#1FID 001 CORPORATE PRESENTATION AES Eletropaulo 2017 F FLEE www#2AES Eletropaulo 24 cities attended in São Paulo metropolitan area Concession contract expires in 2028 Market Cap: US$ 740 million¹ Brazil Pirapora do Cajamar Bom Jesus VGR São Paulo Juquitiba Cotia Santana do Parnaiba Barueri Osasco Itapevi CARAP. TSE Embu apecerica da Serra São Lourenço da Serra AES Eletropaulo São Paulo SCS Mauá Santo André Ribeirão Pires São Bernardo do Campo Embu-Guacu RGS 16% of Brazil's GDP² in its concession area 4,526 km² concession area 46 thousand km of distribution and transmission lines 7.1 million customers³ 18 million people served 16.6 TWh distributed in 2Q17 7,303 employees as of June 2017 Investment Grade: National International Fitch S&P Moody's AA- A+ A3 BB BB- Ba3 - 1 - Base Date: 09/25/2017 (FX rate 3.1285 BRL/1 USD); 2 Source: IBGE, 2010; 3 - Base: 2017, referring to consumer units. Source: Company 1#3Ownership Structure AES Holdings Brasil BNDESPar C 50.00% +1 share C 50.00% 1 share P 0.00% P 100.00% C 61.57% C 14.38% P 0.04% P 37.40% C 50.52% C 22.56% P 0.00% P 16.82% T 46.15% T 53.85% T 24.28% T 28.33% T 16.84% T 18.73% Brasiliana Participações C 100.00% C 100.00% T 100.00% T 100.00% AES Ergos AES Eletropaulo AES Uruguaiana C 99.42% T 99.42% AES Elpa AES Tietê Energia AES Eletropaulo AES 16.8% BNDES Others¹ Market Cap² C = Common Share 18.7% 64.5% US$ 0.7 bi P = Preferred Share T = Total 1 - Includes 14.9% of the Federal Government and GWI shares in AES Eletropaulo; AES Eletropaulo 2 Base Date: 09/25/2017 (FX rate 3.1285 BRL/1 USD) 2#4AES Corporation A Global Company Natural gas and coal fired thermal plants 25 GW of installed capacity Over 8 GW of Renewable sources¹ Distributed energy +104 MW of solar PV2 projects in operation World leader in Energy Storage Total of 476 MW3 無 35 GW installed capacity Providing services to over 9 million customers 19 thousand employees AES Corp is present in 17 countries and 4 continents AES Eletropaulo 1 - Includes hydro, wind, solar, energy storage, and biomass; 2 - PV - Photovoltaic; 3 - Operating or under construction 3#5History in Brazil • Solid participation in the utilities sector in Brazil 1995 1998 AES Brasil +20 years presence in Brazil Beginning of AES Uruguaiana's construction AES Corp acquired AES Sul through privatization process Privatization of AES Eletropaulo by a consortium comprised by AES Corp and other local and international companies 19971 Privatization of AES Tietê 2000 2003 AES Uruguaiana beginning of operation AES Corp increases its interest in AES Eletropaulo and AES Tietê Incorporation of Companhia Brasiliana de Energia and execution of shareholders agreement with BNDES AES Tietê merged into Cia Brasiliana and was renamed AES Tietê Energia S.A. 2001 1999 2002 AES Sul was sold to CPFL Energia in June/2016. AES Brasil 2016 4#6AES Brasil Mission, Vision and Values Mission To promote the well being and development by providing secure, sustainable and reliable energy solutions Vision To be recognized by our customers and shareholders as the preferred partner for safe, innovative, reliable and affordable energy solutions Values - - Put safety first Act with integrity Honor commitments Strive for excellence Have fun through work AES Brasil AIS A caller AES Eletropaulo LO 5#7AES Brasil Environmental Responsibility • • • • Apply the 10 principles and implement the values of the Global Compact, working to build a culture of sustainability Participation in Businesses for Climate Recycling and waste disposal programs Programs aiming to reduce CO2 emissions • Risk Management and identification of opportunities related to climate change AES Brasil 6#8AES Brasil AES Brasil Social Responsability Casa de Case CC MAGICA • Access to reliable energy through social development . Recycling incentive program as a means to pay the electricity bill mitigation of delinquency - Education for efficient and safe use of electricity Sustainable partnership - commitment with sustainable development at AES Brasil's value chain • AES Brasil Institute - Created in 2016 to promote social innovation and income generation initiatives impacting communities and people's life based on 4 pillars: (i) shaping citizens, (ii) innovation for social development, (iii) entrepreneurship and (iv) Volunteering. 