution of advisory agreements; namely, one by and between Mr. Luis Felipe Cerón and AES Gener S.A., and the other by and between Mr. Cerón and the subsidiary Alto Maipo SpA; both in the terms and conditions in-formed to members of the committee in advance to the execution date of this session;

• In the context of changes to be introduced to the administration of the company, it became aware of the tenor of the briefing to be sent as "essen-tial fact" to the Superintendence of Securities and Insurance, and public information to be released into the market, taking into account such changes.

In Board Committee session N° 144, dated June 16, the committee

• Agreed, unanimously by the members present, to approve the new compensation plan submitted by the company administration;

• Analyzed the information and agreed, unani-mously by the members present, to recommend the board of directors the approval of an inter-nal audit plan for 2016 to be carried out by the head company AES Corp. and the budget for such services as well.


In Board Committee session N° 145, dated July 27, the committee

• Acknowledged the report drawn up by the ad-ministration with regard to assumptions in the preparation of the budget for fiscal year 2017, related to microeconomic aspects, commod-ity prices, hydrology, growth of the demand and financial issues;

• Acknowledged the outsourced audit plan esti-mated for fiscal year 2016 for the company and its subsidiaries, to be carried out by Ernst & Young;

• Acknowledged the progress status report of hy-droelectric project Alto Maipo, drawn up by the company administration.

In Board Committee session N° 146, dated August 28, the committee

• Acknowledged the progress status report of hy-droelectric project Alto Maipo, drawn up by the company administration.

• Acknowledged the arrangements carried out by the administration as part of the process intend-ed to obtain, from auditing companies governed by Title XXVIII of Law 18,045, the submission of

proposals for the provision of outsourced au-dit services for the company and its subsidiaries for fiscal year 2017, to the effect that the same be reviewed by the committee and the Board of Directors, and become the foundations for pre-paring a recommendation to the next ordinary shareholders meeting.

• Acknowledged the project being developed by the Administration, intended to uniform criteria for different service supply agreements, between AES Gener and its subsidiaries, and between AES Gener and AES Argentina, subsidiary of AES Corp, the controlling interest, all entered into under the existing market conditions, for the purposes of establishing one type of agreement allowing to determine in a better way proper transfer prices for such services.

In Board Committee session N° 147, dated August 29, the committee

Carried out the first review of the budget for the com-pany for fiscal year 2017 and 2018; acknowledged the activity report of the Ethics and Compliance Manage-ment of the company during 2016; acknowledged the progress status of the internal audit plan correspond-ing to fiscal year 2016; acknowledged the progress

status of negotiations with Minera Los Pelambres, non-controlling shareholder of Alto Maipo SpA for the execution of a "Term Sheet" summarizing agree-ments between project shareholders, with respect to the way of financing the differences due to overrun costs in the project, and modifications to the condi-tions and terms of the PPA between Alto Maipo SpA and Minera Los Pelambres.

In Board Committee session N° 148, dated October 24, the committee

• Acknowledged the renewal process of operational insurances for the company and its subsidiaries for fiscal year 2017, which to date is waiting for the market study contracted by the Administration to the independent company INDECS Consulting Ltd, as a previous requirement for submitting a new proposal to consideration of the committee.

• Acknowledged, unanimously by the members present, and resolved in light of operational con-siderations, to recommend the board of directors the approval of a coal transaction between AES Gener and its subsidiary Empresa Eléctrica Co-chrane, for a coal shipment, under similar condi-tions to which it was acquired by the first to the provider, and transferring all costs of such opera-tion to Cochrane, in terms that AES Gener did not assume whatsoever cost for such.

In Board Committee session N° 149, dated November 21, the committee

• Acknowledged about arrangements carried out by the Administration so as to simplify the structure of several service provision agreements of the Ad-ministration and operation currently in force be-tween the company and its related subsidiaries, in order to: facilitate the administration of such; sim-plify transfer cost studies of different companies in a more accurate way; and facilitate the sub-mission of information related to such services to the tax authority. Likewise, acknowledged the new terms and conditions of the accounting and financing service agreements that are cur-rently under negotiation between the adminis-

tration with AES Servicios América, a company related to The AES Corporation, the controlling shareholder of AES Gener, which would replace the current in force.

• Lastly, acknowledged the terms and conditions of a new human resources service supply agreement that the Administration negotiates with AES Ser-vicios América, in which the latter would provide services such as recruiting, payroll and benefits, among others, which is intended to reduce costs in the provision of services; increase the efficien-cy, speed and quality of services rendered; and reduce the amount of personnel dedicated to human work issues.

• Analyzed the background and agreed, unani-mously by the members present, to recommend the board that in the next ordinary shareholders meeting of the company it proposed the appoint-ment, as outsourced audit company for fiscal year 2017, of Ernst & Young Servicios Profesionales de Auditoría y Asesoría Ltda. as first option; KPMG Auditores y consultores Limitada as second op-tion; and Deloitte Auditores y Consultores Limit-ada as third option; in this preference order; ac-knowledged the report drawn up by outsourced audit company Ernst & Young Servicios Profesio-nales de Auditoría y Asesoría Ltda, in relation to the internal control structure of the company and its subsidiaries.

In Board Committee session N° 150, dated December 16, the committee

• Acknowledged the report drawn up by the admin-istration in relation to the progress report of ne-gotiations with financing parties, consultants and partners of the hydroelectric project Alto Maipo, for the financing restructuring of such, and the progress report of project works;

• Acknowledged the budget of the compa-ny for fiscal years 2017 and 2018, drawn up by the Administration


• Acknowledged the information drawn up by the administration with regard to the involvement of the company in a tendering process carried out by Minera Spence, of BHP, for the construction and operation, for a 20-year term, renewable for an-other 5, of a desalination plant and a water pipe-line for the latter;

• Analyzed the background and agreed, unani-mously by the members present, to recommend the board of directors an annual renewal of the insurance policy against all risks for stoppages of the company and all of its subsidiaries with AES Global Insurance, a company related to AES Corp, controlling shareholder of AES Gener as for fis-cal year 2017, since the operation proposed fits to market conditions and becomes beneficial for company interests.

• Acknowledged and, unanimously by the members present, resolved to recommend to the Board of Directors the approval of the purchase during 2017, by AES Gener, of the necessary coal for its own operations and subsidiaries, transferring to the latter the necessary coal for the operation and all it costs related to each operation. Such costs would be adjusted to market conditions and would replicate cost conditions that the compa-ny may have with its coal providers, freight and insurance. The centralized purchase of coal by the company in the terms proposed would allow getting better economic and logistic conditions as possible, so the transaction would become bene-ficial for both parties.

SUSTAINTABILITY MANAGEMENTDow Jones Sustainability Chile Index

For second consecutive year, AES Gener is part of the Dow Jones Sustainability Index Chile (DJSI Chile Index), reaching this time an important increase in the rating of areas such as governance, code of con-duct in business, relation to community, occupation-al health and safety, development of human capital, and among others.

For entering the DJSI Chile, certain sustainability cri-teria must be met, which are determined by the TTS (Total Sustainability Score) calculated when using the annual evaluation of corporate sustainability of Ro-becoSAM. According to the calculation methodology, the index in Chile is composed of 12 out of 140 com-panies which take part in the IPSA.

ETHICAL FRAMWORKThe Board approved the Code of Conduct and Eth-ics and the Compliance Program, which aimed at en-suring that the company and its associates, business partners, providers and contractors, follow the most stringent ethical rules and fulfill all legal and regulato-ry requirements of Chile.

Among them, Act 20,393 (Criminal Responsibility of Legal People) is pointed out, and also relevant inter-national laws and rules such as: The convention on combating bribery of foreign public officials in inter-national trade transactions of the OCDE; other laws

against fraud and anti-corruption; the US Foreign Corrupt Practices Act and other applicable legislation.

The Code of Conduct governs, as employment re-quirement, actions of all people working in AES Gener, including workers of its subsidiaries.

Ethics and Compliance Department

The Ethics and Compliance Department provides training, information and certification programs for associates of AES Gener related to the Code of Con-duct and programs for avoiding and detecting crim-inal conducts, fostering an organizational culture which promotes ethical behaviors and the commit-ment to the compliance of laws, apart from monitor-ing and enforcing the compliance of company policies concerning corruption, bribery, money-laundering and participation with terrorist groups. The Code of Conduct is posted on the website www.aesgener.cl. In case of modifications, they will be informed through the same means.

Likewise, in order to ensure the compliance of con-cepts contained in the General Rule N° 270, dated December 31st, 2009 of the Superintendence of Securities and Insurance, the Company establishes policies and internal rules referred to the handling of information that, without being a fact or essential information, becomes useful for a proper financial analysis of AES Gener and its subsidiaries, its values or regarding the offer of such; through the "Manual for Handling Market Information of Interest" This concept implies all legal, economic and financial information referring to relevant aspects of social businesses, or that may have a significant impact on such. ("Infor-mation of Interest"). This document may be found on the company website.


The company makes every effort for protecting the confidentiality of reports and it does not stand repercussions against anyone who casts doubt or reports in good faith an improper conduct. More information is available on the company website www.aesgener.cl

Additionally the company is subject to multiple environmental regulations related to current operations and to the development of future projects.

* It does not include the subsidiary Guacolda.

In AES Gener we encourage to create a working en-vironment where associates feel free to raise ques-tions and concerns directly to the management of the company. In this respect, the company has a Help Line managed by an external provider so as to request counsel or inform an improper behavior.

The Help Line is available 24 hours a day, 7 days a week and it can be accessed by telephone (800 360 312 and dial 800 505 7319) or through the company website www.aeshelpline.com. Reports can be made

anonymously and once received by the external pro-vider they are forwarded to the ethics and compliance area of the company in order to proceed with corre-sponding investigations.

RISK MANAGEMENTAES Gener manages risk exposure by following the guidelines of the Risk Policy, which holds the follow-ing objectives:

1. Govern, establish and administer risk manage-ment activities in markets where it operates according to the Corporate Risk Oversight Com-mittee (ROC) Risk Management Policies of the head company The AES Corporation.

2. Review and approve risk management strategies of different businesses in line with guidelines approved by the ROC and the risk policy of the region.

3. Establish controls and a framework to:

• Study, manage, monitor, measure, and report risks inherent to the business on the markets where it operates; and

• Describe the authority structure for managing these risks, which include definition of roles and responsibilities of risk management duties for the busi-nesses where it operates.

The Company has implemented a commitee called Andes Risk Management Committee (ARMC) in order to govern, establish and administer the risk management.

The identification of risks is carried out through the risk log, which is periodically reviewed and updat-ed. Additionally, we use other tools for identifying new risks or establishing a better monitoring pro-cess of those already identified to which the com-pany may be exposed to. For measuring and quan-tifying risks, the policy defines the use of, at least,

two qualitative and quantitative methodologies. The quantitative methodologies entail: Maximum Potential Exposure (MPE) and Conditional Value-at-Risk (CVaR).

Below we present a summary of main risks to which our business is exposed to:

Risk of technological change

The company is exposed to the development of new technologies which may reduce sale prices or imply fundamental changes to the generation business. In order to mitigate the aforementioned, in the possi-ble extent, the company executes long-term elec-tricity supply agreements (PPA) so as to ensure in-come flows to cover financial obligations. In Chile, the company has a remaining service life average of 11 years in agreements.*

Regulatory risk:

The industry where the company operates is subject to multiple regulations governing the business op-

eration. There is a possibility that these regulations change the future or be interpreted in a different way so there might be effects on company operations.

Risk of natural disasters

The occurrence of natural disasters may damage the electric generation assets of the company, then reducing the generation capacity and/or increasing production costs. In case of that, the company may


face the need of purchasing energy from other gen-erators in order to meet its contractual commitments, which may have an adverse impact in the financial statements of such.

In order to mitigate this risk, the company executes insurance policies for all of its assets and operations, with coverage aligned with the industry standard, pro-viding coverage against earthquakes and other natu-ral disasters, and also for physical damages and cov-erage in case of operational stoppages and mitigation of loss of profit, among others.

Exchange rate risk

The financial statements of the company may be af-fected due to variations in the exchange rate, espe-cially the Chilean, Colombian and Argentinian peso. The exposure to this sort of risks arises when the company faces incomes or costs expressed in differ-ent currencies to the functional currency of the com-pany (the United States dollar).

In order to mitigate these risks, the company has im-plemented a strategy to cover variations in the ex-change rate. The main sourcess of risk exposure of the exchange rate are: (i) exposure to the Chilean peso in the term covered between the pricing of the tariff and the collection of sales to certain clients in Chile (ii) exposure to the Colombian peso in the distribution of dividends from the Colombian operation to the head office in Chile.

The company mitigates these risks through the ex-ecution of its coverage strategy, which entails the execution of derivatives agreements with finan-cial institutions which define the exchange rate of flows and/or transactions in currencies different to the functional one.

Risk of commodities.

The variation in the price of certain commodities may have an impact on the financial statements of the company. These impacts may be expressed through:

• Variation of the production costs related to ther-moelectric power plants which use different commodities for generation, especially coal.

• Sale of generation surplus at the spot mar-ket, by the non-covered part of electricity supply agreements.

• Differences in the coal indexation means of agreements with respect to our coal pur-chase agreements.

An important part of the mitigation of the risk is car-ried out through the execution of long-term electric-ity supply agreements (PPA), by indexing part of these agreements to variations that may happen in the price of commodities, in order to transfer to sale prices the variations occurring in our costs.

In 2016, due to the contracting level of the company, there has been no need for taking coverage for sales at the spot market.

With respect to the purchase of coal, the Company performs purchases in order to equal, as possible, the price of commodities used for setting sales in supply agreements with coal purchases. Additionally, the company in 2016 carried out its first transaction for covering the inter-year variation risk caused when it is not possible to fully adjust sales with purchases.

Credit risk

The credit risk is related to the credit quality of coun-terparts with which AES Gener establishes busi-ness relationships. These risks are reflected mostly on trade receivables and financial assets, including bank deposits and other financial institution and other financial instruments.

With regard to trade receivables, the clients of AES Gener in Chile are mostly distribution companies and industrial clients -financially sound- and over 90% of such or its controlling companies have local credit ratings and/or international investment levels.

The sales of the AES Gener group at the spot market are mandatorily carried out with other generation companies. In Colombia, AES Chivor performs risk assessments of its counterparts based on internally credit assessment which, in certain cases, may include the request of performance bonds to the counterpart.

With respect to the credit risk related financial coun-terparts with which the company operates, AES Gener follows a policy in which a local credit rating higher or equal to "A" of Standard & Poors and Fitch and “A2” in Moody’s rating is required.

An important part of the mitigation of the risk is carried out through the execution of long-term electricity supply agreements (PPA), by indexing part of these agreements to variations that may happen in the price of commodities

With regard to trade receivables, AES Gener clients in Chile are mostly distribution companies and industrial clients -financially sound- and over 90% of such or its controlling companies have local credit ratings and/or international investment levels.

08 l Our Management in 2016

Annual Report 2016 AES Gener 105104 Our Management in 2016

This year, just like in 2014 and 2015, the power plants of AES Gener continued to be the generation leaders in Chile with a contribution of 31% to the country’s total generation.

FINANCIAL RESULTS

Milestones

• In December 2015, the Argentine authority partially released the restrictions on the ex-change market, which allowed the company to buy USA dollars in that country. In turn, this al-lowed TermoAndes to distribute US$17.5 million to AES Gener

• In February, AES Gener started trading energy from the SING to the SADI through its own trans-mission line, InterAndes. As of December 31st, 2016 approximately 102 GWh were exported, mostly generated by GasAtacama

• In March, an agreement was reached with GNL Chile to continue with the necessary studies for the expansion of Quintero’s Terminal. This was part of the process associated with Open Season of GNL Quintero, which had started in November 2014 and by which AES Gener was awarded with a re-gasification capacity of 1.45 million m3/day.

• During the first semester, AES Gener execut-ed a liquid natural gas supply agreement with ENAP for Nueva Renca. This agreement, in force since July 28th, 2016, increased the gen-eration of Eléctrica Santiago. In addition, during

the second semester an agreement was signed with ENDESA to lease Nueva Renca between August and December 2016.

• On June 3rd, 2016 AES Gener was awarded with the 2016 Carlos Vial Espantoso Prize which is given every year to companies that build par-ticipatory work relationships based on respect and transparency, with a positive impact on the Company’s sustainability and productivity, the integral development of its employees and the progress of the country.

• On September 12th, for second consecutive year, AES Gener was nominated for the Dow Jones Sus-tainability Index in Chile, which is an award given to sustainable companies.

• On October 26th, 2016, AES Gener received the prize El Buen Ciudadano Empresarial (The good entrepreneurial citizen) from AmCham Chile.

• AES Gener has been recognized as the leading in-novation company in the electrical sector by ESE, the Business School of Los Andes University.

• AES Gener and AES Chivor are part of the rank-ing A Great Place to Work, both in the sixteenth place in 2016.


Alto Maipo. The hydroelectric project, Alto Maipo, includes the construction to two run-of-the-river in series in the basin of the Maipo River, Alfalfal II (264 MW) and Las Lajas (267 MW), with a total installed capacity of 531 MW.

• On February 2nd, 2017, the official bulletin of Resolution 19/2017 from the Under-secretariat of Energy was published. This Resolution amends the energy and capacity payments scheme of generators included in Resolution S.E 95/ 2013 and its amendments. In the case of TermoAndes, it includes the capacity and energy not commit-ted in the contracts of Energía Plus. From this resolution going forward, prices are set in US dollars and translated into pesos at the closing exchange rate of the transaction month. All con-cepts established in the resolution will be paid as of the maturity date of the transaction and there are no withheld concepts.

Status of construction projects

In 2016, AES Gener consolidated an important part of its second expansion phase composed of a diverse portfolio of generation projects with different tech-nologies for a total of 1,256 MW. As of the closing of 2015, 152 MW were completed related to the com-missioning of Unit V of Guacolda. As of the closing of 2016, other projects were completed that contributed with additional 573MW. Below are the details of the status of the project portfolio.

• Andes Solar. This project consists of a photovol-taic power station (solar park) with a capacity of 21 MW and started operations in May 28th, 2016. This project has environmental permits to operate up to a maximum capacity of 220 MW. The Com-pany is assessing its developments by stages.

• Tunjita. The Hydro-electrical project Tunjita con-sists of the construction of a 20 MW run-of-the-river power plant, next to the Esmeralda Dam of AES Chivor, in order to use the hydric potential of the diversion of the Tunjita River and the tun-nel that diverts that river flow rate towards the dam. On June 30th, 2016, the project started commercial operations.

• Cochrane. Cochrane is a thermoelectric project that includes the construction of two coal-fired plants of 266 MW each in order to provide a to-tal capacity of 532MW. Additionally, it has 20 MW of storage capacity. The project is located north of Antofagasta, in the town of Mejillones. The project construction was completed in 2016 with a total cost of US$1,300 million approx. On July 9th, 2016, the first unit started operations. Sub-sequently, on October 12th, 2016, the second unit started operations, which was the start of the commercial operation of the entire project. Ac-cording to the information provided in the Subse-quent Event of August 17th, 2016, the hydroelec-tric project Alto Maipo has experienced certain

difficulties in the execution of works, which has translated into cost overruns that might reach 22% of the original project’s budget. Such cost overruns have been submitted for the review of two independent specialist firms renown world-wide and they have supported its reasonableness. The cost overruns have led to a series of negoti-ations aiming at restructuring the existing financ-ing and obtain additional resources, provided by AES Gener, minority shareholders and project financiers so as to cover such cost overruns and continue with the project construction. On March 17th, 2016, the parties subscribed a restructuring


agreement for Alto Maipo in order to provide funds to finance 22% of the estimated cost over-runs of the project. The restructuring considers, among other aspects:

• AES Gener will acquire, directly or indirectly, the entire equity interest of Minera Los Pelambres in Alto Maipo, which amounts to 40% of the shares.

• Strabag SpA, the main contractor of the project, becomes a minority shareholder with approxi-mately 7% of the Company’s shares.

• The modification of the energy supply contracts between Minera Los Pelambres, Alto Maipo and AES Gener.

• The modification of the terms and conditions of the current senior financing of the project, includ-ing, among others, a term extension and addition-al funds for Alto Maipo from the parties involved.

SUMMARY OF 2016

As of December 31st, 2016, AES Gener S.A. Regis-tered profits for US$261 million which is 1% less than the US$264.8 million registered the previous year. From an operational standpoint, the gross earnings as of December 31st, 2016 amounted to US$625.4 mil-lion that represents a positive variance of 7% in com-parison to the US$582.8 million recorded the previous fiscal year. The variance between 2016 and 2015 is mainly explained by the gross earning variances in the different markets where AES Gener S.A operates as per the following details:

• SIC: the positive variance of US$62 million re-sponds to the higher availability of the power plants of the Company, which implied more effi-cient generation in the SIC: In addition, according to the agreement with ENAP, the generation of Nueva Renca allowed increasing the sales in the spot market in 2016. This partially offset the posi-tive margins resulting from the lease agreement of such power plant in 2016.

• SING: the increase to US$68.8 million corresponds mainly to the margin resulting from the commis-sioning of both units of Cochrane in Mejillones and the higher margin associated with sales to non-regulated clients as a result of the maturi-ty of old contracts and the start of new ones in Nueva Tocopilla. In turn, higher physical sales to non-regulated clients also made a positive contri-bution, as well as the better margins in the spot market resulting from a higher spot price and higher physical sales.

• SADI: The negative variance of US$16.1 million is mainly due to the extraordinary positive ad-justment in 2015 that affected the depreciation of equipment and spare parts received as part of a long-term maintenance agreement, as well as lower physical sales under the Energy Plus mode. This effect is partially offset due to the penalty of Resolution 22/2016 that increases the sale price of the gas turbines of TermoAndes in the spot market.

• SIN: there was a negative variance of US$72.2 mil-lion as a consequence of the negative impact of the exchange rate variances, which drove lower sale prices. Likewise, the margin was affected by lower spot prices associated with the energy sales made by Chivor in the spot market.

The EBITDA reached US$778.2 million that is 13% higher than the EBITDA of the fiscal year as of De-cember 2015. The variance is mainly explained by the better performance of the operations in the northern interconnected grid (SING), the central interconnect-ed grid (SIC), and Argentina (SADI), offset by higher gross gains in Colombia (SIN).

The contribution on EBITDA in 2016 and 2015 of the different markets in which the AES Gener Groups par-ticipates is shown in the graphs below:

EBITDA by Market

39%

22%

36%

3%

44%

31%

22%

3%

EBITDAYear 2015

US$691 million

EBITDAYear 2016

US$778 million

SIN: National Interconnected Grid (Colombia)

SADI: National Interconnected Grid (Argentina)

SIC: Central Interconnected Grid (Chile)

SING: Northern Interconnected Grid (Chile)


Accumulated

Statement of Comprehensive Income December 2015 US$ thousands

December 2016 US$ thousands

Profit & Loss

Gain (loss)

Operating Revenues 2.165.407 2.286.401

Cost of Sale (1.582.564) (1.660.954)

Gross Gains 582.843 625.447

Other income, by function 2.218 2.243

Administration expenses (104.659) (102.296)

Other expenses, by function (2.610) (2.981)

Other gains (losses), net (15.897) 534

Financial income 8.859 8.111

Financial costs (148.304) (161.531)

Equity interest in gains (losses) of investees, (net) 80.273 12.909

Exchange rate differences (17.340) (17.297)

Gain (loss), before taxes 385.383 365.139

Income tax expenses (132.709) (106.830)

Gain (loss) from continuous operations 252.674 258.309

Gain (loss) from discontinuous operations - -

Gains (losses) 252.674 258.309

Gain (loss) attributable to

Gain (loss) attributable to the controlling company’ owners 264.874 261.009

Gain (loss) attributable to non-controlling equity interest (12.200) (2.700)

Gains (losses) 252.674 258.309

Solid interest rate hedging ratios: 3.3x

Strong liquidity: US$706 million

As for the non-operational results, we can highlight the negative variance within “Equity interest in gains (losses) of investees” for US$ 67.3 million mainly de-rived from the results in 2015 due to the restructuring of Guacolda Energía y and higher “income expenses” that increased by US$13.2 million due to the corporate

debt increment partially offset by higher capitaliza-tion of interest expenses associated with Alto Maipo. This effect was partially offset by lower losses within “other gains (losses)” for US$16.4 million due to losses registered in 2015 related to the refinancing of debts related to Eléctrica Ventanas and AES Gener.


2017 2018 2019 2020 2021 2022 2023 2024 2025 2026/73

1.429589209198181575166188147143

Debt amortization schedule as of December 31st, 2016 (US$ million)

Fitch Moody’s S&P Feller (local)

AES Gener BBB- Baa3 BBB- A+

Angamos BBB- Baa3

Guacolda BBB- BB+

Eléctrica Santiago A (Local) A-

Indebtedness Ratio Unit December 2015

December 2016

Current liability/Equity (times) 2,12 2,07

Gross Debt /EBITDA (times) 5,5 4,9

Net Debt /EBITDA (times) 4,5 4,3

Financial expense hedging (times) 3,6 3,3

The main financial commitment of AES Gener is to maintain a balanced capital structure with investment grade by the main credit rating agencies. To this aim, the Finance VP of AES Gener permanently imple-ments actions to optimize the indebtedness level of the Company through an efficient hedging strategy to mitigate the risk of the devaluation of currencies in Chile, Colombia and Argentina.

As of December 31st, 2016, the financial debt amount-ed to US$3,824 million while cash, cash equivalent and other financial assets amounted to US$470 million, which translates into a net financial debt of US$3,354 million.

The total consolidated debt of the Company has an average life of 13 years and a manageable amortization schedule, without relevant maturities until 2021. Out of the total current debt as of the closing of 2016, a 57% (US$2,198 million) corresponds to non-recourse debts subscribed by subsidiaries of the Company , the remaining 43% (US$1,626 million) is composed of is-sued and/or secured debt by AES Gener S.A.

In 2016, the Company implemented important actions in order to optimize the terms and condi-tions of the current debt agreements such as the refinancing of the long-term debt of Angamos for U$199 million and the extraordinary repayment of the debt for US$ 100.5 million.

• Refinancing of a portion of the senior bond is-sued by Empresa Eléctrica Angamos S.A. In April 2016, our subsidiary Angamos performed an early partial redemption of its 144A/Reg S with a coupon for 4,875% and maturity in 2029. This operation implied a total redemption of US$199 million from the total US$800 million issuance. The redemp-tion was made at 94% of the nominal value of the bonds, with an implicit yield of 5.9%. This transac-tion was financed by syndicated loans with local institutions with the same terms and amortizations conditions of the bond. The refinancing had an average rate of 4.5%. As of December 31st, 2016 the notional amount of the bonds with maturity in 2019 is US$ 601 million.

• Extraordinary debt repayments. In order to re-duce financial liabilities, in 2016 AES Gener per-formed two operations to reduce liabilities for a total of US$100.5 million.

• Bond repurchase in the secondary mar-ket. In June and December 2016, AES Gener repurchased its 144A/Reg.S with maturity in 2025 for a total of US$33 mil-lion; which was financed with the funds available. As of December 31st, 2016 the current notio al amount of the bonds with maturity in 2025 was US$392 million. The re-deemed bonds were settled.

• Repayment of short-term loans. In 2016, AES Gener repaid short-term loans with national or international banks for a total of US$66.7 million.

• Debt disbursement over financing lines com-mitted for project construction. In 2016, the subsidiaries of the Company, particularly Em-presa Eléctrica Cochrane SpA and Alto Maipo SpA, continued to make debt disbursement for its corresponding committed financing lines for project construction.

• Empresa Eléctrica Cochrane SpA. In 2016, Cochrane finished to withdraw funds from the credit line given by internation-al banks to finance the construction of the 532MW project. The total financing amount was US$1,000 million. The proj-ect construction was completed and start-ed commercial operations with both units in October 2016.

• Alto Maipo SpA. In 2016, the construction of Alto Maipo continued and reached a prog-ress of 49% by February 15th, 2017. The project withdrew a total of US$280 million from the financing line provided by national and international banks for the construction of a run-of-the-river plant of 531 MW. Such financing considers disbursements for up to US$1,207 million.

Credit Rating

In 2016, the national and international credit ratings of AES Gener were ratified by the main credit rating agencies and remained in BBB- and Baa3 in the in-ternational scale and A+ in the local scale, all with stable outlook. The table below summarizes the na-tional and international credit ratings of the Company as of December 31st, 2016

• On July 28th, 2016, Standard & Poor’s reasserted its rating of BBB- with stable outlook.

• Fitch Ratings, on August 19th, reasserted its rat-ing of A+ with stable outlook in the national scale and BBB- for the international scale in local and foreign currencies.

• Also in August 2016, Feller Rate ratified in A+ the Company’s solvency and bonds with stable outlook.

• The international credit rating of Guacolda En-ergía S.A. (Guacolda) was downgraded in April by Standard & Poors from BBB- stable to BB+ stable. In August, Fitch Ratings ratified the BBB- stable for Guacolda.

