AES 4Q 07 Review

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AES 4Q 07 Review

  1. 1. » AES Corporation Fourth Quarter & Full Year 2007 Financial Review March 17, 2008
  2. 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 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, 2007, 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. AES Corporation 1 Fourth Quarter & Full Year 2007 Financial Review
  3. 3. » Highlights Contains Forward Looking Statements › Q4 and full year 2007 financials at a glance – Operating Cash Flow and Free Cash Flow(1) of $2.4 billion and $1.5 billion, respectively › Up $119 million and $82 million, respectively, when compared to 2006, after excluding the impacts of EDC (sold in Q2 2007) – Revenues for the year up 17% to $13.6 billion, with Gross Margin and IBT&MI at $3.4 billion and $1.6 billion, respectively – Q4 and full year Adjusted EPS(1) of $0.19 and $1.02 › Results include a one-time charge of $0.07 related to a change in Mexican tax law › Improved operations in North American and European businesses, along with contributions from new businesses, helped offset the higher costs and lower volumes in Chile & Argentina › Portfolio and Capital Structure Optimization Plans on track – Sold 10% stake in Chilean subsidiary (Gener) for approximately $300 million – Issued $2 billion unsecured notes, primarily to refinance 2nd Lien notes; reducing secured debt as a percentage of total debt from 43% to 17% – Announced sale of Ekibastuz and Maikuben for an upfront price of $1.1 billion plus up to an additional $380 million in performance based earn-outs and management fees over a 3 year period › Making significant progress to achieving our LT Growth Targets – Announced as Winner of Bids in The Philippines and South Africa totaling 1,762 MW, subject to final negotiation and closing conditions – Secured coal rights for up to 2,400 MW of coal-fired capacity in India (OPCG expansion and Chhattisgarh) – Added 427 MW of capacity to our wind operating portfolio, including the start-up of commercial operations for phase 2 of the Buffalo Gap wind farm and the acquisition of Midwest wind from GE – Began construction of an additional 170 MW expansion to Buffalo Gap wind farm (Buffalo Gap 3) AES Corporation 2 (1)A Non-GAAP financial measure. See Appendix. Fourth Quarter & Full Year 2007 Financial Review
  4. 4. » Meeting Our Commitments 2007 Guidance(1) 2007 Results Gross Margin $3.5 - $3.6 billion $3.4 billion Income Before Income Taxes and $2.0 - $2.1 billion $1.6 billion Minority Interest (IBT&MI)(1) Diluted EPS from Continuing $1.04 $0.73 Operations(2) Adjusted EPS(3)(4) $1.07 $1.02 Net Cash from Operations $2.2 - $2.3 billion $2.4 billion Free Cash Flow(4) $1.2 - $1.4 billion $1.5 billion Subsidiary Distributions(4) $1.1 billion $1.1 billion Maintenance Capex $0.9 - $1.0 billion $0.9 billion Total Capex $2.3 - $2.5 billion $2.5 billion (1)2007 results include approximately $400 million net charges relating to impairments and write-offs net of gain from sale of investments. (2)Includes$0.26 adjustments relating to impairments and write-offs net of gain from sale of investments, and an additional $0.07 one-time deferred tax charge related to a change in Mexican tax law. (3)2007 results include a one-time charge of $0.07 related to a change in Mexican tax law. (4)A Non-GAAP financial measure. See Appendix. AES Corporation 3 Fourth Quarter & Full Year 2007 Financial Review
  5. 5. » Fourth Quarter & Full Year 2007 Highlights ($ Millions Except Earnings Per Share and Percent) Full Year Ended Fourth Quarter December 31, 2006 2007 % Change 2007 2006 % Change (Restated) (Restated) Revenues $3,673 $2,934 25.2% $13,588 $11,576 17.4% Gross Margin 809 789 2.5 3,409 3,434 (0.7) (Loss) Income from (35) 68 (151.5) 1,614 1,001 61.2 Continuing Operations Before Income Taxes & Minority Interest (IBT & MI) Diluted EPS from $0.00 ($0.02) n/a $0.73 $0.27 170.4% Continuing Operations Adjusted EPS(1) $0.19 ($0.02) n/a $1.02 $0.93 9.7% › Strong results for Q4 2007 were primarily driven by: – Improved operations in North American & European subsidiaries – New businesses – Favorable foreign currency translation › Weaker results in Q4 2006 EPS were primarily driven by: – North America outages – Higher business development and restatement charges – Brazil restatement charges AES Corporation 4 (1)A Non-GAAP financial measure. See Appendix. Fourth Quarter & Full Year 2007 Financial Review