7#9AES Brasil and AES Eletropaulo Recognitions NACIONAL PREMIO DA QUAL 2009 PREMIADA Seras Fipeca TROFEUTR RENCIA ANEFAC 2014 AES Eletropaulo Índice de Sustentabilidade Empresarial NACIONAL PREMIO DA 2012 PREMIADA QUALIDADE ISE Fipecal TROFÉUT Serasa TRAN ANEFAC 2013 Prêmio Consumidor Moderno de Excelência em Serviços ao Cliente Exp AES Brasil guia EXAME Sustentabilidade 2015 [1] BEST INNOVATOR © AES Brasil EMPRESA PRO ÉTICA 2015 PREMIO IBEROAMERICANO DE LA CALIDAD AES HOLDINGS BRASIL VENCEDOR ELIS ESTRATÉGIA, LIDERANÇA E INOVAÇÃO PARA A SUSTENTABILIDADE есов Prêmio Eco Brasil 2014 GUIA 2016 vocês/a AS MELHORES EMPRESAS PARA VOCÊ TRABALHAR CartaCapital AS EMPRESAS MAIS ADMIRADAS NO BRASIL 2014 FUNDIBEQ ORGANIZACIÓN GANADORA 2010 8#10National Interconnected System Thermal Plant GENERATION ****** Hydroelectric and Solar Plant Renewable Energy 10 Substation Transformer 平 152709 840036 Distribution Substation 竿 竿 DISTRIBUTION Substation Transformer © AES Brasil XXXX == TRANSMISSION T COMMERCIAL AND INDUSTRIAL CUSTOMERS RESIDENTIAL CUSTOMERS 9#11Energy Sector in Brazil: Business Segments Generation1 Transmission² • 4,660 power plants ⚫160 GW of installed capacity . System based on hydro plants (1,264³) • Contracting environment: free and regulated markets 77 agents High voltage transmission (>230 kV) • +100,000 km of lines (National Integrated System) • Regulated tariff (annually adjusted by inflation) • Distribution² • 63 distribution companies 327 TWh distributed energy 81 million consumer units . • Annual tariff adjustment Tariff reset every four or five years . • Regulated contracting environment © Source: EPE, ANEEL, NOS, ABRADEE and Instituto Acende Brasil. AES Brasil 1. Refers to May/2017 data. 2. Refers to 2016 data. 3. Includes HPP (hydro power plants) and SHP (small hydro plants). 10#12AES Value Creation Strategy#13Strategy of Value Creation of AES Eletropaulo A 1. Recovery of the Quality Indicators 2. Revenue Management 3. Customer Satisfaction B Risk Management and Contingencies C Corporate Governance Investment and improvement of processes to ensure efficiency " New level of investments in the network Mitigation of risks and reduction of volatility Migration to the Novo Mercado ☐ Productivity Program AES Eletropaulo 12#14Productivity Program: Company plans to materially reduce its operating expenses A1 Recovery of the Quality Indicators A2 Revenue Management ■ New level of investments ■ Smart Grid ■ Digitalization of processes ■ Development of system to anticipate consumers' behavior Bring intelligence to the process ■ Transformation of the meter reader into a commercial agent Reduction of OPEX by R$ 350 milion¹ by 2018, in comparison with 2016 AES Eletropaulo 1 Reduction in real terms, compared to the OPEX of 2016, excluding the Pension Fund A 13#15Productivity Program: OPEX Reduction Schedule Reduction of OPEX through investments focused on the recovery of quality indicators and revenue management 77 Expected Evolution of the Reduction of OPEX¹(R$ mm) 43 33 80 200 150 350 2Q17 3Q17E 4Q17E Total 2017E 2018E 2017+2018E Reduction of OPEX by R$ 350 million by 2018, in comparison with 2016 A1 1 - Reduction in real terms, compared to the OPEX of 2016, excluding the Pension Fund AES Eletropaulo 2- Values excluding pension fund and are weighted monthly by the effective rate (IPCA in relation to personnel