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March 3rd, 2005 March 3rd, 2005 Results of 2004 Results of 2004

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Page 1: Apre 4 t04

March 3rd, 2005March 3rd, 2005

Results of 2004Results of 2004

Page 2: Apre 4 t04

• Market

• Finance and OperatingPerformance

• Debt Profile

• Operating Performance

• Finance Performance

Conclusion

Page 3: Apre 4 t04
Page 4: Apre 4 t04

Consumers’ Market Share Consumers’ Market Share -- EletropauloEletropaulo

32,7%

28,7%

28,0%

10,6%

2003 - GWh 2004 - GWh

34,5%

26,5%

28,9%

10,1%

40,4%

21,6%

29,9%

8,0%

41,1%

20,8%

30,3%

7,8%

2003 2004

ResidentialIndustrialCommercialOthers

ResidentialIndustrialCommercialOthers

cons

umpt

ion

reve

nue

Page 5: Apre 4 t04

Comparison of Consumption in Comparison of Consumption in GWhGWh

Ps: the graphics do not consider own consumption

3.473 3.304

10.7279.401 9.174

11.258

8.6709.435

Residential Industrial Commercial Others

2003 2004

32.774 32.668

2003 2004

5,0%

-7,8% 2,9%

-4,8%

-0,3%

Page 6: Apre 4 t04

Comparison of Consumption in Comparison of Consumption in GWhGWh

10.374

3.473

11.109

9.206 9.579

3.395

Industrial w/ Free Commercial w/ Free Others w/ Free

2003 2004

7,1%4,0%

32.774 33.77932.66835.341

Total w/ outFree

Total w/ Free

2003 2004

4,6%-0,3%

-2,2%

Free Clients

Ps: the graphics do not consider own consumption

Page 7: Apre 4 t04

Actual Situation

Migration of 44Consumers

40Consumers renewed

contracts

Jan-Dec 2004

4,0%

4,1%

% Total load of the concession area in 2004

(35, 341 GWh)

Total of 68Free Clients 8,7%

Retention of PotentiallyRetention of PotentiallyFree ConsumersFree Consumers

• Intensification of visits to consumers

• Value adding to the captive supply through:

• The selling of “Interruptive Energy”

• Payments of Bills with Credits of ICMS (Merchandise and Service Circulation Tax)

• Energy Efficiency Projects• Benefit Plans (Load Management

and Preventive Maintenance)

Page 8: Apre 4 t04

9.8% increase on expenses with electric energy purchased and 42.4% increase on transmission chargesIncrease of 24.1% and 200.3% on CCC and CDE expense, respectively:

Stipulated quotasstart of the amortization of the regulatory asset

Results Results –– 20042004

(*) Without adjustments(**) Consolidated Result Values

2003 2004

Net Revenue 6,431.9 15.0%

Operating Expenses (5,636.7)

EBITDA * 1,059.8

Financial Revenue(Expenses)**

23.8

Extraordinary Items Netof Tax Effects

(345.9) -1.4%

Net Profit (Loss) 86.3 5.6 Increase on operating expensesFinancial expense

R$ 546.8 million loss on income from Foreign Currency Monetary Variation, due to the lower rate of appreciation of the Real against the US dollar in 2004In dec/03, 7.5% of the debts were “hedged”, versus 100% in dec/04In dec/03, 38% of the debts were denominated in US$, versus 17% in 2004Negative Adjustments of R$ 207.7 million on hedge contracts

7,394.1

(6,391.3)

1,271.5

(453.1)

(341.0)

The average rate adjustment of 17.9% on July 4, further increased by 0.7% on September 21, 2004Deferred increases in PIS/Cofins taxes with an impact of R$ 154.2 million on the operating result o

Increase in operating revenues, although partially offset by increases in operating expenses

R$ Million

13.4%

20.0%

N.M.

-93.5%

Page 9: Apre 4 t04

3Q 04 4Q 04

Net Revenue 2,050.3

Operating Expenses (1,735.3)

EBITDA * 382.2

Financial Revenue**Expense

(186.9)

Extraordinary ItemsNet of Tax Effects

(85.0)

Net Profit (Loss) (6.4) 17.5

2,050.3

(1,788.4)

329.6

(23.2)

(85.1)

Results Results –– 4Q 04 x 3Q 044Q 04 x 3Q 04

0.0%

3.1%

2.3% growth in billed consumption14.6% increase on deductions from the operating revenues, due to the stronger impact on the deferral of the PIS/Cofins increases in the 3Q04, of R$ 117.7 million, compared to an impact of R$ 36.5 million in the 4Q04