Debt composition as of 31 Dec. 2016

43 %

57 %

US$ 3.824 million

Recourse debt Non-recourse debt

Recourse debt Non-recourse debt


340

320

300

280

260

240

220

200

31.01.16 29.02.16 31.03.16 30.04.16 31.05.16 30.06.16 31.07.16 31.08.16 30.09.16 31.10.16 30.11.16 31.12.16

Month Units Amount

Traded ($)Average Price ($)

January 3.253.377 1.019.147.121 313,26

February 3.342.411 1.049.590.930 313,71

March 4.089.444 1.351.241.488 330,42

April 1.426.120 482.375.966 338,24

May 2.315.829 762.584.277 329,29

June 2.395.838 761.666.571 317,91

July 688.168 219.664.359 319,20

August 3.115.043 893.226.656 286,75

September 3.824.048 974.344.525 252,76

October 8.769.567 1.960.846.307 223,60

November 17.235.781 4.039.119.974 223,85

December 5.745.875 1.367.782.208 238,81

Total 56.201.501 14.881.590.382

Stock information

This section describes the quote evolution of the shares of AES Gener S.A in the Santiago Stock Exchange during 2016.

Stock transactions

During this year, there were no significant variations in the traded units, unlike in 2015 when Inversiones Cachagua SpA sold 337,010,439 shares and remained with 66.7% of the equity share of AES Gener, which remains the same as of the closing of 2016.

In the Valparaíso Stock Exchange, an annual value of CLP$19,636,289 was traded in 61,179 shares. In the case of the Electronic Stock Exchange (BEC), an annu-al value of CLP$14,881,590,382 was traded distributed in 56,201, 501 shares. Finally, in the Santiago Stock Ex-change, an annual value of CLP$272,454,664,867 was traded distributed in 1,002,394,737 shares.

Stock Price in Pesos

Chile Stock Exchange


Month UnitsAmount


January 79.538.201 24.553.515.597 308,69

February 45.533.985 14.272.896.469 313,47

March 70.227.396 23.247.047.222 331,07

April 39.913.229 13.424.961.937 336,35

May 48.402.328 15.678.944.553 323,93

June 46.139.138 14.688.677.518 318,35

July 69.107.094 22.104.518.881 319,85

August 120.044.109 34.050.796.210 283,57

September 74.490.479 17.229.556.476 237,78

October 120.041.555 26.719.788.443 222,6

November 197.154.299 44.843.690.985 227,51

December 91.802.924 21.640.270.576 235,63

Total 1.002.394.737 272.454.664.867

Month UnitsAmount


January 19.800 5.979.600 302,00

March 4.575 1.541.318 336,90

April 17.250 5.870,199 340,30

May 19.554 6.245.172 319,28

Total 61.179 19.636.289

Valparaiso Stock Exchange

AES Corporation

66,70 %13,36 %

19,94%

Ownership structure

As of December 31st, 2016, the net equity of the Company amounted to US$2,559 million divided in 8,400,318,891 shares. As of year-end, Inversiones Ca-chagua SpA registered an equity interest of 66.70% in AES Gener. The American company, AES Corporation, is the indirect controller of AES Gener S.A. with an approximate equity interest of 99.9% in Inversiones Cachagua SpA. The Pension Fun Administrators, through the several funds they manage, own 19.94% of AES Gener S.A as of year closing. The remaining 13.36% is held by several minority shareholders.

As of December 31st, 2016, the net equity of the Company amounted to US$2,559 million divided in 8,400,318,891 shares. As of year-end, Inversiones Cachagua SpA registered an equity interest of 66.70% in AES Gener.

Dividend policy

In compliance with Circular 687 from the Superinten-dence of Securities and Insurances, the Board agreed on the dividend policy in ordinary shareholders meet-ings N°623 held on March 28th, 2016. This is the agreement on the dividend policy that was considered appropriate for the Company for 2016:

“It is the decision of the Board of Directors to distrib-ute dividends among the shareholders up to 100% of the profits realized during 2016. Likewise, the Board has agreed to expressly state that it has decided to distribute interim dividends in 2016. Also, the Board of Directors has agreed to state upon the records that the compliance with the dividend policy will be con-tingent upon the actual profits obtained, the results of the periodic projections made by the Company, the need to contribute with resources to finance invest-ment projects, the compliance with the dividend re-strictions established in the corporate bylaws and the credit agreements that basically consist in complying with the contract obligations and the cash and in-vestment policy. As for the dividends for subsequent years, the Board of Directors considered appropriate to keep a similar policy in the medium term.”

This policy was approved in the ordinary shareholders meetings of AES Gener held on April 26th, 2016.

Santiago Stock Exchange

Ownership Structure

Minority shareholders

Pension fund administrators


The dividend policy of the previous year is described below:

Dividend policy for 2015

In compliance with Circular 687 from the Superinten-dence of Securities and Insurances, the Board agreed on the dividend policy in ordinary shareholders meetings N°611 held on March 26th, 2015. This is the agreement on the dividend policy that was considered appropriate for the Company for 2015:

“It is the decision of the Board of Directors to distrib-ute dividends among the shareholders up to 100% of the profits realized during 2015. Likewise, the Board has agreed to expressly state that it has decided to distribute interim dividends in 2015. Also, the Board of Directors has agreed to state upon the records that the compliance with the dividend policy will be con-tingent upon the actual profits obtained, the results of the periodic projections made by the Company, the need to contribute with resources to finance in-vestment projects, the compliance with the dividend restrictions established in the corporate bylaws and the credit agreements that basically consist in com-plying with the contract obligations and the cash and investment policy. As for the dividends for subsequent years, the Board of Directors considered appropriate to keep a similar policy in the medium term.”

This policy was approved in the ordinary shareholders meetings of AES Gener held on April 30th, 2015.

Payment of dividends charged against profist from 2015

The Ordinary Shareholders Meeting from April 26th, 2016, agreed to distribute the amount of US$ 264,874,655 corresponding to approximately 100% of the profits from 2015, which was paid as follows:

• An interim dividend of US$0.0204159 per share paid from November 20th, 2015 for a total of US$ 171,500,070.45 equivalent to 64.75% of the profits in 2015.

• An additional dividend of US$0.0060712 per share paid from May 26th, 2016 for a total of US$ 51,000,016.05 equivalent to 19.25% of the profits of 2015.

• An interim dividend of US$0.0050444 per share paid from August 29th, 2016 for a total of US$ 42,374,568.615 equivalent to 16% of the profits in 2015.

The profit balance from 2015 that was not distributed as dividend amounts to US$ 239.78 and it was allocat-ed to the reserve account for future dividends.

It is the decision of the Board of Directors to distribute dividends among the shareholders up to

100% of the profits realized during 2015.


Dividend Number

Dividend Type:

Payment Date:

Amount per Share (US$):

Against Year % Profits

88 Interim 15/12/2009 0,00496 2009 12,00%

89 Definitive 11/05/2010 0,008709 2009 21,00%

90 Additional Definitive 07/07/2010 0,005558 2009 14,00%

91 Definitivo Adicional 07/10/2010 0,005558 2009 14,00%

92 Interim 05/01/2011 0,00905 2010 43,00%

93 Definitive 06/05/2011 0,011988 2010 57,00%

94 Eventual 06/05/2011 0,008922 2010 24,80%

95 Interim 14/09/2011 0,00979 2011 24,20%

96 Definitive 08/05/2012 0,002333 2011 5,80%

97 Additional definitive 08/05/2012 0,009316 2011 23,10%


99 Interim 15/11/2012 0,008798 2012 35,00%



102 Interim 17/12/2013 0,009666 2013 38,70%

103 Definitive 22/05/2014 0,00748 2013 31,20%

104 Definitive 27/08/2014 0,007201 2013 30,00%

105 Interim 15/12/2014 0,013012 2014 59,50%

106 Definitive 28/05/2015 0,007559 2014 34,60%

107 Interim 26/11/2015 0,020416 2015 64,70%

108 Definitive 26/05/2016 0,006071 2013-2014 19,3%

109 Additional Definitive 29/08/2016 0,005444 2014 16,0%

Distributable Profits: MUS$

Gains attributable to holders of equity share instruments of the controlling company in 2016 261.009

Minus: Interim dividends paid -

Balance of gain attributable to holders of equity share instruments of the controlling company distributable in 2015 261.009

Withheld results under IFRS as of 12-31-2015 377.125

Reserves for dividends proposed as of 12-31-2015 229.609

Distribution of results to future dividend reserve -

Definitive dividends in 2016 paid against 2015 profits (93.374)

Withheld results and Reserves for accumulated dividends proposed to be distributed 513.360

Total of accumulated results + Future dividend reserve 774.369

Shareholder and Investor Relations

The commitment of AES Gener with its shareholders and investors is one of the fundamental pillars that drives and sustains its business. The Company not only seeks adequate returns on its investments, but also to do it sustainably.

To AES Gener, information transparency as well as quality, effectiveness and opportunity of public dis-closure, in alignment with the stock corporation and the security market regulations, are essetial to its cor-porate responsibility policy. All the above is closely related to the confidentiality limits of strategic in-formation necessary for the correct development of its businesses.

During 2016, AES Gener organized and participated in different activities to maintain a constant flow of accurate and reliable information with current and potential shareholders and investors. Among these activities, we can highlight several local and interna-tional conferences. As part of the international event, the Company participated in the Deutsche Bank An-dean Region Conference in London, the JP Morgan Emerging Markets in Miami and the Bank of Amer-ica - Merrill Lynch Emerging Markets Conference also in Miami.

In Santiago, the Company participated in the Sco-tiabank Andean Investors Conference, the Citi/Banchile Corporate Day, the Larrain Vial Andean Conference and the Itau/Corpbanca Andean Confer-ence. In addition to that, the Company organized a breakfast for analysts and investors in order to share the main aspects of the financial results of the first semester of 2016.

2009/2016 Dividends


Associates 2016

Chile 1.338

Argentina 51

Colombia 109

Total 1.498

Salary Women / Salary Men

Executives 82%

Professionals 83%

Technical and Administrative staff 93%

Women Men Total

Chile 133 1.205 1.338

Argentina 3 48 51

Colombia 22 87 109

Total per gender 158 1.340 1.498

The Company aims at attracting, motivate and retaining the best

professionals in order to efficiently manage its generation portfolio and

execute all its projects.

With the purpose of supporting the Company’s sus-tainability and its employees, AES Gener aims at the development of its people along with that of the or-ganization so that together they can adequately face the current and future challenges, adding value to the business in alignment with the strategic objectives of the Company.

In order to manage the generation units efficient-ly and complete its project portfolio, the Company aims at attracting, motivating and retaining the best people and at the same time, strengthening its hu-man resources by fulfilling each role with the most adequate professionals with development potential to face the projects and prepare those who will be assuming new roles.

OUR PEOPLE

Our People Gender Diversity

Salary gap between men and women 2016


Regular Directors

Alternate Directors

Chief Executive Office + Reporting Areas

Other associates

Chilean 4 2 5 1.300

Colombian 1

Argentinean 2 10

Other nationalities 3 4 2 18

Total 7 6 9 1.329

Regular Directors Alternate DirectorsChief Executive Office & other Reporting Areas to

the CEO or the BoardOther Associates

Chilean N/A

Colombian 10 N/A 4 94

Argentinean N/A

Other Nationalities 1 N/A

Total 11 4 94

TermoAndes / Employees by Nationalities



Chilean

Colombian

Argentinean 3 3 4 46

Other Nationalities

Total 3 3 4 46

TermoAndes / Employees per Age Range



Less than 30 12

Between 30 & 40 2 30

Between 41 & 50 8 3 25

Between 51 & 60 1 1 26

Between 61 & 70 1

More than 70

Total 11 4 94



Less than 30

Between 30 & 40 2 3 15

Between 41 & 50 1 2 12

Between 51 & 60 1 1 18

Between 61 & 70 1

More than 70

Total 3 3 4 46



Less than 30 173

Between 30 & 40 1 1 617

Between 41 & 50 2 3 283

Between 51 & 60 6 1 4 197

Between 61 & 70 1 2 1 59

More than 70 -

Total 7 6 9 1.329

AES Gener Chile / Employees by Nationality

AES Chivor / Employees by Nationalities

AES Gener Chile / Employees per Age Range

AES Chivor / Employees per Age Range




Less than 3 5 6 3 365

Between 3 & 6 1 - 288

More than 6 and less than 9 3 364

Between 9 & 12 1 1 163

More than 12 2 149

Total 7 7 9 1.329



Less than 3 2 - - 32

Between 3 & 6 1 - 1 13

More than 6 and less than 9 1 - - 8

Between 9 & 12 3 - 1 12

More than 12 4 - 2 29

Total 11 - 4 94

TermoAndes / Employees by Seniority (years)



Less than 3 5

Between 3 & 6 2

More than 6 and less than 9 1 1 6

Between 9 & 12 2 2 2 11

More than 12 1 1 22

Total 3 3 4 46

AES Gener Chile Termoandes AES Chivor

Revenues 197 1 10

Terminations 148 1 9

Average annual turnover 1294 51 109

Total turnover rate 12.60% 1.96% 8.75%

Investment 2016 US$

Hours/ Associate

Chile 2.614.404 69

Argentina 11.000 17

Colombia 161.422 76

The AES Corporation and the companies of AES Gener, as part of the compensation system, use the HayGroup methodology to have a proper definition of positions.

HUMAN RESOURCES POLICY

Performance management

Training plans and organizational development investment

AES Gener has a performance and competence man-agement process applicable in Argentina, Chile and Colombia as a key tool to strengthen the potential of all the Company’s associates by contributing with its correct performance in any given position. The process has three stages: The first stage refers to the setting of performance and development ob-jectives; then a half year review and finally the final evaluation of objectives and competencies. In ad-dition to the performance objectives, each associ-ate, along with its leadership, is urged to set at least one development objective aimed at strengthening skills and/or competencies necessary to achieve the proposed objectives.

Every year, the aspects to be developed for the fol-lowing period are identified in order to contribute with the achievement of the Company’s objective and the personnel’s development. In order to strength-en this process, all new associates must take an e-learning course called “Performance Management” as part of their induction process. This course pro-vides important information to develop this process more effectively.

Since 2013, AES Gener has incorporated in the leadership strategy of all its subsidiaries the cor-porate competence model based on the interna-tional methodology, Deninson, which focuses in the necessary behavior to leverage the long-term strategic objectives.

Salary policy

AES Gener and its subsidiaries have a salary and ben-efit system that covers the different aspects of the work-related life of employees.

Salaries are competitive according to the market for which we monitor what the market offers for the dif-ferent positions and then the Company uses the mean of the market to analyze and compare the salaries of its employees.

This is done every year according to the market stud-ies of salaries and benefits. Likewise, the Company has implemented follow-up tools of its employees relat-ed to salary administration, promotions and position in the pay band.

This methodology establishes the common language and tools to describe the actual role of the posi-tion under the Hay system; the variable definition is framed within the skills, knowledge and professional experience required by each position in order to avoid any kind of discrimination on the grounds of gender, age, religion, nationality or any other variable.

This also allows defining a competitive pay for a given position, the annual performance bonus and the ap-propriate allowances.

Similarly, from the moment someone joins AES Gener, they have a benefit plan to provide ease and support in several situations of the work and family life, such as medical expenses, housing loans, calamity and invest-ment loans, life insurances, lenses, education, birth, wedding, death, and others. Employees can consult about these benefits through the different communi-cation channels, such as the corporative intranet and the corporate policies and procedures. They affect all employees depending on their location.

AES Gener Chile /Employees by Seniority (years)

AES Chivor /Employees by Seniority (years)

Staff Turnover


Chile Argentina Colombia

Courses completed 248 33 36

People trained 1.307 273 104

Hours 55.097 698 8.276

A software is used to track-down the achievement of the objectives and check the performance and management status, as well the the final compensation that is linked to a qualification given by the direct superior, which reflects the fulfillment of the goals agreed at the beginning of each period.

Training

The diagnosis to detect training needs made by AES Gener helps the Company to offer workshops and courses aimed at the training and development of its associates on topics of corporate interest. During this year, several external and internal training activities were performed.

In addition, AES Gener provides several levels of fi-nancial support for postgraduate courses for em-ployees with more than one year in the Company. This educational aid lies on the premise of spon-soring programs with a curriculum clearly related to the needs, skills and competencies necessaries for a given position.

The following external training programs offered during this year benefited 1,741 Company associates.

A great place to work.

The Great Place to Work Survey was applied for the fifth time in Chile in 2016, which resulted in an im-provement of 5 points with respect to the previous year. AES Gener is in the 16th place in the ranking of the best companies to work in Chile. The purpose is to do benchmarking with other important compa-nies locally and improve the existing procedures and plans associated with the personnel management in the organization.

TermoAndes was part of the ranking of the best companies to work in Argentina for the second time in 2016, which put the company in the 15th posi-tion, within the group of companies between 250 and 1,000 associates. TermoAndes improved its position by 2 points with respect to the previous measurement (position 17th) and it is the only en-ergy generation company in this ranking. The pur-pose is to do benchmarking with other important companies locally and improve the existing pro-cedures and plans associated with the personnel management in the organization.

AES Chivor traced its strategic development for “A great place to work” for five years (2014-2018) with the goal to position itself in the ranking of the best companies to work in Colombia. This goal was achieved in 2015 and improved in 2016 by moving from posi-tion 19th to 16th in the category of companies with less than 500 associates. It moved from a Work En-vironment Index of 87.2 in 2015 to 90.3 in 2016 and a compliance of 95.9% in comparison to the target established for the year.

AES Chivor shows clear evidence of an ingrained or-ganizational structure in terms of work environment. In this respect, the excellent perception that associates have of their leaders’ skills; the organization policies and practices to manage talent; peer-to-peer relations and the pride they fell for what they do; for their teams and the organization show they are strongly ingrained and spread, they define the Company’s culture and drive the business results.

Performance management cycle

In order to support development and recognize out-standing performance, every year AES Gener initiates the performance management cycle disseminating the strategic objectives of the Company among the as-sociates and coordinating the individual contribution with their accomplishment.

• Performance versus objectives: what is achieved, what it is expected to be achieved.

• Performance versus competencies: how it is achieved.

The key premise of the process is that every associate must receive formal feedback on their performance and the aspects to improve, as well as their strengths. In February 2017, the performance cycle started with two workshops: one in Santa María and other one in Bogotá with a participation of 100% of the associates.

All achievements accomplished in 2016 were com-municated in these workshops, there was recognition on the achievement of the different areas and the objectives for 2017 were established. These work-shops represent the most important milestone of the cycle because they allow the organization to align as a whole and determine the contribution of each indi-vidual with the intended target.


In 2016, after a new review process, AES Gener and subsidiaries kept the Certification of its integrated management system, GENERA, which is based on ISO 14,001 and OHSA 18,001

HEALTH & SAFETYOCCUPATIONAL HEALTH & SAFETY (OHS)

The first value of AES Gener is safety; therefore, every day we work towards having the best occupational health and safety levels, and all our employees and contractors live a world-class Safety Culture both in the workplace and outside. In order to ensure the dai-ly activities are executed safely, we have adopted four safety beliefs:

1. Safety is first for our people, our contractors and our communities. All the work activities must be performed safely in order to promote people’s health, safety and wellbeing.

2. All occupational incidents can be prevented.

3. Working safely is a condition of employment. Each person is responsible for its own safety, as well as the safety of its peers and the members of the communities where we operate.

4. All AES employees and contractors have the right and obligation to stop works as soon as they identify an unsafe condition.

Our fourth belief was developed as a last barrier against incidents; it is empowered by the Compa-ny leaders who promote the use of this author-ity and right as soon as an unsafe condition or action is detected.

In AES Gener, all activities are developed as per the standards of our parent company, the AES Corpo-ration, which are supported by international reg-ulations such as OSHA and ANSI, among others. Also, we comply with the national laws and regula-tions related to Safety, such as Act N° 16,744 and its decrees and protocols.

Our business units have a recognition program by which every month we recognize outstanding safety performance of our associates.

For such recognition we consider the following: Con-tribution and participation in occupational health and safety initiatives, support for the activities of the OHS department, the correct application of the authority to stop works in the event of an unsafe condition or action and other activities in which the associate may excel, as determined by the OHS department.

Integrated Management System (GENERA)

All AES Gener businesses were evaluated periodical-ly under the internal and external audit processes of AES Corp., and the legal review, among others. During these reviews, the maturity and continuous improve-ment of the system was verified.

In parallel, the safety culture of each of the businesses was evaluated under a system developed by AES Corp. called SMS Scorecard,


All the Company businesses have Emergency Plans to respond to different events, such as earthquakes, fires or others depending on the business and its location. Both, direct employees and contractors participated actively in training, internal emergency drills and other events organised by public entities. Also, people visiting our facilities received training on how to respond to emergencies.

Occupational Health & Safety Management of Contractor Companies

Similarly to the associates of AES Gener, contractors perform their activities under the guidelines of the Environmental, Health & Safety Regulation for con-tractor companies, whose compliance is constantly monitored through different preventive tools, such as safety walks, planned inspections, safety observations, audits and others. The regulation considers that con-tractor companies must execute their activities under a Safety Management System based on GENERA. As a way to empower the preventive management of contractor companies, we have urged them to certify their management systems as so to have a conscious and effective way t develop their activities using a safe work methodology.

Also, in 2016, an Action Plan was implemented to im-prove the Occupational Health & Safety Performance of contractors.

Safe Behavior Program

In 2016, we maintained the Safe Behavior Program applicable to operations, transmission and construc-tion both for AES employees and contractors. The program focuses on reducing the behavior-based po-tential events based on the internalization of self-care and fostering a collaborative safety culture.

Over the last period, this Program has aimed at self-regulation and reached world-class safety. In addition, the Company has strengthened the Psy-cho-emotional Support Program available for AES personnel and contractors, which aims at maintaining high biopsychosocial wellbeing among associates.

The Safe Behavior Program has complemented the reduction of the levels in incidents promoting the commitment and importance of putting safety first.

Training

The Organization has developed training programs that provide the necessary knowledge to execute the activities with adequate preventive tools in compli-ance with the law and the Company standards. The programs are developed by the law administration en-tity, technical training organizations and others.

Emergency preparedness and response

Businesses have signaling and equipment to fight different contingencies. In 2016, a training field was inaugurated in Puchuncaví, where the personnel can practice what they know.

This training venue and some areas of our facilities in the work centers received the emergency response organizations of the communities to practice and ex-change their knowledge with our first response teams.

Also, we implemented vehicles equipped for first response, which are available to respond to in-ternal emergencies an support the communities where we operate.

Occupational Health and Industrial Hygiene

In 2016, different activities related to occupation-al health and hygiene were developed systematic and permanently with the purpose of protecting the health of our associates. The occupational health and hygiene activities included health evaluations for em-ployees in each stage of their work-related life, which start with pre-placement examinations (pre-em-ployment medical screening) for each work position and continue with special purpose examinations according to specific hazards to which associates may be exposed to.

Additionally, action plans were implemented, as appropriate, for the ministerial protocols, such as: Work-related musculoskeletal disorders, psy-chosocial risks (ISTAS 21), noise occupational ex-posure protocol, the silicosis eradication national plan and others.

Positive recognition

Positive strengthening is a strong motivator of human behavior and effective to reach a world-class safety culture. In line with that, during 2016 AES Gener con-tinued to strengthen its Proactive Recognition Pro-gram that recognized and awarded several individual associates and/or teams, both from AES and contrac-tors, for their positive efforts in the areas of safety and work-related behaviors and practices.

As part of the safety achievements of the Company, the law administration entity certified four of our Joint Safety Committees and Safety and Hygiene.

Our parent, the AES Corporation, recognized our businesses in Chile for their milestones of Man Hours and years without Lost Time Incidents in 2016 such as the SING Transmission (15 years), Alto Maipo Project (4million man hours), Guacolda (10 years), Cochrane Project (6 million man hours) and Cordillera (5 years).

Also, one of our associates, Cristian Leiva, a mainte-nance technician of civil works from the hydro-elec-trical plants of Cordillera was nominated by AES Ge-ner and selected by The AES Corporation to receive the Safety Excellence Award that is annually given to the most outstanding associate in the area of occu-pational health and safety globally. This recognition takes place in Arlington, E.E.U.U.

Safety at home

It is crucial for the Company to have our safety cul-ture present not only at work, but also in our homes. This is why the department of Occupational Health & Safety in 2016 developed several activities with our associate families to share and convey the importance of our first value.

Some of the activities developed are: first aid training, CPR, use of fire extinguishers, provision of emergen-cy supplies for households, bulletins with preventive measures for safety at home, UV radiation exposure briefs and others.

In 2016, a training field was inaugurated in Puchuncaví, where the personnel can practice what they know.


Items Direct Employees Contractors

Average N° associates 1.330 2.273

Man Hours 3.141.682 5.191.223

Lost time incidents 7 22

Lost days 39 128

Fatalities 0 0

Frequency index 2,23 4,24

Severity index 12,41 24,66

Accidentability Rate 0,53 0,97

Occupational Health & Safety Indicators

The staffing of AES Gener is 3,141,682 man hours worked with an average of 1,330 employees, without lost time incidents (LTI) as per OSHA Based on that, the LTI rate was 0.

The average staffing of contractors in 2016 was 2,273 with 5,191,223 man hours worked, which had no LTI.

According to that, the operations staff of AES Ge-ner and contractors registered an average of 3,603 monthly employees with 8,332,905 man hours worked without LTI OSHA and an LTI Rate of 0.0 that is below the upper 10% of the members of the Edi-son Electric Institute (LTI rate 0.14 for generation and transmission companies). AES Gener is a member of this Institute and it establishes its global safety goals based on its indexes. The construction projects also follow strict safe-

ty standards. In 2016, contractor staff worked a total of 12,258,953 man hours with an average of 5,536 associates.

OUR CLIENTSCHILE

The client portfolio of AES Gener is between the first and eight regions of Chile. It is composed mainly by mining companies in the northern interconnected grid (SING) and distribution companies in the central interconnected grid (SIC). In the portfolio we also have companies from the wood, food, agriculture and health sectors, among others. This allows the Com-pany to be part of important production and service processes that contribute with the development of the country as a supplier of reliable and safe energy.

The Company permanently responds to the needs of each of its clients, with a fluid and constant com-munication to serve them efficiently whenever a requirement arises. It is very important for AES Ge-ner to know its clients and, in turn, that they know how the Company operates. With this aim, the Company periodically arranges meetings and vis-its so that the clients can know the facilities and the generation process. During the visits there is also an exchange of good practices and procedures of the production processes.

The AES Gener Group measures the service quality of its clients, the Company supplies energy according

to the legislation in force and it has energy dispatch available 24 hours in order to inform and coordinate the operation of its plants and respond to any supply issue they may have. On the other hand, the gen-eration plants have high KPIs that translate into high reliability rates. To ensure the service quality stan-dards, the Company keeps a close relationship with its clients and helds meetings to coordinate maintenance efforts. There is a database with the information of the billing meters to facilitate the consumption profile studies and respond to the authority requirements.

All clients are different from one another, which chal-lenges us to meet their diverse supply needs every day. To this aim, AES Gener has flexibility to negotiate the supply contract to fairly adapt to the requirements of each client. In order to accompany them and an-swer all their doubts promptly and clearly, the Sale & Service Department permanently coordinates meet-ings with them.

Every month, all the required information is provided so that they can understand and assess the invoices and make observations and comments that are sim-ilarly resolved. The contract signed by the Company includes dispute resolution clauses for any controver-sy that may arise during the term of the contract.

The AES Gener Group measures the service quality of its clients, the Company supplies energy according to the legislation in force and it has energy dispatch available 24 hours in order to inform and coordinate the operation of its plants

Safety Statistics


Sales to Regulated Customers

GWh

Chilectra 2.547

Chilquinta 1.013

Emelectric 469

Emelat 286

CGE 167

Conafe 111

E.E. Pte Alto 76

Luz Linares 62

Luz Parral 58

Emetal 49

Litoral 43

Edecsa 30

Emelca 10

Elecda 9

Codiner 1

Sales to Free ttCustomers

GWh

Minera Escondida Limitada 2.754

Sierra Gorda 1.687

SQM 869

Min. La Candelaria 799

Codelco 711

Spence 642

MSA-Los Bronces 545

Min. Pelambres -Quillota 425

MSA-El Soldado 237

Quebrada Blanca 209

Pap. Norske Skog (Bio-Bio) 170

Cemento Polpaico 155

MSA-Chagres 148

CCU 91

Cristalerías Chile 73

Min. Ojos Del Salado 63

Proacer 62

Min. Altos De Punitaqui 55

Grace 44

Faenas Pham 23

Min. Tres Valles 20

Cervecera CCU Chile 18

CMPC Mad-Mininco 14

Codelco Teniente Maestranza 13

Codelco Teniente Rancagua 12

Masisa -Mapal 12

CMPC Los Angeles 11

CMPC Inforsa-Laja 10

Puerto Ventanas 10

Aguas CCU Nestlé 9

Min. Pelambres - L. Vilos 9

Viña San Pedro Molina 8

Min. Lo Valdés 3

Pmc 1

Min. Rio Colorado 0,2

Currently, the commercial operation of our Argentina subsidiary focuses mainly on energy sales through two methods: Energy Plus and Energy Base.

