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AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
AES 2Q07 Review
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AES 2Q07 Review

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  • 1. AES Corporation Second Quarter 2007 Financial Review August 10, 2007 Second Quarter 2007 Financial Review
  • 2. AES Corporation 1 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 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/A for the year ended December 31, 2006, 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. Second Quarter 2007 Financial Review
  • 3. AES Corporation 2 Second Quarter 2007 Highlights Delivered Strong Q2 2007 Results –Revenues increased by 17% to $3.3 billion –Operating cash flow increased by $84 million to $526 million –Diluted earnings per share from continuing operations and adjusted earnings per share of $0.41 Includes $0.15 positive impact from the acquisition of lessor interests at AES Eastern Energy in New York and tax recoveries in Latin America Acquired 827 MW Existing and Greenfield Pipeline in 3 Countries – 100% interest in two U.S. fully operating wind farms totaling 186 MW – 51% interest in JV with 26 MW in operations and 390 MW greenfield hydro pipeline in Turkey – 49% interest in JV with 225 MW greenfield wind pipeline in China Commenced construction of 370 MW Amman East CCGT in Jordan Completed construction of 233 MW Buffalo Gap II wind farm in Texas (1) A non-GAAP financial measure. See Appendix. Second Quarter 2007 Financial Review
  • 4. AES Corporation 3 Second Quarter 2007 Highlights ($ Millions Except Earnings Per Share and Percent) Second Second % Change Consolidated Highlights Quarter 2007 Quarter 2006 In comparison to Q2 2006, gross margin increased by $21 million to $888 million reflecting higher prices in New York Revenues $3,344 $2,862 17% and Latin America, favorable foreign currency trends and contributions from new businesses(2). These gains were partially offset by a cumulative charge of $48 million relating Gross Margin $888 $867 2% to transmission fees accumulated from 2004 through 2007 at Tiete in Brazil, increased purchased energy and fuel costs at Uruguaiana in Brazil and lower emission sales of $24 Income Before Taxes and million. $788 $450 75% Minority Interest (IBT & MI) In comparison to Q2 2006, IBT&MI increased by $338 million to $788 million, primarily due to: Diluted EPS from Continuing - A non-cash gain of $137 million recorded in other $0.41 $0.29 41% Operations income related to a previously disclosed acquisition of lessor interests, which is accounted for as a contract settlement in New York . Adjusted EPS (1) $0.41 $0.28 46% - A gain of $93 million recorded in other income due to a gross receipts tax recoveries of $93 million at two of its Latin American subsidiaries. Net Cash from Operating $526 $442 19% Operating cash flow increased by $84 million to $526 million Activities This increase was primarily due to decreases in net working capital and the contributions from new businesses. Free cash flow (1) decreased by $43 million due to increased Free Cash Flow (1) $220 $263 (16%) maintenance capital expenditures, including environmental projects at IPL in Indiana and Kilroot in Northern Ireland. A non-GAAP financial measure. See Appendix. (1) New businesses include the acquisition of TEG and TEP in Mexico and the consolidation of Itabo in the Dominican Republic. (2) Note: All prior period results in this presentation reflect businesses placed in discontinued operations effective March 31, 2007. Second Quarter 2007 Financial Review