costs and IGP-M for other costs) 14#16EBITDA Increase Through Opex Reduction The replacement of OPEX by CAPEX and increase of revenues aim at obtaining a more profitable Company in the long term Improve Operational Performance ✓ Meet regulatory targets ✓ Digital transformation AES Eletropaulo Opex Decrease CAPEX 2018-2022 EBITDA GROWTH Increase Regulatory Asset Base Revenues Increase A1 15#17New Level of Investments in the Network 942 101 792 110 604 82 Investments (R$ mm, nominal value) 3,970 428 +35% 2017 Investments focused on: R$ 115.6 million in system expansion for the addition of new clients and focus on customer satisfaction 3,542 841 237 175 +42% 23 24 682 522 215 151 R$ 80.8 million in operational reliability through maintenance of distribution the 2015 2016 2019E 2017-2021E 2Q16 2Q17 and transmission lines Third Party Resources 1. Amount in real terms AES Eletropaulo Company Resources A1 16#18Improvement of Processes and Application of New Technologies Pillars for SAIDI Reduction Innovation in the Dispatch Process New procedures to ensure process efficiency AES Eletropaulo Productivity Management Communication Improvement of New tools to improve processes, team communication technology and equipment Tools to optimize emergency services Multitasking teams Greater flexibility in team communication Pillars for SAIFI Reduction Expansion and Maintenance Automation and Innovation Intensification of preventive maintenance Technology Investment in the modernization of the distribution network Focus on digital transformation 750 km of Compact Network in 2017 7,200 Fault Detectors in 2017 2,500 Reclosers in 2017 A1 17#19Construction and Investments Portal Construction and Investments Portal Portal web address: http://investimentoaeseletropaulo.com.br/ Informs the investments made by the Company ■ Timeline of scheduled interruption ■ Consult construction in progress in the client region AES Eletropaulo 12:34 B OBRAS EM ANDAMENTO ACS Eletr 412:34 OBRAS EM ANDAMENTO GALERIA DE OBRAS 12:3441 A1 18#20Technology, Support and Innovation Integrated infrastructure for network management 9 000 600 AES Exemplo ATENDIMENTOS TEMPO REAL-LES AES Eletropaulo AIT ** *** AES Eletr Uma Empresa A Operation: Advanced Technology in Dispatch Systems ■ Georeferencing system ■ Automatic systems of indicators assessment and data consolidation ■ Automatic dispatch of events A1 19#21Example: Analytics Analytics system allows the real time follow-up of the distribution network status, thus reducing the reaction time of the support staff Analytics System Team Management Order Priorization Failure Anticipation AES Eletropaulo Live CAES Eletropaulo DOLL A1 20#22Maintenance and Pruning Plans Material increase of the volume of maintenance and pruning services since 2015 A1 Growth of 91% 500 between the two periods Recent average: 466 459 411 320 277 263 Historical average: 240 181 158 140 115 103 98 77 61 65 59 2010 2011 2012 - 1 Basic maintenance level AES Eletropaulo 2013 2014 ■IPS (thd) Pruning (thd) 246 2015 2016 2017E 21#23Average Duration of the Events Average Duration (hours) - (w/o purge) Steady Downward Trend 3.6 3.4 3.4 3.1 3.2 2.9 2.8 2.4 2.2 2.1 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 AES Eletropaulo A1 22#24Value Creation Strategy contributed to reductions of SAIDI and SAIFI and the reduction of fines SAIDI¹ (hours) SAIFI² (times) A1 23.78 3.35 23.21 7.26 4.38 6.90 6.90 6.58 1.20 15.85 1.26 0.89 1.38 14.12 -9% -52% 4.67 5.16 20.43 18.83 6.06 5.69 5.64 5.52 11.18 8.96 2015 2016 Scheduled 2Q16 Unscheduled 2Q17 2015 2016 Scheduled 2Q16 Unscheduled 2Q17 Aneel's Reference - 2016: 8.04 hours / 2017: 7.75 hours AES Eletropaulo 1. System Average Interruption Duration Index. 