MAIN SUPPLY CONTRACTS OF AES GENER AND SUBSIDIARIES DURING 2016

Transmission toll contracts of AES Gener and subsidiaries

In 2016, AES Gener signed several contracts with third parties who use the transmission lines owned by the Company. Among such contracts we can highlight those signed with Termoeléctrica Colmito, ENAP, Codelco and GNL Quintero. In turn, AES Gener main-tains contracts with Engie and Transelec for the use of the transmission liens and facilities.

COLOMBIA

AES Chivor works with different clients in the Regulat-ed (Wholesale) and Non-Regulated Markets providing energy sale services through the Energy Exchange and short-term contracts.

AES Chivor sells energy through contracts with distri-bution companies, traders and the Energy Exchange that is a negotiation system in the energy market in Colombia where the generation agents place their price and availability offers and wholesale buyers purchase as per their needs. Generators also use this exchange place to buy energy when they need it, ei-ther because they lack the necessary resources (water, coal, gas, etc.) or simply because they prefer to keep them for future sales.

In addition, the Company receives revenues from the provision of the AGC service that it’s a frequen-cy control service for the national energy grid and the Reliability Charge resulting from the contribu-tion to the reliability of the grid in the case of critical hydrology events.

Our Frequent Clients in the Wholesale Market

Centrales Eléctricas de Narino S.A. E.S.P. Codensa S.A. E.S.P. Empresa de Energía del Pacífico S.A. E.S.P. Empresa de Energía de Boyaca S.A. E.S.P. Empresa de Energía del Quindio S.A. E.S.P. Empresa de Energía de Cundinamarca S.A. E.S.P. Electrificadora del Caribe S.A. E.S.P. Electrificadora del Huila S.A. E.S.P. Electrificadora del Meta S.A. E.S.P. Empresas Municipales de Cali E.I.C.E Compañía Energética del Tolima S.A. E.S.P. Empresas Publicas de Medellin S.A. E.S.P. Electrificadora de Santander S.A. E.S.P.

From the year 2014, the Company started working in the non-regulated market, a business that has devel-oped with the highest standards in order to meet the specific energy needs of its clients building strategic alliances and long-term relations.

In 2015, energy was supplied to one of the main con-sumers in the country, Cerro Matoso S.A., with a year-ly demand of 800 GWh and at a dollar rate. In 2016, Chivor started serving one of the segments with the highest consumption in the country, Campo Rubiales of ECOPETROL and the goldmine Red Eagle Mining in Santa Rosa de Osos. In the mining and oil & gas segment, 332 GWh were traded during 2016.

ARGENTINA

Energy Plus, a program created in 2006 requires that a supply contract is agred between the parties as well as a price agreement considering the costs involved and a profit margin. Such contracts and the costs in-volved must be approved by the Ministry of Federal Planning, Investment and Public Services, and the profit margin must be determined by the Secretariat of Energy. Contracts under the Energy Plus program are agreed with different industrial and commercial clients, usually with expiration term up to 18 months. For further details, refer to the chapter about the reg-ulatory framework herein.

TermoAndes also sells the non-contracted energy under the Energy Plus program directly to the grid’s operator, CAMMESA, under the regulatory frame-works of Base Energy. For further information refer to the chapter on regulatory framework herein.


OUR SUPPLIERSThrough the Community Relations Regulation for Contractors, part of the Corporate Policy of Engage-ment and Relatedness with Local Communities, AES Gener incorporates its contractors to the Corpo-rate Social Responsibility culture. The purpose of this regulation is to obtain and maintain what AES Gener calls “the social license” for the Company’s operations and projects.

This license assumes the application of good behav-ior rules, activities that support development of the communities and mitigation measures for the neg-ative impacts caused by the Company’s contractors on the surrounding communities As part of its policy, the Company also seeks to privilege the hiring of local labor and contractors members of the communities where it operates, provided that they comply with the safety standards and the technical requirements.

A relevant aspect of those who provide specialized services for AES Gener, is the calling of the Company to establish long-term relationships based on the na-ture of its business. The maintenance works of power plants and transmission lines require high levels of specialization and safety standards, which translates into an incentive for training and the development of external personnel by its employers within a frame-work of collaborative relation that requires high quality services at competitive prices.

Providing the adequate conditions of hygiene and safety is the first responsibility of AES Gener towards its employees and contractors who work regularly or occasionally at the Company’s facilities. The safety equipment standards and measures in the facilities of AES Gener are shared by its own employees and contractors for technical the works at the plants. Ev-eryone is equally obliged to undergo pre-placement examinations to mitigate the risk of accidents.

Supplier selection system

In order to ensure transparency and access to infor-mation, we have a Supplier Registry (REPRO) admin-istered by Achilles Chile, a company specialized in supplier management. This registry allows supply-ing companies to view and update their information directly, as well as the products and services they offer via Internet, which is subsequently validat-ed by Achilles. This system provides better visibili-ty of suppliers and contractors and at the same time it creates scale economies by being an open system for clients in the energy sector; therefore the regis-tered companies are available for any potential cli-ent member of this registry. This system operates with the highest security and control standards of the industry, which allows traceability of operations and in turns contributes with a safe and reliable pur-chasing management. To increase even more the procurement management transparency.

In order to ensure transparency and access to information, we have a Supplier Registry (REPRO)


Number of suppliers

%

North 714 26,0

Guacolda 515 18,8

Center 1.517 55,2

Total 2.746

%

Chile 72,8

Estados Unidos 19

Japón 3,2

Austria 1,3

Canadá 1,1

Bélgica 0,8

Suiza 0,2

Singapur 0,3

Otros 1,3

Total 100

To increase even more the procurement management transparency, AES Gener started to use an electronic purchasing portal called ARIBA through which sup-pliers send their proposals and offers for the tenders opened by AES Gener. Management of supplier infor-mation through this tool ensures the full transparency and reliability of the process.

Corporate Social Responsibility in Procurement

In 2016, AES Gener, as part of the Strategic Busi-ness Unit (SBU) AES Andes, launched a Suppli-er Sustainability Survey (AES Sustainability Grade) that is a program with suppliers and contractors to know the degree of commitment these companies have on sustainability.

The survey is performed through an on-line platform with exclusive and safe access through which users complete a country and company-based form. The platform gathers the profile information of the sup-pliers of AES and calculates points representing their degree of commitment on environmental sustainabil-ity and social responsibility.

AES Gener started to use an electronic purchasing portal called ARIBA through which suppliers send their proposals and offers for the tenders opened by AES Gener.

COMMUNITY RELATIONSThe Policy of Engagement and Relatedness with the Local Communities guides the relations of AES Ge-ner with the communities where it operates. The policy helps managing efficiently and sustainably the community relations in the environmental and social aspects.

On top of the CSR policy, through the AES Gener Foundation, each complex of the Company has estab-lished specific alliances with the surrounding com-munities to deploy a diverse portfolio of programs based on the potentials of each community.

AES Gener Foundation.

The objective of the foundation is to strengthen the elaboration and implementation of the social pro-grams of the Company; it focuses on the design and execution of programs aimed at three areas: Educa-tion, community infrastructure and employability. In addition, the institution develops other programs fo-cused on sports, oral health and culture.

The AES Gener Foundation has a General Counsel composed of senior officers and staff of the Compa-ny that watch over the fulfillment of its objectives, as well as the correct administration of resources. The work performed by the institutions is in charge of a General Director that runs, supervises and leads the correct execution of the programs and activities annually established.

EDUCATION

The MUNK Program

The MUNK Program is being executed since 2011 in the schools of Mejillones and Tocopilla. It is a pro-gram to follow-up the progress of English learning that involves students, teachers and parents. Thanks to sophisticated software, schools can monitor the progress of students and get on line reports to ad-just their lessons. In order to support the use of this platform, the program includes teachers who are experts on its educational use to get the most of it for the students.

During the year, the program was implemented in the seven schools of Tocopilla and the three from Me-jillones: almost 2,500 students between 5th and 8h grade participated in this initiative.

SAT Scholarships

For the last 6 years, AES Gener and the Municipality of Puchuncaví have worked together to execute the university preparation scholarship that funds the best students of the participating schools to take courses to prepare for the SAT, (called PSU in Chile) at Pre-universitario Pedro de Valdivia in Viña del Mar. In 2016, forty-five (45) students received this benefit. They were students of 11th and 12th grade from the Sargento Aldea High School in Ventanas and General Velazquez high School in Puchuncaví. Between 2011 and 2016, one hundred and seven students received this scholarship.

Number of suppliers per Complex

Percentage bought from suppliers by country


In 2016 a total of 86 children from the following 6 local schools visited this center:San Gabriel, El Canelo, Julieta Becerra, El Manzano, El Melocotón and Los Maitenes.

As an additional commitment made by the Com-pany and the Municipality, AES Gener gives a cash prize to the best three municipal scores. The mu-nicipality, in turn, gives away computers fro students in the 4h; 5th and 6th places.

Digital Literacy

For the second year, in San José de Maipo the Compa-ny implemented the Digital Literacy Program, mainly aimed at elders from the town. The purpose of this program is to provide the beneficiaries with access to the new technologies so that they have better tools to be more involved with the community.

In 2016, the program sought to reach new groups lacking digital knowledge so it was extended to housewives and micro-entrepreneurs. In addition, we worked in two levels: one to apply basic knowledge and an advanced course focused n Microsoft tools. During this year one hundred and five (105) people were trained.

Scholarship for higher education in Alto Maipo

For the fourth consecutive year, the AES Gener Foun-dation granted a scholarship to support higher ed-ucation in Alto Maipo, which consisted in financial support for CLP$800,000 for students residents of San José de Maipo. The scholarship is granted in two installments, it can be used freely by the students and it is part of the Social Covenant.

In 2016, sixty-two contributions were made out of which thirty-two were renewals and thirty were new beneficiaries. The total investment of this program amounts to $ 49,600,000.-

Learning is Natural

The purpose of the program learning is natural is to foster the development of an environmental culture in the school community of San José de Maipo. It in-volves children from the schools that are part of the Municipal Corporation of the town, who are selected

by the teachers based on environmental workshops Implemented in schools or the interest shown by students themselves.

The program included guided visits to the Recycling and Environmental Management Center of San José de Maipo, Where the AES Gener Foundation and the Municipality work together to maintain in.

Social Agents

For the second consecutive year, Puchuncaví was part of the Social Agents’ Program whose objective is to engage with the members of the community and turn social leaders into transformation agents. The program includes theoretical and practical training so that the social leaders can perform their social role better pre-pared and informed, with a positive and proactive view.

This year, the program trained 17 leaders from different areas of Puchuncaví, mainly from the sport, social and educational sectors.

As a result of this program, the trained leaders have considerably improved their performance and at least 40% of them have joined social organizations with higher social representation locally.

Dual Students

Through cooperation agreements, vocational and tech-nical institutes have the possibility of sending students every year to work at the power plants.


The AES Gener Foundation Cup rewards all the participating teams, particularly those outstanding as fair play. Each team received t-shirts, shorts, socks and shin guards.

In Tocopilla, the Company has an agreement with the Diego Portales Palazuelo High School and in Mejillones with Juan José Lastarria High School. In Huasco, Gualcolda has an agreement with the Japón High School.

In Puchuncaví, the Company has agreements with the high schools Sargento Aldea and General Velásquez. In 15 years, five hundred (500) students have been able to learn trades at Ventanas Power Plant through this program. In 2016, there were 16 students.

Smiles

This is a pilot program in Huasco to promote a self-care culture to protect the smile, based on the preven-tion and promotion of oral hygiene habits among the students of the José Miguel Carrera School.

This initiative was implemented by Fundación Sonri-sas during the first semester of 2016. It was aimed at students from nursery, kinder, first and second grades.

There were three workshops with two modules each plus a maintenance activity to foster healthy diets. The program reached 1323 children.

SPORTS

The AES Gener Foundation Cup

Since 2012, the AES Gener Foundation has imple-mented this program in alliance with the Ganamos Todos Foundation whose mission is to foster sports among girls and boys, between 5th and 8th grade, who live or study in Tocopilla.

One of the purposes of this program is to foster the sport development, create employment for young people and adults with Training as trainers, referees and leaders; foster nutritional habits to improve the quality of life and strengthen social values such as teamwork discipline and perseverance.

In 2016, this school league was composed of 32 teams from ten different educational units, 16 boy teams and 16 girl teams, each of then in turn composed of 10 members in average. Since 2014, the special needs school, Pedro Aguirre Cerda F9, joined this program.

Tennis for all

This program was developed in Huasco between June and December 2016. Its main objective was to pro-mote a healthy life style for children and youngsters showing the benefits of practicing sports.

The idea was to create a Tennis Municipal School through the training or teacher and monitors, tennis clinics in schools and inter school tournaments, so that all the community could play.

In the first year, the program covered 400 participants who were students from the Mireya Zuleta School, El Olivar School, José Miguel Carrera School and the English College.

TRAINING AND EMPLOYABILITY

As part of the Social Responsibility Policy, in every operation AES Gener promotes the hiring of local la-bor, either directly by the Company or through some of its contractors.

In San José de Maipo, where Alto Maipo is under construction, part of the Social Covenant Signed between the Municipality, the Union of Neighbor associations and AES Gener Establishes that every contractor company of the project must contractual-ly commit to hire at last 15% of the labor force from


In 2016, a total 20 people participated in face-to-face lessons, twice a week at the AES Poeta Center in the Office-House of the AES Gener Foundation. The program included coaching to foster and strengthen the skills and entrepreneurship of students.

the local community, with accumulated measure-ment. Currently, the accumulated employability of the projects is 17%.

Training Programs

Also in San José de Maipo and with the purpose of fostering local employment, the Social Covenant in-cludes training for entrepreneurship, as well as cours-es and programs aimed at developing abilities and skills of the inhabitants (adult and young men and women) to take advantage of the work opportunities in the areas where there are strengths locally. Thus, thirty-two (32) courses have been executed since 2010 with 404 graduates. In 2016, the training pro-gram of San José de Maipo implied an investment for CLP$ 476,510,100.-

Meanwhile, in Puchuncaví, a class-B driving course was run in 2016 in which 44 people participated in a six-month training course.

In Tocopilla, the program run courses of cus-toms agents, caregivers for people with diseas-es, security guard, caregivers for the elderly and customer care assistants. A total of 100 people participated in such courses.

The AES Gener Foundation, in turn, developed pro-grams to improve the work opportunities of the members of the communities where the Company has operations or construction projects. In San José de Maipo, some courses and workshops were orga-nized to support people in their entrepreneurship. There were 3 workshops on electronic billing to for-malize the entrepreneurship and one workshop to help them with the applications to the SERCOTEC programs. In total, 78 entrepreneurs receive the benefits of such workshops.

Another outstanding program was that of Entrepre-neurial Strengthening performed in alliance with the Business Center La Florida. Through this pro-gram 18 people were trained in two cycles, that is, 36 people in total. Each cycle included four individual counseling and four workshops (registration, busi-ness model, costing and sale closing techniques with the powepitch method)

AES Poet

For third consecutive year, the AES Gener Foundation developed the program AES Poet, an initiative that seeks to encourage entrepreneurial silks of people between 18 and 30 years old from San José de Mai-po. Through a six-month course, the participants can learn topics such as management, market, production processes and trading with a focus on the production areas that are relevant to the region such as tourism, baking, nursery gardens and services.

The AES Poet program is supported by The Trust for the Americas, a collaborating entity of the Orga-nization of American States (OAS), the Municipality, Microsoft and Magenta Capacitación. Classes are offered in a room equipped with computers, soft-ware and tools that were donated by the alliance with these institutions.

COMMUNITY INFRASTRUCTURE

One of the pillars of the CSR in AES Gener is collaborating with the improvement of the com-munity’s infrastructure.

San José de Maipo Grant

The AES Gener Foundation administers the social program that is the result of the Social Collaboration Agreement signed with the community of San José de Maipo as part of Alto Maipo Hydroelectric Project (PHAM). The program considers the San José de Mai-po Grant for projects of social interest. During thirty years, initiatives will be funded with an annual contri-bution of UF 5,807.-

The areas to be covered are: Education and training social development and infrastructure, promotion and development of productive activities or services and sport support. The fourth version of this grant took place in 2016 with 62 projects amounting to CLP$106,558,900.- Between 2012 and 2015 a total of 162 projects have been awarded.

One of the strengths of the application process is the training and counseling for applicants, whose benefits remains with the community. As part of this process, ninety people were trained in 2016 on the preparation of social projects and micro-entrepre-neurship with coverage for almost all the localities of the municipality.

The winners of the Grant also receive permanent counseling for their project development and the ex-pense reports that are essntial for the total disburse-ment of the awarded amount.

The AES Gener Grant in Puchuncaví.

In 2016, the third version of the Puchuncaví AES Gener Grant took place, which benefited 32 social organization for UF 4,711.-

In the area of social infrastructure, there were 13 or-ganizations that developed projects: 13 projects in the area of social development and initiates that fos-ter tourism and culture; 2 product or service-related projects to create employment locally and benefit the community and 4 projects related to healthy lifestyles and sports.

In addition, Puchuncaví made efforts so that more members could learn how to prepare and apply social project; therefore, in 2016 there were 11 workshops in which 121 social organizations participated and 227 members of the community.

Urban Recovery Program in Renca

Since mid 2016, the Urban Recovery Program is devel-oped in Renca in the Illanes Beytía Villa.

The initiative responds o a concern of the community that is located in front of Nuev Renca Power Plants, who detected rubbish in some areas of the villa.

Thus, along with the Junto al Barrio Foundation, this nine-month program was elaborated through which an intense citizen participation process has been per-formed to recover some areas that had become rubbish dumps.

As a result of this process, in 2016 four murals were painted that reflect the history and identity of the villa and in 2017 some outstanding works would be com-pleted for the remodeling of border plates.

Since the implementation of this program, neighbors have been able to learn tools to improve their perfor-mance as a community, empower their leaders and look for ways to fund their plans.


The villa is composed of 16 streets with 200 houses approx. and a population f 1,000 people and almost all of them receive the benefits of the urban recovery.

OTHER PROGRAMS

Corporate Volunteering

In 2016, AES Gener worked towards strengthening its Corporate Volunteering Program through which the Company associates aparticipate in the initiatives developed as part of the Social Responsibility Policy.

The corporate guidelines is for the participants not to conceive this activities are philanthropic contribu-tions, but part of the joint work performed with the communities where the Company operates.

In 2016, we participated directly in six (6) initiatives with community members in whom we encourage the exchange of information, socialization, the provision of benefits and materials, labor, funding of different community needs between associates and community members. Some of the activities we can highlight:

Celebration of Christmas with Meaning. Since 2013, the associates of Guacolda Power Plants organize themselves to celebrate Christmas with the most underprivileged members of the town. More than 130 people participated in this version of the vent, mostly boys and girls.

Improvements to El Melocotón School: Representa-tives of the Finance VP contributed to the execution of several repairs and enhancements to the school lo-cated in San José de Maipo, which has an enrollment of 180 students and 76% of them come from vulnera-ble situations. Parents, teachers and students partici-pated in this event with the purpose of improving the school that required several repairs.

Murals in the Illanes Beytía Villa: The IT department participated in the painting of murals as part of the Urban Recovery Program developed by the Company. Three murals were painted in this opportunity, which reflect the history of the villa.

Open Doors

In the town of Puchuncaví, Huasco and Sam José de Maipo, the Company develops programs to perform guided visits to the facilities of the power plants locat-ed in each of these communities.

In Puchuncaví, in 2016 a total of 320 neighbors visited Ventanas Power Plant and the ash depos-it in Pangue to know how both facilities operate, learn about the measures implemented to protect the environment and the community works.

In San José de Maipo, there were 23 visits to Alfal-fal and the Alto Maipo nursery garden with a total participation of 492 people.

In both cases, we can highlight the visits performed by higher education institutions that constantly show interest to visit our facilities.

Outdoor cinema

With the purpose of empowering the neighbors about the use of public areas and offer an entertainment alternative in summer time, in 2016 AES Gener im-plemented an open-air cinema season in Tocopilla, Mejillones, Puchuncaví and San José de Maipo.

The program is a shortened version of “Huasco de Película”, an initiative that in 2016 celebrated its eighth version and during six days almost 2,800 view-ers enjoy family movies. Meanwhile, the first version of “Tocopilla de Película” received 1,500 viewers; “Mejillones de Película” had 1,200; “Puchuncaví de Película” has 1,600 viewers and “San José de Película” had 1,800 viewers.

AES Chivor

The relatedness strategy implemented by AES Chivor with the communities in its areas of influence is based on three premises: Constant dialogue, trust building and value creation for development.

The Company has designed different action lines that respond to the needs that the communities have shared with the Company and today have translated into initiatives recognized by the inhabitants of the region, such as:

• Investment in basic infrastructure

• Transportation in the region

• Fostering networks of local suppliers

• Creation of qualified jobs

• Fostering education

• Support for vulnerable people

• Promotion of productive projects

AES Chivor wants to turn Corporate Social Responsibility into a daily commitment, which is why it embraces the challenges proposed by differ-ent countries and organizations worldwide as a way to contribute with the wellbeing and development of mankind, such as:

• The principles of the Global Compact of the United Nations to protect human rights, children rights, labor, gender perspective, the environment and the inclusion of anti-corruption practices.

• Sustainable development objectives: as a fa-cilitating agent of favorable scenarios for local development.

AES Chivor wants to turn Corporate Social Responsibility into a daily commitment.


SOCIAL POLICY OF AES CHIVOR

Currently, Chivor divides its initiatives into two pil-lars: social responsibility and social solidarity, which primarily correspond to a division between the action tending to road infrastructure investment and mobil-ity in the area of influence and the other initiatives, such as education and production processes, among others. The investment in both pillars amounted to $3,089 Colombian pesos.

On top of the actions described in the Social Man-agement Policy, an agreement was signed with the Institute of Natural Sciences of the National Uni-versity for a contribution of $421 million Colombian pesos for the protection of the areas established by the Environmental Commission Corpochivor (DRMI Cristales Castillejo) where the characterization of flora and fauna started in Paramo Cristales. Also as part of this project, more than 150 hectares were ac-quired to focus on natural recovery and water protec-tion for the total amount of $650 million Colombian pesos, granted to the Municipality of Capilla. The total value of the project amounted to $1,071 million Colombian pesos.

Social Responsibility Management.

In compliance with the commitments made by the Company in the areas of social compensation, in 2016 the following activities were developed with an investment amounting to $1,864 million of Colombian pesos.

• River transportation in La Esmeralda dam: free service offered to the communities that are part of the municipalities of Macanal, Chivor and Almei-da. The passenger service is provided with three motor boats covering 21 ports, a loading truck and a ferry for vehicles.

• Land transportation for people from Macanal. A free bus service was established for Macanal and Almeida due to the closing of the Sisga - El Secre-to national road during the winter season. A total of 165,972 passengers were transported in this service; 14,288 vehicles; 8,708 motorbikes; 992 livestock and 30.8 tons of freight.

• Maintenance of bridges and communication roads related to the operation. The Company works in the permanent maintenance of the ac-cess roads to the Dam to ensure passengers safe-ty when boarding the vessels. The maintenance of Los Militares road is part of this project, along with the municipalities of Almeida and Macanal, from Almeida to Chivor (more than 15 km); the agreement with the municipality of Santa María and Campohermoso for the replacement of the wood platform of the Salitre bridges (Tunitariver) and maintainance of the bridge in the area La Pla-ya (Lengupá river) Also, the maintenance of five aerial lifts over the Batá River. In alliance with the community of Culima in order to strengthen the agreement with the municipality of Santa María, more than 125 meters of tread plates were built together. Maintenance of the lighting system and contribution with the river machinery and mate-rials for the maintenance of the 70’s tunnel that provides access to Camoyo in Chivor.

• Support to neighboring communities of Tun-jita power plant. Some of the activities agreed with the community as compensation for the construction works of the Tunjita project in 2016: The agreement with the municipality of Campo-hermoso considered the installation of a pedestri-an suspension bridge at Limón over the Lengupá river (in progress during 2017); the agreement with ASOJUNTAS Macanal to build more than 150 meters of tread plate at El Volador road that in total amounts to more than 350 meters of tread plate on this road (phase 2015 & 2016) and for the construction of a Box Culvert in Campoher-moso road, Hoya Grande (to be executed in 2017) and less staffing in Los Cedros Library. Agree-ment with the municipalities of Macanal and Chivor for the construction of the foundations of the military bridge in Palo Arañado. An agree-ment was signed with the municipality of Ma-canal for the maintenance of 10 centers of rural community associations.

Social Solidarity Management

AES Chivor has focused its social solidarity invest-ments on programs that help transforming the com-munities in their areas of influence through man-agement, coordination and Citizen participation processes with a long-term view and investing in the strategic pillars, that is: education, production processes, vulnerable population and protection of paramos and wetlands.

During 2016 the following activities were devel-oped with a total investment of $1,225 million Colombian pesos:

• The “Escuela Plus” Project: As part of this Sat-ellite television project under development with DIRECTV Colombia, this service was also pro-vided in 2016 and an agreement was signed with the NGO Descubrir to make a diagnosis of all the schools so as to reconnect as many schools as possible to this service and gather basic informa-tion to replace equipment in the future.

• Educational infrastructure: the infrastructure of 10 rural community centers on Macanal.

• POETA Center: the Center, located in Santa María, continued to provide training courses re-lated to connectivity and access to IT. This project is developed in association with the Trust for the Americas Foundation.

• Coffee production project: In association with the Autonomous Corporation of Chivor (Corpo-chivor), the municipalities and Acción Cultura Popular(ACPO) all the commitments made related to the sectorial table of special coffee were com-pleted, which benefited more than 530 producing families from 14 municipalities of the region.

AES Chivor has focused its social solidarity investments on programs that help transforming

the communities in their areas of influence through management, coordination

and Citizen participation

On top of the actions described in the Social Management Policy, an agreement was signed with the Institute of Natural Sciences of the National University for a contribution of $421 million Colombian pesos for the protection of the areas established by the Environmental Commission Corpochivor.


Energy Balance of AES Gener in SIC in 2016 Energy (GWh)

Net Generation 8.208

Purchases

Third-parties 1.033

Spot -

Inter-company 4.901


Sales -

Distribution companies 5.010

Other Customers 2.965

Spot 1.229

Inter-company 4.901

Total Sales 14.105

• Cacao production project: In 2016, a portion of the resources provided by AES Chivor in 2015 were executed in Campohermoso, San Luis de Gaceno and Santa María, which gather more than 200 producing families. The resources focused on technical assistance, purchase of materials for crop enhancement and rehabilitation of ex-isting plantations. A participatory investigation started to determine the cacao technological package of San María. Also, an agreement was signed with the non-profit association “Selva In-vestigación para la Conservación del Neotrópico” for the development of the production project of cacao as an agroforestry strategy to generate ecological connectors and favor biodiversity in the region, which links actions to be executed in 2017 with the three actions of the cacao pro-ducer associations from Santa María, San Luis de Gaceno and Campohermoso.

• Support for vulnerable people: This program fo-cuses on prevention and the support of commu-nities that at some point may be at risk due to nat-ural events such as landslides, flooding, avalanche or vulnerable population.

In 2016, an agreement was signed with the munici-pality of Macanal and the NGO Gotas de Agua for the maintenance of the bio-engineering works installed in the basin of Caño Cangrejo as a risk management strategy in San María and prevents the repetition of avalanche-type events as those from 2012 and 2013.

OPERATION AND MAINTENANCECHILE

In 2016, there were two important milestones: the commissioning of both new units in Cochrane and the first photovoltaic power stations of AES Gener in Chile, Andes Solar.

Another operational challenge in 2016 was represent-ed by the overhauls of Tocopilla Unit II and Venta-nas Unit I. In the case of Tocopilla, the overhaul in-cluded the dismantling of the turbine, removing the shell from the different stages and the replacement of several internal pieces mainly due to wear and tear. In the case of Ventanas Unit I, the pneumat-ic-electrical control system was replaced for a cutting edge digital system.

In 2016 the Operations VP made efforts to continue to implement a management system for fixed assets moving from the implementation of an asset manage-ment standards to the certification under ISO 55,001.- Such certification was successful in TermoAndes (Ar-gentina), Chivor (Colombia) and Nueva Renca (Chile), and in the case of Colombia and Chile, these are the first businesses to get this certification.

Operations of AES Gener in SIC


Power Plant Location Commissioning Turbine Units Capacity (MW)

Specific Consumption (BTU/KWh)

Availability 2015 (%)


Ventanas 1(1) Ventanas, V Región 1964 Carbón / Vapor 1 120 11.007 80,76 74,34

Ventanas 2(1) Ventanas, V Región 1977 Carbón / Vapor 1 220 10.926 66,19 78,70

Laguna Verde(1)

Laguna Verde, Valparaíso, V

Región1939-1949 Diésel, Vapor 2 47 19.031(2) 100,00 100,00

Laguna Verde(1)

Laguna Verde, Valparaíso, V

Región1990 Diésel, TG 1 19 11.419(2) 0,00 0,00

Laja (1) Cabrero, VIII Región 1995 Cogeneración

con Biomasa 1 13 15.351 96,02 96,25

(1) These facilities are owned by AES Gener. (2) There was no generation in this period, the amount is by design.