  6. 6. » Reconciliation of Adjusted Earnings Per Share(1) ($ Per Share) Full Year Ended Fourth Quarter December 31, 2007 2006 2007 2006 (Restated) (Restated) Diluted Earnings (Loss) Per Share from $0.00 ($0.02) $0.73 $0.27 Continuing Operations FAS 133 Mark to Market (Gains)/Losses 0.02 - 0.03 (0.06) Currency Transaction (Gains)/Losses - - - 0.01 Net Asset (Gains)/Losses and Impairments 0.09 - 0.18 0.68 Debt Retirement (Gains)/Losses 0.08 - 0.08 0.03 Adjusted Earnings (Loss) Per Share(1) $0.19 ($0.02) $1.02 $0.93 (1)A non-GAAP financial measure. See Appendix. AES Corporation 5 Fourth Quarter & Full Year 2007 Financial Review
  7. 7. » Fourth Quarter 2007 Bridge ($ Per Share) $0.19 $0.07 $0.11 $0.19 ($0.10) $0.02 ($0.08) ($0.02) $0.00 Q4 2006 Higher Adjusted Q4 2007 Operational Impairments Debt Other Q4 2007 Overhead and Improvements EPS Adjusted & Other Retirement Adjustments Diluted EPS (Restated) Factors(5) EPS(5) Other in Q4 2007 Charges in Q4 related from Diluted EPS 2007(3) Significant (2) charges in Q4 Continuing from 2007(4) Charges in Q4 Operations Continuing 2006(1) Operations (1)Primarily driven by higher G&A expenses in Q4 2006, Brazil restatement charges, Transgas restructuring charges and Panama non-recourse re-financing related write-off. (2) Primarily driven by improved operations in North American & European subsidiaries. (3)Impairments & Other Charges include: Uruguiana, AgCert, gain from sale of Gener shares, FAS 133 and other adjustments. (4)Primarily driven by costs related to early retirement of recourse debt. (5)A non-GAAP financial Measure. See Appendix. AES Corporation 6 Fourth Quarter & Full Year 2007 Financial Review
  8. 8. » Full Year 2007 Bridge ($ Per Share) $0.29 $0.02 $0.18 $0.63 ($0.08) ($0.09) ($0.20) $1.02 $0.73 $0.27 FY 2007 FY 2007 FY 2006 Restructuring FY 2007 Gas Foreign Higher Other Adjusted EPS FY 2007 Factors(3) Charges Net of Curtailment Operational Diluted EPS Currency G&A and Adjustments Adjusted (Restated) EPS(3) Impact in the Improvements Translation from Asset Sale Restatement Diluted (2) Continuing Gains in 2006 Southern Charges EPS from (1) Operations Cone Continuing Operations (1) Primarily driven by $0.76 loss from Brasiliana restructuring, offset by ($0.13) gain from sale of Kingston. (2)Primarily driven by improved operations in North American & European subsidiaries and addition of new businesses. (3)A non-GAAP financial measure. See Appendix. AES Corporation 7 Fourth Quarter & Full Year 2007 Financial Review
  9. 9. » Cash Flow Highlights ($ Millions) Full Year Ended Fourth Quarter December 31, 2007 2006 2007 2006 (Restated) (Restated) Consolidated Net Cash from Operating Activities(1) $488 $476 $2,357 $2,351 Maintenance Capital Expenditures: Operational Maintenance Capex(2) $135 $255 $643 $702 Environmental Capex(2) $64 $37 $235 $165 Less: Total Maintenance Capital Expenditures(2) $199 $292 $878 $867 Free Cash Flow(2)(3) $289 $184 $1,479 $1,484 › Excluding the impacts of EDC, net cash from operating activities would have increased by $30 million for 4Q07 compared to 4Q06 and increased by $119 million for 2007 compared to 2006 › Excluding the impacts of EDC, free cash flow would have increased by $73 million for 4Q07 compared to 4Q06 and increased by $82 million for 2007 compared to 2006 (1)Excluding the impacts of EDC, net cash from operating activities would have been $458 million for 4Q06, $2,206 million for 2007 and $2,087 million for 2006. (2)A non-GAAP financial measure. See Appendix. (3)Excluding the impacts of EDC, free cash flow would have been $216 million for 4Q06, $1,372 million for 2007 and $1,290 million for 2006. AES Corporation 8 Fourth Quarter & Full Year 2007 Financial Review
