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AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
AES 2Q 2006 AE SFinancial
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AES 2Q 2006 AE SFinancial

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  • 1. AES Corporation Second Quarter 2006 Financial Review August 7, 2006 The Global Power Company
  • 2. Safe Harbor Disclosure Certain statements in the following presentation regarding AES’s business operations may constitute “forward looking statements.” Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute AES’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to continued normal or better levels of operating performance and electricity demand at our distribution companies and operational performance at our contract generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see the Appendix to this presentation. Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES’s filings with the Securities and Exchange Commission including but not limited to the risks discussed under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2 2Q06 Financial Review www.aes.com
  • 3. Second Quarter 2006 Highlights ($ Millions except earnings per share and percent) Second Quarter Revenue Comparison 2006 2005 Change Period-Over-Period Revenues $3,038 $2,649 15% Price/Volume/Allowances 10% Gross Margin (1) $919 $526 75% New projects (3) 1% as % of Sales 30.3% 19.9% 1,040b.p. Currency 4% Total 15% Income Before Income Taxes and Minority Interest $483 $186 160% (IBT&MI) Diluted EPS from Continuing Operations $0.31 $0.13 138% Adjusted EPS (2) $0.29 $0.12 142% Return on Invested Capital (ROIC) (2) 13.2% 7.3% 590b.p (1) Includes depreciation and amortization of $239 million in 2Q2006 and $222 million in 2Q2005. (2) Non-GAAP measure. See Appendix. (3) New projects include Buffalo Gap I in the U.S. and consolidation of Itabo in the Dominican Republic. 3 2Q06 Financial Review www.aes.com
  • 4. Reconciliation of Adjusted Earnings Per Share ($ Per Share) Six Months Second Quarter Ended June 30, 2006 2005 2006 2005 $0.85 $0.31 Diluted Earnings Per Share From Continuing $0.31 $0.13 Operations (0.02) 0.02 FAS 133 Mark-to-Market (Gains)/Losses (0.01) 0.02 Currency Transaction (Gains)/Losses (0.01) (0.04) (0.01) (0.03) (0.13) -- Net Asset (Gains)/Losses and Impairments -- -- 0.03 -- Debt Retirement (Gains)/Losses -- -- Adjusted Earnings Per Share(1) $0.29 $0.12 $0.72 $0.29 (1) Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses associate with (a) mark to market amounts related to FAS 133 derivative transactions, (b) foreign currency transaction gains and losses on the net monetary position related to Brazil, Venezuela, and Argentina, (c) significant asset gains or losses due to disposition transactions and impairments, and (d) early retirement of recourse debt. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and is considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability associated with mark-to-market gains or losses related to certain derivative transactions, currency transaction gains or losses, periodic strategic decisions to dispose of certain assets which may influence results in a given period, and the early retirement of corporate debt. 4 2Q06 Financial Review www.aes.com
  • 5. Second Quarter 2006 Earnings Bridge $0.05 $(0.09) $(0.14) $0.30 $0.31 $0.29 $(0.02) $0.13 $0.06 2Q05 Higher Higher 2Q06 Adjusted 2Q06 2005 Brazil Lower Lower Diluted EPS Receivables Gross Income Diluted EPS Adjusted IBT&MI Interest EPS (1) From Margin Taxes & EPS Factors Reserve and (Net of Expense, Continuing (Primarily Minority From Tax Gross Pre-Tax Operations Reversal, Price, Interest Continuing Margin, Currency Expense Operations After-Tax) Interest and Volume, (Net of 2005 Expense, Pre-Tax) Brazil Items) Brazil Tax Reversal, Pre-Tax) (1) Non-GAAP measure. See Appendix. Note: Certain elements are rounded. 5 2Q06 Financial Review www.aes.com