(1) These facilities are owned by AES Gener.t



Disponibilidad 2016 (%)

Maitenes (1) Los Maitenes, Cajón Río Colorado, RM 1923-1989 Francis 5 31 95,71 92,51

Queltehues (1) Los Queltehues, Cajón Río Maipo, RM 1948 Pelton 3 49 95,62 98,81

Volcán (1) Cajón Río Maipo, RM 1949 Pelton 1 13 92,62 99,39

Alfalfal (1) Cajón Río Colorado, RM 1991 Pelton 2 178 94,73 95,35

Other important project implemented this period was the Automatic Generation Control (AGC) that controls the power output of generators in order to control secondary frequency.

Thermal Power Stations

The thermal units of AES Gener in the SIC (central in-terconnected grid) include units I & II of Ventanas, the two steam units that run with diesel in Laguna Verde, the gas turbine in Laguna Verde and Laja that runs with forest biomass.

In 2016, Ventanas Unit I generated 623 GWh net. One of the relevant activities was the maintenance per-formed in this unit, which took thirty days. The most significant works executed were the modernization of the control system of the boiler and ancillary systems and the replacement of the feeding water pumps of the boiler.

In turn, Unit II generated 1,223 GWh net and it un-derwent maintenance during twenty-one days. As part of this maintenance effort, works were done on the boiler and ancillary equipment, the tubes of the secondary super-heater of the boiler were re-placed, the joint seals of the air super-heater were replaced and the SO2 absorption system pieces were changed too.

AES Gener (SIC) Run-of-the-river stations

The Run-of-the-river power stations of AES Gener: Alfalfal, Maitenes, Queltehues and Volcán use water from the surrounding rivers and they are all run-of-river plants, that is, they do not have dams therefore; the impact on the environment is reduced.

These power stations have an installed capacity of 271 MW and they all are located in San José de Maipo. During 2016, the four power stations were in service permanently with an annual net generation of 1,383 GWh that is 17% higher than the generation in 2015.

They met 100% of the Preventive Maintenance Plan that included the annual maintenance of both Alfalfal units and the three units of Maitenes, and they faced a generator failure in Alfalfal Unit I that was repaired in twenty-two days.

Dispatch Load Center, Operation and Maintenance of Substations and Transmission Lines in the SIC

The main objective of the Dispatch Load Center of AES Gener is to fulfill the needs to use electrical ener-gy in an economic and safe manner, watching over the balance between the generation of the power plants and the requirements of energy, capacity, security and quality of clients. It is in charge of the coordination and operation of the generation and transmission grid of AES Gener that is located between the III and VIII regions. It is also responsible for coordinating the operation and service of approximately 44 facilities of free clients, regulated clients (Enel Distribución, EEPA, Chilquinta, Emelca and Emel) and 20% of the energy generated in the SIC in the event of failure.

It keeps direct coordination with the CISEN and the others coordinated companies; it also leads the Regional Operation Center in the V Region (COR), which was a role assigned by the CEN as part pf the service recovery plans in the event blackouts or natural disasters.

In 2016, the new SCADA (Supervisory control and data acquisition) system was implemented in AES Gener to supervise and control remotely all the transmis-sion lines and power stations owned by AES Gener, both in the SIC and SING. This is the first SCADA system in the country that is capable of supervising and controlling both grids, which is an early step to-wards the interconnection of both grids that has been considered for 2018.

In fact, Guacola and Los Vientos power stations, both in the SIC, were included using this SCADA. The Com-pany intends to include Nueva Renca during the first semester in 2017.

Thermal Power Plants of AES Gener (SIC)

Run-of-the-river plants of AES Geber (SIC)


Circuit Type Voltage (kV) Length (km)

Simple 220 0,8

Double 220 74,3

Simple 110 6,7

Double 110 254,88

Simple 66 14,42

Total 351,1

Substations

Alfalfal

Maitenes

Queltehues

La Laja

Punta de Peuco

Pachacama

San Pedro

Ventanas 110 Kv

Ventanas 220 Kv

Torquemada

Laguna Verde

Bays or Connections to S/S of

Other Companies

Los Almendros

Florida

Cerro Navia

Las Vegas

La Calera

Miraflores

Quillota

Nogales





Renca (1) Comuna de Renca, Santiago, RM. 1962 Diesel/Steam 2 100 15.787(2) 100,00 100,00

Nueva Renca (1) Comuna de Renca, Santiago, RM. 1977 Combines

Cycle

1 gas turbine, 1 steam turbine

379 (3) 7.466 95,43 92,44

Los Vientos (1) Las Vegas, Llay Llay, V Región 2007 Diesel / GT 1 132 11.283 100,00 80,54

Santa Lidia (1) Cabrero, VIII Región 2009 Diesel / GT 1 139 11.270 97,92 97,09

In addition, Phase II of the automatic generation de-tachment/reduction schemes (EDAG/ERAG) was im-plemented. This system includes a dynamic automatic generation in the northern zone of the SIC in order to optimize the energy transmission capacity between substations Maintencillo and Nogales, necessary to consider the high additional otffer of solar and wind renewable energy in the country. This system is fully monitored from the Dispatch Center of AES Gener.

The use of drones has been an important contribution to supervise and monitor power lines. In fact, this new way to inspect electric isolated facilities with difficult access has proven to be a great benefit because it has allowed reducing risks, optimizing resources and shortening execution times.

As part of the Alto Maipo Project, one of the most im-portant milestones of 2016 was the inclusion of the new transmission facilities that consider new bays of 220 and 110 kV at sutbstations Alfalfal and Las Lajas, as well as the inclusion of new lines of 220 and 110 KV to interconnect Alfafal Unit II and Las Lajas.

In 2016, the Company continued to work on the struc-tural enhancement of the transmission grid as part of the continuous improvement plan. The main works focus on strengthening the structures that compose the transmission grids and improving the height of the power lines, for which the program considered permanent disconnects that did not compromise the energy generation of AES Gener.

As for safety, in 2016 the Company reached 51,416 man hours without lost time incidents among contractors and 42,679 man hours among AES Gener employees. Likewise, the Company recorded 8,819 days without LTI under OSHA, both for employees and contractors.

ELÉCTRICA SANTIAGO

During 2016, Nueva Renca power station run either with liquid natural gas or diesel and it achieved a highly reliable dual generation. Thus, the power sta-tions recorded a net generation of 2,026 GWh using all types of fuels (6,775.6 hours of service with liquid natural gas and 379.6 hours with diesel). This level of generation exceeded the annual budget estimat-ed in 1,497 GWh. In comparison to 2015, there was a net generation increase by 13% that represents the highest annual generation over the last nine years (in 2007 the net generation was 2,052 GWh). The operational availability was 92.44% that exceeded the budget of 89.94%.

In December 2016, Nueva Renca became the first Chilean company to be certified under ISO 55001:2014 (Asset Management).

The plant was available for operations in 2016 but its dispatch was not required.

In turn, the gas turbine of Los Vientos and Santa Lidia worked mainly as backup plants for the SIC. Los Vien-tos had dispatch from the injection point to the 110 kV Cerro Navia bus bar and then until the bus bar of substation Las Vegas and it generated 32.3 GWh. San-ta Lidia, in turn, generated 18.04 GWh.

With regard to relevant maintenance, in 2016 a main-tenance type called Hot Gas Path Inspection (HGPI) was performed and took seventy days. After this maintenance the turbine is prepared to deliver more capacity to the grid given hat the replacement compo-nents used have better performance that the old ones.

No lost time incidents were registered this time, which leads to almost seven years without LTI.

Transmission Lines & Substations of AES Gener

Substations

(1) These facilities are owned by Eléctrica Santiago. (2) There were no operation during this period, this is a design value. (3)The capacity of Nueva Renca Power Plant is 355 MW running with diesel and 379 MW with natural gas.






Nueva Ventanas (1)

Ventanas, V Región 2012 Coal / Steam 1 272 9.406 97,83 92,88

(1) These facilities are property of Eléctrica Ventanas.

Empresa Eléctrica Ventanas





Campiche Ventanas, V Región 2013 Coal / Steam 1 272 9.286 93,19 99,10





Guacolda (1) Huasco, III Región1995 / 1996 2009 / 2012

2015Coal / Steam 5 760 10.317 89,90 93,52

Empresa Eléctrica Campiche

Guacolda Energia

ELÉCTRICA VENTANAS

During 2016, Ventanas Unit III, part of the subsidiary Eléctrica Ventanas, generated 1.979 GWh net and registered an availability of 92.88%.

In terms of maintenance, Ventanas II was out of ser-vice during fourteen days in January for some minor maintenance works.

These units had scheduled an overhaul for the tur-bine in 2016, which implies dismantling the turbine and normally takes fifty days. The AES Corporation has a program that applies to low generation power stations and after a technical assessment of the main pieces of the turbine made by a group of specialists, it was determine that such overhaul could be post-poned. The analysis considers the current status of the unit and the main symptoms of the components in the event of wear, vibrations, etc. If such group of specialists considers that it is possible to postpone the maintenance, it does so considering the monitoring of certain variable and the equipment status through brief scheduled outages. The Company requested this assessment to the unit and the technical team de-termined that the overhaul could be postpones until 2018, considering some specific monitoring and an scheduled outage to check certain pieces of equip-ment before March 2017. This overhaul postpone-ment implied keeping the unit in service during a high demand season.

ELÉCTRICA CAMPICHE

In 2016, Ventanas Unit IV, part of the subsidiary Eléc-trica Campiche, generated 2,084 GWh net and regis-tered an availability of 99.10%.

GUACOLDA

The net generation of Guacolda thermal complex reached 4,247 GWh in 2016 considering the genera-tion of its five units.

In addition, the emission abatement system for partic-ulate matter (PM10), sulfur dioxide (SO2) and Nitrogen (NOx) in Units I; II; III & IV were handed over to Oper-ations as follows:

• Unit 1: April 1st, 2016.

• Unit 2: April 15th, 2016.

• Unit 4: March 30th, 2016.

From an operational standpoint, annual maintenance works were performed on Units III; IV & V. In the case of Unit V, Mitsubishi executed works associated with the warranty of the system to transfer coal into the silos. On the other hand, Units II; III & V implement-ed the automatic generation control (AGC) that is re-quired by the authority to all units in the electric grid.

This is an important milestone since Guacolda is the first coal-fired power station to adapt to this remote system that brings flexibility to the operation and meet the regulations of the authority.

In the area of occupational health and safety, it is im-portant to highlight that no Lost time incidents were registered in 2016. Records of LTI as of today: Guacol-da Complex: 12 years and 26 days; contractor compa-nies registered 11 years, 11 months and 20 days In the safety audit scorecard, Guacolda obtained 8.23pints that makes it a company with world-class safety. In 2015, the score was 7.18.-

From an environmental standpoint, the environmental impact statement (DIA), called elimination of petcoke in Guacolda, was filed in the Environmental Assess-ment Agency (SEA). This project was filed within the context in which the Company eliminates the use of petcoke voluntarily because it is working on ways to reduce its environmental impact. Currently, the

Company is awaiting the formal response to elimi-nate this fuel definitely in the plant from the second semester of 2017.

The score of the Heat Rate Assessment made by the Guacolda Complex was 3.29.-

Every year, the AES Corporation organizes an annu-al competition to promote innovation and the use of new technologies in its powers stations. In this ver-sion, Guacolda obtained the third place within the cat-egory of projects for more than US $10 million for the “EDAG/ERAG” project to optimize the margin.

Other recognitions in this period were given by the AmCham Chile called “El Buen Ciudadano Empresarial 2016” (the good entrepreneurial citizen) under the in-novation category for the Project “Tu suelo es mi suelo” (your soil, my soil) that was developed with the farmers of Huasco and aims at enhancing the farming land with material produced by the plant.

(1) These facilities are property of Eléctrica Ventanas.

(1) These facilities are property of Guacolda Energía. (2) In the availability estimates, Guacolda V is excluded because it COD was in December.


Transmission Lines & Substations of Guacolda


Double 220 72,4

Simple 110 19,7

Transmission Lines

Substations Guacolda

Bays or S/S connections of other Companies

4 bays 220 kV in S7S-Maitencillo

1 bay 11 kV in S/S Cardones

Substations

Energy Balance of AES Gener in SING in 2016

Energy GW

Net Generation 6.987

Purchases

Third-parties -

Spot 1.212

Inter-company -

Total Purchases 1.212

Sales

Non-regulated customers 7.195

Spot 970

Inter-company -

Total Sales 8.165

Operations of AES Gener in SING

Transmission Lines & Substations of SING

Transmission Lines





Nueva Tocopilla (1) Tocopilla, II Región 1995-1997 Coal / Steam 2 277 10.083 85,24 86,26

Andes Solar (1) Antofagasta, II Región 2016 Solar Fotovoltaica 15 23 (2) (3) 34,1 (4)


Simple 345 142

Simple 220 203,6

Double 220 135,3

Simple 110 33

Total 513,9

AES Gener (SING)

The annual net generation of the units in Nueva Toco-pilla (ex Norgener) reached 1,754 GWh in 2016.

Some of the works performed by Tocopilla during this period was the overhaul to the turbine and the gen-erator of Unit I, as well as the migration of the turbine control system of both units. In the case of Unit I, we can highlight the first overhaul of many to be per-formed to the units of AES Gener between 2016 and 2020, which were awarded to General Electric. The agreement includes a reduction of labor costs and other other services, as well as the work execution in less time than usual. In addition, we can highlight the first maintenance to the emission abatement equip-ment, which were commissioned in 2015.

With respect to safety, it is very important to highlight that during 2016, Tocopilla reached 13 years without LTI under OSHA and the Integral Management System was certified again under ISO 14001 - ISO 9001 and OHSA 18001 without non-conformities in any of the three standards.

Load Dispatch Center, Operation and Maintenance of Substations and Transmission Lines in the SING

In addition, we can highlight the commissioning of new projects, such as the commercial operation of the photovoltaic power plant, Andes Solar.

During this period, preventive maintenance was performed on the transmission systems and substations of AES Gener and the subsidiaries Angamos and Cochrane.

One of the most relevant maintenance of the trans-mission lines is that of the disconnect switches of the 220 kV bars in substation Crucero, which was performed with the lines energized that added high complexity from the standpoint of safety due to the high risks involved.

The dynamic studies of the behavior of the line under this condition were provided to the competent au-thority as preparation for the increase of the capacity transference in the SING -SADI interconnection line. Said studies are necessary due to the modifications made to Decree N°7 on exports.

The development of continuous improvement trans-ferences was recognized with the first place APEX SBU Andes and the third place APEX Summit Pan-ama with the project “Performance problems in photovoltaic power station”.

In the areas of environment and safety, the Compa-ny reached the milestone of 14 years and 1 month without LTI as per OHSAS standards. AES Gener also reached world-class safety and environmental recog-nition through the 2017 scorecard.

(1) These facilities are property of AES Gener. (2) Not applicable to this technology. (3) Year 2016 was the first year of operations. (4) It’s not availability, but a solar plant factor value represents he design factor due to lack of data for a full year.


Substations

Andes

Nueva Zaldívar

Laberinto

Tocopilla

Oeste

Minsal

La Cruz

Bays or S/S connections of other Companies

2 bays in S/S Mantos Blancos

1 bay in S/S Lomas Bayas

2 bays in S/S Crucero

2 bays in S/S Barriles

Energy storage BESS Andes 12 MW





Angamos (1) Mejillones, II Región 2011 Coal / Steam 2 558 9.683 90,99 97,68

(1) These facilities are property of Eléctrica Angamos.

Substations

Empresa Eléctrica Angamos

(1) These facilities are property of Eléctrica Cochrane. (2) Units started operations in 2016


Double 220 142,5

Transmission Lines

Substations

Substations

Angamos

Ampliación Nueva Zaldivar

Ampliación Laberinto

Energy storage BESS Angamos 20 MW





Cochrane (1) Mejillones, II Región 2016 Coal / Steam 2 532 9.822 (2) 97,68

Empresa Eléctrica Cochrane

ELÉCTRICA ANGAMOS

In 2016, Eléctrica Angamos registered a historic net generation of 3,969 GWh that represents 14% in-crease with respect to 2015.

Angamos power station is one of the most modern coal-fired plants in Latin-America and it uses cut-ting-edge technology to abate emissions and reduce the use of seawater, in compliance with all the existing regulations related to emission, quality of liquid efflu-ents and noise levels. Considering the seismic charac-teristic of Chile, the power plants also have a design that supports medium intensity earthquakes without having to undergo an outage.

As part of the works executed during 2016, we can highlight the repair of the cooling water lines to-wards the cooling tower and the normalization of the voltage regulator of Unit I, as well as the repair of the quick shut-off valve of the intermediate pressure turbine in Unit II.

In 2016, the operation of the reverse osmosis de-salination plant was consolidated, stage I, at 100% capacity, which creates the possibility of selling water to third-parties.

In terms of safety, Angamos reached the milestone of 6 years and 9 months without LTI under OSHA stan-dards. In addition, the integral management system was certified again under ISO 14,001; ISO 9001 and OHSA 18001 without any high non-conformities un-der any these three standards.

TRANSMISSION LINES AND SUBSTATIONS OF ANGAMOS

In 2016, a project was commissioned for the operation of the transmission system 220 kV Angamos-Kapa-tur-Laberinto, which included the sectioning of the existing double circuit line Angamos - Laberinto.

We can also highlight the enhancement of the fi-ber optic communication system that replaced the ground wire of the Kapatur-Laberinto line using a mechanized robot. Such robot allows installing large distances of cable in energized lines reducing the ex-ecution time and the risk levels substantially.

ELÉCTRICA COCHRANE

In 2016, both units of Cochrane started commercial operations. The first unit started operations on July 9th and the second one on October 12th. Both units together have an installed capacity of 532 MW Ac-cording to the requirements of the technical standard, the performance and maximum load tests were run in both units with a result of 274 MW gross as maximum capacity per unit.

The annual net generation of the units of Eléctrica Cochrane reached 928 GWh in 2016.

One of the works developed this year was the mainte-nance of Unit I to normalize the boiler welding, which was covered by the warranty in charge of the POSCO that built the plant.

In 2016, SING Transmission along with Engineer-ing and Construction of AES Gener commissioned and started operations of the transmission system of Cochrane, which includes the 220 kV substation Cochrane, the 220 kV Cochrane-Encuentro transmis-sion line and BESS 20 MW Cochrane.



Simple 345 268

Total 268

AES Gener

Substations Salta


Double 220 142,5

Transmission Lines

Substations

SubstationsCochrane

2 bays in S/S Encuentro

Energy storage BESS Cochrane 20 MW

Installed Capacity (MW)

AES Chivor 1.020,0

Total 1.020,0

Energy Balance AES Chivor 2016 Energy (Gwh

Net production 4.373

Purchases -

Purchases 2.450

Total Purchases 2.450

Sales

Contracts 3.535

Spot 3.310

Total Sales 6.845

INTERANDES

InterAndes has a concession for the transmission of electrical energy from Salta power station in Ar-gentina and the frontier node at Paso Sico, in the border with Chile. Likewise, it has a contract with TermoAndes to supply the service of energy and ca-pacity transmission between Salta power stations and such frontier node.

During 2016, the line running from the Andes end was energized repeatedly as VAR compensator in the SING. Also, in 2016 this line operated as a link between the SING and SADI experting energy mainly from the SING into the SADI. This operation was ex-ecuted at the request of the load dispatch centers, as part of the energy trading framework between AES Gener and CAMMESA.

As for Safety and Environment, in 2016 there were not Lost Time Incidents among contractors and AES personnel. Likewise, the company maintained the environmental certifications ISO 14001 and the Public Security and Energy Plans RES ENRE 057 & 22 respectively.

COLOMBIA

AES Chivor has the third largest hydroelectric pow-er station in the country, with an installed capacity of 1,000 MW. In 2016, the hydrological contributions to the dam La Esmeralda corresponding to 101.8% of the historical mean. At the end of the year, the dam level reached 83% of its useful capacity and the net ener-gy production of AES Chivor during this period reach 4,373 GWh, including Tunjita. A total of 6,887 GWh were traded out of which 3,309 GWh were traded through the energy exchange and the remaining 3,578 GWh through medium-term contracts.

The affluents or tributary of the AES Chivor dam con-tributed with 101.8% of the flow rate of the histori-cal mean, which places it as a normal year within the existing hydrological series. The weather and hydro-logical condition in 2016 was influenced by El Niño that started at the end of 2014 and it has been clas-sified within the strong category. The hydrological

behavior in Colombia was consistent with the impact of this type of phenomena, where the central and western zones experienced a significant deficit. Rain-fall in the basin of Chivor was consistent with El Niño and Chivor recovered before the rest of the country, which occurred in April.

The energy generation of AES Chivor was 4,373 GWh that represents a 107.1% of the historical average be-tween 2006 and 2015. Regarding the national demand, generation represented 6.6% of the total energy de-manded by the country.

In line with the strategy defined for the intervention of the critical physical assets of the business. A gen-eral maintenance was performed in Units IV; VI & VII in compliance of the Master Maintenance Plan. Like-wise, in 2016 the third and fourth phase of the works to strengthen the structure of the drainage gallery of the powerhouse, which represents the most complete gen-eral maintenance ever performed since its construc-tion. This gallery was built to relieve the hydrostatic pressure of the mountain over the tunnels of Chivor I & II and mitigate potential failures. Finally, the repair of two rotary valves DN 1500 mm continued, which will be replaced during the maintenance to the tunnel of Chi-vor I that started on December 1st, 2016 and is expected to be complete in March 2017.

In terms of the operational sustainability of the busi-ness, as a result of the first Sediment Management Workshop in Colombia, the Ad-hoc Sediment Com-mittee was created in 2016 with the participation of companies from the electrical sector, members of the National Operation Council (CNO) and the Co-lombian Association of Power Generators (ACOL-GEN). The objective is this Committee in 2016 was to characterize the issue and present it to the compe-tent authorities to determine the regulatory strategy nationally for the next year.





AES Chivor Boyacá, Colombia 1977-1982 Pelton 8 1000 81,25 89,42

AES TunjitaBoyacá,

Colombia2016 Francis 2 20 N.A. 94,34

(1) These facilities are property of Eléctrica Angamos.

ISO

55000

Thermal Power Plants of AES Gener in SADI

Gross Capacity

(MW)

Termoandes

Salta 643

Total 643

Energy Balance Termoandes in Argentina 2016

Energy (GWh)

Net production 4.637

Purchases

Spot Purchases -

Total Purchases -

Sales

Contracts 828

Spot 3.809

Total Sales 4.637

Power Plant Location Commis-sioning Turbine Units Capacity

(MW)




Salta* Salta, Argentina 1999Ciclo

Combinado2 Turbogas,

1 Turbina Vapor643 7.510 82,18 96,26

*These facilities are property of Termoandes.

TermoAndes

AES Chivor has a record of 17 years without disabling incidents among direct employees.

In 2017, the Direction of Energy from the Ministry of Mines and Energy, in alliance with the Ministry of Environment, Will support the identification of a sus-tainable governmental solution for this issue of sedi-ment management in the country.

ISO 55000

As a consequence of operational excellence and continuous improvement, after several years of im-plementing good practices related to asset manage-ment, AES Chivor translated all of that into a man-agement system that today meets the requirement of ISO 55000. A a result of the joint effort of the entire business and the team work with the SBU, AES Chivor has became the first company in Colombia to get this certification and the third in Latin-America.

The commitment of the leadership, the awareness of associates and the alignment of the asset man-agement objectives with the organization’ objectives played a key role in this achievement; however, the essential aspect was to recognize asset management as part of the business strategy.

As regards to Safety, no Lost Time Incidents (LTI) were registered among direct employees of AES Chivor with a record of 17 years without disabling incidents among direct employees. In the case of contractors, there was 1 LTI.

ARGENTINA

As a result of the demand increase and the lack of new investments, the regulations considered that the fu-ture demand increase should be covered by contracts under the Energy Plus program. In view of the lack of supply in Argentina and given that TermoAndes is the most efficient power station in comparison to other competitors, it is expected for TermoAndes to con-tinue to to supply a significant portion of the soaring industrial demand in Argentina.

In November 2015, the energy authority in Argen-tina (CAMMESA) confirmed that the energy sold by TermoAndes, which exceeds the sales under Ener-gy Plus, will be paid as per Resolution 482 that sets forth higher prices than the spot price applicable to this type of sales. This recognition operates retroac-tively since February 2015. In March 2016, the Secre-tariat of Electric Energy revised the prices of Reso-lution 482 through Resolution 22/2016 retroactively to February 2016.

Salta Power Station is composed of a combined cy-cle made-up of two gas turbo-generators, with ca-pacity to run either with natural gas or diesel, two heat recovery boilers and a steam turbo-generator. Additionally, it can connect each of the three tur-bo-generators to any of the two grids: SING in Chile and SADI in Argentina, without the needs of having such grids interconnected.

In 2016, Salta operated normally supplying energy to SADI with 4,637 GWh. 100% of the generation was supplied to SADI out of which 828 GWh was sold to clients directly and 3,809 GWh was sold to the spot market.

Minor inspections were performed on the gas tur-bines I & II, as well as the repairs of the exhaust ducts of both units.

In regard to Safety and Environment, during 2016 the quality certifications IO 9001; ISO 14001 (Environ-ment) and OHSA 18001 (occupational health & safe-ty management) were kept. Finally, we got the asset management certification ISO 5500.

AES Chivor has became the first company in Colombia to get this certification

09 l Caring for the Environment

Annual Report 2016 AES Gener 171170 Caring for the Environment

Due to its sustainability practice, the Company is part of the Dow Jones’ Sustainability Index for the second consecutive year.

AES GENER MANAGE-MENT APPROACHMISSION AND POLICY

The Company has explicitly recognized the value of sustainability in its mission statement:

“To improve lives by providing safe, reliable and sus-tainable energy solutions.”

To carry out the mission on the environmental di-mension of sustainability, the Company has an En-vironmental Division that covers the operations in Chile, Argentina, and Colombia. This Depart-ment provides specialized support to the heads of the businesses in each of those countries throu-gh field-based professional teams, and a senior staff based in Santiago.

The Environmental, Safety, Occupational Health and Quality Policy of the Management System is reviewed periodically, and its latest version is dated December 2016. The commitments assumed in this Policy, as far as Environment is concerned, include: to ensure compliance with the regulations (local, corporate and voluntary); promote the continuous improvement of environmental performance; stren-gthen the environmental and safety culture; prevent, reduce, and manage our environmental impacts; promote the efficient use of natural resources; pro-mote the conservation of biodiversity; and incorpo-rate climatic change mitigation and adaptation in the analysis and development of the business.

The Company has twelve environmental stan-dards that establish the performance requirements complementing the regulations applicable to every

business. These standards are operational require-ments needed to supervise and control legal com-pliance and permits, air contamination monitoring, water discharge, handling of hazardous substances, hazardous waste and non-hazardous waste, stan-dards to ensure quality of data, occupational safety and health issues, and control of contractors.

The Company conducts an annual program of cross internal environment and safety audits between the different businesses, while the parent company AES Corp. (hereinafter the Corporation) develops an ex-ternal audit program coordinated by an officer of the parent company. In the case of businesses in opera-tion, external audits are conducted every three-year cycle, and in case of construction projects, every year. To establish the extension and depth of the audits, the environmental risk of the business and its previous performance are considered. Environ-mental audits (both cross internal and external) are devised to evaluate businesses in: (1) site specific environmental compliance and mitigation of envi-ronmental risks, (2) compliance with environmental standards, and (3) compliance with the Environ-mental Management System (EMS) expectations. To guide the audit processes, the Company uses tools called “Audit Protocols”.

Annual Report 2016 AES Gener 173172 Caring for the Environment

-0

-5

-10

-15

-20

-25

-30

-35

-40

PM: Particulate Matter

Nitrous Oxides

Sulphur Dioxide Mercury

-36% -37%

-32%

-21%

%Significant Environmental Aspects and Key Environmental Indicators

The significant environmental aspects are determi-ned according to a clear and thorough methodology that is applied to all processes that interact with the environment to first determine the environmental as-pects and then assess its environmental impacts. As a result of this analysis, the significant environmental aspects for AES Gener and its affiliates are identified and grouped as follows:

• Air Emissions: Particulate matter, Combustion Gases, Greenhouse Gases, and Noise

• Use of Water (including marine ecosystem)

• Generation of Coal Combustion Products and Wastes

• Biodiversity

The Environmental Aspects and Impacts (“EAI”) analysis is updated annually in all businesses of AES Gener and affiliates, both in operation and under construction.

Based on these significant environmental aspects, and in line with the Policy commitments, the Com-pany establishes key environmental performance in-dicators and environmental objectives.

The environmental information that gives rise to the indicators is reported from time to time by each busi-ness through its own system provided by the Corpo-ration, named AES Online. Each year, in order to check the information, AES Corp engages a third party to audit the consistency and accuracy of the data repor-ted in the system. This is why the data for years 2012 through 2015 were audited by Lloyd’s Register LRQA, Inc., and the data for 2016 will be checked as well. At the same time, the information used for the creation of the 2015 and 2016 indicators, regarding the first three categories (air emissions, use of water, and waste), for the businesses in operation (i.e. not under construction), was locally checked for AES Gener and affiliates by the audit firm Deloitte - Chile. This work

included the comparison of the data entered in AES Online with source records and related evidence by applying standardized information analysis and audi-ting methodologies in order to obtain representative samples of the Company’s reality.