  • 5. AES Corporation 4 Reconciliation of Adjusted Earnings Per Share ($ Per Share) Second Quarter 2007 2006 Diluted Earnings Per Share From $0.41 $0.29 Continuing Operations FAS 133 Mark to Market (Gains)/Losses -- (0.01) Currency Transaction (Gains)/Losses (0.01) -- Net Asset (Gains)/Losses and Impairments 0.01 -- Debt Retirement (Gains)/Losses -- -- Adjusted Earnings Per Share (1) $0.41 $0.28 Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or (1) losses associated with (a) mark to market amounts related to FAS 133 derivative transactions, (b) foreign currency transaction impacts on the net monetary position related to Brazil and Argentina, (c) significant asset gains or losses due to disposition transactions and impairments, and (d) costs related to early retirement of recourse debt. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and is considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability associated with mark-to-market gains or losses related to certain derivative transactions, currency transaction gains or losses, periodic strategic decisions to dispose of certain assets which may influence results in a given period, and the early retirement of corporate debt. Second Quarter 2007 Financial Review
  • 6. AES Corporation 5 Second Quarter 2007 Bridge ($ Per Share) $0.15 $0.11 Excess Emission Sales ($0.04) $0.03 $0.03 $0.41 $0.41 ($0.12) $0.29 $0.26 2Q06 Eastern Energy 2Q07 Diluted Higher Higher 2Q07 Gross Margin Lower Diluted and EPS from Development Income Taxes Adjusted Improvements Net EPS (3) EPS from Tax Recoveries Continuing and and (1) Interest Continuing Non-Operational Operations G&A Expense (1) Minority Income (2) Expense (1) Operations Interest Gross margin increase reflects higher prices in New York and Latin America, favorable foreign currency trends and contributions from new businesses, partially offset by a $48 cumulative charge related to transmission costs in Brazil and lower emission sales of $24 million compared to 2Q 2006. Higher Taxes reflect appreciation of the Brazilian real at certain of the Company’s Brazilian subsidiaries which increased the 2007 effective tax rate and the release of a valuation allowance at Eletropaulo in Brazil in the second quarter of 2006 which reduced the 2006 effective tax rate. Higher minority interest due to lower ownership of Eletropaulo in Brazil. Shown on a pre-tax and pre-ownership adjusted basis. (1) Calculated as $102 million divided by 692 million shares (2) A non-GAAP financial measure. See Appendix. (3) Second Quarter 2007 Financial Review
  • 7. AES Corporation 6 Second Quarter 2007 Cash Flow Highlights ($ Millions) Second Quarter 2007 2006 Subsidiary Only Subsidiary Net Cash from Operating Activities (1) $357 $604 Consolidated Net Cash from Operating Activities $526 $442 Net Asset (Gains)/Losses and Impairments $11 $17 (1) Free Cash Flow $220 $263 Parent Only Subsidiary Distributions (1) $259 $177 Return of Capital from Subsidiaries (1) $34 $29 Recourse Debt Repayment -- -- A non-GAAP financial measure. See Appendix. (1) Second Quarter 2007 Financial Review
  • 8. AES Corporation 7 Second Quarter 2007 Subsidiary Distributions ($ Millions) Second Quarter 2007 Subsidiary Distributions (1) North Latin Europe & Other (2) Asia America America Africa Total Utilities $74 $118 $0 $0 $192 Generation $32 $11 $13 $8 $64 Other $3 $3 Total $106 $129 $13 $8 $3 $259 Top 10 Second Quarter 2007 Subsidiary Distributions (1) Business Amount Segment Business Amount Segment EDC (3) $97 Shady Point $9 LA Utilities NA Generation E&A Generation IPALCO $74 Elsta $7 NA Utilities $20 $6 Brasiliana Warrior Run LA Utilities NA Generation Andres Kilroot LA Generation $11 $6 E&A Generation NA Generation $11 $6 Asia Generation Hawaii Lal Pir A non-GAAP financial measure. See Appendix. (1) Other includes wind and other alternative energy projects (2) AES sold its interest in EDC in second quarter 2007 (3) Second Quarter 2007 Financial Review