2. System Average Interruption Frequency Index. Aneel's Reference 2016: 5.92 times / 2017: 5.64 times - 23#25Pillars of the Action Against Bad Debt The Company's efforts directed to fight the bad debt are concentrated in three main pillars Development of System to Anticipate the Consumers Behavior Bring Intelligence to the Process Transformation of Meter Reader into a Commercial Agent A2 ■New, more efficient model of collection based on the use of new technologies Implementation of debt negotiation through the portal Program of Registration Improvement, making the collection measures more assertive Hiring of new collectors under the new incentive model ■ New intelligent collection system Efficiency and assertiveness: new role of meter readers as commercial agents AES Eletropaulo 24#26New Collection Model A2 New collection model that identifies the best action to be applied to each client, avoiding costs and increasing assertiveness (R$) Result of R$1 Spent by Type of Collection Action² 17.5 8.1 I….. New Initiatives ■ Development of a new client segmentation will allow more efficient collection actions New hiring model that also stimulates competition between the hired consulting firms Fixed Ruler 7.5 3.8 3.0 Segmented Ruler Meter Reader Consulting Soft Actions¹ Protest Disconnection Letter Dynamic Ruler Intelligent Collection System (collection actions suggested by the system) There is a trend of reduction of the "disconnection" action that generates lower returns AES Eletropaulo 1 Contact the client by means of SMS, ARU or E-mail 2 Basis: period of 3 months between Feb-17 and Apr-17 ང་ 25#27Meter Readers as New Commercial Agents Multitasking teams formed by meter readers that can perform energy disconnections due to the failure to pay A2 55% 1,600 90% 56% 18% лаз ситора Of disconnections avoided due to the payments immediately made Disconnections per day performed by the meter readers Of the renegotiations made by the meter readers result in payment on the same day Growth potential: only 18% of the disconnections Of saving per disconnection service are currently performed by the meter readers Reduction of costs of Eletropaulo due to the lower cost per disconnection operation and immediate renegotiations, decreasing the reconnection costs AES Eletropaulo 26#28Reduction of ADA reflects Revenue Management and Customer Satisfaction initiatives Eletropaulo has implemented a range of measures to reduce bad debt... Expenses related to ADA¹ (R$ mm) Main Initiatives 81 197 309 Saving of more than R$50 mm² in 1H17 vs. 1H16 Transformation of the Management Model • Specialized collectors with new metrics • Management of field teams and online audit 104 2014 2015 2016 1H17 Negotiation Portal • Launched in March/17 • Flexibility for customers A2 ...such as the Recycle More, Pay Less Project that offers a discount to the electricity bill of residential customers in exchange for recyclable materials AES Eletropaulo 1. ADA Allowance for Doubtful Accounts. 27#29Risk Management and Contingencies: Amendment to the Concession Agreement B O Eletropaulo has already requested the evaluation of the amendment to the concession agreement from ANEEL and it expects that the regulatory agency will answer throughout the first half of 2018 New Amendment to the Concession Agreement The Company disclosed, in a Notice to the Market in May, 2017, the beginning of the negotiations with the regulator regarding a potential amendment to the concession agreement The amendment will address specific issues of AES Eletropaulo's concession area The Company believes that the new amendment can generate value to the customers, community and shareholders Next Steps May-2017 May Formal Request of Amendment Evaluation 2017 1H18 Expectation of ANEEL's 1H18 answer AES Eletropaulo 28#30Risk Management and Contingencies: Reduction of the Overcontracting Level B The Company has implemented several initiatives to maintain