Basis for Environmental Management

The Company has developed its own integrated management system, called GENERA, which mana-ges Environmental, Occupational Health, and Sa-fety issues. This system groups the requirements contained in the standards of the Corporation, national regulations, and international standards (ISO 14001 and OHSAS 18001).

The scope of GENERA reaches all the operations of the Company and its affiliates in Chile. Likewise, Ter-moAndes and AES Chivor have environmental ma-nagement systems consistent with the requirements of the Corporation.

All the operations of AES Gener in Chile, and its subsidiary TermoAndes in Argentina, are certified to ISO 14.001:2004. In 2017 and 2018, we plan to up-grade the Environmental Management System to comply with the new version of ISO 14001:2015 in all the businesses, and to obtain the certification to ISO 14001:2015 for the Environmental Management System of AES Chivor.

Management of Environmental Variables Air

Air emissions are the most relevant environmental variables for the thermoelectric generation busines-ses, since they are directly linked to combustion pro-cesses. Considering that 76% of the gross installed capacity of the Company is of thermoelectric source, the Company conducts a meticulous monitoring of air emissions, including the emission of Greenhouse Gases (“GHGs”), and has committed to reduce the in-tensity of emissions. Figure 1 shows the reduction in emissions by comparing year 2014 (prior to the com-missioning of the new abatement technologies) with year 2017 (estimated on the basis of the last quarter of 2016, when all the new emission abatement equip-ment currently available started to operate).

During year 2016, the Ministry for Environment of Chile, worked hard on the Decontamination Plan for Concón-Quintero-Puchuncaví, the Decontamination Plan for the Metropolitan Region, and the Environ-mental Prevention Plan for the area of Huasco. These plans were publicly disclosed and had formal parti-cipation instances through the Citizen Participation mechanism, of which the Company has been part. The Plans mentioned above are currently undergoing va-rious stages of final approval, and they are expected to be promulgated during the first half of 2017.

Regarding climate change, as we are aware of the risks, both physical and regulatory, that might derive from national climate change mitigation and adap-tation policies, we monitor and assess those risks on permanent basis. The Company is committed to reducing the intensity of greenhouse gas emis-sions by migrating to a portfolio of less GHG emis-sions in line with the commitments assumed by Chile in the COP-21.

Water

We monitor 100% of the water extracted, returned, and consumed at our facilities. From the analysis of the information, it is observed that consumed water represents only 1.4% of the extracted water, while the remaining 98.6% is returned at the same source in a quality similar to that of the extracted water (data of year 2016). In addition, 68% of the water consumed is of marine origin, and therefore the use of such wa-ter is not in significant competition with other users of continental fresh water. Without prejudice of the foregoing, and in accordance with our Environmen-tal Policy that promotes the efficient use of natu-ral resources, AES Gener and its affiliates carefully monitor their water consumption, and organize, at the same time, campaigns and projects intended to reduce water consumption.

We monitor 100% of the water extracted, returned, and consumed at our facilities. From the analysis of the information, it is observed that consumed water represents only 1.4% of the extracted water

Figure 1. Reduction of expected emissions intensity for year 2017 (estimated on the basis of last quarter 2016) and year 2014, at AES Gener and affiliates in Chile.

174 Caring for the Environment Memoria Anual 2016 AES Gener 175

(1) http://www.sea.gob.cl/sites/default/files/migration_files/version_final_ingresada_a_imprenta.pdf(2) http://www.fundaciongaviotinchico.cl/w/wp-content/uploads/2012/05/Informe-Final Gaviotin-2014-2015.pdf (página 47)

Waste

Coal Combustion Products (hereinafter “CCP”) re-present almost all the non-hazardous waste that we generate. That is why we channel our efforts into mo-nitoring the quantity of CCPs produced, increasing their use in other industrial processes, and ensuring their appropriate final disposition. We further keep track of the percentage of CCPs which is delivered to other companies and used by them as raw materials in their processes. In fiscal year 2016, 3.8% of the CCP generation was recovered and used as raw material in another industrial process, which accounted for twice as much as the previous year.

Likewise, we monitor the Hazardous Waste in ac-cordance with the current regulations, which represent 0.14% of the total volume of waste generated during 2016.

Consistent with the enactment of Supreme Decree No. 43/2016 regarding storage of hazardous substan-ces (warehouses, ponds and lime storage silos), this year there was a significant advance in the definition of the plans for the adequacy of the facilities to the new requirements.

Another achievement of this year was the implemen-tation of a computer system to support the manage-ment of hazardous substances and waste within the operations of the Company.

Biodiversity

All the businesses in operation and the projects under construction have performed an analysis to establish any possible risks of affecting biodiversity. It has arisen from this analysis that 5 of our 16 businesses require a Biodiversity Management Plan, which as of this date have been fully implemented and are being executed. The businesses requiring Biodiversity Management Plans are: Angamos, Cochrane, Ventanas, AES Chivor and Alto Maipo (currently under construction).

2016 Outstanding Environmental Facts

During year 2016, we supported four educational es-tablishments (three of Tocopilla and one of Mejillones) to obtain the environmental certification delivered by the Regional Ministerial Environmental Secretary (Se-remi, for its acronym in Spanish) of the Antofagasta Region. Three of them obtained the “Excellence” ra-ting and one of them, “Medium Level” rating. In 2017, we will continue supporting the last one so that it achieves the “Excellence” rating.

Environmental Qualification Resolution No. 141/2016, issued by the Atacama Region Assessment Commit-tee, where the project “60 MW Battery Energy Stora-ge Systems (BESS) - Guacolda” is favorably qualified, was obtained on July 26, 2016. This new BESS project falls within the new lines of business of AES Gener, and adds 52 MW in the BESS already installed and in operation, which are held by AES Gener in Andes, Cochrane and Angamos substations. This equipment allows to effectively and efficiently support the va-riability of energy coming from renewable sources, which will have an increasing participation in the electrical systems.

Environmental Qualification Resolution No. 0278/2016, issued by the Antofagasta Region As-sessment Committee, where the project “Expansion of Seawater Desalination Plant, Angamos Thermal Power Station” is favorably qualified, was obtained on August 18, 2016. This project will make it possible to expand the Reverse Osmosis (“RO”) Desalination Plant of Angamos to be able to supply desalinated water to Cochrane. This way we will avoid using the Thermal Vapor Compression (“TVC”) Desalination Plant of Co-chrane, and it will be possible to sell desalinated water to third parties. This project is part of the initiatives intended to make better use of resources (in this case, a reduction in the use of energy to desalinate water). This is simultaneous to the beginning of a new line of business, which is the development of Water Desali-nation Plants, whose purpose is, in the near future, to provide safety and quality to the water supply in the regions of Antofagasta, Atacama, and Valparaiso.

With the commissioning of the new Particulate Mat-ter (PM) and Sulfur Dioxide (SO2) abatement systems of units 1, 2 and 4 of Guacolda Plant, and a selective catalytic reduction equipment for the abatement of Nitrous Oxides (NOx) emissions in Unit 1 of Guacolda Plant, during year 2016 we completed the environ-mental improvement plan focused on reducing air emissions. Similar equipment for the abatement of Particulate Matter and Sulphur Dioxide started opera-tions during year 2015 in Ventanas and Nueva Toco-pilla. The environmental improvement plan required investments of around US$ 472.8 million.

Cochrane Plant, an affiliate of AES Gener, with a gross generating capacity of 532 MW, started to operate during 2016. This plant uses cooling towers to cool seawater in a closed cycle, thus contributing to the re-duction of impacts on the marine environment when compared with an open-cycle cooling system, since it allows to considerably reduce (about 90%) the seawa-ter collection volume with respect to a traditional open-cycle system, with the ensuing reduction in the use of electricity, thus optimizing the use of resources. In addition, the dimensions of the structures that need to be built on the beach and in the sea for the collec-tion and return of water are reduced. The project “An-gamos Plant Cooling Towers”, equivalent to that of Cochrane Plant, was recognized by the Environmen-tal Evaluation Service in 2013 as a leading measure towards the reduction of environmental impacts1 .

Cochrane Plant became member of the “Fundación para la Sustentabilidad del Gaviotín Chico,” which aims to contribute to the conservation of an endan-gered bird, Gaviotín Chico or Chirrío (Sterna lorata), in a manner consistent with the industrial development of Mejillones. The Foundation has been in operation since 2008 and Angamos Plant is one of its founding partners. Thanks to the implementation of technical measures intended to protect the Gaviotín Chico, cer-tain studies conducted by the Foundation suggested that the population of gaviotines in the 2014-2015 season was higher than in the previous season2 , thus recovering the upward trend, and that the levels were significantly higher than those registered in 2008, when the first studies were carried out.

Cochrane Plant, an affiliate of AES Gener, with a gross generating capacity of 532 MW, started to operate during 2016. This plant uses cooling towers to

cool seawater in a closed cycle, thus contributing to the reduction of impacts on the marine environment

Annual Report 2016 AES Gener 177176 Financial Statements of AES Gener S.A.

10 l Financial Statements of AES Gener S.A.


ASSETS Note 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

CURRENT ASSETS

Cash & Cash Equivalent 8 469.560 267.233

Other current financial assets 9 21.692 40.161

Other current non-financial assets 11 3.007 5.787

Trades receivable and other current accounts receivable, net 12 373.146 362.558

Accounts receivable from related parties, current 13 18.833 13.213

Inventory 14 136.235 122.853

Current tax assets, net 15 37.909 42.149

Total Current Assets 1.060.382 853.954

NON CURRENT ASSETS

Other non-current financial assets 9 12.824 34.359

Other non-current non-financial assets 11 33.620 29.764

Trades receivable and other non-current accounts receivable, net 12 20.021 14.832

Investments in investees 16 419.468 402.178

Intangible assets, net 17 51.857 53.238

Goodwill 17 7.309 7.309

Property, plant and equipment 18 6.150.290 5.795.506

Deferred tax assets, net 15 93.133 94.893

Total Non-current Assets 6.788.522 6.432.079

TOTAL ASSETS 7.848.904 7.286.033

EQUITY & LIABILITIES Note 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

CURRENT LIABILITIES

Other current financial liabilities 19 230.814 159.552

Trades payable and other current accounts payable 20 358.154 288.589

Accounts payable to related parties, current 13 10.654 18.392

Other provisions, current 21 912 3.455

Tax liabilities, current, net 15 38.180 45.595

Provisions for employee benefits, current 22 3.858 3.689

Other non-financial liabilities, current 23 35.724 34.086

Total Current Liabilities 678.296 553.358

NON-CURRENT LIABILITIES

Other non-current financial liabilities 19 3.672.070 3.456.919

Trades payable and other accounts payable, non-current 20 17.266 26.283

Accounts payable to related parties, non-current 13 241.031 229.788

Other provisions, non-current 21 71.662 106.599

Deferred Tax Liabilities, net. 15 571.597 542.540

Provisions for employee benefits, non-current 22 28.570 27.960

Other non-financial liabilities, non-current 23 9.819 10.352

Total Non-Current Liabilities 4.612.015 4.400.441

TOTAL LIABILITIES 5.290.311 4.953.799

EQUITY

Issued Capital 2.052.076 2.052.076

Retained earnings (losses) 24 544.760 377.125

Share premium 49.864 49.864

Other equity interest 24 237.408 236.567

Other reserves 24 (457.378) (492.188)

Equity attributable to controller’s owners 2.426.730 2.223.444

Non-controlling equity interest 3.b 131.863 108.790

Total Net Equity 2.558.593 2.332.234

TOTAL EQUITY & LIABILITIES 7.848.904 7.286.033


STATEMENT OF COMPREHENSIVE INCOME Note 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

Profit & Loss

Gains (loss)

Operating Revenues 25 2.286.401 2.165.407

Cost of sales 26 (1.660.954) (1.582.564)

GROSS GAINS 625.447 582.843

Other revenues, by function 2.243 2.218

Administration expenses 26 (102.296) (104.659)

Other expenses, by function (2.981) (2.610)

Other gains (losses), net 27 534 (15.897)

Interest Revenues 28 8.111 8.859

Financial costs 28 (161.531) (148.304)

Equity interest in gains(losses ) of investees, net 16 12.909 80.273

Exchange rate differences 28 (17.297) (17.340)

Gain (loss), before taxes 365.139 385.383

Income Tax Expenses 15 (106.830) (132.709)

Gain (loss) from continuous operations 258.309 252.674

Gain (loss) from discontinuous operations - -

GAIN (LOSS) 258.309 252.674

Gain (loss) attributable to

Gain (loss) attributable to controlling interest 261.009 264.874

Gain (loss) attributable to non-controlling interest 3.b (2.700) (12.200)

GAIN (LOSS) 258.309 252.674

Gains per share

Gains from basic share

Gain (loss) from basic share in continuous operations 29 0,031 0,032

Gain (loss) from basic share in discontinuous operations

GAIN (LOSS) PER BASIC SHARE 0,031 0,032

Gains from diluted shares

Diluted gain (loss) per share from continuous operations 0,031 0,032

Diluted gain (loss) per share from discontinuous operations

Diluted Gains (Losses) per Share 0,031 0,032

STATEMENT OF COMPREHENSIVE INCOME 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

GAIN (LOSS) 258.309 252.674

Components of other comprehensive income not reclassified in net income, before taxes.

Other comprehensive income, before taxes, actuarial gain (loss) for defined benefit plan. 1.143 760

Other comprehensive income, before taxes, gains (losses) from equity instruments. 198 (23)

Other comprehensive income, before taxes, not reclassified in net income. 1.341 737

Components of other comprehensive income, before taxes, not reclassified in net income

Gains (losses) from exchange rate differences 10.790 (99.660)

Unrealized gains (losses) from cash flow hedges 33.021 (60.150)

Interest in other comprehensive income of investees and joint ventures using the equity method. 4.380 898

Other comprehensive income, before taxes, not reclassified in net income. 48.191 (158.912)

Other components of other comprehensive income, before taxes. 49.532 (158.175)

Income tax related to components of other comprehensive income not reclassified in net income.

Income tax related to defined benefit plans from other comprehensive income. (680) 142

Income taxes related to components of other comprehensive income not reclassified in net income. (680) 142

Income tax related to components of other comprehensive income reclassified in net income.

Income tax related to cash flow hedges from other comprehensive income (9.562) 17.094

Income taxes related to components of other comprehensive income not reclassified in net income. (9.562) 17.094

Income tax related to other components of other comprehensive income (10.242) 17.236

Other comprehensive income 39.290 (140.939)

Total comprehensive income 297.599 111.735

Comprehensive income attributable to

Comprehensive income attributable to the controller’s owners. 295.819 144.968

Comprehensive income attributable to non-controlling interest. 1.780 (33.233)

TOTAL COMPREHENSIVE INCOME 297.599 111.735


STATEMENT OF CHANGES IN EQUITY Issued capitalShare

Premium Other interest

in EquityConversion

Reserves

Reserves of Cash Flow

Hedges

Reserves for defined

benefit plans Other sundry

reservesTotal other

reservesRetained

gains (losses)

Equity attributable

to controllers owners

Non- controlling

interest Total Equity

MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$

Opening balance current period 01 Jan. 2016 2.052.076 49.864 236.567 (154.098) (221.710) (10.041) (106.339) (492.188) 377.125 2.223.444 108.790 2.332.234

Changes in equity - - - - - - - - - - - -

COMPREHENSIVE INCOME

Gain (loss) - - - - - - - - 261.009 261.009 (2.700) 258.309

Other comprehensive income - - - 10.790 23.422 458 140 34.810 - 34.810 4.480 39.290

Comprehensive income - - - - - - - - - 295.819 1.780 297.599

Dividends - - - - - - - - (93.374) (93.374) - (93.374)

Increase (decrease) from transfers and other changes - - 841 - - - - - - 841 21.293 22.134

Total changes in equity - - 841 10.790 23.422 458 140 34.810 167.635 203.286 23.073 226.359

FINAL BALANCE CURRENT PERIOD 31 DEC. 2016 2.052.076 49.864 237.408 (143.308) (198.288) (9.583) (106.199) (457.378) 544.760 2.426.730 131.863 2.558.593

OTHER RESERVES

STATEMENT OF CHANGES IN EQUITY Issued capitalShare

Premium Other interest

in EquityConversion

Reserves

Reserves of Cash Flow

Hedges

Reserves for defined

benefit plans Other sundry

reservesTotal other

reservesRetained

gains (losses)

Equity attributable

to controllers owners

Non- controlling

interest Total Equity

MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$ MUS$

Opening balance current period 01 Jan. 2015 2.052.076 49.864 224.791 (54.438) (200.601) (10.956) (106.287) (372.282) 358.103 2.312.552 51.807 2.364.359

Changes in equity - - - - - - - - - - - -

COMPREHENSIVE INCOME

Gain (loss) - - - - - - - - 264.874 264.874 (12.200) 252.674

Other comprehensive income - - - (99.660) (21.109) 915 (52) (119.906) - (119.906) (21.033) (140.939)

Comprehensive income - - - - - - - - - 144.968 (33.233) 111.735

Dividends - - - - - - - - (235.000) (235.000) - (235.000)

Increase (decrease) from transfers and other changes - - 11.776 - - - - - (10.852) 924 90.216 91.140

Total changes in equity - - 11.776 (99.660) (21.109) 915 (52) (119.906) 19.022 (89.108) 56.983 (32.125)

FINAL BALANCE CURRENT PERIOD 31 DEC. 2015 2.052.076 49.864 236.567 (154.098) (221.710) (10.041) (106.339) (492.188) 377.125 2.223.444 108.790 2.332.234

OTHER RESERVES


STATEMENT OF DIRECT CASH FLOW 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

CASH FLOW FROM (USED IN) OPERATING ACTIVITIES

Receipts from operating activities

Receipts from sales of goods and service supply 2.475.838 2.210.541

Other receipts from operating activities 29.892 18.165

Payment types

Payment to suppliers of goods and services (1.537.769) (1.520.384)

Payments to and for employees (78.232) (68.910)

Other payments of operating activities (103.436) (83.390)

Dividends paid (93.374) (235.000)

Dividends received - 22.500

Interests paid (177.638) (166.108)

Interests received 20.003 5.982

Reimbursed income tax (paid) (97.603) (74.317)

Other cash inflows (outflows) (15.760) (1.445)

Net cash flows from (used in) operating activities 421.921 107.634

CASH FLOWS FROM (USED IN) INVESTMENT ACTIVITIES

Cash flows from the sale of interests in investees 616 -

Amounts from the sale of property, plant & equipment 11 7.381

Acquisition of property, plant & equipment (561.919) (1.001.514)

Amounts from the sale of intangible assets 1.704 (932)

Acquisition of intangible assets (766) (1.851)

Amounts from other long-term assets 163.506 144.432

Acquisitions of other long-term assets (144.787) (134.871)

Other cash inflows (outflows) (60) 135.728

Net cash flows from (used in) investment activities (541.695) (851.627)

STATEMENT OF DIRECT CASH FLOW 31 Dec. 2016 31 Dec. 2015

MUS$ MUS$

Cash flow from the sale of interest in investees 616 -

Amounts from the sale of property, plant & equipment 11 7.381

Acquisition of property, plant & equipment (561.919) (1.001.514)

Amounts from the sale of intangible assets 1.704 (932)

Acquisition of intangible assets (766) (1.851)

Amounts from other long-term assets 163.506 144.432

Acquisitions of other long-term assets (144.787) (134.871)

Other cash inflows (outflows) (60) 135.728

Net cash flows from (used in) investment activities (541.695) (851.627)

CASH FLOW FROM (USED IN) FINANCING ACTIVITIES

Amounts from share issuance 21.280 90.240

Payments for buying or redeeming entity’s shares (10) -

Amounts from long-term loans 608.537 1.038.773

Amounts from short-term loans 23.600 91.100

Loan payments (312.482) (421.483)

Payment of liabilities for financial leases (1.879) (1.797)

Other cash inflows (outflows) (21.837) (998)

Net cash flows from (used in) financing activities 317.209 795.835

"Net increase (decrease) of cash and cash equivalent, before exchange rate effects” 197.435 51.842

EFFECTS OF EXCHANGE RATE CHANGES ON CASH & CASH EQUIVALENT

Effects of exchange rate changes on cash & cash equivalent 4.892 (13.300)

Net increase (decrease) of cash & cash equivalent 202.327 38.542

Initial cash & cash equivalent 267.233 228.691

CLOSING CASH & CASH EQUIVALENT 469.560 267.233


LUIS FELIPE CERÓN Presidente Rut Nº 6.375.799-3 Chileno

ANDRÉS GLUSKI Director Pasaporte Nº 6024620Venezolano

BERNERD DA SANTOS Director Pasaporte Nº 037105150Venezolano

GONZALO PAROT Director Rut Nº 6.703.799-6 Chileno

RADOVAN RAZMILIC DirectorRut Nº 6.283.668-7 Chileno

CLAUDIA BOBADILLA Directora IndependienteRut Nº 9.954.477-5Chilena

VINEET MOHAN DirectorPasaporte Nº E4088685L Singapurense

VICENTE JAVIER GIORGIO Gerente GeneralRut Nº 23.202.311-2Argentino

In accordance with the existing regulation in force of the Superintendency of Securities and Insurance, the An-nual Report herein has been approved and underwritten by the Chief Executive Officer of the Company and the Directors identified below, who represent the majority of the members of the Board of Directors of AES Gener S.A. as of the date of the publication of the Document. They assume responsibility, under oath, for the truthful-ness of the information herein contained.

SWORN STATEMENT OF RESPONSIBILITY

11 l Appendices

Annual Report 2016 AES Gener 193192 Appendix 1: Subsequent Events

Appendix 1 Subsequent Events

INFORMED TO THE SVS DURING 2016JANUARY 22ND, 2016

On January 21st, 2016 the Company sent a commu-nication to the Superintendency of Securities and In-surance (SVS) about a news report published in Diario Financiero on January 20th, 2016 about the search of a potential partner for Empresa Eléctrica Angamos S.A. and the sale of an additional percentage of Em-presa Eléctrica Cochrane SpA. It was informed that the expansion strategy of AES Gener in the country has considered in the past and continues to consider in the present is the incorporation of minority share-holders for some of its projects, so that they contrib-ute with the funding of its projects, optimization of the capital structure and increase if he Company value maintaining the credit rating. Thus, the subsidiaries Empresa Eléctrica Cochrane SpA, Alto Maipo SpA and Guacolda Energía S.A include minority shareholders in the corresponding capital structure. In alignment with the expansion strategy mentioned above, AES Gener S.A. Was analyzing the possibility to include a minority shareholder for Empresa Eléctrica Angamos in a way that AES Gener could keep the control and administration of such company.

MARCH 29TH, 2016

Subsequent Event

In accordance with the provisions set forth in article 9 & 10 of the security market Act N° 18045; article 63 of the stock corporation Act N°18046 and Section II of the General Regulation N°30 from the SVS, the Com-pany informed the SVS that based on the agreement reached by the Board of Directors of AES Gener in an ordinary session held in March 28th, 2016, it was agreed to call shareholders for an Ordinary Share-holders Assembly on April 26th, 2016.

The objective of the Shareholders Assembly was to know and pronounce about the following: (i) Approval of the Financial Statements and the Annual Report of the fiscal year ended December 31st, 2015, including the report from the external auditors; (ii) profit distri-bution and definite dividend distribution; (iii) appoint-ment of the Board of Directors of the Company; (iv) definition of the compensations for the members of the Board Committee, approval of the budget of the Committee and its advisors for 2016 and the expense and activity report of such Committee during 2015; (v) appointment of the external audit and credit rating firms for 2016; (vi) dividend policy; (vii) information about operations with related-parties referred to in Section XVI of the stock corporations Act N°18046; (viii) appointment of the newspapers to publish the notices of shareholders meetings, dividend pay-ment and other appropriate corporate publications; (ix) other issues of corporate interest related to the extraordinary shareholders assembly and (x) in gen-eral, adopt all the other agreements necessary or convenient to materialize the decisions made by the shareholders assembly.


Regular Alternate

Andrés Gluski Weilert Margaret Tigre

Radovan Razmilic Tomicic Radovan Razmilic Tomicic

Stephen Coughlin Daniel Stadelmann Rojas.

Michael Chilton Vineet Mohan

Bernerd da Santos Arminio Borjas

Gonzalo Parot Palma Luis Hernán Palacios Correa.

Claudia Bobadilla Ferrer Antonio Kovacevic Biskupovic

MARCH 29TH, 2016

Subsequent Event

In accordance with the provisions set forth in article 9 & 10 of the security market Act N° 18045, Section II of the General Regulation N°30 and Circular N°660 from the SVS, the Company informed the SVS about the Subsequent Event that in ordinary session of the Board held in March 28th, 2016, they agreed to call ordinary shareholders meeting on April 26th, 2016 and propose the Shareholders Assembly to distribute dividends charged against profits for the year ended December 31st, 2015 for US$264,874,655 that corre-sponds to 100% of the profits from such fiscal year susceptible of dividend distribution. The profit dis-tribution aforementioned would proceed through the distribution of a definite dividend for US$0.0315315 per share charged against the profits from 2015, which should be discounted from the interim dividend of US$0.0204159 per share already paid in November 2015. The remaining balance of US$0.111156 per share would be paid through a dividend for US$0.0060712 per share to be paid in May 26th, 2016 and a dividend for US$0.0050444 to be paid on August 29th, 2016.-

APRIL 26TH, 2016

Subsequent Event

In accordance with the provisions set forth in article 9 & 10 of the security market Act N° 18045; stock cor-poration Act N°18046 and Section II of the General Regulation N°30 from the SVS, the Company informed as subsequent event that in the Ordinary Sharehold-ers Assembly held on April 26th, 2013 the Board of Directors was renewed completely and the new reg-ular and alternate directors were appointed for the next three years.

The Directors appointed were:

Likewise, it was informed that the regular directors Gonzalo Parot Palma and Claudia Bobadilla Ferrer, and their corresponding alternate directors, were in-dependent directors, as established in Article 50 bis of ACT 18046 about stock corporations.

JUNE 23RD, 2016

Subsequent Event

In accordance with the provisions set forth in article 9 & 10 of the security market Act N° 18045; article 63 of the stock corporation Act n°18046 and Sec-tion II of the General Regulation N°30 from the SVS, the Company informed as subsequent event that on June 23rd, 2016 the Board of Directors of AES Ge-ner accepted the resignation of the Chief Executive Officer, Felipe Cerón, and appointed Vicente Javier Giorgio in his place, who, until then, was the Opera-tions VP of the Company. Likewise, in the same Board meeting other Directors submitted their resignation,

namely, Stephen Coughlin as Regular Director, Daniel Stadelmann as his alternate director and Andrés Gluski as Chairmen of the Board of AES Gener. Due to the res-ignations submitted by Mr. Coughlin (Regular) and Mr. Stadelmenn (Acting), the Board decided to appoint Mr. Felipe Cerón as Regular Director who was also appointed Chairman of the Board.

AUGUST 17TH, 2016

Subsequent Event

The Company informed as subsequent event that the ad-ministration of its subsidiary Alto Maipo SpA, indirectly controlled by the informant company with 60%, that the Alto Maipo Project currently under development in San José de Maipo, Metropolitan Region, had experience cer-tain difficulties with the construction works. Such situa-tion could potentially implied higher costs by 10% or 20% over the original construction budget. Therefore, Alto Maipo SpA was working with the main contractor, finan-ciers, and parters in order to estimate the amount of the higher costs and decide how to finance them.


INFORMATION PROVIDED TO THE SVS DURING 2017JANUARY 19TH, 2017

Subsequent Event

In accordance with the provisions set forth in article 10 of the security market Act N° 18045 and Section II of the General Regulation N°30 from the SVS, the Company Informed as subsequent event that, as pre-viously informed also as subsequent event on August 17th, 2016, the Alto Maipo Project had experienced some difficulties to execute the works. Such diffi-culties had translated into cost overruns that might reach 22% including contingencies, of the original project budget (the “cost overruns”). The amount of the cost overruns has been reviewed by an indepen-dent expert, who corroborated it reasonableness. It was indicated that the cost overruns had led to a se-ries of negotiations with main contractors, financiers and partners of the project in order to restructure the existing financing and obtain additional financing for the project (the “Restructuring”) provided by AES Gener, minority shareholders and the project finan-ciers, so as to cover the cost overruns and continue with the construction. Likewise it was informed that the restructuring basis had been agreed, which was contingent upon the following conditions: (i) the ne-gotiation and subscription of the definite documenta-tion to formalize the different agreements associated with the Restructuring in a way that is satisfactory for the all the parties involved; and (ii) the negotiation and approval of the terms and conditions of each one of the documents that are part of the Financing.