Increase in operating expenses (2.4%), personnel expenses (31.2%) and materials and third parties services (47.9%)

Increase in operating expenses

198.6% increase of financial income, due to the negative impacts occurred in 3Q04:

Signing of the SP municipality agreement, that generated a reversion of R$ 62.3 million on the monetary variation Reversion of fine provisions

Reduction of Financial expenses

0.1%

-13.8%

-87.6%

N.M

(*) Without adjustments(**) Consolidated Result Values

R$ Million

Page 10: Apre 4 t04

Adjusted EBITDA Adjusted EBITDA -- R$ MillionR$ Million

R$ 1,271.5 EBITDA without adjustments

R$ 88.2

R$ 1,671.9 Adjusted EBITDA

Debt Confession IIa

2003 2004

13.6% Increase

R$ 1,059.8

R$ 284.2 RTE

R$ 81.7

R$ 46.4

R$ 1,472.1 Adjusted EBITDA

R$ 312.1 RTE

R$ 0.0 Cetemeq Provision

EBITDA without adjustments

Debt Confession IIa

Cetemeq Provision

Page 11: Apre 4 t04

EBITDA without adjustments

Adjusted EBITDA

Debt Confession IIa

3rd Quarter 2004 4th Quarter 2004

10.6% Decrease

EBITDA without adjustments

RTE

Debt Confession IIa

Adjusted EBITDA

RTE

R$ 382.2

R$ 82.9

R$ 23.9

R$ 489.0

R$ 329.6

R$ 21.5

R$ 437.3

R$ 86.2

Adjusted EBITDA Adjusted EBITDA -- R$ MillionR$ Million

Page 12: Apre 4 t04

Total 297

Total Recorded 330

186

297

400 - 450

33

32

2003 2004 2005 (e)

Capex Self-Paid

Investments’ Trend Investments’ Trend -- R$ millionR$ million

2004 Investments

125

33

Losses Recovery 8

Personnel 78

Others 54

Customer Service and System Expansion

Maintenance

Self-Paid 33

Page 13: Apre 4 t04

LossesLosses

5,6 5,6

7,2 6,7

2003 2004

Technical Losses(1) Commercial Losses(2)

• Intensification of loss recovery plan:

• Regularization of 18 thousand illegal connections

• 320 inspection teams • Advertisement Campaigns to teach

citizens about fraud problems:• Energy theft is crime -

association with police• Dishonest concealment -

association with finance secretary

• Distresses the society, through increases on the tariff – lack of return on part of the investments

(1) Losses resulting from the company’s operations in the transmission and distribution systems. They occur due to the points of overload in the transmission and distribution lines.

(2) Losses resulting from illegal connections, frauds and mistakes in the meter reading.

12,84 12,34

- 4%

Page 14: Apre 4 t04

ST vs. LT Consolidated IndebtednessST vs. LT Consolidated Indebtedness

53%68% 71%

23%

47%32% 29%

77%

0%

50%

100%

2001 2002 2003 2004

ST LT

R$ 5,278 R$ 5,284R$ 4,490 R$ 5,902

million

Page 15: Apre 4 t04

Hedging StrategyHedging Strategy

0%10%20%30%40%50%60%70%80%90%

100%

2000 2001 2002 2003 2004

Local Currency Hedged Foreign Currency

41%

41%

18% 14%

61%

25%

42%

4%

54%

3%

35%

62%

17%

83%

Currently 100% of foreign currency debt is hedged

R$3,473 R$4,490 R$5,902 R$5,278 R$5,284

million

Page 16: Apre 4 t04

Amortization ScheduleAmortization Schedule

143

611

299

130 166 196 225 227 230 246 222 224 226 251 225 227 231

107 82 80 77

107112 116

12678 83

41 78

5279

167

51

144149

101

12118

4024

24 40

24 45

149

4216 80

16

3418

33

4583

Dow

npay

men

t **

Capi

taliz

atio

nP

rogr

am**

*

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

R$ BNDES US$ *

* Exchange rate conversion on 12/30/2004 US$/R$=2.6544** “Capitalization Support to Electric Power Distribution Companies Program”, according to which Eletropaulo would be eligible to receive up to R$ 771 million

Amortization made on 01/12/05 with funds from the third trancheof the rationing loan

R$ million

Page 17: Apre 4 t04

Corporate Corporate GovernanceGovernance

• In Dec. 13, 2004 AES Eletropaulo took the commitment to have closer relations with its various publics, including shareholders and the capital markets

• By the time a company adheres to Bovespa Level II, it is certified with a Corporative Governance Seal which promotes:

• A higher commitment of the Company with their stockholders (minority and controllers)

