AES Idiosyncratic Risk Scores and WACCCategory Weight Andres Caracoles Drax Electrop.Oper. 3.5% 3 2 2 1Counterparty 7.0% 3 0 2 1Regulatory 10.5% 3 2 2 3Construction 14.5% 3 3 0 0Commodity 18.0% 3 1 3 2Currency 21.5% 3 2 0 3Legal 25.0% 3 2 2 3

100.0% 3.0 1.8 1.5 2.2

Basis: 15.0% 15.0% 9.1% 7.3% 10.9%

u 0.25 0.50 ### 0.25 Equity % 65% 59% 71% 70%l 0.39 0.84 0.71 0.36 Rf 4.5%Rm - Rf 7.0%Re 7.2% 10.4% 9.5% 7.0%Sovereign spread 8.9% 16.3% 0.0% 8.9%Adjusted Re 16.1% 26.7% 9.5% 15.9%

Default spread 3.6% 3.6% 3.6% 2.9%Adjusted Rd 17.0% 24.3% 8.1% 16.3%Marginal tax rate 25% 35% 0% 34%

WACC 14.9% 22.2% 9.1% 14.4%+ Idiosyncratic 15.0% 9.1% 7.3% 10.9%Adjusted WACC 29.9% 31.4% 16.4% 25.3%

AES Idiosyncratic Risk Scores and WACCGener Haripur Kelvin Lal Pir Los Mina OPGC Ottana Red Oak

0 0 0 1 3 1 0 21 1 2 1 3 3 3 31 0 1 2 3 3 0 00 2 1 0 0 0 0 02 1 0 1 3 0 0 21 0 2 2 3 2 1 00 1 1 2 3 2 0 0

0.7 0.8 1.1 1.4 2.6 1.5 0.4 0.6

3.8% 4.0% 5.4% 7.1% 12.8% 7.5% 2.1% 3.2%

0.25 0.25 ### 0.25 0.25 ### 0.50 0.25 65% 67% 67% 65% 71% 70% 58% 61%

0.39 0.37 0.37 0.39 0.35 0.36 0.87 0.41

7.2% 7.1% 7.1% 7.2% 7.0% 7.0% 10.6% 7.4%1.7% 5.2% 3.1% 9.9% 8.9% 3.6% 0.1% 0.0%8.9% 12.4% 10.2% 17.1% 15.9% 10.6% 10.7% 7.4%

4.3% 4.3% 4.3% 3.6% 1.9% 3.6% 4.3% 3.6%10.6% 14.1% 12.0% 18.0% 15.3% 11.7% 9.0% 8.1%

17% 0% 25% 23% 25% 8% 35% 38%

8.9% 12.9% 9.8% 16.0% 14.6% 10.7% 8.6% 6.5%3.8% 4.0% 5.4% 7.1% 12.8% 7.5% 2.1% 3.2%

12.6% 16.9% 15.2% 23.1% 27.4% 18.1% 10.8% 9.7%

AES Idiosyncratic Risk Scores and WACCRivno. Telasi Uruguaiana

0 2 01 3 21 3 30 0 00 3 22 3 30 3 3

0.6 2.5 2.2

3.0% 12.7% 11.1%

0.25 0.25 0.25 64% 74% 68%

0.39 0.34 0.37

7.3% 6.9% 7.1%10.0% 10.0% 8.9%17.2% 16.8% 16.0%

3.6% 1.9% 1.9%18.1% 16.3% 15.3%

30% 20% 34%

15.6% 15.9% 14.1%3.0% 12.7% 11.1%

18.6% 28.5% 25.2%

Lal Pir Cash FlowsFree Cash Flow Calculations

1 2 3 4 5 6 2004 2005 2006 2007 2008 2009

EBIT 69.4 69.1 68.8 68.5 68.3 68.0 + Depr. 30.6 31.3 31.9 32.5 33.1 33.8 - Cap. Ex. 12.5 ### 12.6 12.6 12.7 12.7 - WC Inc. - ### - - - - Oper. CF 87.5 87.9 88.1 88.4 88.7 89.1 - Taxes 16.0 15.9 15.8 15.8 15.7 15.6 Free CF 71.5 72.0 72.3 72.6 73.0 73.5

Total EV 285.65Value of the debt 430.7Equity Value (145.05)

Equity Cash Flow Calculations 1 2 3 4 5 6

2004 2005 2006 2007 2008 2009Equity CF 20.3 20.4 20.4 20.4 20.3 20.2

Equity Value(PV of CF) 134.2There is a difference in the Equity Values which are derived from the two methods because when using the Equity Valuation method, we only use the Equitycash flows and discount them by the expected cost of equity hence, we take into account less assumptions and variables. When using the Enterprize Valuationmethod, we use WACC to discount the firm cash flows. Since WACC is a only a weighted average, it may not be able to predict the most accurate value. Secondly, WACC incorporates many more assumptions and generalizations in the form of Idiosyncratic Risk, Default Spread and Sovereign Spread which might not identify the market risk accurately. All these new assumptions and varirables would be the reason in giving us a different equity value.

Lal Pir Cash FlowsFree Cash Flow Calculations

7 8 9 10 11 12 13 14 15 16 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

67.7 67.4 67.1 66.8 66.6 66.3 66.0 65.7 65.4 65.1 34.4 35.1 35.7 36.3 37.0 37.6 38.3 39.0 39.6 40.3 12.8 12.8 12.9 12.9 12.9 13.0 13.0 13.1 13.1 13.2 - - - - - - - - - - 89.3 89.7 89.9 90.2 90.7 90.9 91.3 91.6 91.9 92.2 15.6 15.5 15.4 15.4 15.3 15.2 15.2 15.1 15.0 15.0 73.7 74.2 74.5 74.8 75.4 75.7 76.1 76.5 76.9 77.2

Equity Cash Flow Calculations 7 8 9 10 11 12 13 14 15 16

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20.0 19.7 19.3 18.9 18.3 17.6 16.8 15.9 14.8 69.4

There is a difference in the Equity Values which are derived from the two methods because when using the Equity Valuation method, we only use the Equitycash flows and discount them by the expected cost of equity hence, we take into account less assumptions and variables. When using the Enterprize Valuationmethod, we use WACC to discount the firm cash flows. Since WACC is a only a weighted average, it may not be able to predict the most accurate value. Secondly, WACC incorporates many more assumptions and generalizations in the form of Idiosyncratic Risk, Default Spread and Sovereign Spread which might not identify the market risk accurately. All these new assumptions and varirables would be the reason in giving us a different equity value.

Lal Pir Cash FlowsFree Cash Flow Calculations

17 18 19 20 21 2020 2021 2022 2023 TV

64.8 64.5 64.2 63.9 40.9 41.6 42.3 42.9 13.2 13.3 13.3 13.4 - - - - 92.5 92.8 93.2 93.4 14.9 14.8 14.8 14.7 77.6 78.0 78.4 78.7 415.9

TV growth rate 3%The FCF growth rate for AES is pegged at around 1% according to various sources and research. This combined with the targeted inflation rate of 2-3%, can allow us to safely assume a 3% growth rate for the Free Cash Flow generating from the plant. This can also be seen by analysing the growth rate of AES up until this point by analysing their statements and while predicting it's performance through the pro-forma calculations also.

Equity Cash Flow Calculations 17 18 19 20 21

2020 2021 2022 2023 TV 69.8 70.3 70.7 71.1 535.1

method, we use WACC to discount the firm cash flows. Since WACC is a only a weighted average, it may not be able to predict the most accurate value. Secondly,

WACCLal Pir