  10. 10. » Fourth Quarter & Full Year 2007 Subsidiary Distributions ($ Millions) Fourth Quarter/Full Year Ended December 31, 2007 Subsidiary Distributions(1) North Europe & Other(2) Latin America Asia Total America Africa Utilities 54 / 170 41 / 215 31 / 33 -/- 126 / 418 Generation 48 / 316 54 / 93 76 / 177 29 / 72 207 / 658 Other 10 / 23 10 / 23 Total 102 / 486 95 / 308 107 / 210 29 / 72 10 / 23 343 / 1,099 Top 10 Full Year Ended December 31, 2007 Subsidiary Distributions(1) Business Amount Segment Business Amount Segment IPALCO 170 NA Utilities Hawaii 49 NA Generation New York 122 NA Generation Cartagena 42 E&A Generation EDC(3) 97 LA Utilities Shady Point 38 NA Generation Brasiliana 90 LA Utilities Ekibastuz 37 E&A Generation Kilroot 69 E&A Generation Gener 36 LA Generation (1)Anon-GAAP financial measure. See Appendix. (2)Otherincludes wind and other alternative energy projects. AES Corporation 9 (3)AES sold EDC in Q2 2007. Fourth Quarter & Full Year 2007 Financial Review
  11. 11. » Fourth Quarter Segment Highlights Latin America Generation ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › Latin America Generation revenue increased (Restated) by $326 million to $1.0 billion, primarily due to: Revenues $1,036 $710 46% – Higher prices and volume in Chile of Gross Margin 324 273 19% approximately $184 million; IBT&MI 20 149 (87%) – An increase in sales to Eletropaulo and the volume of energy sold to third parties at Tiete of approximately $55 million; Comparison (% Change) Revenue Gross Margin – Higher spot market sales in the Dominican Republic of approximately $20 million; and Volume/Price/Mix 43% 24% – Favorable foreign currency translation of New Businesses/Projects 1% (1%) approximately $13 million. Currency (Net) 2% (4%) › Gross margin increased by $51 million to $324 Total 46% 19% million, primarily due to the Tiete energy sales. › IBT&MI decreased by $129 million to $20 million, primarily due to the Uruguaiana impairment offset by the Gener share sale gain. AES Corporation 10 Fourth Quarter & Full Year 2007 Financial Review
  12. 12. » Fourth Quarter Segment Highlights Latin America Utilities ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › Latin America Utilities revenue increased by (Restated) $228 million to $1.4 billion, primarily due to favorable foreign currency translation of Revenues $1,383 $1,155 20% approximately $211 million Gross Margin 94 200 (53%) IBT&MI 3 (29) 110% › Gross margin decreased by $106 million to $94 million, primarily due to an increase in fixed costs and higher purchased power costs Comparison (% Change) Revenue Gross Margin of approximately $107 million at Eletropaulo. Approximately $84 million of the increase in Volume/Price/Mix 2% (81%) fixed costs is associated with an increase in New Businesses/Projects 0% 0% the labor contingency charge recorded in 2007 versus 2006 Currency (Net) 18% 28% Total 20% (53%) › IBT&MI increased by $32 million to $3 million, primarily due to the Eletropaulo Special Obligation charges in 2006 AES Corporation 11 Fourth Quarter & Full Year 2007 Financial Review
  13. 13. » Fourth Quarter Segment Highlights North America Generation ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › North America Generation revenue increased (Restated) by $121 million to $543 million, primarily due to approximately $57 million in contributions from Revenues $543 $422 29% the newly acquired TEG and TEP businesses Gross Margin 167 102 64% in Mexico and approximately $28 million IBT&MI 94 22 327% attributable to higher prices in New York as well as higher volumes due to the planned Somerset outage in 2006. Comparison (% Change) Revenue Gross Margin › Gross margin increased by $65 million to $167 Volume/Price/Mix 13% 42% million, primarily due to the higher rates and New Businesses/Projects(1) 16% 22% volumes as well as lower costs at Eastern Energy, an impact of approximately $41 Currency (Net) 0% 0% million, and contributions from TEG and TEP Total 29% 64% of approximately $18 million. › IBT&MI increased by $72 million to $94 million, primarily due to the increase in gross margin coupled with Southland legal reserves in 2006. AES Corporation 12 (1)Includes TEG and TEP in Mexico. Fourth Quarter & Full Year 2007 Financial Review