  • 9. AES Corporation 8 Second Quarter Segment Highlights Latin America Generation ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights Revenues $620 33% $823 Latin America Generation revenue increased by $203 million to $823 million, primarily due to Gross Margin $255 (22%) $200 higher contract and spot prices at Gener in Chile, higher intercompany sales at Tiete in Brazil and IBT&MI $203 44% $293 the consolidation of Itabo in the Dominican Republic Gross margin remained flat at Gener, primarily due to higher fuel costs. Total gross margin decreased by $55 million to $200 million, primarily Revenue Comparison (QOQ) % Change due to a cumulative charge of $48 million at Tiete in Brazil and increased purchased electricity and Volume/Price/Mix 27% fuel costs at Uruguaiana in Brazil. New Businesses/Projects (1) 4% Currency (Net) 2% IBT&MI increased by $90 million primarily due to a recovery of $93 million relating to gross receipts Total 33% tax recoveries and the reduction of interest expense offset by the decrease in gross margin. Includes the consolidation of Itabo in the Dominican Republic (1) Second Quarter 2007 Financial Review
  • 10. AES Corporation 9 Second Quarter Segment Highlights Latin America Utilities ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights Latin America Utility revenue increased by $151 Revenues $1,156 13% $1,307 million to $1.3 billion, primarily due to the positive Gross Margin $267 8% $289 impact of foreign currency translation in Brazil and higher volumes at Eletropaulo. IBT&MI $165 39% $230 Gross margin increased by $22 million to $289 million, primarily due to favorable foreign currency translation. IBT&MI increased $65 million primarily due to foreign currency transaction gains and lower Revenue Comparison (QOQ) % Change interest expense. Volume/Price/Mix 4% New Businesses/Projects 0% Currency (Net) 9% Total 13% Second Quarter 2007 Financial Review
  • 11. AES Corporation 10 Second Quarter Segment Highlights North America Generation ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights North America Generation revenue increased by Revenues $459 19% $546 $87 million to $546 million, primarily due to the Gross Margin $133 36% $181 acquisition of TEG and TEP in Mexico and higher spot prices at Eastern Energy in New York. $65 314% $269 IBT&MI Gross margin increased by $48 million to $181 million, primarily due to the higher spot prices at Eastern Energy and the acquisition of TEG and TEP. These gains were partially offset by lower emission sales in New York. Revenue Comparison (QOQ) % Change IBT&MI increased by $204 million primarily due to the acquisition of TEG and TEP and a $137 Volume/Price/Mix 8% million gain related to the acquisition of lessor New Businesses/Projects (1) 11% interests at one of our subsidiaries in New York. Currency (Net) 0% Total 19% Includes TEG and TEP in Mexico (1) Second Quarter 2007 Financial Review
  • 12. AES Corporation 11 Second Quarter Segment Highlights North America Utilities ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights North America Utility revenue increased by $8 Revenues $251 3% $259 million to $259 million, primarily due to higher Gross Margin $59 32% $78 volumes at IPL in Indiana. Gross margin increased by $19 million to $78 IBT&MI $29 79% $52 million primarily due to higher volume and lower maintenance costs associated with generation unit overhauls in second quarter of 2006 at IPL. IBT&MI increased $23 million primarily due to an increase in gross margin and lower interest Revenue Comparison (QOQ) % Change expense. Volume/Price/Mix 3% New Businesses/Projects 0% Currency (Net) 0% Total 3% Second Quarter 2007 Financial Review