  • 6. Second Quarter Cash Flow Highlights ($ Millions) Second Quarter 2005 (2) 2006 Subsidiary-Only Subsidiary Net Cash from Operating Activities (1) $1,316 $496 Consolidated Net Cash from Operating Activities $434 $328 Free Cash Flow (1) $243 $182 Parent-Only Subsidiary Distributions (1) $177 $170 Return of Capital from Subsidiaries (1) $29 $50 Recourse Debt Repayment $0 $115 (1) Non-GAAP measure. See Appendix. Excludes $53 and $29 million in proceeds from the net sale of allowances included in investing activities in 2006 and 2005 periods, respectively. (2) Results exclude businesses placed in discontinued operations effective June 30, 2006. 6 2Q06 Financial Review www.aes.com
  • 7. Second Quarter Subsidiary Distributions ($ Millions) Second Quarter 2006 Subsidiary Distributions(1) North Latin Europe & Asia & America America Africa Middle East Total Regulated $64 $0 $10 $0 $74 Utilities Contract $18 $31 $17 $25 $91 Generation Competitive $5 $7 $0 $0 $12 Supply Total (1) $87 $38 $27 $25 $177 88% of Second Quarter 2006 distributions were from North American Regulated Utilities and Worldwide Contract Generation. (1) Non-GAAP measure. See Appendix. 7 2Q06 Financial Review www.aes.com
  • 8. Second Quarter Segment Highlights Regulated Utilities ($ Millions except as noted) % Second Quarter Change 2006 2005 Segment Highlights Revenues $1,376 9% $1,506 • Revenues increased primarily from favorable foreign exchange rates in Gross Margin $112 264% $408 Latin America and higher fuel cost as % of Sales 27.1% 8.1% 1,900b.p. pass-through pricing in North America. These were partially offset by higher IBT&MI $84 226% $274 intercompany revenue elimination in Latin America. Revenue Comparison (QOQ) % Change • Gross margin and gross margin as a Volume/Price/Mix 1% percent of sales increased mostly due to 2005’s $192 million receivables Currency (Net) 8% reserve in Brazil, together with Total 9% favorable foreign exchange rates. • IBT&MI increased on higher gross margin partially offset by a $70 million Brazil business tax reserve reversal in 2005. 8 2Q06 Financial Review www.aes.com
  • 9. Second Quarter Segment Highlights Contract Generation ($ Millions except as noted) Second Quarter % 2006 2005 Change Segment Highlights Revenues $1,199 $988 21% • The increases are driven primarily by higher demand in Pakistan, higher Gross Margin $415 $353 18% demand and pricing in Latin America as % of Sales 34.6% 35.7% (110)b.p and the consolidation of Itabo in the Dominican Republic. IBT&MI $282 $211 34% • Gross margin increased due to the higher demand and pricing partially Revenue Comparison (QOQ) % Change offset by higher maintenance costs in Volume/Price/Mix 19% North America. The decline in Gross Margin as a percent of sales is driven New projects 2% by the higher dispatch in Pakistan and Currency (Net) -- higher North America maintenance costs. Total 21% • IBT&MI increase is mostly the result of increased gross margin. (1) New projects include Buffalo Gap I in the U.S. and consolidation of Itabo in the Dominican Republic. 9 2Q06 Financial Review www.aes.com
  • 10. Second Quarter Segment Highlights Competitive Supply ($ Millions except as noted) % Second Quarter 2006 2005 Change Segment Highlights Revenues $333 $285 17% • Revenues increased primarily as a result of better prices and volume in Gross Margin $96 $61 57% New York, higher prices in Argentina, as % of Sales 28.8% 21.4% 740b.p. and higher volume and prices in Kazakhstan, partially offset by lower IBT&MI $87 $53 64% emissions sales. • Gross margin and gross margin as a Revenue Comparison (QOQ) % Change percent of sales increased due to the Volume/Price/Mix 18% better pricing. Currency (Net) (1%) • IBT&MI increases is mostly the result of increased gross margin. Total 17% 10 2Q06 Financial Review www.aes.com
  • 11. 2006 Financial Guidance Update: Income Statement Contains Forward Looking Statements 2006 Guidance Element Updated Guidance Prior Guidance Revenue Growth (% change) 7 to 8% 4 to 5% Gross Margin $3.5 to $3.6 billion $3.2 to $ 3.3 billion Business Segment Income Before Tax & Minority Interest $2.4 to $2.5 billion $2.3 billion (Excludes Corporate Costs of $550 Million)(1) Allocated by Segment as % of Total • Regulated Utilities 42% 44% • Contract Generation 40% 38% • Competitive Supply 18% 18% Diluted Earnings Per Share From Continuing Operations $1.05 $0.96 Adjusted Earnings Per Share Factors(2) ($0.04) $0.01 Adjusted Earnings Per Share(2) $1.01 $0.97 (1) Prior guidance was $625 million. Updated guidance includes Kingston sale gain recorded in corporate costs. (2) Non-GAAP measure. See Appendix. 11 2Q06 Financial Review www.aes.com