The restructuring considers, among other aspects: (I) AES Gener would acquire, directly or indirectly, the entire equity interest of Minera Los Pelambres in Alto Maipo, which amounts to 40% of the shares; (ii) Strabag SpA, the main contractor of the project, would become a minority shareholder with an initial 7% of the Company’s shares approx.; (iii) The modi-fication of the energy supply contracts between Minera Los Pelambres, Alto Maipo and AES Gener, respectively; and (iv) The modification of the terms and conditions of the current senior financing of the project, including, among others, a term exten-sion and additional funds for Alto Maipo from the parties involved. As per the provisions established in Circular N°988 of the SVS, it was informed that during this stage it was not possible to quantify the effects this operation would have on the net income of the AES Gener S.A.

MARCH 17TH, 2017

Subsequent Event

In accordance with the provisions set forth in article 10 of the security market Act N° 18045 and Section II of the General Regulation N°30 from the SVS, the Company, duly authorized, informs you about the subsequent event related to the businesses of AES GENER S.A. (”AES Gener”):

1. On this date, the financial restructuring process of the Hydroelectric Project Alto Maipo (”The Project”), as informed to the SVS, through Subsequent Events on August 17th, 2016 and January 19th, 2017.

2. As informed to the SVS through the Subsequent Events aforementioned, the Project experienced difficulties to execute the works, which translates into cost overruns that might get to 22% 22% in-cluding contingencies, of the original project budget (the “cost overruns”).

3. The cost overruns had led to a series of negotia-tions with the main contractors, financiers and part-ners of the project in order to restructure the exist-ing financing and obtain additional financing for the project (the “restructuring”) provided by AES Gener, minority shareholders and the project financiers (”the financial restructuring”)

4. The Financial Restructuring, whose documentation was signed on this date, Basically covered the issues informed to the SVS as Subsequent Eventfrom Jan-uary 19th, 2017, including, among other aspects, the following: (i) the acquisition, directly or indirectly, of the entire equity interest of Minera Los Pelambres (MLP) in Alto Maipo by AES Gener; (ii) the inclusion of Strabag SpA, the main contractor of the project, as a minority shareholder with an initial 7% of the Com-pany’s shares approx.; (Iii) The modification of the en-ergy supply contracts between Minera Los Pelambres,

Alto Maipo and AES Gener, respectively; and (Iv) The modification of the terms and conditions of the cur-rent senior financing of the project, including, among others, a term extension and additional funds for Alto Maipo from the parties involved, which, in the case of AES Gener implies an additional disbursements of US$117 million approx. “under the terms and condi-tions agreed in the financing contracts”.

5. The Financial Restructuring agreed on this date will allow to fully cover the cost overruns Of the Project and continue with the construction thats, as of today, has reached a progress of 50%.

Finally, as established in Circular N°988 from the SVS, we hereby inform you that despite the additional dis-bursement committed by AES Gener. The operation herein disclosed will not have a direct significant im-pact on the net income of the Company.


Regular Directors Alternate Directors

Javier Giorgio (1) Ricardo Falú (2)

Luis Carlos Valenzuela Alberto Zavala (8)

Roberto Junguito Letitia Dawn Mendoza

Luis Felipe Cerón (3) Arminio Borjas (4)

Elizabeth Hackenson(10) Annemarie ReynoldsAppendix 2

AES CHIVOR & CIA SCA ESPAS OF DECEMBER 31ST, 2016

Identification Legal Nature: Limited partnership by shares (Foreign) Address Calle 100 Avenue N°19-54 floor 9 Bogota, Colombia Telephone (57 1) 4079555 Fax: (57 1) 6427311

Object:Generation and trading of electric energy; provision of maintenance and repair services of equipment used in power generation plants or similar facilities.

Capital and shares Paid-in capital COP$ 233,736,958,964

Subscribed and Paid-in shares 222.818.836

Equity interest 99.99% indirectly through Norgener SpA. (222.769.668)and AES Gener S.A. (1 share)

Chief Executive Officer Federico Echavarría

Staff* Technical and administrative staff: 62 Professional staff: 46 Executives: 1

AES CHIVOR S.A. (MANAGING PARTNER OF AES CHIVOR & CIA SCA E.S.P.)

Identification Legal Nature: Stock corporation (Foreign) Address Calle 100 Avenue N°19-54 floor 9 Bogota, Colombia Telephone (57 1) 4079555 Fax: (57 1) 6427311

Object:Subscription, acquisition, disposition or investment in securities, shares, convertible bonds, and all types of debt securities: investments in other companies, in-vestment in all kind of goods to fulfill its objective, eq-uity interest in other companies, capital contributions, acquisition or possession of shares and debentures of other companies. The possibility to secure and guar-antee third-party debentures and those from its own shareholders is excluded.



Luis Felipe Cerón (3) Valerie Barnich (6)

Ricardo Falú (2) Alberto Zavala (8)

Vicente Javier Giorgio (1) Luis Knaak (7)

Alfredo Atucha Patricio Enei

Anna Gretchina Alan Muchnik

Capital and shares Paid-in capital US$57,554 (Col$120,000,000)

Subscribed and Paid-in shares 120.000

Equity interest 99.38% indirectly and indirectly through Norgener SpA. y Sociedad Eléctrica Santiago SpA.

ALTO MAIPO SPA

Identification Legal Nature: Limited liability company TAX ID: 76,170,761. Address 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone (56 2) 26868900 Fax: (56 2) 26868990

Object:Generation, transmission, purchase, sale and distribu-tion of electric energy and capacity anywhere in the country or overseas; the execution and exploitation of infrastructure civil and hydraulic works, among oth-ers; investment in all type of property and physical assets; the participation in all kind of public or private tenders and proposals; integral consultancy services.

Capital and shares Paid-in capital US$ 235,577,301

Subscribed and Paid-in shares 11,577,300 subscribed and paid shares; 134,575 Subscribed shares pending payment.

Equity interest 60% indirectly through Norgener SpA.

Chairman Luis Felipe Cerón (3)

* On January 12th, 2017 the Board of Directors was in-formed about the resignation of the Regular Director Luis Felipe Cerón and his Alternate director Valerie Barnish; the Regular Director Ricardo Manuel Falú and his Alternate directors Alberto Zavala; and Vicen-te Javier Giorgio and hid Alternate director Luis Kaak Quezada. The Board greed to appoint as Regular Di-rectors Ricardo Roizn who will also assume as Chair-man of the Board and the Company; Javier Dib and Ricardo Falú respectively. Likewise, Alfredo Atucha also submitted his resignation as Regular Director and Patricio Enei took over in his replacement.

Then, on March 17th, 2017, the shareholders agreed to revoke the Board and appointed Vicente Javier Giorgio, Ricardo Manuel Falú and Alberto Zavala, as Regular Directors and Luis Knaak, Quezada Javi-er Dib and Mariana Soto as Alternate directors, as replacements, respectively.

Chief Executive Officer Luis Knaak Quezada (7)

Staff* Technical and administrative staff: 14 Professional staff: 80

EMPRESA ELÉCTRICA ANGAMOS S.A.

Identification Legal Nature: Closely held corporation (Foreign) TAX ID: 76.004.976-K Address 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone (56 2) 26868900 Fax: (56 2) 26868990

Object:Generation, purchase, sale and distribution of elec-tric energy or any other type of energy, anywhere in the country; the extraction distribution, trading and exploitation, in any way, of solid, liquid or gas fuels; the sale and provision of engineering, maintenance and mechanic services; lease, construction or ac-quisition of docks or ports and their exploitation, and the development of production and commercial activities that may be related or complementary to the activities aforementioned.

Capital and shares Paid-in capital US$ 326,869,538.99

Numbers of issued and paid-in shares 22,150,749,834

Equity interest 100% indirectly through Norgener SpA. of Inver-siones Nueva Ventanas SpA.

Chairman Ricardo Falú (2)

Directors Ricardo Falú (2) Vicente Javier Giorgio (1) Luis Knaak Quezada (7)

Chief Executive Officer Vicente Javier Giorgio (1)


EMPRESA ELÉCTRICA CAMPICHE S.A.

Identification Legal Nature: Closely held corporation TAX ID: 76,008,306-2 Address 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone (56 2) 26868900

Object:Generation, purchase, sale and distribution of electric energy or any other type of energy,anywhere in the country or overseas; the extraction distribution, trad-ing and exploitation, in any way, of solid,liquid or gas fuels; the sale and provision of engineering, mainte-nance and mechanic services; lease, construction or acquisition of docks or ports and their exploitation, and the development of production and commercial activities that may be related or complementary to the activities aforementioned Capital and shares.

Paid-in capital US$8,669,066

Numbers of issued and paid-in shares 522,974,841

Equity interest 100% indirectly and indirectly through Inversiones Nueva Ventanas SpA.

Chairman Ricardo Manuel Falú (2)

Directors Ricardo Falú (2) Vicente Javier Giorgio (1) Osvaldo Ledezma (5)




Luis Felipe Cerón (4) Vicente Javier Giorgio (1)

Ricardo Falú (2) Alberto Zavala (8)

Elizabeth Hackenson (10) Valerie Barnich (6)

Yasayuki Asakura Takao Fujii

Tadashi Omatoi Kentaro Ichino

EMPRESA ELÉCTRICA COCHRANE SPA

Identification Legal Nature: Limited Liability Company TAX ID: 76,085,254-6 Address 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone (56 2) 26868900

Object:Generation, purchase, sale and distribution of electric energy or any other type of energy, anywhere in the country or overseas; the extraction distribution, trad-ing and exploitation, in any way, of solid,liquid or gas fuels; the sale and provision of engineering, mainte-nance and mechanic services; lease, construction or acquisition of docks or ports and their exploitation, in any way, and the development of production and commercial activities that may be related or comple-mentary to the activities aforementioned.


Subscribed and Paid-in shares 428,963,745 subscribed and paid shares; 13,900,000 shares pending payment.

Equity interest 60% indirectly through Inversiones Nueva Ventanas SpA


Chief Executive Officer Luis Knaak Quezada (7)


EMPRESA ELÉCTRICA VENTANAS S.A.

Identification Legal Nature: Closely held corporation TAX ID: 96,814,370-0 Address 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone (56 2) 26868900

Object:Generation, transmission, purchase, sale and dis-tribution of electric energy or any other type of energy, anywhere in the country or overseas; the extraction distribution, trading and exploitation, in any way, of solid,liquid or gas fuels; the sale and provision of engineering, maintenance and me-chanic services; lease, construction or acquisition of docks or ports and their exploitation, in any way, and the development of production and commercial activities that may be related or complementary to the activities aforementioned.



Equity interest 100% directly and indirectly through Inversiones Nueva Ventanas S.A.


Directors Vicente Javier Giorgio (1) Luis Knaak Quezada (7) Ricardo Falú (2)


ENERGEN S.A.

Identification Legal Nature: Stock corporation Address: 410 Callao Avenue 1st floor, C1022AAR Buenos Aires, Republic Of Argentina Telephone (54 11) -2300

Object:Wholesale purchase and sale of electric energy generated by third-parties and to be consumed by third-parties; import, export, consignment, inter-mediation and trading of electric energy in Argen-tina and/or overseas; any type of management and/or activity related to generation, transporta-tion and distribution of electric energy; trading of all types of fuel.

Capital and shares Paid-in capital AR$ 114,450

Numbers of issued and paid-in shares 114,450

Equity interest 94% directly and 6% indirectly through Gener Argentina S.A.

Chairman Martín Genesio

Regular Directors Vicente Javier Giorgio Emiliano Chaparro

Alternate directors Mario Basso Guillermo Paponi Iván Diego Durontó

Chief Executive Officer Martín Genesio

GASODUCTO GASANDES S.A.

Identification Legal Nature: Closely held corporation TAX ID: 96,721,360-8 Address: 11650 Chena Avenue, Parque Industrial Puerta Sur, San Bernardo, Santiago, Chile. Telephone (56 2) 23665960 Fax: (56 2) 23665074

Object:The objective of the company is to provide services of natural gas transmission and make investments in everything related to the natural gas service industry in Chile and overseas, directly or through third-par-ties, with the possibility of requesting the necessary concessions and permits required for such purposes. The company may take part in all type of businesses or activities that either directly or indirectly related to its business activities, including, without limita-tion, the establishment, operation, management and use of facilities or transmission networks of gas, the separation and processing of natural gas liquids, the necessary engineering for pipes or ducts and techni-cal assistance related to them, the administration of pipe or duct construction services and in general, all services and activities related to gas transportation, marketing, storage or processing.

Capital and shares Issued capital US$ 11,789 thousand

Numbers of issued and paid-in shares 172,800

Chairman Hugo Antranik Eurkirian


GASODUCTO GASANTES ARGENTINA S.A.


Hugo Antranik Eurkirian Néstor Raffaeli

Luis Santos Fernand Ketchian

Matías Brea José Rolandi

Emilio Daneri Juan Pablo Freijo

Pablo Sobarzo Mierzo Javier Eduardo Roa de la Carrera

Jorge Beytía Moure Carmen Paz Talma

Klaus Lührmann Poblete Luis Arancibia Yametti

Luis Sarrás Martín Genesio

Gabriel María Wilkinson Gonzalo Romero Arrau

Directors

Regular Alternate

Hugo Antranik Eurnekian Néstor Raffaeli

Luis Alberto Santos Fernando Ketchian

Matías Brea José Rolandi

Emilio Daneri Vacante

Pablo Sobarzo Mierzo Gonzalo Romero Arrau

Jorge Beytia Moure Carmen Paz Talma

Klaus Lührmann Poblete Luis Arancibia Yametti

Martín Genesio Emiliano Chaparro

Vacante Vacante

Capital and shares Paid-in capital US$ 24,165,943.47

Equity interest 100%

Directors Ricardo Falú (2) Vicente Javier Giorgio (1) Alberto Zavala(8)

GENERGIA POWER LTD.

Identification Legal Nature: Limited company (Foreign) Address: P.O. Box 309, Ugland House Grand Cayman KY1-1104, Cayman Islands Telephone: (1 345) 949 8066 Fax: (1 345) 949 8080

Object: Investments in South America

Capital and shares Paid-in capital US$22,448,116

Equity interest 100%

Directors Ricardo Falú (2) Vicente Javier Giorgio (1) Alberto Zavala(8)

GENERGÍA S.A.

Identification Legal Nature: Closely held corporation TAX ID: 96,761,150-6 Address: 532 Rosario Norte Street, floor 19 Las Condes, Santiago de Chile Telephone: (56 2) 26868900 Fax: (56 2) 26868990

Identification Legal Nature: Stock corporation (Foreign) Address: 1745 Bopland St. Buenos Aires Telephone: (54 11) 6100 Fax: (54 11) 6130

Object: Natural gas transportationCapital and shares Paid-in capital AR$83,467,000 (US$ 19,393 thousand)


Equity interest: 13%

GENER ARGENTINA S.A.

Identification Legal Nature: Stock Corporation Address: 410 Callao Avenue 1st floor, C1022AAR Buenos Aires, Republic of Argentina Telephone: (54 11) -2300

Object:Execution of financial and investment operations di-rectly or through third-parties, including the granting or requesting recourse and non-recurse loans, short and long term, capital contributions to individual per-sons or other companies to financial past or future operations, purchase and sale of shares, debentures, negotiable bonds, real state and papeles de crédito under any existing or future system or method. Ex-cept for the operations included in the Financial En-tities Act and any other requiring a public tender; b) Take or maintain equity interest directly or through

other controlled or related companies in: the tender of share packages or companies with hydroelectric or thermal power stations not privatized by the Argen-tinian State or in the development of other projects in the Argentine electric market.

Capital and shares Paid-in capital AR$544,443,672 (US$ 224,928,640)


Equity interest 92.05% directly and 7.95% indirectly through Norgener SpA.


Regular Directors Vicente Javier Giorgio (1) Emiliano Chaparro



GENER BLUE WATER LIMITED

Identification Legal Nature: Limited company (Foreign) Address: P.O. Box 309, Ugland House Grand Cayman KY1-1104, Cayman Islands Telephone: (1 345) 949 8066 Fax: (1 345) 949 8080

Object:No activity restrictions, it can perform all type of businesses and investments.


Object:Long-term revenue-generation investment in se-curities, debt instruments and negotiable instru-ments, administer such investments and receive their revenues, make contributions and be partners in all types of companies; provide consultancy and engineering services.


Numbers of subscribed and paid-in shares 2,488,637

Equity interest 99.99% indirectly thourgh Genergía Power Ltd.

Chairman Ricardo Manuel Falú (2)

Directors Ricardo Falú (2) Vicente Javier Giorgio (1) Osvaldo Ledezma (5)


GUACOLDA ENERGÍA S.A.

Identification Legal Nature: Closely held corporation TAX ID: 96,635,700-2 Address: 3885 Apoquindo Avenue, 10th floor, Las Condes Santiago, Chile Telephone:(56 2) 23624031 Fax: (56 2) 23621675

Object:Exploit the generation, purchase, purchase and distri-bution of electric energy or any other type of energy; the purchase, extraction,exploitation, processing, dis-tribution, trading and sale of solid, liquid and gas fuels;

the sale and provision of project engineering, mainte-nance and mechanical services; the provision of port and dock services; obtain, transfer, buy, lease, encum-ber and exploit in any way the concessions referred to by the Electric Service Act, the maritime conces-sions and water use rights of any nature; invest in real state or physical assets, as specified by the investment and financing policy approved by the Shareholders Assembly every year; organize, constitute and/or ac-quire shares or equity interest in companies of any nature, whether they are equity-method-investees, related companies or whose corporate activities relat-ed to energy in any way, the supply of public services or those with electric energy as main raw material, or those related to any of the activities aforementioned.

Capital and shares Paid-in capital US$901,340,017 thousand


Equity interest 50.01%

Chairman Luis Felipe Cerón (3)


INTERANDES S.A.

Identification Legal Nature: Stock Corporation Address: 410 Callao Avenue 1st floor, C1022AAR Buenos Aires, Republic of Argentina Telephone: (54 11) -2300

Object:The development, either directly or indirectly, of the following activities in Argentina or overseas: The construction, operation, and/or maintenance of transmission lines and grids of electric energy of any voltage; provision of electric energy transmission ser-vice of any voltage, in Argentina or overseas through lines and/or transmission grids linking consumption points, generation points and/or other electric ener-gy transmission grids in Argentina with those of other countries and vice versa with the purpose of import-ing and/or exporting the electric energy. The pro-duction, trading, export and import of electric energy.

Capital and shares Paid-in capital AR$ 135,365,996 (US$ 55,876,946.-)

No Subscribed and Paid-in shares 135,365,996

Equity interest 13% directly and 87% indirectly through Gener Argentina S.A.





INVERSIONES NUEVA VENTANAS SPA.

Identification Legal Nature: Limited liability company TAX ID: 76,803,700 Address: 532 Rosario Norte Street, floor 19 Las Condes, Santiago, Chile Telephone: (56 2) 26868900 Fax: (56 2) 26868990

Object:Investment in all kind of real state and physical assets; investment in all type of incorporeal assets, specially the purchase and sale of bonds, securities and all kind of debt instruments, shares and rights over nation-al or foreign companies, and in urban and rural real state, administer them exploit them and receive their revenues; participation in the formation and incorpo-ration of any existing companies; participation in all kind of tenders, privatizations, awards and proposals, either public or private, the provision of consultancy services; any activity, contract and business agreed by the shareholders.



Equity interest 100% directly and indirectly through Norgener SpA

Managing partner Norgener SpA.




Luis Felipe Cerón (3) Alberto Zavala (8)

Ricardo Manuel Falú (2) Luis Knaak Quezada (7)

Vicente Javier Giorgio (1) Juan Ricardo Inostroza (9)

Jonathan Bram Patricio Chico

Thomas Frazier Robert Callahan

Randall Robertson William Gutterman

INVERSIONES TERMOENERGIA DE CHILE LIMITADA

Identification Legal Nature: Limited Liability Company TAX ID: 78,759,060-8 Address: 532 Rosario Norte Street, floor 19 Las Condes, Santiago, Chile Telephone: (56 2) 26868900 Fax: (56 2) 26868990

Object:Participate, administer, finance and invest in all kinds of energy-related projects; generate, transport, trade, buy and sale electricity, gas and all sort of energy di-rectly or through third-parties in Chile or overseas; buy and sell all kins of real state and assets; and in general, perform all activities and contracts consid-ered necessary to fulfill such purpose, as well as those agreed by the partners.

Capital Paid-in capital US$24,165,944

Equity interest 99.99% indirectly through Gener Blue water Ltd.

NORGENER SPA.

Identification Legal Nature: Limited liability company TAX ID: 96,678,770-8 Address: 2960 Jorge Hirmas St. Renca, Santiago, Chile Telephone: (56 2) 2680 4710 Fax: (56 2) 2680 4895

Object:Generation, transmission and sale of electric energy

Capital and shares Paid-in capital US$324,167,105.8

No Subscribed and Paid-in shares 2,859,166,629

Equity interest 99.99% directly

Managing partner AES Gener S.A.


SOCIEDAD ELÉCTRICA SANTIAGO SPA.

Identification Legal Nature: Limited liability company TAX ID: 96,717,620-6 Address: 2960 Jorge Hirmas St., Renca, Santiago, Chile Telephone: (56 2) 6804760 Fax: (56 2) 6804743

Object:Exploit the generation, purchase, purchase, distribu-tion and sale of electric energy or any other type of energy; Buy, extract, process, distribute, trade and sale solid, liquid and as fuels; sell and provide services of project engineering, mechanics and operation, ex-ploitation, and administration of power stations; ob-

tain, transfer, buy, lease, encumber and exploit in any way the concessions referred to by the Electric Ser-vice Act; invest in real state and assets; organize and set up companies of any nature.

Capital and shares Paid-in capital US$247,765,685


Equity interest 99.99% directly

Managing partner AES Gener S.A.



TERMOANDES S.A.

Identification Legal Nature: Stock corporation Address: 410 Callao Avenue, 1st floor, Buenos Aires, C1022AAR, Republic of Argentina Telephone: (54 11) -4000-2300

Object:The production, trading, export and import of electric energy. The construction, operation and/or mainte-nance of electric energy transmission lines and grids of medium and/or high voltage; the service of electric energy transmission of medium and/or high voltage; either in Argentina and/or overseas through trans-mission lines and/or grids that link the consumption

points, generation points and/or other electric energy transmission grids in Argentina with those of other countries, and vice versa with the purpose of import-ing and/or exporting electric energy.

Capital and shares Paid-in capital AR$ 581,869,516 (US$ 299,833,447.-)


Equity interest 8.82% directly and 91.18% indirectly through Gener Argentina S.A.

Chairman Martín José Genesio




Staff* Technical and administrative staff: 35 Professional staff: 14 Executives: 2

The commercial relations of AES Gener S.A with its related companies are governed by Existing con-tracts in force. The executives of AES Gener S.A do not receive payment for their roles as Directors of related companies.


As for the subsidiaries whose social capital is ex-pressed in foreign currency different from US dollar. The information is provided in this section in USA dollars using the exchange rate valid on December 31st, 2016.

(1) Chief Executive Officer of AES Gener S.A. (2) Vice president of Finance of AES Gener S.A. (3) Chairman of AES Gener (4) Alternate director of AES Gener S.A. (5) Director of Environment of AES Gener S.A. (6) Vice President of Development of AES Genr S.A. (7) Vice President of Engineering & Construction of AES Gener S.A. (8) Legal Counsel of AES Gener S.A. (9) Commercial Director of AES Gener S.A. (10) CIO and Senior Vice president Global Business Services AES Corp.

* Personnel from related companies that consolidate their net income with those of AES Gener and have their own hired staff.

ADDRESSES AND PHONE NUMBERS OF POWER STATIONS

ANGAMOS 1100 Séptima Industrial Av., Barrio Industrial, Mejillones, Chile Telephone: (56 55) 2 689938

ALFALFAL Road G-345 Km. 23 San José de Maipo, Chile Telephone: (56 2) 2 686 8102

CHIVOR 19 – 54 Calle 100 Av., office 901. Bogota, Colombia Telephone: (57 1) 594 1400

GUACOLDA Guacolda Peninsula 100. Huasco Telephone: (56 51) 2 564 100

LAGUNA VERDE Main Road, Valparaíso, Chile Telephone: (56 32) 2 348 294

LAJA Road to Laja Km. 1.5 Cabrero, Chile Telephone: (56 43) 2 402 705

LOS VIENTOS Highway 5 North, Km. 91 Llay Llay, Chile Telephone: (56 2) 2 686 8606

MAITENES Road G-345 Km. 14 San José de Maipo, Chile Telephone: (56 2) 2 680 4875

COCHRANE PROJECT Port 1 N°7705, Port Industrial district, Mejillones, Chile Telephone: (56 55) 2 6804716

ALTO MAIPO Road G-345 Km 14, San José de Maipo. Telephone: (56 2) 2 6868111

RENCA ADMINISTRATION BUILDING 2960 Jorge Hirmas St. Renca, Chile Telephone: (56 2) 2 680 4710

NUEVA TOCOPILLA Balmaceda Street, Tocopilla, Chile Telephone: (56 55) 2 432 623

VENTANAS Coastal Road Puchuncaví, Chile Telephone: (56 32) 2 160 200

QUELTEHUES Road G-465, Km. 3 San José de Maipo, Chile Telephone: (56 2) 2 686 8391

RENCA & NUEVA RENCA 2964 Jorge Hirmas St. Renca, Chile Telephone: (56 2) 2 680 4760

SANTA LIDIA Yungay Road Km.7 Cabrero, Chile Telephone: (56 43) 450527

TERMOANDES National Road No 9 - Km. 1557 (4432) Cobos-Salta, Argentina Telephone: (56 2) 2 6804760

VOLCÁN Las Melosas Road Km. 2 San José de Maipo. Telephone: (56 2) 2 6868391

MATTA BUILDING 532 Rosario Norte Street, floor 19 Las Condes, Santiago, Chile Telephone: (56 2) 2 6868900

Annual Report 2016 AES Gener 213212 Appendix 3: Environment

Appendix 3 Environment

INDEX1 AES CORP SUSTAINABILITY STRATEGY 214

2 AES GENER AND AFFILIATES ENVIRONMENTAL MANAGEMENT APPROACH 215

2.1 Basis for Environmental Management 216 2.2 Significant Environmental Aspects 218 2.3 Key Environmental Performance Indicators 218

3 GENERATION, INSTALLED CAPACITY, OPERATIONAL EFFICIENCY AND TRANSMISSION 220

3.1 Gross Electric Power Generation (MWh) 220 3.2 Installed Capacity 220 3.3 Operational Efficiency 221 3.4 Availability 221 3.5 Electric Transmission Activities 221

4 MANAGEMENT OF ENVIRONMENTAL VARIABLES 221

4.1 Air 221 4.1.1 Climate Change and Greenhouse Gases (GHG) 222 4.1.2 Management of Air Emissions 225 4.2 Water 227 4.3 Waste Generation 232 4.4 Regulatory Compliance 233 4.5 New Relevant Regulations 234 4.6 Biodiversity Protection 235 4.7 Environmental Investment and Innovation 237


Environmental Standards

1. General Environmental Requirements and Prohibitions.

2. Spill Prevention and Containment.

3. Hazardous and Special Waste Requirements

4. Chemical and Raw Material Management

5. PCB management

6. AES Compliance Data Quality Assurance & Reporting

7. Environmental Incidents (Environmental Non-conformance Events (ENEs) and Environmental Near Misses) and Management of Environmental Operating Events (EOE)..

8. Environmental Emergency Response Planning

9. Hydroelectric Power Plant & Reservoir Requirements

10. Environmentally Related Financial Disclosure Obligations

11. Managing Potential Contractor Environmental Impacts

12. Biodiversity Assessment & Protection.

2. AES GENER AND AFFILIATES ENVIRONMENTAL MANAGEMENT APPROACH

To carry out the Mission on its sustainability dimen-sion, the Company conducts a coordinated work between different areas. Regarding environmental issues, one of the main pillars in the achievement of this sustainability, the Company has an Environmen-tal Department that covers the operations in Chile, Argentina, and Colombia. This Department provides specialized support to the heads of the businesses in each of those countries through field-based profes-sional teams, and a senior staff working in Santiago.

As part of the management of each business, the Company establishes environmental goals and in-dicators with respect to the main environmental aspects of the electric generation processes, as de-scribed below. You can find further information on the definition and scope of each key performance indicator in Section 2.3.

Name Environmental Protocols Applicable to businesses in:

ENV_1 Environmental Compliance and Environmental Risk Mitigation Operation

ENV_2 Compliance with Environmental Standards Operation

ENV_3 Compliance with Environmental Management System expectations Operation

ENV_4 Environmental Compliance, Risk Mitigation, Compliance with EMS Expectations, and Disclosure Requirements. Construction

ENV_5 Environmental Culture Assessment. Operation and Construction

Table 2. AES Corp Auditing Protocols.

1. AES CORP SUSTAINABILITY STRATEGY

AES Corp. (hereinafter, the “Corporation”) has ex-plicitly recognized the value of sustainability in its mission statement:

“To improve lives by providing safe, reliable and sus-tainable energy solutions.”

Its sustainability practices have allowed AES Corp, for the third year in a row, to be part of the Dow Jones Sustainability Index (DJSI) for North America, while AES Gener S.A. (hereinafter, AES Gener, or the “Com-pany”) has been part of the Dow Jones Sustainability Index - Chile for the second year in a row.