• Higher transparency on the information given to the Capital Markets

• 25% Free Float of total shares

• Maintenance of a Fiscal Council

• Higher rights to the preferred share holders

Page 18: Apre 4 t04
Page 19: Apre 4 t04

19

Tariff AdjustmentTariff AdjustmentTariff AdjustmentThe Initial Contracts are readjusted on a yearly basis according to the following formula as established in the concession contract: :

The Bilateral Contract is readjusted in July of each year according to the variation in the IGP-M index

Tariff readjustment in 2004:

Rate for Tariff Adjustment = VPA + VPB x IGP-MRevenue

Tariff after adjustment(R$ / MWh)

Initial ContractsBragantina February 7.17% 58.10Nacional February 7.17% 61.76CPFL April 6.30% 66.69AES Eletropaulo July 7.14% 69.62Elektro August 7.95% 58.59Bandeirante Energia October 8.36% 71.75Piratininga October 8.36% 71.75Bilateral ContractsAES Eletropaulo July 9.61% 117.59

Company Month of Adjustment % of adjustment

Average Tariff (4Q04):R$ 76.8 / MWh

Page 20: Apre 4 t04

20

Energy Balance - 2004Energy BalanceEnergy Balance -- 20042004

MRE

=

Energy Generation x Billed Energyin MWh

Caconde plant didn't generate energy during the 3rd Quarter because of it's maintenance program.**After deducing own consumption and transmission losses, the difference is addressed to the Energy Reallocation Market - MRE

Total energy production was 6.7% over assured

Caconde282,182*Euclides565,161

Limoeiro164,082

Ibitinga718,722

Bariri646,416

Barra Bonita566,091

Água Vermelha6,525,785

Promissão1,056,810

Nova Avanhandava1,385,178

Mogi Guaçu32,545

Bandeirante548,306

Nacional155,728

Bragantina239,566

Elektro920,384

Eletropaulo - CI1,985,427

Piratininga559,739

CPFL1,134,791

Eletropaulo - Bilateral5,618,771

TOTAL

11,942,972

BILLED

11,162,711

Page 21: Apre 4 t04

21

Stored EnergyStored EnergyStored Energy

Source: Operador Nacional do Sistema – ONS; December/04

Southeast Reservoirs

10

30

50

70

90

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2000 2001 2002 2003 2004

% o

f Max

. Sto

red

Ener

gy

Page 22: Apre 4 t04

22

Income Statement – 4Q04Income Statement Income Statement –– 4Q044Q04

Net Revenues 10%

Costs 3%

Ebitda 12%

Financial Income (Expenses)

44%

Income Before Taxes and Participations

Net Income

Higher IGP-M index, 1.5 % in 4Q03 to 2.0% in 4Q04 Financial expenses of R$ 15 million do to investments in Banco Santos

Higher EBITDA due to better operational performance

Operational expenses increased less than inflation

Tariff readjustment and the transfer of 25% of energy from initial contracts to bilateral contract Impacted by the increase in PIS and Cofins rates

4Q03R$ million

21.3

(64.3)

169.0

(50.2)

78.9

67.9 20%

Increase due to better operational performance

4Q04

239.8

(66.2)

189.5

(72.2)

101.5

81.6

Page 23: Apre 4 t04

23

Higher IGP-M index, 8.7% in 2003 to 12.4% in 2004 Financial expenses of R$ 15 million do to investments in Banco Santos

Increase in transmission costs, power purchase, provision of energy purchase from Itaipu, and operational provisions (details in the next slide)

Net Revenues

Costs

Ebitda

Financial Income (Expenses)

Income Before Taxes and Participations

Net Income

779.0 980.8

(231.4) (267.9)

611.8 766.5

(251.2) (293.2)

272.7 419.7

2003R$ million

195.4 291.5

2004

570.1

(194.3)

439.1

(379.9)

(2.5)

2002

(3.8)

Tariff readjustment and the transfer of 25% of energy from initial contracts to bilateral contract 26%

16%

27%

17%

49%

Income Statement – 2004Income Statement Income Statement –– 20042004

Higher EBITDA due to better operational performance

Increase due to better operational performance

Page 24: Apre 4 t04

24

Costs and Operating ExpensesCosts and Operating ExpensesCosts and Operating Expenses

Payroll

Outsourced Services

Financial Compensationfor Use of Water Resources

Electricity DistributionNetwork

Power Purchased

Depreciation and Amortiz.