overcontracting within the regulatory limit of 105% 2017 and 2018 Overcontracting 105.9% Estimated in 1Q17 -2.3 pp 105%¹ 103.6% Estimated in Aug-17 Overcontracting 2017 -3.6 pp 107.3% Estimated 103.7% Estimated in 1Q17 in Aug-17 Overcontracting 2018 Reduction is a result of the Company's efforts, through measures such as: • Participation in the auctions of the Surplus and Deficit Compensation Mechanism • Bilateral negotiations with energy generators 1- Regulatory limit of 105% AES Eletropaulo 29#31Corporate Governance Key for Investiment Decision Operational and Investment Management Committee: robust capital allocation process Corporate policy of Integrated Risk Management monthly assessed by Companies' Executive Officers and quarterly by Fiscal committee and Board of Directors High level of commitment, with monthly Board of Directors meetings Listed at B3: ELPL3: Level II ELPL4: Proposal of Migration to the Novo Mercado ISE Corporate Sustainability Index portfolio Tag along rights AES Eletropaulo AES Brasil 30 C#32Recent Initiatives of Corporate Governance Committees already is Place Committee of Compensation and Personnel Committee of Related Parties Sustainability Committee¹ Audit Committee² Composition of the Board of Directors 53 independent or not appointed by the controlling shareholder 6 appointed by the controlling shareholder 1 - Although it is not a statutory committee, it has a Company advisor as member AES Eletropaulo 2 Audit Committee to be determined in the context of the migration to the Novo Mercado 3 - Three independent members, one appointed by the minority shareholders (BNDESPAR) and other by the Company's employees New By-Laws4 C Board of Directors compound by at least 5 and a maximum of 9 members, without alternates Creation of Statutory Committee of (i) Compensation and Personnel and (ii) Audit Inclusion of the poison pill - OPA 30 (rules about relevant interest acquisition) 4 The amendment in the by-laws will be effective after the migration to the Novo Mercado 31#33Migration to Novo Mercado: A New Path of Value Creation Exchange Ratio Proposed exchange ratio of 1:1 ON/PN, providing similar conditions for all shareholders ■ BoD Meeting: call of EGM/Preferred Shareholders Special Meeting Timetable ■ EGM/Preferred Shareholders Special Meeting ■ Novo Mercado listing expected for 4Q171 Current Shareholder Structure² AES Holdings BNDESPAR C: 50.52% P: 0.00% T: 16.84% Brasil AES Eletropaulo C: 22.56% P: 16.82% Others C: 26.92% P: 83.18% T: 18.73% T: 64.43% AES Eletropaulo Post-migration Shareholder Structure AES Holdings Brasil BNDESPAR Others T: 16.84%³ T: 18.73%³ T: 64.43%3 AES Eletropaulo 1 - Assumes new by-laws are approved on first Preferred Shareholders Special Meeting. In case a second and a third PSSM are needed to approve the new documents, the transaction would take approximately four additional months to be completed; 2 - As of June 9th, 2017; 3 - Comprised only by common shares C 32#34Main Pillars of the Migration to Novo Mercado AES Eletropaulo Increased Attractiveness to Investors Superior Corporate Governance Better corporate governance practices One share, one vote 100% tag along Broader Access to Capital Markets Increases flexibility to raise capital in the equity capital market Potentially sets the ground for the deleverage of the company Improves investment capacity Enhances liquidity levels for the shares Potential re-rating of share price AES Eletropaulo NOVO MERCADO BM&FBOVESPA C 33#35Necessary Approvals and Proposed Timetable¹ Necessary Approvals Creditors ■ Approval by part of the Company's debt holders³ B3 Approval of the new Company's bylaws ANEEL Approval of the new bylaws required by the Novo Mercado Shareholders Publishing of the Shareholders' Manual for Extraordinary General Meeting and Special Meeting of Preferred