  • 12. 2006 Financial Guidance Update: Cash Flow and Sensitivities Contains Forward Looking Statements 2006 Guidance Element Updated Guidance Prior Guidance Net Cash From Operating Activities $2.2 to $2.3 billion $2.2 to $2.3 billion Maintenance Capital Expenditures $800 to $900 million $800 to $900 million Free Cash Flow(1) $1.3 to $1.5 billion $1.3 to $1.5 billion Subsidiary Distributions(1) $1.0 billion $1.0 billion Parent Investments and Capital Expenditures(2) $500 to $600 million $250 to $350 million 2008 Financial Targets(3) • Diluted EPS from Continuing Operations(4) $1.18 to $1.34 $1.18 to $1.34 • Gross Margin $3.5 billion $3.5 billion • Return on Invested Capital(1) 11% 11% • Net Cash Provided by Operating Activities $2.6 to $2.9 billion $2.6 to $2.9 billion (1) Non-GAAP measures. See Appendix. (2) Excludes other sources of funds. Total 2006 property additions are estimated to be $1.7 to $1.8 billion, including certain growth projects not yet awarded. Maintenance capital expenditures are expected to be $800 to $900 million, and growth capital expenditures are expected to be $800 million to $1 billion. (3) Guidance includes growth projects committed to in 2004 and prior years. (4) Based on 16-19% per year growth in diluted EPS from continuing operations from $0.56 per share 2003 base (pre-restatement). Note: Certain foreign exchange and interest rate sensitivities previously provided have not been updated. 12 2Q06 Financial Review www.aes.com
  • 13. Appendix 13 2Q06 Financial Review www.aes.com
  • 14. Segment Reporting Changes Contains Forward Looking Statements Business Segments: Contract Generation Contract Generation Competitive Supply Competitive Supply Regulated Utilities Regulated Utilities New Format Prior Format Geographic Segments: Asia & ME Asia North America North America China China US/Puerto Rico US/Puerto Rico India India Mexico Mexico Oman Kazakhstan Pakistan Sri Lanka Europe/Africa/Middle East Europe & Africa Qatar Bulgaria Bulgaria Sri Lanka Cameroon Cameroon Czech Republic Czech Republic Hungary Hungary Latin America Latin America Italy Italy Argentina Argentina Netherlands Kazakhstan Brazil Brazil Nigeria Netherlands Chile Chile Oman Nigeria Colombia Colombia Pakistan Spain Dominican Republic Dominican Republic Qatar Ukraine El Salvador El Salvador Spain United Kingdom Panama Panama Ukraine Venezuela Venezuela United Kingdom Note: Changes are shown in Bold 14 2Q06 Financial Review www.aes.com
  • 15. Parent Sources and Uses of Cash ($ Millions) Six Month Second Quarter Ended June 30, Sources 2006 2006 Total Subsidiary Distributions(1) $177 $308 Proceeds from Asset Sales, Net 80 188 Refinancing Proceeds, Net -- -- Increased Senior Unsecured Credit Facility Commitments 100 600 Issuance of Common Stock, Net 20 28 Total Returns of Capital Distributions and Project Financing Proceeds 29 29 Beginning Liquidity(1) 1,063 624 Total Sources $1,469 $1,777 Uses Repayments of Debt(2) $-- ($150) Investments in Subsidiaries, Net (247) (344) Cash for Development, Selling, General and Administrative and Taxes (64) (137) Cash Payments for Interest (132) (209) Changes in Letters of Credit and Other, Net (381) (292) Ending Liquidity(1) (645) (645) Total Uses ($1,469) ($1,777) (1) Non-GAAP financial measure. See Appendix. (2) Includes redemption of 8.875% Sr. Subordinated notes due 2027 (approximately $115 million aggregate principal amount plus a make-whole premium of $35 million in the first quarter of 2006. 15 2Q06 Financial Review www.aes.com
  • 16. Second Quarter 2006 Reconciliation of Changes to Debt Balances ($ Millions) Debt Reconciliation Parent Debt (Including Letters of Credit) at 12/31/05 (1) $5,176 Scheduled Debt Maturities: -- Discretionary Debt Repayments: Prepayment of Debt (115) Other (2) 400 Parent Debt (Including Letters of Credit) at 6/30/06 $5,461 (583) Less: Letters of Credit Outstanding at 6/30/06 Parent Debt (Excluding Letters of Credit) at 6/30/06 $4,878 (1) Amount reflects recourse debt of $4,882 million and $294 million of letters of credit under the parent revolver. Revolver availability at 12/31/05 was $356 million. (2) Other includes $289 million increase in letters of credit, a $100 million draw on the revolving credit facility, a $3 million change in unamortized discounts, and an $8 million increase due to foreign currency changes. 16 2Q06 Financial Review www.aes.com