Others

Total

em R$ milhões

25.4

17.5

32.4

34.2

23.8

64.2

34.0

231.4

2004

25.7

24.0

35.5

41.7

36.1

63.6

41.3

267.9

2003

Biannual restoration of locks Environment consultingMaintenance of generation equipment

Connection fees Transmissions – increase due to higher volume of energy sold under the bilateral contract

Provision of cost of energy purchased from ItaipuFinancial Exceeds – feb/04 (“Excedente Financeiro”)Power purchase to replace energy from Itaipu

Regulatory feesInsurancesWaterwayR&DOperational provisions

Page 25: Apre 4 t04

25

Facts Occurred in the 4Q04Facts Occurred in the 4Q04Facts Occurred in the 4Q04

PIS and Cofins

• Increase in PIS and Cofins rates that moved up from 0.65% to 1.65% and 3.0% to 7.6% respectively

• The legislation established that new rates would not apply to long-term, pre-fixed priced contracts signed before October 31, 2003; AES Tietê, as well as all energy-related companies, understood that these new rates would not apply to their contracts

• In November the Brazilian IRS (Receita Federal) clarified that the new rates would apply if the prices of such contracts were adjusted by inflation

• In the 4Q04, AES Tietê booked retroactive PIS and Cofins

Banco Santos

• From a total of R$35.5 millions invested at BancoSantos, R$ 15,0 million refers to Bank Certificate Deposits through an exclusive investment fund and were written off as financial expenses. The remaingR$ 20.5 million invested directed in Bank Certificate Deposits were booked as long term asset and, were considered as loss provision of R$ 4.1 million

• AES Tietê joined to the group of creditors led by KPMG who looking for solutions that would minimize financial expenses

Market Security (accrued)

R$ 15 million

Bank Certificate Deposits (accrued)

R$ 4,1 million

Bank Certificate Deposits

R$ 16,4 million

Page 26: Apre 4 t04

26

Financial InvestmentsFinancial InvestmentsFinancial Investments

* Rating before the Brazilian Central Bank intervention

Credit Risk: Moody´s Rating – Local Currency (long term)

• Financial investments are allocated as shown bellow:

BRL Federal T Bonds (Ba3) - 76%

Banco Santos (B1*)3%

Foreign Bonds - US$ - (Aa3)

11%

Foreign Bonds - US$ - (Aa1))

9%

Private Bonds (A3) - 1%

Page 27: Apre 4 t04

27

Capital ExpedituresCapital Capital ExpedituresExpeditures

• Capex in 2004, amounted R$ 21.9 million*, mostly in modernization andmaintenance of equipment

2004 – R$21.9 million2003 – R$12.4 million

EquipmentTelemetryWaterwayEnvironmentalOthers

* Consolidated

28%

6%27%

20%

19%41%

10%18%

20%

11%

Page 28: Apre 4 t04

28

Capital MarketsCapital MarketsCapital Markets

186 195

292277

95%95%

2003 2004

Dividends Net Income Pay-Out

• In 2004, the common shares had an appreciation of 118% and the preferred shares of 205%. Ibovespa increased 18%

• AES Tietê’s stocks were traded in 98% of all Bovespa’s trading sessions in 2004

• In 2004, R$ 199 million were paid as dividends remaining R$ 77,5 million referring to 4Q04 net income, shall be paid after Annual Shareholders Meeting approval

Dividends – R$ millions

218

305

100

118

-

50

100

150

200

250

300

350

dec jan feb mar apr may jun jul aug sep oct nov dec

GETI3 GETI4 Ibovespa

Page 29: Apre 4 t04

• Eletropaulo’s R$ 5.6 million net profits in 2004 offset the R$ 11.9 million loss accumulated on the first nine months of the year

• The 15% increase on net revenues and 20% increase on EBITDA, reflect a strong cash generation capacity

• The 0.3% reduction on the billed market, due to the loss of free clients, and the further decrease on revenues, is smoothened by the billing of TUSD and by the proportional reduction on energy purchased

• The company has constantly sought operational and commercial excellence, in order to offer increasing quality in the service provided to customers

• Net income for 2004 was R$ 291.5 million and net margin was 29,7%

• Net income, although impacted by higher financial expenses, increased 49% year over year.

• AES Tietê enforces its commitment to its shareholders and investor increasing, year by year, its operational performance on return the investments made

ConclusionConclusion

Page 30: Apre 4 t04

March 3rd, 2005March 3rd, 2005

Results of 2004Results of 2004

All statements contained in this declaration related to the outlook of the company’s business, projections of operational and financial results, and growth potential represent mere provisions and were based on management expectations in relation to the future of the company. These expectations are highly dependent on market changes, Brazil’s economic outcome, the energy sector, international markets, being thus subject to change