Shareholders' Aug 9 August Indicative Transaction Timetable September Extraordinary Shareholders Meeting and Special Meeting of Preferred Shareholders I Period for exercise of the withdrawal rights I Sep 29 Oct 30 Beginning of trading with common shares only Nov 13 Aug 8 Meeting of BoD² (Bylaws and conversion of shares) Aug 10 Call of the Extraordinary General Meeting and Special Meeting Sep 12 Extraordinary General Meeting / Special Meeting / Notice to Shareholders (withdrawal rights) AES Eletropaulo 1 - Assumes the preferred to ordinary shares conversion will be approved on the first PSSM (Preferred Shareholders Special Meeting). In case a second and a third PSSM are needed to approve the conversion, the transaction would take approximately four additional months to be completed October Oct 31 2 Board of Directors November Nov 9 Period to evaluate the amount of the withdrawal rights C 34#36AES Recent Results#37Market performance Consumption show signs of recovery on QoQ comparision Total Market1 (GWh) -0.2% -3.2% 45,101 45,557 46,216 46,415 43,345 44,237 42,826 8,284 7,987 8,742 8,589 7,911 8,058 8,362 35,434 36,817 37,570 37,474 37,827 36,179 34,464 -0.2% Consumption Breakdown - 2Q16 x 2Q17 -2.0% 11,000 10,777 -4.3% 4,035 4,027 3,699 3,539 2,220 2,190 1,046 1,021 Residencial Commercial Industrial Others Total Market 2010 2011 2012 2013 2014 2015 2016 2Q16 2Q17 1. Own consuption not included. AES Eletropaulo 36#38Consumption is concentrated in residential and commercial classes Consumption by Class1 AES Eletropaulo AIDA il Parque 1. 2017 (Own consumption not included) Source: EPE. 28% 48% 18% 37% 33% 17% Brazil Residential Commercial 10% 8% AES Eletropaulo Industrial Other 37#39Revenue follows the lower cost with Parcel A Gross Revenue (R$ million) 24,566 611 20,510 803 10,898 8,850 Costs and Expenses (R$ million) 12,093 2,209 10,123 2,442 9,884 7,681 2,430 2,490 630,70 584 1,799 1,906 2016 2Q16 2Q17 13,057 5,261 5,249 10,857 180 239 2,090 2,210 2,991 2,800 2015 2016 2Q16 2Q17 2015 Construction Revenue Net Revenue (ex-construction revenue) Deductions to Gross Revenue AES Eletropaulo 1. ex-Construction Costs and Depreciation and Amortization. Opex¹ Energy costs and sector charges 38#40Productivity Program Actions resulted in cost reduction of R$ 77 million in real terms 563 550 13 OPEX1 (in real terms) 2016 - 2017 (R$ million) -13.7% 48 18 R$ -77 million 486 OPEX 2016 Inflation2 OPEX 2016 Real Fines³ ADA Contingencies PMSO OPEX 2Q17 ADA with a 50% reduction resulting from the strategy of default combat, with a 22% improvement in the average ticket Reduction in Fines of 28% is a result of investments and consequent improvement of the SAIDI and SAIFI indicators Reduction in Contingencies reflects remeasurement of success in cases of tax, civil and labor execution procedure AES Eletropaulo 1- Excludes Private Pension Expenses (R$ 80.5 m in 2Q16 vs. R$ 98 m in 2017); 2 - Monthly values weighted by the effective rate (IPCA in relation to personnel costs and IGP-M for other costs); 3 - Compensation of DIC / FIC / DMIC / DICRI 39#41Productivity Program Results contribute to a 58% increase in EBITDA1 228 Adjusted EBITDA1 2Q16-2017 (R$ million) +58.0% 19 48 71 R$ +132 million 360 Adjusted EBITDA 2Q16 Tariff and Market Bilateral and overcontracting Reduction of fines, PMSO Adjusted EBITDA 2Q17 ADA and Contingencies Tariff and Market: higher tariff (parcel B), partially offset by the decrease in the captive market Bilateral and Overcontracting: strategy to reduce the energy overcontracting exposure PMSO: Collective Labor Agreement and Recovery Plan of Quality Indicators 1- EBITDA adjusted by Expenses with the Pension Fund (2016 and 2017) and Possibly Non-Existing Assets (2016 only) AES Eletropaulo 40#42Highest Quarterly Net Income for the last 2 years Net Income1 2Q16 - 2Q17 (R$ million) 59 59 12 14 31 5 Net Income 2Q16 Adjusted EBITDA (ex- Pension Fund) Pension Fund Financial Result Depreciation and Amortiz. And Others Net Income 2Q17 3 Pension fund impacted by the reduction of the discount rate (from 7.3% per year to 5.8% per year) Financial Result as a result of the changes in the Itaipu exchange rate variation Depreciation reflects increase in Regulatory Asset Base (RAB) AES Eletropaulo R$ +28 million 41#43Increase in cash position R$ millions 2015 2016 1Q17 2Q17 1H17 Initial Cash 909 531 1,068 1,264 1,068 Operating Cash Flow 571 2,692 610 171 780 Investments (634) (7566) (259) (296) (555) Net Financial Expenses/ Net Amortization (36) (847) (97) (117) (215) Pension Fund Expenses (195) (409) (113) (108) (221) Income Tax (106) (1) (0) (0) (0) Cash Restricted and/or Locked 21 (100) 56 18 74 Free Cash Flow (378) (578) 197 (332) (136) Dividends and Interest on Capital 0.0 (42) 0.0 0.0 0.0 FINAL CASH CONSOLIDATED 531 1,068 1,264 932 932 AES Eletropaulo 42#44Reduction of Indebtedness Higher cash availability allowed the payment of debt instruments, reducing the gross indebtedness Covenants 3.02x 3.7 Net Debt¹ (R$ bn) 2.91x 3.6 2016 2Q17 Net Debt (R$ billion) Net Debt/ Adjusted EBITDA³ Net Debt/ Adjusted EBITDA³ < 3.5x ☐ Adjusted EBITDA³ / Financial Expenses > 1.75x AES Eletropaulo Schedule of Amortization (R$ mm)² 1,836 1,144 1,149 1,067 967 410 361 1.740 385 339 514 216 734 788 682 628 299 96 2017 2018 2019 2020 2021 2022-2028 ■Local Currency Pension Fund Obligations Debt Profile 2Q16 Average maturity (years) Effective rate4 4.6 13.7% 2Q17 4.3 10.9% Average spread (CDI +)5 1.86% p.y. 2.00% p.y. 1 - Net Debt according to Covenants; 2- Amortization flow considers principal, acumulated interests and deferred balance 3 - Adjusted by CESP Foundation (last 12 months); 4 - Average value in the period of total indebtedness; 5 - Only for debt linked to the CDI 43#45Capital Markets % A 140 120 100 80 60 00 40 40 A Jul/2014: Tariff readjustment approved by ANEEL including 50% of "cable" restitution BXC D E F GHI B May/15: 4th Tariff Reset Cycle preliminary numbers released C Jul/15: 4th Tariff Reset Cycle final numbers released Sep/15: Market expectation on the D Eletrobras Court Case outcome Jun/16: Utilities sector intense M&A E activities followed by signal of economic recovery F Nov/16: Corporate Restructuring announcement G Feb-Mar/17: 2016 Results Release: Migration to Novo Mercado, Productivity Plan and Investment Plan H May/17: 1Q17 Results Release 0 ELPL41 IEE Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 - IBOV TSR - ELPL4 1 May/17: Brazilian Political Events J Sep/17: Approval³ of Migration to Novo Mercado 20 20 NÍVEL 2 Índice de Sustentabilidade Empresarial ISE Índice de Ações com Tag Along Diferenciado ITAG BOVESPA BRASIL Base Date: Sept 2017 LTM; 1 - The only ELPL4's ex-dividend session in the period was on April 29th, 2016 | 2. Base Date: 09/25/2017 (FX rate 3.1285 BRL/1 USD) | 3. Approved in Special Meeting of Preferred Shareholders and still subject to withdrawal amount 44 Market cap²: US$ 0.7 billion / R$ 2.3 billion B3: ELPL3 (common shares) and ELPL4 (preferred shares) ADRs at US OTC Market: EPUMY (preferred shares) AES Eletropaulo#46Brazilian Opportunities AES and Recent Events#47Recent events in course in the energy sector GSF and PLD Provisory Measure: New proposals for the sector GSF: New renegotiation proposal PLD: Change in calculation Disco's Overcontracting Contracted tariff above 105% Tariff Flags 3.0 18% Red Flag reduction 4th Tariff Review Cycle Economic-financial sustainability AES Eletropaulo Special tariff review 23.4% average increase 3rd Tariff Review Cycle Reduced Ebitda margin MP 579 / Law 12,783 18% reduction of the tariff benefited the increased consumption Hydrological challenges Discos' cash flow mismatch