  • 17. Second Quarter 2006 Consolidated Cash Flow AES Corp (1) Subsidiaries Eliminations Consolidated ($ Millions) Net Cash from Operating Activities (2) $(32) $(164) $434 $630 11 -- (361) Property Additions (372) (26) -- (14) Project Development Costs 12 (132) 167 -- Investment in Subsidiaries (35) 31 (35) -- Returns of Capital from Subsidiaries 4 -- -- 3 Proceeds from the Sales of Assets 3 -- -- 9 Proceeds from the Sales of Emission Allowances, net 9 - -- 124 Proceeds from the Sale of Business 124 -- -- (13) Acquisitions - Net of Cash Acquired (13) -- - (16) Sale of Short Term Investments (16) (52) - (52) Purchase of Long Term Available for Sale Securities -- (2) -- (74) Increase in Restricted Cash (72) -- -- (14) Increase in Debt Service Reserves and Other Assets (14) (7) -- (16) Other (9) (177) 132 (424) Net Cash Used in Investing Activities (379) -- -- 108 Financing Proceeds for Growth Capital Expenditures 108 50 -- 877 Financing Proceeds from Other Financings Including Refinancings 827 20 -- 20 Issuance of Common Stock -- -- 144 (981) Repayments of Debt, Net (Including Refinancings) (1,125) (2) -- (39) Payments of Deferred Financing Costs (37) -- -- 8 Distributions to Minority Interests 8 53 (188) -- Equity Contributions by Parent 135 (13) 72 -- Distributions to Parent (59) (8) -- (3) Other Financing 5 100 28 (10) Net Cash (Used in) Provided by Financing Activities (138) (109) (4) -- Total Increase (Decrease) in Cash & Cash Equivalents 113 (3) -- (8) Effect of Exchange Rate Changes on Cash (5) 190 -- 1,338 Cash & Cash Equivalents, Beginning 1,148 $78 $(4) $1,330 Cash & Cash Equivalents, Ending $1,256 Includes activity at qualified holding companies. (1) Consolidated depreciation and amortization was $239 million in 2Q2006 and $222 million in 2Q2005. (2) Note: Certain amounts have been netted, condensed and rounded for presentation purposes. 17 2Q06 Financial Review www.aes.com
  • 18. Six Months Ended June 30, 2006 Consolidated Cash Flow AES Corp (1) Subsidiaries Eliminations Consolidated ($ Millions) Net Cash from Operating Activities (2) $25 $(364) $977 $1,316 (23) -- (593) Property Additions (570) (26) -- (27) Project Development Costs (1) (248) 292 -- Investment in Subsidiaries (44) 30 (54) -- Returns of Capital from Subsidiaries 24 -- -- 7 Proceeds from the Sales of Assets 7 -- -- 53 Proceeds from the Sales of Emission Allowances, net 53 110 -- 234 Proceeds from the Sale of Business 124 -- -- (13) Acquisitions - Net of Cash Acquired (13) -- - (184) Sale of Short Term Investments (184) (52) - (52) Purchase of Long Term Available for Sale Securities -- (2) -- (95) Increase in Restricted Cash (93) -- -- (5) Increase in Debt Service Reserves and Other Assets (5) (8) -- (20) Other (12) (219) 238 (695) Net Cash Used in Investing Activities (714) -- -- 125 Financing Proceeds for Growth Capital Expenditures 125 100 -- 1,267 Financing Proceeds from Other Financings Including Refinancings 1,167 28 -- 28 Issuance of Common Stock -- (150) 136 (1,721) Repayments of Debt, Net (Including Refinancings) (1,707) (9) -- (55) Payments of Deferred Financing Costs (46) -- -- (8) Distributions to Minority Interests (8) 53 (213) -- Equity Contributions by Parent 160 (13) 199 -- Distributions to Parent (186) (2) -- (3) Other Financing (1) 7 122 (367) Net Cash (Used in) Provided by Financing Activities (496) (187) (4) (85) Total Increase (Decrease) in Cash & Cash Equivalents 106 (3) -- (28) Effect of Exchange Rate Changes on Cash 31 268 -- 1,387 Cash & Cash Equivalents, Beginning 1,119 $78 $(4) $1,330 Cash & Cash Equivalents, Ending $1,256 Includes activity at qualified holding companies. (1) Consolidated depreciation and amortization was $473 million in the six months ended June 30, 2006 and $439 million in the six months ended June 30, 2005. (2) Note: Certain amounts have been netted, condensed and rounded for presentation purposes. 18 2Q06 Financial Review www.aes.com