  14. 14. » Fourth Quarter Segment Highlights North America Utilities ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › North America Utilities revenue increased by (Restated) $4 million to $257 million, due primarily to an increase in wholesale power sales and Revenues $257 $253 2% environmental trackers within IPL’s rates. Gross Margin 68 65 5% IBT&MI 38 32 19% › Gross margin increased by $3 million to $68 million. Lower SO2 allowance purchase costs of approximately $13 million arising from the Comparison (% Change) Revenue Gross Margin installation of clean coal technology at the Harding Street plant contributed to the Volume/Price/Mix 2% 5% increase, offset in part by higher fixed New Businesses/Projects 0% 0% maintenance costs of approximately $12 million. Currency (Net) 0% 0% Total 2% 5% › Consistent with the improvement in gross margin, IBT&MI showed an increase of $6 million to $38 million. AES Corporation 13 Fourth Quarter & Full Year 2007 Financial Review
  15. 15. » Fourth Quarter Segment Highlights Europe & Africa Generation(1) ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › Europe & Africa Generation revenue increased (Restated) by $30 million to $292 million, primarily due to favorable foreign currency translation of Revenues $292 $262 11% approximately $23 million. Increased prices Gross Margin 108 76 42% and volumes of approximately $15 million in IBT&MI 88 51 73% Kazakhstan and $13 million in Kilroot contributed as well, more than offsetting the decrease in volume at Hungary of Comparison (% Change) Revenue Gross Margin approximately $19 million. Volume/Price/Mix 2% 34% › Gross margin increased by $32 million to $108 New Businesses/Projects 0% 0% million, primarily due to higher capacity pricing at Kilroot and increased prices and volume in Currency (Net) 9% 8% Kazakhstan. Total 11% 42% › IBT&MI increased by $37 million to $88 million, primarily due to increased gross margin contribution from Kilroot and Kazakhstan. AES Corporation 14 (1)Includes CIS countries. Fourth Quarter & Full Year 2007 Financial Review
  16. 16. » Fourth Quarter Segment Highlights Europe & Africa Utilities(1) ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › Europe & Africa Utilities revenue increased by (Restated) $30 million to $182 million, primarily due to increased rates of approximately $18 million in Revenues $182 $152 20% Ukraine and approximately $9 million in Gross Margin (1) 12 (108%) favorable foreign currency translation. IBT&MI (6) 3 (300%) › Gross margin decreased by $13 million, primarily due to an increase in fixed Comparison (% Change) Revenue Gross Margin maintenance costs of approximately $18 million at Sonel in Cameroon. Volume/Price/Mix 14% (107%) New Businesses/Projects 0% 0% › Consistent with gross margin, IBT&MI decreased by $9 million, primarily due to Currency (Net) 6% (1%) higher fixed costs at Sonel. Total 20% (108%) AES Corporation 15 (1)Includes CIS countries. Fourth Quarter & Full Year 2007 Financial Review
  17. 17. » Fourth Quarter Segment Highlights Asia Generation(1) ($ Millions except as noted) Fourth Quarter Segment Highlights 2007 2006 % Change › Asia Generation revenue increased by $29 (Restated) million to $203 million, primarily due to higher volume in Sri Lanka and higher dispatch in Revenues $203 $174 17% Pakistan. Gross Margin 39 43 (9%) IBT&MI 16 14 14% › Gross margin decreased by $4 million to $39 million, primarily due to higher fuel costs at Ras Laffan in Oman and higher coal costs in Comparison (% Change) Revenue Gross Margin China. Increased revenue in Sri Lanka and Pakistan had only a modest impact on gross Volume/Price/Mix 16% (9%) margin due to related increases in fuel costs. New Businesses/Projects 0% 0% › IBT&MI increased by $2 million to $16 million Currency (Net) 1% 0% primarily due to asset impairments at Chigen in Total 17% (9%) 2006. AES Corporation 16 (1)Includes the Middle East. Fourth Quarter & Full Year 2007 Financial Review
  18. 18. » 2008 Guidance Update Contains Forward Looking Statements 2008 Guidance Element 2008 Full Year Guidance Gross Margin $3.6 to 3.7 billion Income Before Tax & Minority Interest(1) $3.0 to 3.1 billion Diluted Earnings Per Share from Continuing Operations(1) $2.43 Adjusted Earnings Per Share Factors(1)(2) ($1.29) Adjusted Earnings Per Share(2) $1.14 Net Cash from Operating Activities $2.3 to 2.4 billion Maintenance Capital Expenditures $0.8 to 0.9 billion Free Cash Flow(2) $1.4 to 1.6 billion Growth Capital Expenditures $2.3 to 2.4 billion Subsidiary Distributions(2) $1.0 to 1.1 billion (1)Includes net gain of approximately $900 million or $1.29 per share primarily from sale of two indirectly owned subsidiaries in Kazakhstan, which have not yet closed. (2)A non-GAAP financial measure. See Appendix. AES Corporation 17 Fourth Quarter & Full Year 2007 Financial Review