The Corporation provides a several tools that help to facilitate the incorporation of sustainability in each business, the most outstanding of which are AES Corp EHS (Environmental, Health and Safety) Standards. These standards have been developed by observing the best international practices and establish per-formance requirements that complement the local requirements applicable to each business. The stan-dards currently regulate the operational requirements needed to supervise and control legal compliance and permits, air contamination monitoring, water dis-charge, handling of hazardous substances, hazard-ous waste and non-hazardous waste, and standards to ensure quality of data, occupational safety and health issues, and control of contractors. Twelve of these standards are environmental, all of them apply to operations, and seven of them apply to projects under construction.

The Environmental Department carries out an an-nual program of cross internal environment and safety audits in the different businesses. Moreover, the Corporation develops an external audit program coordinated by an officer of the parent company. In the case of businesses in operation, external au-dits are conducted every three-year cycle, and in case of construction projects, every year. To estab-lish the extension and depth of the audits, the en-vironmental risk of the business and its previous performance are considered.

Environmental audits (both cross internal and exter-nal) are devised to evaluate businesses on: (1) site spe-cific environmental compliance and mitigation of en-vironmental risks, (2) compliance with environmental standards, and (3) compliance with the Environmental Management System (EMS) expectations.

The Corporation delivers tools to guide the audit pro-cesses, known as “Protocols”, that are focused on the following topics:

Table 1. List of AES Corp Environmental Standards


Power Generation and

Other Businesses

Regulatory Compliance

Biodiversity

Air Emissions

WasteGenerationWater Use Commitments

• To ensure compliance with the national legal provisions, AES Corp regulations, programs, policies, and standards, and the commit-ments taken on towards the customers and other stakeholders on environmental, safety, and occupational health issues.

• To review the Integrated Management System from time to time in order to promote the continued improvement of its performance based on goals and measurable indicators

• To strengthen and promote the environmental and safety culture in all our businesses, based on the application of its environmental standards and procedures, and the application of our safety principles.

• To identify hazards, assess risks, and implement the control measures required to prevent occupational injuries and/or diseases.

• To stick to our safety beliefs: (i) safety is a priority for our staff, partners, and those who live in the communities where we operate; (ii) all incidents can be prevented; (iii) safety is an employment condition and we are all responsible for it; (iv) we all have the right and obligation to stop the works when an unsafe condition or action is identified.

• To prevent, reduce, and manage environmental impacts related to our activities, particularly those resulting from air emissions, discharges to water bodies, and waste generation.

• To promote efficient use of natural resources, awareness for the care of the environment, and relations with the communities where we develop our activities.

• To promote the conservation of the high biodiversity value areas located within our operations by protecting and promoting the knowledge of species that should be preserved in those areas.

• To include climate change mitigation and adaptation in the analysis and development of our businesses, in line with the regulations and commitments adopted by the country in this regard.

Table 3. Commitments of GENERA Integrated Policy

Figure 1. Main Aspects of Environmental Performance.

1 The AES Gener environmental policy is available at the website of the Company.

The environmental information that gives rise to the key environmental performance indicators is re-ported from time to time by each business through its own system provided by the Corporation, named AES Online. Each year, to check the information, AES Corp engages a third party to audit the completeness, consistency, and accuracy of the data reported in the system. This is why the data for years 2012 through 2015 were audited by Lloyd’s Register LRQA, Inc., and the data for 2016 will be checked as well.

In this context, the announcement made by the Santi-ago Stock Exchange and SftP Dow Jones Index in 2016 that the Company will continue to be part, for the second year in a row, of the Dow Jones Sustainability Index - Chile (DJSI - Chile) has been a positive recog-nition for the efforts made by AES Gener in terms of sustainability and environment.

2.1 Basis for Environmental Management

ISO 14001 Certified Management System

The Company has sought to group the requirements contained in the standards of the Corporation, nation-al regulations, and international standards (ISO 14001 and OHSAS 18001) to develop its own integrated management system, called GENERA, which manages environmental, occupational health, and safety issues.

GENERA covers all the operations of the Company and its affiliates, and the achievement and mainte-nance of the certification to ISO 14001 is an internal requirement. Termoandes (Argentina) and AES Chivor (Colombia) have environmental management systems consistent with the requirements of the Corporation’s Protocol ENV-3.

The operations of AES Gener in Chile, and its subsid-iary Termoandes in Argentina, have been certified to ISO 14001:2004 mainly by Bureau Veritas (BVQI) and, to a lesser extent, by Det Norske Veritas (DNV).

In 2017-2018, we plan to upgrade the Environmental Management System to comply with the new version of ISO 14001:2015 in all the businesses currently certi-fied to ISO 14001:2004, and to obtain the certification to ISO 14001:2015 for the Environmental Management System of AES Chivor.

During 2016, 100% of the plants in operation in Chile and Termoandes were audited for recertification or monitoring purposes by the certification agencies mentioned above, and all of them managed to main-tain the ISO 14001 certification.

Under the ISO 14001 recertification and monitoring audits of year 2016, a major nonconformity was found at Nueva Tocopilla plant (formerly Norgener). This nonconformity was due to gaps in the fulfillment of two legal requirements: (i) failure to declare the emis-sions from the generator sets of the Plant, as stated in the Supreme Decree No. 138/2005; and (ii) failure to humidify the in-use pile of ashes at the Barrel Depos-it. To date, the nonconformity was closed to the sat-isfaction of the certifying agency (BVQI), thus Nueva Tocopilla continues to be certified to ISO 14001:2004. To address the first gap, a survey of the existing gen-erator sets with reporting obligation was conducted. All of them were registered in the online platform of the Emission Declaration System, and are now ready to submit the annual statement in March 2017 through the Pollutant Release and Transfer Register (RETC). As of the date hereof, the second gap was remedied, and now there is a record of the daily en-tries and exits of the humidifier truck into the deposit to secure compliance with the humidification plan. The effectiveness of these steps will be reviewed by BVQI in its next audit.

Environmental Policy

The Environmental, Safety, Occupational Health and Quality Policy1 (hereinafter “Policy” or “Integrated Pol-icy”) is reviewed periodically, and its latest version is dated December 2016. The commitments assumed in this policy, as far as environmental aspects are concerned, include: to ensure compliance with the regulations (local, corporate and voluntary), promote the continuous improvement of environmental per-formance, strengthen the environmental and safety

culture, prevent, reduce, and manage our environ-mental impacts, promote the efficient use of natural resources, and incorporate climate change mitiga-tion and adaptation in the analysis and development of the business.


Indicator Detail

Air Emissions

Particulate Matter: absolute (t) and intensity (kg/MWh).

The indicator is developed with the data obtained from Continuous Emission Monitoring System (CEMS) and/or isokinetic measurements, which must be standardized and completed according to the Annexes to Supreme Decree No. 13/2011, and related Circular Letters.

SO2: absolute (t) and intenity (kg/MWh).

NOx: absolute (t) and intensity (kg/MWh).

Greenhouse gases: absolute (tCO2e) and intensity (tCO2e/MWh)

Scope 1: direct emissions related to combustion, SF6 emissions, and motor vehicle fleet emissions; data checked by Deloitte. Scope 2: emissions associated to the generation of energy purchased from third parties for our own consumption, and to losses in the transmission of energy not generated by AES Gener and transported through our networks; data checked by third parties at the request of AES Corp. Scope 3: related to emissions from the production and transport of coal, and flights of the staff of AES Gener and affiliates in Chile.

Heavy metals: yearly estimation of mercury emissions (kg).

The estimation is made considering the percentage of mercury contained in each type of coal, the amount of that coal used, and the particulate matter and SO2 emissions control systems available in the generating unit. Data have been recorded since January 2014.

Water use

Adduction: absolute (m3) and intensity (m3/MWh)

Water use includes the origin of the resource, making a distinction between Maritime and Continental Water. Under Continental Water, a distinction is made between Surface, Ground or Drinking Water (drinking water distributor, water company, municipal water utility, or other similar company). Water used for hydroelectric generation is not considered in water extractions.

Discharge: absolute (m3) and intensity (m3/MWh)

Consumption: absolute (m3) and intensity (m3/MWh)

Waste Generation

Hazardous wastes: absolute (t) and intensity (t/GWh).

All the waste regulated by Supreme Decree No. 148/2003, and identified in the management plans of each business, where applicable (generation above 12 t/year).

Coal Combustion Products: absolute (t) and intensity (t/GWh).

Fly ash captured in particulate matter and SO2 emission control systems, and bottom ash are mainly considered. For some units, fly ash includes gypsum.

Reuse of Coal Combustion Products (%)

Percentage of Coal Combustion Products incorporated to third party processes as inputs or raw materials (e.g.: ash for cement industry)

Regulatory Compliance

Environmental Sanctions

The initiation of procedures for the imposition of sanctions and the fines paid according to year of payment are reported. (It should be mentioned that there was a change during year 2016 in this KPI: fines were previously reported in the year of incident occurrence, which caused a modification in historic tables.) The procedures for the imposition of sanctions are monitored through AES Online pursuant to Environmental Standard No. 7.

Biodiversity

Initiatives, developed or under development. Description of Projects or Initiatives.

Table 4. Description of Key Environmental Performance IndicatorsThe most relevant of these new commitments estab-lished in the updated version of the Policy are: to pro-mote relations with the communities where we devel-op our activities, promote the conservation of the high biodiversity value areas located within our operations, and incorporate climate change mitigation and adap-tation in the analysis and development of businesses.

As basis for the management of environmental as-pects, and following the Policy commitments, we set annual goals for all the businesses, which are moni-tored and evaluated through performance indicators.

2.2. Significant Environmental Aspects

While the management system is planned, it is of vital importance to have a clear and thorough methodol-ogy to be able to identify the environmental aspects, and assess their impacts. The methodology we im-plement makes it possible to stop any activities that might generate environmental issues and that interact with the environment through air emission, water use, generation of wastewater, generation and disposal of waste, possible leaks and spills, other environmental interactions with the vicinity, and possible emergen-cies resulting from its processes.

Once these environmental issues and their source activities are identified, an assessment of impacts is performed. To that end, three main assessment crite-ria are considered: the existence of control measures in the processes, physical impact on the environment, and negative impact on the business. The outcome of the assessment helps us to establish which are the significant issues interacting with the environment that require action plans and the investment plans re-quired to mitigate, repair, or compensate the impact. These plans are the fundamental basis of environ-mental performance in the businesses.

Thanks to this methodology, we can establish the im-portance and significance of the environmental im-pacts of the businesses on the environment.

As a result of the analysis of Environmental Aspects and Impacts (“EAI”), the environmental aspects that are more relevant for AES Gener and its affiliates are identified and grouped as follows:

• Air Emissions: Particulate matter, Combustion gases, Greenhouse Gases, and Noise,

• Generation of Coal Combustion Products,

• Use of Water (including marine ecosystem),

• Biodiversity.

The EAI analysis is updated annually in all businesses of AES Gener and affiliates, both in operation and un-der construction.

2.3 Key Environmental Performance Indicators

Consistent with the analysis of EAI, the key environmen-tal indicators established by the Company are organized into five categories: air emissions, water use, waste gen-eration, biodiversity, and regulatory compliance. Their scopes and requirements are detailed in Table 4.

The information used for the creation of the 2015 and 2016 indicators, regarding the first three categories, for the businesses in operation, was locally checked for AES Gener and its affiliates by the audit firm De-loitte - Chile, as evidenced in the letter attached hereto as Annex 1. This work included the compari-son of the data entered in AES Online with source records and related evidence by applying standard-ized information analysis and auditing methodolo-gies in order to obtain representative samples of the Company’s reality.

The indicators are calculated for all our businesses and affiliates in operation, over which we have opera-tional control. When the operation of a new business is started, data are consolidated as from the start date of commercial operation, and in the event of acquired operations, data are consolidated as from the year following their incorporation. The data and environ-mental indicators of the businesses operationally controlled by AES Gener are consolidated at 100% without taking into account the participating interest owned by AES Gener in the business (which is used for the preparation of the financial statements).


Gross Generation (MWh) 2012 2013 2014 2015 2016

Argentina 4.202.600 4.256.804 4.534.498 4.073.252 4.735.213

Chile 13.326.974 12.031.384 14.758.678 19.320.025 22.236.550

Colombia 4.672.350 3.378.378 3.987.878 4.116.556 4.364.255

Total 22.201.924 19.666.566 23.281.054 27.509.833 31.336.018

Table 5. Gross yearly electric generation

2016 (MW)

2021 (MW)

Hydroelectric (includes AES Chivor and Tunjita) 1.291 1.822

Biomass and Solar 33 33

Total 1.324 1.855

Transmission 2012 2013 2014 2015 2016

Losses % 0,94 0,96 0,95 0,77 0,71

Transmission 2012 2013 2014 2015 2016

Availability (active time in %)

99,46 99,28 99,48 99,10 97,50

3. GENERATION, INSTALLED CAPACITY, OPERATIONAL EFFICIENCY AND TRANSMISSION

3.1 Gross Electric Power Generation (MWh)

The gross electric power generation is the parameter used to express emission intensity in most of our en-vironmental indicators.

Consolidated production is detailed in Table 5.

3.2 Installed Capacity

Although the 2016 installed capacity matrix of AES Gener and affiliates was mainly based on fossil fu-els (coal, natural gas, and diesel), the strategy of the Company considers balancing its future generation portfolio, and plans to increase the installed power capacity in solar and/or wind plants by year 2021, along with the coming into operation of the run-of-river hydroelectric project Alto Maipo (currently under construction).

As part of this strategy, during 2016, we should high-light the commissioning of our Colombian subsidiary AES Chivor’s Tunjita project, which included the in-corporation of 20.4 MW of hydraulic generation with

Source: Measured data and own elaboration, reported and recorded at AES Online. Years 2015 and 2016 data are verified locally by Deloitte according to Annex 1, while 2012 to 2016 data are verified by Lloyd’s Register LRQA, Inc. at AES Corp level.

Table 6. Current renewable energy installed capacity (December 2016) and projection to 2021

3.3 Operational Efficiency

The Company considers that the continued improve-ment of efficiency in its plants is of the utmost im-portance, since this way the electric power generation is maximized, and the CO2 emissions resulting from fossil fuel combustion are reduced. The indicator reg-ulating efficiency is called “Heat Rate”, for whose cal-culation the variable remuneration earned by the staff of AES Gener and affiliates is considered.

3.4 Availability

The Company also monitors the availability of gener-ation units, since a greater availability reflects a better use of the generation assets. The KPI is called EAF (Equivalent Availability Factor). The variable remuner-ation earned by the staff of AES Gener and affiliates is linked to different KPIs, including EAF.

3.5 Electric Transmission Activities

Although the main business of the Company is to generate and commercialize electric power, several businesses were required to develop transmission systems to be able to be connected to the Intercon-nected Grids and/or its customers.

The environmental aspects of the electric transmis-sion activities are also considered with the same stan-dards as the power generation activities. For instance, the continued reduction of technical losses in our lines and substations (Table 7) is a manner of operat-ing with higher efficiency, which is one of the Compa-ny’s values. This reduction of our losses not only has an economic impact, but also reduces CO2 emissions.

Likewise, to increase the availability of the grids also has a positive economic impact, and at the same time reduces CO2 emissions (Table 8). It is important to note that the decrease in the availability of our net-works in 2016 was due in part to the negative impact of the availability of the Cochrane - Encuentro line (which was only 89.95%), which began its operation this year 2016 was affected by situations pending of the construction phase.

4 MANAGEMENT OF ENVIRONMENTAL VARIABLES

4.1. Air

Air emissions are the most relevant environmental variables for the thermoelectric generation business-es, since they are directly linked to combustion pro-cesses. These emissions are regulated by a specific regulation (Supreme Decree No. 13/2011), and there also exist country-wide commitments to the reduc-tion of greenhouse gas emissions. Additionally, air emissions are a relevant part of the environmental surveys and permits, and many of our businesses are located in areas subject to Environmental Prevention and/or Decontamination Plans, which also impose additional requirements.

a minimum environmental impact, since, in addition to being a run-of-the-river hydroelectric plant, the Project took advantage of the existing infrastructure, specifically the diversion tunnel of Tunjita river that runs towards La Esmeralda reservoir of AES Chivor.

The installed capacity in renewable energy of AES Gener and affiliates as at December 2016 is shown in Table 6. The same table also includes the estimated gross installed ca-pacity in renewable energy as at December 2021, consid-ering only the projects that are currently under construc-tion (i.e. Alto Maipo run-of-river hydroelectric project).

Table 7. Losses in transmission lines

Table 8. Availability of transmission lines


Project Amount (tCO2e/year)

Andes Solar (141 MW) 373.203

Phase 1 (21 MW in operation) 55.583

Next phases (for up to 141 MW) 317.620

Alto Maipo 1.688.164

Total 2.061.367

2 https://cdm.unfccc.int/Projects DB/CarbonCheck_Cert1425989791.25/view 3 http://www.vcsprojectdatabase.org/” \l “/project_details/1321

4.1.1 Climate Change and Greenhouse Gases (GHG).

Physical hazards

Beyond the discussion about the causes of climate change, there are countless surveys and proofs that suggest that the existence of this phenomenon is un-deniable. Climate change is mainly characterized by a progressive increase of yearly average temperatures in the atmosphere and oceans. In addition to these in-cremental effects, the occurrence of extreme events, which are more and more frequent and intense, is also associated to climate change: swells, rains in unusual places or out of season, increase in the surface tem-perature of the sea, forest fires, boulders and land-slides, floods, etc.

As a result, the Company is working on the identifi-cation of physical risks coming from climate change, both from gradual changes and from extreme phe-nomena, to address then the development of strate-gies, policies, and mitigation actions.

Regulatory risks

The most important AES Gener executives who are responsible for the Operations, Finance, Trade, and Development Departments are involved in the de-sign of strategies to minimize the impacts of climate change on our business. Monthly meetings are held to analyze and monitor the mitigation and adapta-tion initiatives that are being developed in the coun-tries where we operate, the major trends in this field around the world, and their impact on our business.

Within the Commercial Department, the Regulation and Climate Change Management is specifically re-sponsible for monitoring regulatory risks associated with national climate change mitigation and/or ad-aptation policies, and the coordination of actions to mitigate these risks in the Company.

AES Gener and its affiliates have specific strategies related to the management of risks resulting from cli-mate change, such as optimal level of energy procure-ment, and the addition, as part of the price of energy sold, of the incremental costs associated to climate change policies.

One of the main parameters considered both in trade policies and in the evaluation of new projects and developments is to establish the optimum level of energy procurement, which is reviewed from time to time and before each significant offer. This analysis includes, as one of its main parameters, the assess-ment of its own water availability and the total water availability for hydroelectric generation in the country, the climatic variability, and consideration of the ener-gy spot market exposure.

Climate change brings about financial risks that AES Gener and its affiliates have tried to identify and mitigate. Those risks include taxes on CO2 emis-sions, possible costs of CO2 capture equipment, and cost overruns due to renewable energy goals. We have sought to mitigate these risks through contractual policies, but there is always a risk of interpretation disputes.

The so-called Tax Reform, approved in Chile in September 2014 (Law 20,780), levied a tax on CO2 emissions amounting to US$ 5/tCO2. Therefore, our internal projects, which involve reduction of CO2 emissions, value those reductions at this price. This tax on CO2 emissions is accounted for as from January 2017 and will be paid in April 2018.

Impact on the availability of water and its best exploitation

Climate change brings about new challenges, since in large areas of Chile this change is evidenced as a reduction in rains and in the availability of water at underground aquifers, in addition to the retreat of glaciers, which sometimes can generate an increase in the availability of water in glacial rivers.

Being aware of this, the water environmental indica-tors allow us to manage the use of this resource by the implementation of specific projects aimed at op-timizing consumption, and the search of other indus-trial uses for our water discharges, such as its use for irrigation purposes.

While seawater might seem to be an inexhaustible resource, energy is required for the desalination pro-cess; therefore, considering our commitment to the best use of resources, we have channeled our efforts into reducing the energy used in the desalination pro-cess. This was the framework for the implementation of the Reverse Osmosis (“RO”) Desalination Plant at Angamos Plant in a more efficient manner. This new plant replaced the previous Thermal Vapor Com-pression (“TVC”) Desalination Plant. Environmen-tal Qualification Resolution No. 0278/2016, issued by the Antofagasta Region Assessment Committee, where the project “Expansion of Seawater Desalina-tion Plant, Angamos Thermal Power Station” is favor-ably qualified, was obtained on August 18, 2016. This new project will supply desalinated water to Cochrane Thermoelectric Plant (thus avoiding the use of the Co-chrane TVC Desalination Plant) and will make it possi-ble to sell desalinated water to third parties.

This way, we have launched a new line of business: the development of water desalination plants. The purpose of these plants is, in the near future, to add safety and quality to the water supply in the regions of Antofagasta, Atacama, and Valparaíso.

Carbon Credits

Andes Solar Plant is the AES Gener’s first plant of photovoltaic electric generation, and is located in the dessert of Atacama, Antofagasta Region, near to Salar de Atacama, and is connected to our “Andes” Substation. It has an environmental permit approved for 220 MW, and in August 2016 its first phase of 21 MW started operations. The Carbon Credits of An-des Solar Plant were accepted and registered by the United Nations Framework Convention on Climate Change (UNFCC) as a Clean Development Mechanism (CDM) for 141 MW.

Our project under construction, Alto Maipo, is a run-of-the-river hydraulic project located in the commune of San José de Maipo, which is made up of two run-of-the-river hydraulic plants: (i) Alfalfal II, 264 MW, and

(ii) Las Lajas, 267 MW. The estimated average annual production from the project is 2,327 MWh, which is equivalent to 1,688,164 tCO2e2. The Alto Maipo Proj-ect will help to balance the generation portfolio of AES Gener. The Carbon Credits of this project were certified by Carbon Check and registered under the VCS (Verified Carbon Standard).

Table 9. Registered Carbon Credits.

Source: Projects registered in UNFCCC2 and VCS3 .

Greenhouse Gases (GHGs)

The State of Chile has participated in the Conference of the Parties (COP) organized by the United Nations, and has committed itself to meet certain emissions control goals that should be translated into policies and regulations to support their implementation. In the COP 21 conducted in Paris, Chile committed it-self to reduce its CO2 emissions per GDP unit as at 2030 in 30% as compared with the level reached in 2007, considering a future economic growth that will make it possible for Chile to implement appropriate measures to honor this commitment. The regula-tion that might finally arise from the Congress and the Executive Branch must be consistent with the commitments adopted by Chile, and linked to the national energy policy.


2012 2013 2014 2015 2016

Gross Generation (MWh) 22.201.924 19.666.566 23.281.054 27.509.833 31.336.018

Scope 1 and Scope 2 Annual Emission (tCO2e) 11.437.992 10.672.185 12.814.089 19.536.624 18.970.699

Indicator (tCO2e/MWh) 0,52 0,54 0,55 0,71 0,65

Table 10. Scope 1 and Scope 2 Greenhouse Gas Emissions.

Emission PointTotal

Emissions (tCO2e)

Percentage Contribution (%)

Staff air trips 775 0,02%

Emissions from coal extraction 1.019.093 30,06%

Emissions from coal post-extraction

135.374 3,99%

Coal transport 2.235.439 65,93%

Total Scope 3 Emissions 3.390.680 100%

Table 11. Scope 3 GHG Emissions.

4 The entry into force of the limits of Supreme Decree No. 13/2011 was on November 23, 2013 for PM, while the standard for SO2 and NOx had deferred effective dates: June 23, 2015 for latent or saturated qualified areas, and June 23, 2016 for the remaining areas.

AES Gener is committed to this goal through the de-velopment of renewable energy, including hydroelec-tricity, solar and/or wind power, and the storage of electric power as a mechanism to provide the flexi-bility required by the electrical system when it has a greater penetration of different renewable energies.

The Company is also committed to the development of projects aimed at a gradual increase in the effi-ciency of thermal generation, a reduction of internal energy consumption, and an increase in the energy efficiency of our processes, as well as an increase in the flexibility of our thermal units.

Moreover, every month, the Company monitors 100% of the CO2 emissions coming from the combustion of fossil fuels for electric power generation, sulfur hexa-fluoride (SF6) releases, and emissions from the mo-tor vehicle fleet, either owned or leased, used by our staff. This information is registered as environmental indicator in absolute (tCO2e) and unit (tCO2e/MWh) amounts (Table 10). The estimation and calculation of emissions were made according to the methodologies and emission factors of “The Greenhouse Gas Proto-col” mutually agreed by the World Resources Institute (WRI) and the World Business Council for Sustain-able Development (WBCSD). The data are entered in AES Online, and then audited by Lloyd’s Register LRQA, Inc. At the same time, the information used for the creation of the 2015 and 2016 indicators was lo-cally checked for AES Gener and its affiliates by the audit firm Deloitte - Chile, as evidenced in the letter attached hereto as Annex 1.

Regarding indirect GHG emissions, we monitor emis-sions related to energy bought from third parties for our own consumption, and to losses in the transmis-sion of energy not generated by AES Gener and trans-ported through our grids (both classified as Scope 2 under the classification of the “GHG Protocol”).

Regarding Scope 3 GHG indirect emissions (according to the classification made by the “GHG Protocol”), as from January 2016, we started to keep record of the GHG emissions associated with extraction, post-ex-traction, and transport of the main input of the Com-pany, coal, and emissions associated with national and international flights of the staff of AES Gener and its affiliates in Chile. Scope 3 GHG emissions are shown in Table 11 and were for “other region”, as proposed by the GHG Protocol corresponding to the World Re-sources Institute (WRI) list of March 2017. The emis-sion factors for coal extraction and post-extraction in the 2006 IPCC Guidelines for the GHG national inventories are also shown in Table 11.

Source: Measured data and own elaboration, reported and registered at AES Online. Years 2015 and 2016 data are verified locally by Deloitte according to Annex 1, while 2012 to 2016 data are verified by Lloyd’s Register LRQA, Inc. at AES Corp level.

4.1.2 Management of Air Emissions

The regulatory framework for air emissions man-agement in general includes: (i) national regulations, particularly Supreme Decree No. 13/2011 issued by the Ministry for Environment, which regulates con-centration limits for the emission of certain pollutants from thermal power plants; (ii) obligations stipulated in the environmental qualification resolutions of each business, and those stipulated in the Environmental Decontamination or Prevention Plans, as appropri-ate, which broadly define total emission limits (daily or annual); and, (iii) national regulations governing air quality in the receptor sites.

This set of regulations is mainly intended to reg-ulate the emissions of Particulate Material (PM), Sulphur Dioxide (SO2), Nitrous Oxides (NOx), and Mercury (Hg). One of the main requirements of Su-preme Decree No. 13/2011 is to have a Continuous Emission Monitoring System (CEMS) in each stack which is implemented under a procedure that will ensure its validation, and is reviewed and approved by the Superintendency of Environment (SMA, for its acronym in Spanish).

The coming into effect of Supreme Decree No. 13/20114 forced the Company to execute projects aimed at adapting the existing units from 2013 through 2016, which were called Environmental Improvement Projects (EIP). These projects incorporated new emis-sions control systems to ensure compliance with the concentrations established for the existing units.

During year 2016, the new Particulate Matter and Sul-fur Dioxide emissions control systems of units 1, 2 and 4 of Guacolda Plant, and a Nitrous Oxides emissions control equipment based on Selective Catalytic Re-duction (SCR) in Unit 1 of the same plant started oper-ating. Moreover, no additional works were considered for Guacolda Units 3 and 5, since they comply with the limits defined by the thermal emission standard. Regarding the other plants of the Company, the new emissions control systems to meet these regulations started operating during 2015.

In addition to the continuous control and monitoring of Particulate Matter, Sulfur Dioxide, and Nitrogen Oxides emissions, all the thermal power generation units using solid fuels record and report the emis-sions of mercury (Hg) to the authorities, according to the regulatory requirements and their own environ-mental authorizations. Additionally, as from January 2014, the businesses using solid fuels report the es-timated mercury emissions in AESOnline, considering the amount of fuel used, the percentage content of mercury in the fuel, and the estimated efficiency of the emissions control equipment contained of their generating units.

Considering that the Particulate Matter emissions resulting from coal combustion represent almost all the PM emissions that we generate, the PM emissions from the motor vehicle fleet that we use, or the trans-fer of staff, have not been accounted for.