  • 19. Reconciliation of Subsidiary Distributions and Parent Liquidity ($ Millions) Quarter Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Total subsidiary distributions 2006 2006 2005 2005 2005 & returns of capital to Parent $177 $132 $354 $274 $170 Subsidiary distributions to Parent -- -- -- -- Net distributions to/(from) QHCs 177 132 354 274 170 Total subsidiary distributions 29 -- 5 -- 37 Returns of capital distributions to Parent Net returns of capital distributions to/ -- -- -- -- 13 (from) QHCs 29 -- 5 -- 50 Total returns of capital distributions Combined distributions & return of capital 206 132 359 274 220 received Less: combined net distributions & returns -- -- -- -- (13) of capital to/(from) QHCs Total subsidiary distributions & $206 $132 $359 $274 $207 returns of capital to Parent Balance as of Sept. 30, June. 30, Dec. 31, June 30, Mar. 31, Liquidity 2005 2005 2005 2006 2006 Cash at Parent $146 $145 $262 $71 $148 281 215 Availability under revolver 356 567 898 7 9 19 17 6 Cash at QHCs Ending liquidity $645 $1,063 $436 $379 $624 See following page for further information. 19 2Q06 Financial Review www.aes.com
  • 20. Assumptions Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: (a) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; (b) businesses continue to operate in a manner consistent with or better than prior operating performance, including achievement of planned productivity improvements including benefits of global sourcing, and in accordance with the provisions of their relevant contracts or concessions; (c) new business opportunities are available to AES in sufficient quantity so that AES can capture its historical market share or increase its share; (d) no material disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; (e) negative factors do not combine to create highly negative low-probability business situations; and (f) material business-specific risks as described in the Company’s SEC filings do not occur. In addition, benefits from global sourcing include avoided costs, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. Also, improvement in certain KPIs such as equivalent forced outage rate and commercial availability may not improve financial performance at all facilities based on commercial terms and conditions. These benefits will not be fully reflected in the Company’s consolidated financial results. The cash held at qualifying holding companies (QHCs) represents cash sent to subsidiaries of the Company domiciled outside of the U.S. Such subsidiaries had no contractual restrictions on their ability to send cash to AES, the Parent Company. Cash at those subsidiaries was used for investment and related activities outside of the U.S. These investments included equity investments and loans to other foreign subsidiaries as well as development and general costs and expenses incurred outside the U.S. Since the cash held by these QHCs is available to the Parent, AES uses the combined measure of subsidiary distributions to Parent and QHCs as a useful measure of cash available to the Parent to meet its international liquidity needs. AES believes that unconsolidated parent company liquidity is important to the liquidity position of AES as a parent company because of the non-recourse nature of most of AES’s indebtedness. 20 2Q06 Financial Review www.aes.com
  • 21. Definitions of Non-GAAP Measures • Adjusted earnings per share (a non-GAAP financial measure), is defined as diluted earnings per share from continuing operations excluding gains or losses associated with (a) mark-to-market amounts related to FAS 133 derivative transactions, (b) foreign currency transaction impacts on the net monetary position related to Brazil, Venezuela, and Argentina, (c) significant asset gains or losses due to disposition transactions and impairments, and (d) early retirement of recourse debt. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and are considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability associated with mark-to-market gains or losses related to certain derivative transactions, currency gains and losses, periodic strategic decisions to dispose of certain assets which may influence results in a given period, and the early retirement of corporate debt. • Free cash flow – Net cash flow from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures. • Liquidity – Cash at the parent company plus availability under corporate revolver plus cash at qualifying holding companies (QHCs). • Return on invested capital (ROIC) – Net operating profit after tax (NOPAT) divided by average capital. NOPAT is defined as income before tax and minority expense plus interest expense less income taxes less tax benefit on interest expense at effective tax rate. Average capital is defined as the average of beginning and ending total debt plus minority interest plus stockholders’ equity less debt service reserves and other deposits. • Subsidiary Distributions – Cash distributions (primarily dividends and interest income) from subsidiary companies to the parent company and qualified holding companies. These cash flows are the source of cash flow to the parent to meet corporate interest, overhead, cash taxes, and discretionary uses such as recourse debt reductions and corporate investments. 21 2Q06 Financial Review www.aes.com
  • 22. Reconciliation of Cash Flow Items Net Cash from Operating Activities ($ Millions) AES Corp & QHCs (1) Subsidiaries Eliminations Consolidated Second Quarter 2006 $630 $(32) $(164) $434 Six Months Ended June 30, 2006 $1,316 $25 $(364) $977 Six Months Ended Property Additions ($ Millions) Second Quarter June 30, 2006 2005 2006 2005 Maintenance Capital Expenditure $191 $146 $366 $270 Growth Capital Expenditures 170 114 227 261 Property Additions $361 $260 $593 $531 Reconciliation of Free Cash Flow ($ Millions) Six Months Ended Second Quarter June 30, 2005 (2) 2005 (2) 2006 2006 Net Cash from Operating Activities $434 $328 $977 $845 Less: Maintenance Capital Expenditures (191) (146) (366) (270) Free Cash Flow $243 $182 $611 $575 (1) Includes activity at qualified holding companies. (2) Results exclude businesses placed in discontinued operations effective June 30, 2006. 22 2Q06 Financial Review www.aes.com
  • 23. Second Quarter Calculations of Return on Invested Capital ($ Millions except percent) Rolling Twelve Rolling Twelve Second Months Second Third Fourth First Third Fourth First Months Quarter Second Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Second Quarter Net Operating Profit After Tax(1) 2005 2005 2006 2004 2004 2005 2005 2005 2006 2006 $186 $991 $483 IBT&MI $226 $204 $375 $484 $408 $633 $2,008 497 475 1,929 442 Reported Interest Expense 491 466 448 502 432 1,824 Income Tax Expense(2) (330) (1,080) (284) (1,459) (203) (393) (494) (273) (285) (320) 377 330 511 2,752 201 659 1,461 722 Net Operating Profit After Tax 625 745 43.0% 49.9% 21.9% 39.2% 28.2% Effective Tax Rate(3) 54.4% 71.1% 29.3% 31.4% 30.0% ROIC(4) 7.3% 13.2% Second Second Second Quarter Quarter Quarter Total Capital(5) 2004 2005 2006 $18,185 $18,086 $17,497 Total Debt Minority Interest 981 1,462 2,256 1,386 1,210 2,451 Stockholders’ Equity (574) (593) (612) Debt Service Reserves and Other Deposits Total Capital $19,978 $20,165 $21,592 Average Capital(6) $20,072 $20,879 (1) Net operating profit after tax, a non-GAAP financial measure, is defined as income before tax and minority interest expense (IBT&MI) plus interest expense less income taxes less tax benefit on interest expense at the effective tax rate. (2) Income tax expense calculated by multiplying the sum of IBT&MI and reported interest expense for the period by the effective tax rate for the period. (3) Effective tax rate calculated by dividing reported income tax expense for the period by IBT&MI for the period. (4) Return on invested capital (ROIC), a non-GAAP financial measure, is defined as net operating profit after tax divided by average capital calculated over rolling 12 month basis. (5) Total capital, a non-GAAP financial measure, is defined as total debt plus minority interest plus stockholders’ equity less debt service reserves. (6) Average capital is defined as the average of beginning and ending total capital over the last 12 months. 23 2Q06 Financial Review www.aes.com

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