  19. 19. » Base Case Growth Assumptions(1) Contains Forward Looking Statements Prior Guidance Revised Guidance Guidance by 2012 by 2011(2) by 2011 Core Power Incremental Capacity Online 4,000 MW 3,000 MW 4,100 MW Incremental Capacity Under 2,500 MW 2,650 MW 2,400 MW Construction Alternative Energy Incremental Wind Generation 2,100 MW 2,100 MW 2,600 MW Capacity on-line(3) Greenhouse Gas Offsets 26 Million tonnes/yr 24 Million tonnes/yr 34 Million tonnes/yr (1)Base case puts AES in the middle of its $1.95-2.25 EPS Guidance range for 2012. (2)Per AES’s guidance given during Q4 2006 Earnings Call. (3)Includes 600 MW of projects already announced, including Buffalo Gap 2 (233 MW), Buffalo Gap 3 (170 MW) and GE Mid-West acquisition (186 MW). AES Corporation 18 Fourth Quarter & Full Year 2007 Financial Review
  20. 20. » Adjusted EPS(1) Guidance for the Next Five Years Contains Forward Looking Statements $2.50 $1.75-$2.15 $2.25 $1.55-$1.85 $2.00 $1.75 $1.95-2.25 $1.25-$1.45 $1.50 $1.70-$1.95 $1.12-$1.20 $1.25 $1.45-$1.65 $1.14 $1.20-$1.25 $1.00 Previous Guidance(2) $1.02 Overlap $0.75 › Base Case EPS in 2011 is $1.83, as compared to our previous guidance of Updated Guidance $1.95. Our updated guidance includes ($0.05) charges primarily due to: $0.50 1) RGGI compliance related costs and 2) non-cash impact of a contract 2007 Actual amendment at our Pakistan business, which triggered lease accounting. These costs were previously not included in our prior guidance. $0.25 $0.00 2007 2008 2009 2010 2011 2012 (3) (3) (3) (3) (1)A non-GAAP measure. See Appendix (2)Per AES’s guidance given during Q4 2006 earnings call. AES Corporation 19 (3)For 2009-2012, Diluted EPS from Continuing Operations and Adjusted EPS for the purposes of this slide are assumed to be the same. Fourth Quarter & Full Year 2007 Financial Review
  21. 21. » Adjusted EPS(1) Growth Driven by Four Factors Contains Forward Looking Statements 2.5 $2.25 $1.95 Core Power 2 $ Per Share Alternative Energy 1.5 Construction $1.14 Organic Growth $1.02 1 0.5 0 2007 2008 2012 Low 2012 High (2) (2) (1)A non-GAAP financial measure. See Appendix. (2)For 2012, Diluted EPS from Continuing Operations and Adjusted EPS for the purposes of this slide are assumed to be the same. AES Corporation 20 Fourth Quarter & Full Year 2007 Financial Review
  22. 22. » Forecast Shows Strong Cash Flow Growth Contains Forward Looking Statements 4.5 $3.3-4.1 4 $2.9-3.6 2.5-3.3 3.5 $2.3-2.9 3 2.1-2.8 1.8-2.6 $2.2-2.5 $ Billions $2.4 $2.3-2.4 2.5 1.6-2.2 1.4-2.0 2 1.4-1.7 1.2-1.7 1.4-1.6 1.5 1.5 1.1-1.3 1.1 1.0-1.1 1 0.5 0 2007 2008 2009 2010 2011 2012 Free Cash Flow(1) Net Cash from Subsidiary Distributions Operating Activities (1)A non-GAAP financial measure. See Appendix. AES Corporation 21 Fourth Quarter & Full Year 2007 Financial Review
  23. 23. » Appendix AES Corporation 22 Fourth Quarter & Full Year 2007 Financial Review
  24. 24. » Full Year 2007 Segment Highlights Latin America Generation ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › Latin America Generation revenue increased (Restated) by $895 million to $3.5 billion, primarily due to higher contract and spot prices at Gener and Revenues $3,510 $2,615 34% Alicura of approximately $443 million and $95 Gross Margin 955 1,052 (9%) million, respectively. Increased volume and IBT&MI 667 800 (17%) intercompany sales at Tiete contributed approximately $130 million as well. Comparison (% Change) Revenue Gross Margin › Gross margin decreased by $97 million to $955 million, primarily due to an increase in Volume/Price/Mix 29% (8%) costs of approximately $173 million as a result New Businesses/Projects 3% 1% of gas supply curtailments, drier than normal hydrology and higher spot prices for purchased Currency (Net) 2% (2%) electricity in the Company’s businesses Total 34% (9%) located in the Southern Cone region. › IBT&MI decreased by $133 million to $667 million, primarily due to the Uruguaiana impairment offset by the Gener share sale. AES Corporation 23 Fourth Quarter & Full Year 2007 Financial Review