Item 2012 2013 2014 2015 2016


Annual Emissions

MP (t) 1.210 1.215 975 2.259 1.182

NOx (t) 7.784 7.701 7.945 19.953 21.442

SO2 (t) 16.420 17.084 19.187 34.190 19.160

CO2 (t) NA NA NA 17.783.641 17.599.494

Hg (kg) NA NA 51,75 65,05 67,24

Indicators

MP (kg/MWh) 0,054 0,062 0,042 0,082 0,038

NOx (kg/MWh) 0,35 0,39 0,34 0,73 0,68

SO2 (kg/MWh) 0,74 0,87 0,82 1,24 0,61

CO2 (t/MWh) NA NA NA 0,65 0,56

Table 12. Progress of Air Emissions - Period 2012 - 2016

2012 2013 2014 2015 2016


Water use (m3)Seawater

Adduction 636.843.440 1.063.242.953 1.241.287.581 1.533.490.032 1.499.703.128

Discharge 631.738.701 1.058.138.214 1.234.960.861 1.523.493.521 1.484.963.423

Consumption 5.104.739 5.104.739 6.326.720 9.996.511 14.739.705

Continental WatersAdduction

Surface / Ground water 16.241.311 9.664.037 10.659.568 8.362.274 9.173.209

Sanitary Drinking Water 42.238 414.178 425.577 524.415 699.490

Discharge 3.991.884 2.919.755 1.973.849 2.552.767 2.872.310

Consumption 12.291.665 7.158.460 9.111.296 6.333.922 7.000.390

TotalAdduction 653.126.989 1.073.321.168 1.252.372.726 1.542.376.721 1.509.575.827

Discharge 635.730.585 1.061.057.969 1.236.934.710 1.526.046.288 1.487.835.733

Consumption 17.396.404 12.263.199 15.438.016 16.330.433 21.740.095

Indicator (m3/MWh)Adduction 29,4 54,6 53,8 56,1 48,2

Discharge 28,6 54,0 53,1 55,5 47,5

Consumption 0,8 0,6 0,7 0,6 0,7

Table 13. Progress of water use categories, 2012 - 2016 period

The main air emissions are shown in Table 12. It should be mentioned here that the CO2 emissions shown in Table 10 differ from those shown in Table 12, since the first are Scope 1 and Scope 2 GHG emissions, while those of Table 12 are exclusively stack CO2 emissions.

Yearly emission goals are set based on the emissions of the previous year, the gross power generation of the previous year, and the gross power generation estimated for the following year.

Source: Measured data and own elaboration, reported and recorded at AES Online. Years 2015 and 2016 are verified locally by Deloitte according to Annex 1, while 2012 to 2016 data are verified by Lloyd’s Register LRQA, Inc. at AES Corp level.

4.2 Water

In AES Gener and affiliates, as part of AES Corp., during years 2015 y 2016 we participated in the evalu-ations of the “Carbon Disclosure Project” (CDP) (www.cdproject.net), which poses huge challenges concern-ing monitoring, control, risk management, and aware-ness with respect of the water resource.

Water Sources and Uses

We monitor 100% of the water extracted, returned (to the same source in a quality similar to that of the extracted water), and used in our premises, using the guidelines of the Global Reporting Initiative (GRI). The information related to water adduction, discharge,

and consumption is recorded each month in AES On-line, and verified by third parties both at a corporate and local level.

The water that we use in the generation processes can be divided by original source. Among them, we can find: seawater, drinking water and continental water (superficial and ground water).

Table 13 lists the volumes of water use according to type of source. In the data of extracted water, the flow used in our hydraulic power plants is not con-sidered, since 100% of the water used for generation is returned to its original source, without altering its quality or quantity.

Source: Measured data and own elaboration, reported and recorded at AES Online. Years 2015 and 2016 are verified locally by Deloitte according to Annex 1, while 2012 to 2016 data are verified by Lloyd’s Register LRQA, Inc. at AES Corp level.


Water Consumption according to Source

2016 (m3) 2016 ( % )

Seawater 14.739.705 68%

Continental Waters 7.000.390 32%

Total 21.740.095 100%

Destination of Adducted Water

Annual Volume (m3)

Annual Volume (%)

Consumption 21.740.095 1,4%

Discharge 1.487.835.733 98,6%

Total Adduction 1.509.575.827 100,0%

Table 14. Water Consumption according to Source, year 2016

Table 15. Water Consumption according to Source, year 2016

68%

32%

Continental Water Consumption

Seawater Consumption

Figure 5Water Consumption according to Source,

year 2016

98,6%

1,4%

Discharge Consumption

Figure 6Destination of

adducted water, year 2016

Water use (m3) Water use per MWh (m3/MWh)

Plant Location 2015 2016 2015 2016

Renca and Nueva Renca

Urban Area, Renca, Metropolitan Region 3.299.212 3.445.707 1,7 1,6

Ventanas

Coastal Area, Ventanas, Puchuncaví, Valparaíso Region

1.410.643 985.494 0,23 0,15

Los Vientos Central Valley, Llay Llay, Valparaíso Region

90.850 85.210 1,2 2,6

Cordillera

Cordillera Area, San José de Maipo, Metropolitan Region.

5.300 4.997 0,0046 0,0035

Table 16. Plants in Water Stress Areas with Continental Water Consumption

5 http://old.wbcsd.org/work-program/sector-projects/water/global-water-tool.aspx

Table 14 shows that seawater is the major source of wa-ter, given to the coastal location of many of our plants. Table 14 shows this proportion in summary form.

It is also important to note that 98.6% of the total wa-ter supplied is returned to the source of origin, while the consumption of the resource reaches only 1.4% of the volume adduced, as can be seen in Table 15.

During year 2016, certain environmental improve-ment initiatives were implemented, some of which made it possible to reduce continental water con-sumption. Those initiatives or projects are described in section 4.7.

Risks related to Water

The availability of water in amount and quality is es-sential for the businesses developed by the Compa-ny. AES Gener and its affiliates use large quantities of water from different sources in the refrigeration pro-cesses of the electric generation plants.

Although most of the water used by the Company comes from the sea, and therefore there is no sig-nificant competition with other users of continental fresh water, if no appropriate precautions are taken, the demand of drinking and continental water from the Company can even compete with the use of water

allocated to other purposes (human and animal con-sumption, irrigation, tourism, and ecology). This might have a negative impact on our businesses. Consider-ing population growth, the economic development of populations, and climate change, the future trend is an increased demand of water by other users.

Consistent with how relevant is the availability of water for the Company, and in accordance with our Environmental Policy that promotes the efficient use of natural resources, AES Gener and its affiliates care-fully monitor their water consumption, and organize, at the same time, campaigns and projects intended to reduce water consumption.

The Company uses the WBCSD/WRI Global Water Tool5 to identify the plants located in areas of wa-ter scarcity (or “water stress” areas). These are areas where there is an availability of water lower than 1,700 m3/(person per year), which is consistent with the definition of the United Nations, where the following areas are established:

• Water Stress: availability of water below 1,700 m3/(person per year);

• Water Scarcity: availability of water below 1,000 m3/(person per year);

• Absolute Water Scarcity: availability of water below 500 m3/(person*year);

After an analysis of year 2016, we observe that 9 of our 16 business units, which were responsible for the pro-duction of 71% of the generated energy, are located in water stress areas. Now, if we consider only the busi-ness units which, in addition to being located in wa-ter stress areas, extract continental fresh water, these are reduced to only 4 business units (i.e., 25% of the businesses), and have contributed 32% of the energy generated during 2016. These 4 business units that are located in water stress areas and use continental fresh water are: Ventanas, Cordillera, Los Vientos, and Central Renca and Nueva Renca plants, and their con-sumptions are shown in Table 16.


Complex Generating Unit Name of Marine EMP Frequency Execution

Nueva Tocopilla (formerly Norgener)

Units 1 and 2 Norgener Thermoelectric Plant Bi-annually Since 1999

Cochrane Units 1 and 2 Angamos Thermoelectric Plant

Bi-annually and Quarterly Since 2016

Angamos Units 1 and 2 Angamos Thermoelectric Plant


Guacolda

Units 1 and 2Guacolda Thermoelectric Plant Units 1 and 2


Unit 3Guacolda Thermoelectric Plant Unit 3

Bi-annually Since 2006





Ventanas

Units 1 and 2 (Ventanas)

Ventanas Units 1-2 (Ventanas Plant) Bi-annually Since 1994

Unit 3 (Nueva

Ventanas)

Ventanas Unit 3 (Nueva Ventanas) Bi-annually Since 2010

Ventanas Unit 3 (Nueva Ventanas) Quarterly Since 2010

Monitoring of waters of Campiche estuary. Ventanas Unit 3 (Nueva Ventanas)

Annually Since 2008

Unit 4 (Campiche)

Ventanas Unit 4 (Campiche Plant) Quarterly Since 2009

Laguna Verde Units 1 and 2 Laguna Verde Plant Bi-annually Since 1995

Table 17. Summary of Marine Environmental Monitoring Programs of AES Gener operationsWater use in water stress areas is the water actually used by the plant. Water use is water consumption, which is equivalent to:

Water Consumption = Water Extraction + Munici-pal Water - Discharged Water

It should be noted here that water extraction re-fers to the extraction of surface and ground water, and discharged water is returned in similar con-dition and quality as the extracted water into the same watercourse.

For year 2017, and continuing with the goal set for 2016, the Company has set an annual goal intended to reduce by 5% the use of water for operations located in water stress areas that use continental water. This will require the implementation of actions to improve the use of this resource.

AES Gener has the affiliates of Nueva Tocopilla (for-merly Norgener), Cochrane, Angamos, and Guacolda located in water stress areas. However, these affiliates use (appropriately treated) seawater for cooling pro-cesses, boiler feed, and consumption; therefore, they are not considered in Table 17. Without prejudice of the above, these plants also make permanent efforts to reduce the use of seawater.

The quality of the water used in the boilers and re-frigeration systems is of vital importance in our plants. The quality of boiler feed water is essential for the op-eration of the boiler, and vapor turbine, to avoid early wearing out. Adducted water is treated with desalina-tion systems (where applicable) and demineralization units to produce top quality water, as required to meet the demands of boilers and steam turbines.

As important as the above is the quality of discharged water, since its parameters can affect the environ-mental quality of the receiving body.

Therefore, the discharge parameters are monitored on a periodical and permanent basis, and such quality is specified in specific environmental authorizations and general regulations, and frequently supervised by the environmental authorities.

Particularly, monitoring over marine ecosystems (called Environmental Monitoring Programs, EMP) are periodical studies both of physical and chemical variables of seawater (water quality) and biotic vari-ables of the marine environment (hydro-biological re-sources). The main environmental variables that need follow-up include, without limitation: seawater qual-ity, thermal and saline dispersion plume (tempera-ture, pH, salinity, sulfate, nickel, vanadium, copper, dissolved oxygen), subtidal macrofauna, marine sedi-ments, plankton communities, [sic] marine sediments, and intertidal communities.

Today, the businesses with EMP are listed in Table 17.

Source: requirements contained in current Environmental Qualification Resolutions (RCA, for its acronym in Spanish)


Waste Type 2015 2016

Gross Generation (MWh) 27.509.833 31.336.018

Waste Generation:

Fly Ash and Gypsum 921.455 976.930

Bottom ash 179.194 184.077

Coal Combustion Products (t) 1.100.649 1.161.007

Coal Combustion Products (t/GWh) 40 37

Hazardous waste (including used oil) (t) 2.664 1.679

Hazardous waste (including used oil) (t/GWh)

0,097 0,054

Table 18. Annual Generation of Waste Classified according to Type, Year 2016

Waste Type 2015 2016

Coal Combustion Products (t) 1.100.650 1.161.007

Reuse of Coal Combustion Products (CCPs) (t)

21.175 44.079

Reuse of CCPs with respect to total CCPs (%)

1,9 % 3,8%

4.3 Waste Generation

Given that Coal Combustion Products (CCPs) rep-resent almost all the non-hazardous waste that we generate, we channel our efforts into tracking the quantity of CCPs produced, increasing their reuse, and ensuring a proper final disposition.

We also focus our efforts on tracking Hazardous Waste in accordance with the current regulations. This information is detailed in Table 18.

The information is reported to the authorities through the authorized platforms (Pollutant Release and Transfer Register, “RETC”, and Hazardous Waste Declaration and Monitoring System (SIDREP, for its acronym in Spanish)).

Source: Data Verified locally by Deloitte according to Annex 1.

Likewise, we monitor the percentage of Coal Combustion Products that is reused, mainly delivered to other companies to be used as input or raw ma-terials in their processes or businesses. During year 2016, 3.8% of the Coal Combustion Products were re-used, twice as much as the previous year, as shown in Table 20, which accounts for more than 50% of the ash produced by Ventanas Unit 2 (the only ash currently reused), thus producing an income of US $ 90,000.

We are evaluating together with cement companies to increase the use of ashes from the other units for the production of cement and other products, and the use of synthetic gypsum for the manufacturing of panels and soil improvement.

Table 19. Reuse of Coal Combustion Products.

Source: Data Verified locally by Deloitte according to Annex 1.

4.4 Regulatory Compliance

In the context of GENERA management system, the Company periodically monitors compliance with the applicable environmental regulations, as a manda-tory requirement of the international standard ISO 14.001 under which all its businesses are certified and which require annual audits by the Certifica-tion Agencies operating worldwide. This evaluation of compliance with the applicable regulations is carried out from time to time by external legal advi-sors and internal auditors who report directly to the Board of the Company.

Moreover, pursuant to the guidelines of our Environ-mental Standard “Environmental Incidents and Envi-ronmental Operating Events”, all the “Environmental Non-Conformance Events” and “Environmental Op-erating Events”, which include legal sanctions, are monitored in our system AESOnline.

Under this Standard, an “Environmental Non-Confor-mance Event” (ENE) is an event that does not conform to legally required or expected environmental perfor-mance. This standard also establishes and includes the “Environmental Near Misses” as an event, action or condition which could have but did not result in harmful environmental impact or non-conformity.

Moreover, under this Standard, an “Environmental Operating Event” (EOE) is an environmental pro-ceeding (new or ongoing), a need for environmental remediation, a non-compliance with an environ-mental permit or a lack of environmental permit, or an environmental restoration obligation associ-ated with the end of the useful life of an asset that may potentially affect the financial position of any AES Gener business.

The main regulated aspects, which are of interest to the Company, are related to air emissions (Supreme Decree No. 13/2011), noise (Supreme Decree No. 38/2013), discharge to water bodies (Supreme Decree No. 90/2000), storage of dangerous substances (Su-preme Decree No. 43/2016), and waste management (Supreme Decree No. 148/2003), among others. It is worth mentioning here that with the creation of the

Environmental Superintendency (“SMA”, for its acro-nym in Spanish), and the coming into effect of its su-pervisory and sanctioning powers in December 2012, the visits and depth of the inspections have increased, both with respect to the Environmental Qualification Resolutions, and the applicable sectorial regulations.

On April 27, 2016, the SMA notified the Company of the initiation of a procedure for the imposition of a sanction against Nueva Tocopilla (formerly Norge-ner) plant for breach of the maximum temperature differential in the discharge of water to the sea with respect to adducted water, as authorized in the en-vironmental permit. According to current regulations, on May 18, the Company submitted a “Compliance Program” for the SMA’s approval, which was approved on June 22, 2016. With a 20-month execution period, this Plan considers an investment of US$ 1.7 million, which were already provided for in the investment budget approved for year 2016. If the Company com-plies with the commitments assumed in said pro-gram, no sanctions are expected to be imposed by the environmental authority.

On June 23, 2016, the SMA gave notice of the initia-tion of a procedure for the imposition of a sanction against the affiliate Angamos due to non-compliance with the discharge of water to the sea (Supreme De-cree No. 90/2000), air emissions and certain specific instructions from the SMA regarding emission report-ing. According to the current regulations, on July 15, the Company submitted a “Compliance Program” for SMA’s approval, which was approved on August 16, 2016. The execution period of this “Compliance Pro-gram” is 10 months, and no significant costs are con-sidered (estimated to be less than US$ 20,000). If the Company complies with the commitments assumed in said program, no sanctions are expected to be im-posed by the environmental authority.

On November 12, 2016, the Company was notified of a lawsuit against the Ministry for Environment and eleven companies in the Quintero Bay area, includ-ing AES Gener, brought by two fishing labor union and 18 individuals. The plaintiffs claim the full repa-ration of the environment of Quintero and Ventanas bays as a result of the damage caused by the industrial


activity of the companies located in that area. On Jan-uary 27, 2017, AES Gener filed the answer to the com-plaint, and it is still too early to be able to estimate the possible results of this action, and its possible finan-cial impacts, if any.

4.5 New Relevant Regulations

On March 29, 2016, the Ministry of Health published Supreme Decree No. 43/2016 concerning storage of hazardous substances. This new regulation became applicable as of September 25, 2016 for new storage infrastructure (warehouses, ponds and lime silos), for non-structural improvements of existing facilities (signage and information standards), and for the sub-mission of structural adequacy plans so that the exist-ing facilities are approved by the environmental au-thority. The regulation grants a two-year term (March 2018) for the implementation of such adequacy plans. The non-structural adequacies have been timely made, and the adequacy plan have also been submit-ted and they are currently undergoing different stages of approval. During year 2016, almost US$ 631,000 were invested in adjustments, while an investment of about US$ 14.9 million has been estimated for the im-plementation of the adequacy plans, and has already been incorporated in the approved budgets for the years 2017 and 2018.

The regulation establishing new limits (in Chile) on emissions of particulate matter, sulphur dioxide, and nitrous oxides, and emissions of mercury result-ing from thermoelectric generation has been in full force and effect since mid-2016. To date the Compa-ny has made all the additional investments required to comply with this regulation, i.e. approximately US$ 472.8 million.

In July 2016, the Ministry for Environment issued Su-preme Decree No. 18/2016, which establishes proce-dures for the application of the tax levied on emissions of particulate matter, nitrous oxides, sulphur dioxide, and carbon dioxide. This regulation is key to the ap-plication of this new tax, which must be paid as from April 2018. To ensure compliance with this standard, AES Gener established methodologies for the quanti-fication of emissions from all its thermal power plants, which were approved by the environmental authority, and have been fully implemented since January 2017.

The Ministry for Environment has been working, with citizen participation, on a new air quality standard to regulate maximum hourly concentrations of sulphur dioxide (SO2). We expect that this new regulation is not going to have a significant impact on the opera-tions of the Company.

In relation to the regulation of liquid waste discharge to marine and continental watercourses, in December 2016, the Superintendency of Environment published Resolution No. 1175/2016, which is the technical pro-cedure for the application of Supreme Decree No. 90/2000. This procedure is a guide addressing dis-charge operations, processing of monitoring program, self-monitoring and re-sampling reports, self-control reporting obligation, and other related aspects.

During year 2016, the Ministry for Environment worked hard on the Decontamination Plan for Con-cón-Quintero-Puchuncaví, the Decontamination Plan for the Metropolitan Region, and the Environmental Prevention Plan for the area of Huasco. These plans were publicly disclosed and had formal participation instances through the Citizen Participation mecha-nism, of which the Company has been part. The Plans mentioned above are currently undergoing various stages of approval, and they are expected to be pro-mulgated during the first half of 2017. The public drafts that we have managed to access so far imply that the Company is likely to be required to make cer-tain operational adjustments and investments to meet the new requirements.

In the areas of Huasco and Quintero – Puchuncaví, Environmental and Social Recovery Councils (CRAS, for its acronym in Spanish) were created in order to develop Environmental and Social Recovery Pro-grams (PRAS, for its acronym in Spanish). The affili-ate Guacolda has participated directly in the CRAS of Huasco area. Moreover, we have participated through ASIVA (Association of Region V Companies) in the CRAS of Quintero – Puchuncaví area. Both PRAS pro-grams were submitted for public inspection and their final version is expected to be drafted during 2017.

New increasingly demanding environmental regulations are continuously under development, this being an event that can modify the oper-ations and/or require additional investments for compliance purposes.

AES Gener and affiliates, within the framework of the Environment, Safety, Occupational Health, and Qual-ity Policy, take on the commitment to caring for the environment, ensuring faithful compliance with the national regulatory framework, AES Corp standards, and the voluntary commitments made.

4.6 Biodiversity Protection

AES Gener and its affiliates are aware that their own operations and projects under construction may ad-versely affect biodiversity if no appropriate precau-tions are taken, and they are also aware of the fact that preserving biodiversity is a key aspect to attain their sustainability goal. For this reason, it is vital to be in-formed of the interactions between the different pro-duction processes and the environment, so that we can assess the impacts on biodiversity and establish the measures that will mitigate, repair, or compensate any possible adverse effects. The implemented mea-sures are monitored in order to assess whether the proposed goals are being achieved.

This way, our involvement in the selected group of companies that make up the Dow Jones Sustainabil-ity Index - Chile (DJSI - Chile) helps us to be aware of the competitive advantage represented by the pro-tection of biodiversity in issues such as the access to financing sources, and the impact that the loss of a social license to operate as a result of an adverse impact on biodiversity would have on our operations and cash flows.

Biodiversity is considered as another aspect in our Environmental Management System. Each year, during the review of the matrices of Environmental Aspects and Impacts, the analysis of possible impacts

on biodiversity is included. Our Environmental Stan-dard, called “Biodiversity Evaluation and Protection” also includes the requirement to provide, each year before April 15, information about biodiversity, in-cluding interventions made during the previous year near sensitive or protected areas, identification of protected species and their habitats, and biodiversity protection indicators.

Consistent with the current regulations and our own standards, the relevant biodiversity and baseline stud-ies were conducted, and the risks related to biodiver-sity were established in all the businesses of AES Ge-ner and its affiliates, including sites in operation and under construction.

We have found biodiversity risks in 5 of our 16 exist-ing businesses; therefore, it has been set forth that the relevant biodiversity management plans will be developed by each of them. These businesses are: Angamos, Cochrane, Ventanas, AES Chivor, and Alto Maipo (currently under construction). To date, such Biodiversity Management Plans have been fully im-plemented and are being currently executed.

The review by Environmental Authorities (Environ-mental Evaluation Service and Services with Envi-ronmental Authorities) of the Biodiversity Studies contained in the environmental studies of the proj-ects (including changes and extensions), as well as the fact that the process is open to the public in gen-eral, including stakeholders, allows us to affirm that Biodiversity Management (including risk assessment, impact assessment, and management and monitoring plans) undergoes a due quality assurance process.

The responsibility for the monitoring of Biodiversity Management Plans, as far as businesses in operation are concerned, falls on the Manager of the Complex, who receives the advice of the Environmental Man-agement Head of the Complex. As regards Alto Maipo Project, the responsibility falls on the Project Manager, who receives the advice of the Environment Manager.


6 http://www.fundaciongaviotinchico.cl/w/wp-content/uploads/2012/05/Informe-Final-Gaviotin-2014-2015.pdf 7 http://ciencias.bogota.unal.edu.co/fileadmin/content/icn/publicaciones/guiasdecampo/Ebook_Aves_de_Santa_Maria.pdf

Compensation measures for impacts on biodiversity include, without limitation, environmental education campaigns for external and internal workers, and the community, vegetation enrichment in areas where re-covery of biodiversity is possible, reforestation plants, raising of native species in nurseries, and support to the protection of certain species for instance, support to the Foundation for the Sustainability of the Gavi-otín Chico (sterna lorata) 6”.

The “Foundation for the Sustainability of the Gaviotín Chico” is a public-private initiative whose purpose is to contribute to the protection of this endangered specie, which is mostly present in the industrial area of Mejillones. The Foundation works for the preser-vation of the gaviotín through the development of re-search capacities, generation of new knowledge with respect to the specie, and the implementation of tech-nical measures intended to protect it.

As a result of the above, certain studies conducted by the Foundation suggested that the population of gaviotines in the 2014-2015 season was higher than in the previous season6, thus recovering the upward trend, and that the levels were significantly higher than those registered in 2008, when the first studies were carried out.

In 2016, AES Gener has voluntarily developed projects for the improvement of the biodiversity in the com-munities surrounding its operations. Among these, we can mention the “El Pangue Eco-Corredor”. The purpose of this project is to foster individuals’ mobili-ty through a biological corridor, and to protect genet-ic material of native fauna and flora in the different natural habitat fragments, as well as to offer a space where certain research and environmental education actions can be developed with activities including bird watching, and botanical research, among others. The

project included the planting of about 40,000 indi-viduals of 17 native species of trees and shrubs on 55 hectares, harvesting and planting of bulbs and seeds as food for wildlife, construction of stone walls to im-prove the habitat of small size fauna (lizards, mice, and marsupials), development of an educational path, construction of a viewpoint, construction of inter-sections, and design of a plan for the development of the Eco-Corridor.

It is interesting to note here that thanks to this project the Company obtained the “2016 ASIVA Environmen-tal Improvement” award, and the international recog-nition “Call LALI for Good Practices”.

Likewise, certain initiatives to contribute to the gen-eration of knowledge about biodiversity were carried out. An example of this is the publication of the book “Flora y Fauna en el Pangue”, which was edited by AES Gener and included the distribution of 1,100 copies to the community, internal staff, and contractors. This publication contains information about the flora and fauna species present in El Pangue, Commune of Pu-chuncaví, Valparaíso Region.

The awareness of the importance of biodiversity pro-tection and appreciation has resulted in proposals emerging from the organization and its employees, which are aimed at improvements in the communi-ties surrounding our operations. This is how, in year 2016, with the support of Fundación Cultiva and the Municipality of Renca, a group of volunteers, made up of our staff and the community, reforested a hectare in Renca Hill, one of the inselbergs of the Metropolitan Region neighboring Renca Thermoelectric Plant.

In July 2016, our affiliate AES Chivor, whose hydro-electric power plant is located in the Municipality of Santa María, Department of Boyacá, Colombia, pub-

lished book No. 16 of the series “Guías de Campo del Instituto de Ciencias Naturales”, under an institutional alliance with the National University of Colombia. This time the subject was “Birds of Santa María.” The book was published in electronic form7 and 500 printed copies were distributed.

4.7 Environmental Investment and Innovation

During this year 2016, the environmental investment and innovation projects covered virtually all the areas related to our main environmental impacts.

On the one hand, with the commissioning of the new Particulate Matter and Sulfur Dioxide emissions con-trol systems of units 1, 2, and 4 of Guacolda Plant, and a Nitrous Oxides abatement equipment based on Se-lective Catalytic Reduction (SCR) in Unit 1 of Guacolda Plant, we completed the cycle of investments in air emission emissions control equipment, which started in 2012 to comply with the requirements of Supreme Decree No. 13/2011. This way, we complete a cycle of investments in environmental improvements relat-ed to air emissions that amounted to more than the US$ 472.8 million.

Regarding dangerous substances management, this year we invested about US$ 631,000 in the im-provement of storage warehouses and tanks so that they reach the level required by Supreme Decree No. 43/2016, and we expect investments of about US$14.9 million during 2017 and 2018.

Also worthy of mention are the “minor” projects im-plemented during 2016, which were related to the use of water and biodiversity, and that in addition to reducing the environmental impact of the Company, have resulted in a reduction of costs, an increase in revenues, an increase in productivity and/or a reduc-tion of environmental impacts:

Reduction in the use of water in Alfalfal plant: a team of professionals of Alfalfal, motivated by the fact that the plant is located in a water stress area, verified that there is no substantial difference between water consumption at the plant during working days, when there are 1,200 users of water, and water consump-tion during weekend days, when there are 15 users of water. This led them to think that there were losses that they needed to address in the irrigation network, drinking water network, drinking water pond, or san-itary appliances. In addition, based on the number of users, and the surface to be irrigated, they estimated (using standard factors) that consumption should be around 31 m3/day, and that the existing consumption was close to 64 m3/day. Therefore, they implemented a project to reduce water consumption based on three dimensions: awareness in the use of the resource (“imagine a day without water” and “live your native garden”), improvements in the network of drinking water, and repair of leaks and installation of low con-sumption appliances.

The project “Live your native garden” considered the reforesting of green areas of the plant with native species, which require a lower consumption of water. Three hundred and fifty-six specimens of native trees were planted by volunteers of the Plant.


8 Considering an emission factor of 0,397 tCO2e/MWh, according to http://huelladecarbono.minenergia.cl emission-for-the-sic 9 Considering an energy price of US$ 61.6/MWh in Renca bar 110 kV, simple average year 2016, according to https://cmg-sic.coordinadorelectrico.cl/Modulos/CMg/CDEC_CMgBarras.aspx

To date, water consumption at Alfalfal plant was re-duced from 64 m3/day to 42 m3/day, i.e. the reduction was approximately 8,000 m3 per year, the equivalent to the water contained in approximately 250 regular size swimming pools, and an energy saving in pump-ing of 9.8 kWh, equivalent to the consumption of 980 10W LED bulbs.

Reduction of water use in the cooling towers of Nueva Renca plant: as a result of the recirculation of cooling water in the towers, there is a progressive increase in the concentration of sulfates, therefore it is necessary to incorporate freshwater adducted from the wells in order to wavoid the water discharge to exceed the limits established by Supreme Decree No. 90/2000. The presence of sulfates in water is indi-rectly determined by measuring conductivity, and is contrasted with sampling and direct measurements of sulfates. During year 2016, we made simulations of the behavior of the circulating and discharge wa-ter parameters, and then successive tests in order to reduce the adduction of well water, respecting at the same time the sulfate concentrations set out in the regulation mentioned above (concentration lower than 1,000 ppm). It was determined that, maintaining adequate safety margins, it is possible to operate with a conductivity of 2,850 pS/cm instead of the histori-cal 2650 pS/cm. This allowed a 13% decrease in the adduction of water, which, considering the genera-tion level of year 2016, meant an adduction of about

500,000 m3 a year less. Considering the energy con-sumption of well pumps, this meant savings of 160 MWh during year 2016, and reduced CO2 emissions of 63 tCO28 . At the same time, it meant higher energy sales for approximately US$ 10,0009 . The next step in this project is to incorporate a continuous (in-line) sulfate meter in order to monitor this environmental variable more accurately. This is expected to result in even greater reductions in water adduction.

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