  • 13. AES Corporation 12 Second Quarter Segment Highlights Europe & Africa Generation (1) ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights Europe & Africa Generation revenue increased by Revenues $186 15% $214 $28 million to $214 million, primarily due to higher Gross Margin $55 (22%) $43 volume at Tisza II in Hungary and in Kazakhstan and favorable foreign currency translation. These $54 (26%) $40 IBT&MI gains were partially offset by lower emission sales in Hungary and the Czech Republic. Gross margin decreased by $12 million to $43 million, primarily due to lower emission sales and a planned outage at Kilroot in Northern Ireland. Revenue Comparison (QOQ) % Change IBT&MI decreased by $14 million primarily due to the decrease in gross margin as well as an Volume/Price/Mix 7% increase in interest expense and foreign currency New Businesses/Projects 1% losses. Currency (Net) 7% Total 15% Includes CIS countries (1) Second Quarter 2007 Financial Review
  • 14. AES Corporation 13 Second Quarter Segment Highlights Europe & Africa Utilities (1) ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights Europe & Africa Utility revenue increased by $23 Revenues $136 17% $159 million to $159 million, primarily due to higher Gross Margin $29 (17%) $24 volume and tariff rates in Ukraine and foreign currency translation gains. $26 (15%) $22 IBT&MI Gross margin decreased by $5 million to $24 million primarily due to reduced rainfall in Cameroon which led to increased fuel costs at SONEL and higher fixed costs related to increased staffing and higher depreciation also at Revenue Comparison (QOQ) % Change SONEL in Cameroon. IBT&MI decreased by $4 million due to the Volume/Price/Mix 13% decrease in gross margin. New Businesses/Projects 0% Currency (Net) 4% Total 17% Includes CIS countries (1) Second Quarter 2007 Financial Review
  • 15. AES Corporation 14 Second Quarter Segment Highlights Asia Generation (1) ($ Millions except as noted) Second Quarter % 2007 2006 Change Segment Highlights Asia Generation revenue increased by $11 million Revenues $240 5% $251 to $251 million, primarily due to higher volume in Gross Margin $56 7% $60 Pakistan and Sri Lanka, partially offset by lower volumes at Barka in Oman. IBT&MI $42 12% $47 Gross margin increased by $4 million to $60 million, primarily due to higher volumes in Pakistan. IBT&MI increased $5 million due to a higher gross margin and Interest income. Revenue Comparison (QOQ) % Change Volume/Price/Mix 5% New Businesses/Projects 0% Currency (Net) 0% Total 5% Includes the Middle East (1) Second Quarter 2007 Financial Review
  • 16. AES Corporation 15 Appendix Second Quarter 2007 Financial Review
  • 17. AES Corporation 16 Parent Sources and Uses of Cash ($ Millions) Second Quarter Sources 2007 Total Subsidiary Distributions (1) $259 Proceeds from Asset Sales, Net 734 Refinancing Proceeds, Net -- Increased Credit Facility Commitments -- Issuance of Common Stock, Net 14 Total Returns of Capital Distributions and Project Financing Proceeds 34 Beginning Liquidity (1) 878 Total Sources $1,919 Uses Repayments of Debt $-- Investments in Subsidiaries, Net (362) Cash for Development, Selling, General and Administrative and Taxes (67) Cash Payments for Interest (133) Changes in Letters of Credit and Other, Net 21 Ending Liquidity (1) (1,378) Total Uses ($1,919) A non-GAAP financial measure (1) Second Quarter 2007 Financial Review
  • 18. AES Corporation 17 Six Months Ended June 2007 Reconciliation of Changes to Debt Balances ($ Millions) Debt Reconciliation (1) Parent Debt (Including Letters of Credit) at 12/31/06 $5,251 Scheduled Debt Maturities: -- Discretionary Debt Repayments: Prepayment of Debt -- Other (2) (79) Parent Debt (Including Letters of Credit) at 6/30/07 $5,172 (377) Less: Letters of Credit Outstanding at 6/30/07 Parent Debt (Excluding Letters of Credit) at 6/30/07 $4,795 Amount reflects recourse debt of $4,790 million and $461 million letters of credit under the parent revolver. Revolver availability at 12/31/06 was $889 (1) million. Other includes a decrease in letters of credit of approximately $84 million, a decrease in unamortized discount of approximately $1 million, and a $4 (2) million increase due to foreign currency changes. Second Quarter 2007 Financial Review