  25. 25. » Full Year 2007 Segment Highlights Latin America Utilities ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › Latin America Utilities revenue increased by (Restated) $620 million to $5.2 billion, primarily due to approximately $493 million in favorable foreign Revenues $5,172 $4,552 14% currency translation, as well as increased rates Gross Margin 865 888 (3%) and volume at our Sul and El Salvador IBT&MI 612 (163) 475% businesses of approximately $99 million. › Gross margin decreased by $23 million to Comparison (% Change) Revenue Gross Margin $865 million, primarily due to reduced tariff rates at Eletropaulo of $355 million offset by Volume/Price/Mix 3% (22%) lower costs, favorable foreign currency New Businesses/Projects 0% 0% translation of approximately $148 million and higher volume of $74 million. Currency (Net) 11% 19% Total 14% (3%) › IBT&MI increased by $775 million to $612 million, primarily due to Brasiliana restructuring in 2006. AES Corporation 24 Fourth Quarter & Full Year 2007 Financial Review
  26. 26. » Full Year 2007 Segment Highlights North America Generation ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › North America Generation revenue increased (Restated) by $240 million to $2.2 billion, primarily due to the approximately $200 million contributed by Revenues $2,168 $1,928 12% the acquisition of the TEG and TEP facilities Gross Margin 702 610 15% and $96 million in higher rate and volume IBT&MI 536 420 28% sales at Eastern Energy; offset in part by $51 million of marked to market adjustments in 2006 for embedded derivatives at Deepwater Comparison (% Change) Revenue Gross Margin and lower emission sales of $39 million. Volume/Price/Mix 1% 4% › Gross margin increased by $92 million to $702 New Businesses/Projects 11% 11% million, primarily due to the acquisition of TEG and TEP in Mexico, combined with higher Currency (Net) 0% 0% rates and volumes and lower cost at Eastern Total 12% 15% Energy; offset by lower emission sales of $39 million. › IBT&MI increased by $116 million to $536 million, primarily due to the NY Lease purchase. AES Corporation 25 Fourth Quarter & Full Year 2007 Financial Review
  27. 27. » Full Year 2007 Segment Highlights North America Utilities ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › North America Utilities revenue increased by (Restated) $20 million to $1.1 billion, primarily due to increased volume from favorable weather, Revenues $1,052 $1,032 2% offset by a slight decrease in tariff rates at IPL. Gross Margin 313 277 13% IBT&MI 196 153 28% › Gross margin increased by $36 million to $313 million, primarily due to increased sales volume and deferred fuel cost recovery at IPL. Comparison (% Change) Revenue Gross Margin › Consistent with gross margin, IBT&MI Volume/Price/Mix 2% 13% increased by $43 million to $196 million. New Businesses/Projects 0% 0% Currency (Net) 0% 0% Total 2% 13% AES Corporation 26 Fourth Quarter & Full Year 2007 Financial Review
  28. 28. » Full Year 2007 Segment Highlights Europe & Africa Generation(1) ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › Europe & Africa Generation revenue increased (Restated) by $123 million to $975 million, primarily due to favorable currency translation of approximately Revenues $975 $852 14% $77 million and increased rate and volume Gross Margin 275 247 11% sales of approximately $60 million at our IBT&MI 225 203 11% Kazahstan businesses; offset in part by lower emission sales in Hungary and at Bohemia of approximately $28 million. Comparison (% Change) Revenue Gross Margin › Gross margin increased by $28 million, Volume/Price/Mix 5% 5% primarily due to rate and volume increases at New Businesses/Projects 0% 0% our businesses in Kazakhstan and Kilroot of $44 million and $13 million, respectively; offset Currency (Net) 9% 6% in part by lower emission sales in Hungary and Total 14% 11% at Bohemia. › IBT&MI increased by $22 million to $245 million, primarily due to the increase in gross margin. AES Corporation 27 (1)Includes CIS countries. Fourth Quarter & Full Year 2007 Financial Review
