A_Ares

Latin American Energy SectorEconomic Climate and its Impact on the Sector : 

Latin American Energy SectorEconomic Climate and its Impact on the Sector Ana Paula AresSenior Director La Jolla, May 12th, 2009

Global and Regional Economic Slowdown : 

www.fitchratings.com 2 Global and Regional Economic Slowdown

Unprecedented Risk – Fear and Panic Strike : 

www.fitchratings.com 3 Unprecedented Risk – Fear and Panic Strike Source: Bloomberg Volatility Off the Charts Pricing Dislocations Global Government Intervention ’09 Outlook Bleak VIX Signaling Next Great Depression? 9/11 Enron, Worldcom

Dow Jones Industrial Average (Number of Days Over +/- 5.0% Change) : 

www.fitchratings.com 4 Dow Jones Industrial Average (Number of Days Over +/- 5.0% Change) Source: Bloomberg DJIA 1998 – 2008 DJIA 1920 – 1939 ????

Defaults On the Rise : 

www.fitchratings.com 5 Defaults On the Rise Recent Defaults Arantes (Liquidity/Trade Lines) CCM (Derivatives/Bad Bets) Transtel (Undercapitalized) Durango (Economy/Undercap) TGN (Lost Customer) Vitro Near Misses ???? (Gruma, Aracruz) Source: Fitch Systemic Related Idiosyncratic Related

Contagion in Latin American Debt Markets : 

www.fitchratings.com 6 Contagion in Latin American Debt Markets

Prepared Like Never Before : 

Prepared Like Never Before Source: Fitch Data Base, median values De leveraging Better Debt Composition(Short Debt/Long-Term Debt) (USD Mil.) (%) (%)

Investing in an Unpredictable World : 

www.fitchratings.com 8 Investing in an Unpredictable World Electricity reserve margins remain tight Electricity demand continues to grow albeit at a slower rate Large capital spending cycle likely to continue Discretionary capex is a small component of total ongoing investment Slowing growth will provide some opportunity to cut/slow investments

Short-Term Drivers Conflict with Long-Term Planning : 

www.fitchratings.com 9 Short-Term Drivers Conflict with Long-Term Planning

External Funding : 

www.fitchratings.com 10 External Funding Reduced liquidity and access to capital and credit markets Limited financing options Higher cost of capital Multilaterals to play a bigger ‘key’ role IPOs subject to equity market conditions Back to the Basics - Liquidity

Back to the Basics - Liquidity : 

Back to the Basics - Liquidity Source: Company Reports, Various Other Data Sources, Fitch Estimates

Concluding Observations : 

www.fitchratings.com 12 Concluding Observations Market Volatility at Levels Not Seen Since the Great Depression Liquidity Crunch and Dramatic Economic Slowdown are Real Default and Downgrade Risks Remain High – Expect More Defaults Corporate Balance Sheets and Liquidity Strong for Most Cross-Border Issuers Credit Rating and Outlook Implications Utilities are well positioned => Defensive Sector Short term stresses do not generally affect ratings and outlooks Expect coverage measures to weaken Draw-downs on bank revolvers reduce flexibility Credit Rating Activity likely to reflect individual issuer circumstances