Tariff Flags Reduced the split of the distribution company's cash flow 83% Red Flag increase Government Subsides CDE and debt via CCEE 46#48Tariff methodology for distributors - - Tariff Reset is applied each 4-5 years AES Eletropaulo next Tariff Reset: Jul/2019; Parcel A: costs are passed on through to the tariff Parcel B: costs are set by ANEEL Annual Tariff Adjustment Parcel A: costs are passed on through to the tariff Parcel B: costs are adjusted by IGPM +/- X Factor 1 AES Eletropaulo Energy Purchase Transmission Sector Charges Regulatory Opex (PMSO) Parcel A Costs Non-manageable costs passed on through to the tariff Incentives to reduce costs Regulatory Opex Efficient operating cost determined by ANEEL X WACC Investment Remuneration Remuneration Asset Base X Depreciation Depreciation 1. X Factor: index that capture productivity gains Remuneration on Special Obligations Regulatory Ebitda - Remuneration Asset Base Prudent investments used to calculate the investment remuneration (applying WACC) and depreciation Special Obligations Recognition of the opportunity cost of equity capital over third party investments Parcel A - Non-Manageable costs Parcel B Manageable costs - 47#49X Factor methodology X Factor Pd Definition Distribution productivity Objective Capture productivity gains + Q Quality of service + T Operational expenses trajectory Stimulate improvement of service quality Implement operational expenses trajectory Application Defined at Tariff Reset, considers the average productivity of the sector adjusted by market growth and consumption variation Defined at each Tariff Readjustment, considers variation of SAIDI and SAIFI and comparative performance of discos. Includes commercial indexes Defined at Tariff Reset, makes the transitions to operational costs verified in the last 12 months to the one set in the benchmarking models 1. X Factor: index that capture productivity gains AES Eletropaulo 48#504th Tariff Reset Cycle Parcel A + 13.96% R$ 1,936m Financial Components ◉ Parcel B 1.27% R$ 176m ☐ Tariff Reset Effect 15.23% R$ 2,112m AES Eletropaulo ☐ Energy CVA including FX rate variation associated with Itaipu ■ CDE charge increase (loans and CDE share) Reduction of AES Tietê's energy participation due to end of contract in Dec/15 ■ Involuntary exposure in 2015 ■ WACC of 8.09% Special Obligations remuneration ■ Opex adjusted to match the concession area's reality 49#51Breaking down Parcel B Remuneration (RAB) Depreciation Special Obligations Annuity (Other Assets) • R$ 732m • R$ 458m Net RAB of R$ 6.0 billion WACC of 8.09% Gross RAB of R$ 12.2 billion Depreciation Rate of 3.75% R$ 39m Remuneration of 3.34% R$ 134m Operational Expenses R$ 1,373m . Bad Debt R$ 198m . Other Revenues Productivity Gains - R$ 88m Remuneration and depreciation of IT, vehicles and administrative assets Xt Factor of -2.37%; Inclusion of labor liabilities, São Paulo salaries and underground network 0.85% of bad debt, considering Tariff Flag revenues ~60% of non-distribution revenues - R$ 33m • Xp Factor of 1.13% Parcel B R$ 2,812m AES Eletropaulo 50#52Ranking of distribution tariffs in Brazil Tariff excluding tax (R$/kWh) Ranking (out of 96) 100-1041 AES Sul Boa Vista 0.337 4 CEA 0.392 13 Bandeirante 0.398 14 CPFL Paulista 0.404 16 CPFL Piratininga 0.406 17 CPFL Jaguari 0.418 22 Eletropaulo 0.42 24 RGE 0.434 Copel-DIS 0.441 Celesc-DIS 0.46 Coelce 0.474 Elektro 0.488 Cemig-D 0.494 Eletroacre 0.498 Light 0.527 Celpa 0.599 AES Eletropaulo Source: Aneel's website as of 09/28/2017 referring to Residential Tariff (B1 Group) 30 33 41 52 58 61 66 99 79 91 51#53AES Eletropaulo Investor Relations Ave. Dr. Marcos Penteado de Ulhôa Rodrigues, 939 - 7th floor Barueri - SP - Brazil ZIP: 06460-040 Website: ri.aeseletropaulo.com.br Phone: +55 11 2195-7048 Fax: +55 11 2195-1004 Email: [email protected]