  • 19. AES Corporation 18 Second Quarter 2007 Consolidated Cash Flow ($ Millions) AES Corp (1) Subsidiaries Eliminations Consolidated $62 $107 $526 Net Cash Provided by Operating Activities(2) $357 (19) -- (714) Capital Expenditures (695) -- -- (82) Acquisitions, Net of Cash Acquired (82) 734 -- 781 Proceeds from the Sale of Business 47 -- -- 3 Proceeds from the Sales of Assets 3 -- -- (269) Purchase/Sale of Short–Term Investments, Net (269) -- -- (165) (Increase)/Decrease in Restricted Cash (165) -- -- 1 Proceeds from the Sale of Emission Allowances 1 -- -- (1) Purchase of Emission Allowances (1) -- -- (8) Decrease in Debt Service Reserves and Other Assets (8) -- -- (15) Purchase of Long Term Available for Sale Securities (15) -- -- (1) Other Investing (1) (365) -- -- Investment in Subsidiaries 365 34 10 -- Returns of Capital from Subsidiaries (44) (384) 10 (470) Net Cash (Used in) Provided by Investing Activities (864) (148) -- (369) (Repayments) Borrowings under the Revolving Credit Facilities, Net (221) -- -- -- Issuance of Recourse Debt -- -- -- 428 Issuance of Non-Recourse Debt 428 -- -- -- Repayments of Recourse Debt -- -- -- (227) Repayments for Non-Recourse Debt (227) -- -- (17) Payments of Deferred Financing Costs (17) -- -- (212) Distributions to Minority Interests (212) -- -- 327 Contributions from Minority Interests 327 16 -- 15 Issuance of Common Stock (1) -- -- (4) Financed Capital Expenditures (4) -- -- -- Other Financing -- -- (294) -- Equity Contributions by Parent 294 16 (138) -- Distributions to Parent 122 (116) (432) (59) Net Cash (Used in) Provided by Financing Activities 489 330 (315) (3) Total (Decrease) Increase in Cash & Cash Equivalents (18) -- -- 33 Effect of Exchange Rate Changes on Cash 33 75 314 1,448 Cash & Cash Equivalents, Beginning 1,059 $405 $(1) $1,478 Cash & Cash Equivalents, Ending $1,074 Includes activity at qualified holding companies (1) Consolidated depreciation and amortization was $230 million for 2Q07 and $224 million for 2Q06. Depreciation and amortization from continuing (2) operations was $220 million for 2Q07 and $187 million for 2Q06. Note: Certain amounts have been netted, condensed and rounded for presentation purposes. Second Quarter 2007 Financial Review
  • 20. AES Corporation 19 Six Months Ended June 2007 Consolidated Cash Flow AES Corp (1) ($ Millions) Subsidiaries Eliminations Consolidated $18 $-- $1,107 Net Cash Provided by Operating Activities $1,089 (2) (28) -- (1190) Capital Expenditures (1,162) -- -- (256) Acquisitions, Net of Cash Acquired (256) 734 -- 781 Proceeds from the Sale of Business 47 -- -- 5 Proceeds from the Sales of Assets 5 -- -- (413) Purchase/Sale of Short–Term Investments, Net (413) (2) -- (179) (Increase)/Decrease in Restricted Cash (177) -- -- 10 Proceeds from the Sale of Emission Allowances 10 -- -- (2) Purchase of Emission Allowances (2) -- -- 109 Decrease in Debt Service Reserves and Other Assets 109 (3) -- (23) Purchase of Long Term Available for Sale Securities (20) (0) -- 11 Other Investing 11 (669) 683 -- Investment in Subsidiaries (14) 49 (54) -- Returns of Capital from Subsidiaries 5 81 629 (1,147) Net Cash (Used in) Provided by Investing Activities (1,857) -- -- (183) (Repayments) Borrowings under the Revolving Credit Facilities, Net (183) -- -- -- Issuance of Recourse Debt -- -- -- 798 Issuance of Non-Recourse Debt 798 -- -- -- Repayments of Recourse Debt -- -- -- (597) Repayments for Non-Recourse Debt (597) (0) -- (21) Payments of Deferred Financing Costs (21) -- -- (266) Distributions to Minority Interests (266) -- -- 336 Contributions from Minority Interests 336 28 -- 29 Issuance of Common Stock 1 -- -- (8) Financed Capital Expenditures (8) -- -- 1 Other Financing 1 -- (559) -- Equity Contributions