  29. 29. » Full Year 2007 Segment Highlights Europe & Africa Utilities(1) ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › Europe & Africa Utilities revenue increased by (Restated) $90 million to $660 million, primarily due to increased tariff rates and volume of Revenues $660 $570 16% approximately $57 million in the Ukraine and Gross Margin 63 103 (39%) approximately $28 million in favorable foreign IBT&MI 50 85 (41%) currency translation. › Gross margin decreased by $40 million to $63 Comparison (% Change) Revenue Gross Margin million, primarily due to higher fuel usage and certain non-fuel operating and maintenance Volume/Price/Mix 11% (43%) costs at Sonel. New Businesses/Projects 0% 0% › IBT&MI decreased by $35 million to $50 Currency (Net) 5% 4% million, primarily due to the decrease in gross Total 16% (39%) margin. AES Corporation 28 (1)Includes CIS countries. Fourth Quarter & Full Year 2007 Financial Review
  30. 30. » Full Year 2007 Segment Highlights Asia Generation(1) ($ Millions except as noted) Full Year Segment Highlights 2007 2006 % Change › Asia Generation Revenue increased by $104 (Restated) million to $889 million, primarily due to increased dispatch of approximately $83 Revenues $889 $785 13% million at Lal Pir and Pak Gen, as well as $30 Gross Margin 193 201 (4%) million of improvement at Kelanitissa due to IBT&MI 129 127 2% favorable dispatch. › Gross margin decreased by $8 million to $193 Comparison (% Change) Revenue Gross Margin million, primarily due to decreased volume at Chigen and higher coal prices in China. Much Volume/Price/Mix 13% (4%) of the increase in revenue for Pakistan and New Businesses/Projects 0% 0% Kelanitissa is offset by higher fuel prices. Currency (Net) 0% 0% › IBT&MI increased by $2 million to $129 million, Total 13% (4%) primarily due to asset impairments at Chigen in 2006. AES Corporation 29 (1)Includes the Middle East. Fourth Quarter & Full Year 2007 Financial Review
  31. 31. » Parent Sources and Uses of Cash Fourth Quarter Full Year Ended ($ Millions) 2007 December 31, 2007 Sources Total Subsidiary Distributions(1) $343 $1,099 Proceeds from Asset Sales, Net 214 1,003 Refinancing Proceeds, Net 1,974 1,974 Increased Credit Facility Commitments - - Issuance of Common Stock, Net 21 51 Total Returns of Capital Distributions and Project Financing Proceeds 21 106 Beginning Liquidity(1) 1,515 1,146 Total Sources $4,088 $5,379 Uses Repayments of Debt ($1,314) ($1,314) Investments in Subsidiaries, Net (268) (1,120) Cash for Development, Selling, General and Administrative and Taxes (68) (323) Cash Payments for Interest (128) (425) Changes in Letters of Credit and Other, Net (157) (44) Ending Liquidity(1) (2,153) (2,153) Total Uses ($4,088) ($5,379) (1)A non-GAAP financial measure. AES Corporation 30 Fourth Quarter & Full Year 2007 Financial Review
  32. 32. » Fourth Quarter 2007 & Full Year 2007 Consolidated Cash Flow ($ Millions) Fourth Quarter Full Year Ended December 31, 2007 2006 2007 2006 (Restated) (Restated) Net Cash Provided by Operating Activities(1)(2) $488 $476 $2,357 $2,351 Capital Expenditures (697) (463) (2,425) (1,460) Acquisitions - Net of Cash Acquired 1 (6) (315) (19) Proceeds from the Sales of a Business 301 81 1.136 898 Proceeds from the Sale of Assets 6 14 16 24 Sale/(Purchase) of Short-Term Investments, Net (342) (46) (490) (348) Decrease (Increase) in Restricted Cash 72 49 (28) (8) Proceeds from the Sales of Emission Allowances 7 7 17 82 Purchase of Emission Allowances (10) (24) (13) (77) Decrease in Debt Service Reserves and Other Assets 66 58 122 39 Purchase of Long Term Available for Sale Securities (26) - (49) (52) Repayment of Affiliate Loan - - 55 - Other Investing (13) 1 4 14 ($635) ($329) ($1,970) ($907) Net Cash Used in Investing Activities Repayments/(Borrowings) under the Revolving Credit Facilities, Net ($3) ($32) ($85) $72 Issuance of Recourse Debt 2,000 - 2,000 - Issuance of Non-Recourse Debt 1,128 1,660 2,297 3,097 Repayments of Recourse Debt (1,315) - (1,315) (150) Repayments of Non-Recourse Debt (1,116) (2,125) (2,251) (4,059) Payments of Deferred Financing Costs (61) (22) (97) (86) Distributions to Minority Interests (128) (125) (699) (335) Contributions from Minority Interests 4 8 374 125 Issuance of Common Stock 22 19 58 78 Financed Capital Expenditures (8) (5) (35) (52) Other Financing (5) - (3) (7) Net Cash Provided by (Used in) Financing Activities $518 ($622) $244 ($1,317) Total Increase (Decrease) in Cash & Cash Equivalents $371 ($475) $631 $127 Effect of Exchange Rate Changes on Cash 23 49 69 62 Cash & Cash Equivalents, Beginning 1,270 1,784 1,358 1,169 Cash & Cash Equivalents, Ending $1,664 $1,358 $2,058 $1,358 (1)Depreciationand amortization from continuing operations was $249 million for 4Q07 and $217 million for 4Q06. Changes in net working capital were (42) for 4Q07 and 103 for 4Q06. (2)Depreciationand amortization from continuing operations was $932 million for 2007 and $840 million for 2006. Changes in net working capital were (234) for 2007 and (74) for 2006. Note: Certain amounts have been netted, condensed and rounded for presentation purposes. AES Corporation 31 Fourth Quarter & Full Year 2007 Financial Review