by Parent 559 16 (70) -- Distributions to Parent 54 44 (629) 89 Net Cash Provided by (Used in) Financing Activities 674 143 0 49 Total (Decrease) Increase in Cash & Cash Equivalents (94) -- -- 50 Effect of Exchange Rate Changes on Cash 50 262 -- 1,379 Cash & Cash Equivalents, Beginning 1,117 $405 $0 $1,478 Cash & Cash Equivalents, Ending $1,073 Includes activity at qualified holding companies (1) Consolidated depreciation and amortization was $459 for 2Q07 and $458 for 2Q06. Depreciation and amortization from continuing operations was $449 (2) for 2Q07 and $393 for 2Q06. Note: Certain amounts have been netted, condensed and rounded for presentation purposes. Second Quarter 2007 Financial Review
  • 21. AES Corporation 20 Reconciliation of Subsidiary Distributions and Parent Liquidity ($ Millions) Quarter Ended Jun. 30, Mar. 31, Dec. 31, Sept 30, Jun. 30, 2007 2007 2006 2006 2006 $259 $137 $311 $352 $177 Total subsidiary distributions 34 15 9 34 29 Total returns of capital distributions Total subsidiary distributions & $293 $152 $320 $386 $206 returns of capital to Parent Balance as of Sept 30, Jun. 30, Dec 31, Jun. 30, Mar. 31, Liquidity (2) 2006 2006 2006 2007 2007 Cash at Parent $172 $71 $237 $395 $54 764 567 Availability under revolver 889 973 804 10 Cash at QHCs (1) (2) 37 7 20 20 Ending liquidity $1,378 $878 $973 $645 $1,146 Qualified Holding Company. See “Assumptions” (1) A non-GAAP financial measure (2) Second Quarter 2007 Financial Review
  • 22. AES Corporation 21 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 to achieve its growth objectives; (d) no material disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; and (e) material business-specific risks as described in the Company’s SEC filings do not occur individually or cumulatively. 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. Second Quarter 2007 Financial Review
  • 23. AES Corporation 22 Definitions of Non-GAAP Financial Measures Adjusted earnings per share – 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 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 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 – Defined as net cash flow from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures. AES believes that free cash flow is a useful measure for evaluating our financial condition because it represents the amount of cash provided by operations less maintenance capital expenditures as defined by our businesses, that may be available for investing or for repaying debt. Liquidity – Defined as cash at the parent company plus availability under corporate revolver plus cash at qualifying holding companies (QHCs). 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. Subsidiary distributions – Defined as cash distributions (primarily dividends and interest income) from subsidiary companies to the parent company and qualified holding companies. AES believes subsidiary distributions are an important measure, as 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. Second Quarter 2007 Financial Review
  • 24. AES Corporation 23 Reconciliation of Cash Flow Items ($ Millions) AES Corp & Net Cash from Operating Activities QHCs (1) Subsidiaries Eliminations Consolidated Second Quarter 2007 $357 $62 $107 $526 Six Months Ended Second Quarter June 30, Capital Expenditures 2007 2007 2006 2006 Maintenance Capital Expenditures $510 $306 $179 $379 Growth Capital Expenditures 688 412 148 190 Capital Expenditures $1,198 $718 $327 $569 Six Months Ended Second Quarter June 30, Reconciliation of Free Cash Flow 2007 2006 2007 2006 Net Cash from Operating Activities $526 $1,107 $442 $951 Less: Maintenance Capital Expenditures 306 510 179 379 Free Cash Flow $220 $597 $263 $572 Includes activity at qualified holding companies. (1) Second Quarter 2007 Financial Review

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