  33. 33. » Reconciliation of Subsidiary Distributions and Parent Liquidity ($ Millions) Quarter Ended Dec. 31, Sept. 30, Jun. 30, Mar. 31, 2007 2007 2007 2007 Total subsidiary distributions $343 $361 $259 $137 Total returns of capital distributions 21 35 34 15 Total subsidiary distributions & returns of $364 $396 $293 $152 capital to Parent Balance as of Parent Company Liquidity(1) Dec. 31, Sept. 30, Jun. 30, Mar. 31, 2007 2007 2007 2007 Cash at Parent & QHCs(1)(2) $1,315 $619 $405 $74 Availability under revolver 838 896 973 804 Ending liquidity $2,153 $1,515 $1,378 $878 (1)A non-GAAP financial measure (2)Qualified Holding Company. See “Assumptions.” AES Corporation 32 Fourth Quarter & Full Year 2007 Financial Review
  34. 34. » 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. AES Corporation 33 Fourth Quarter & Full Year 2007 Financial Review
  35. 35. » Definitions of Non-GAAP Financial Measures › Adjusted earnings per share – 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 and Argentina, (c) significant asset gains or losses due to disposition transactions and impairments, and (d) costs related to early retirement of recourse debt. Effective January 1, 2008, the Company has decided to include costs associated with early retirement of non-recourse debt, in addition to recourse debt. This modification will apply prospectively and is not reflected in the 2007 results presented in this Form 8-K. 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 – Free cash flow (a non-GAAP financial measure) is defined as net cash from operating activities less maintenance capital expenditures (including environmental 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 – Subsidiary Distributions should not be construed as an alternative to Net Cash Provided by Operating Activities which are determined in accordance with GAAP. Subsidiary Distributions are important to the Parent Company because the Parent Company is a holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries’ business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation of difference between the Subsidiary Distributions and Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies. AES Corporation 34 Fourth Quarter & Full Year 2007 Financial Review
  36. 36. » Reconciliation of Cash Flow Items(1) ($ Millions) Full Year Ended Fourth Quarter December 31, 2007 2006 2007 2006 Capital Expenditures (Restated) (Restated) Maintenance Capital Expenditures $199 $292 $878 $867 Growth Capital Expenditures 506 176 1,582 645 Capital Expenditures $705 $468 $2,460 $1,512 Full Year Ended Fourth Quarter December 31, 2007 2006 2007 2006 Reconciliation of Free Cash Flow (Restated) (Restated) Net Cash from Operating Activities $488 $476 $2,357 $2,351 Less: Maintenance Capital Expenditures 199 292 878 867 Free Cash Flow(2) $289 $184 $1,479 $1,484 (1)Includes EDC, a business AES sold in Q2 2007. AES Corporation 35 (2)A non-GAAP financial measure. Fourth Quarter & Full Year 2007 Financial Review
  37. 37. » Reconciliation of 2006 Adjusted Earnings per Share(1) 1Q06 2Q06 3Q06 4Q06 FY2006 (Restated) (Restated) (Restated) (Restated) (Restated) Diluted Earnings (Loss) Per Share $0.51 $0.30 ($0.53) ($0.02) $0.27 from Continuing Operations FAS 133 Mark to Market (0.04) (0.02) - - (0.06) (Gains)/Losses Currency Transaction - - 0.01 - 0.01 (Gains)/Losses Net Asset (Gains)/Losses and (0.13) - 0.83 - 0.68 Impairments Debt Retirement (Gains)/Losses 0.04 - - - 0.03 Adjusted Earnings (Loss) Per $0.38 $0.28 $0.31 ($0.02) $0.93 Share(1) (1)A non-GAAP financial measure. AES Corporation 36 Fourth Quarter & Full Year 2007 Financial Review
  38. 38. » Reconciliation of 2007 Adjusted Earnings per Share(1) 1Q07 2Q07 3Q07 4Q07 FY2007 (Restated) (Restated) (Restated) Diluted Earnings Per Share from $0.17 $0.42 $0.14 - $0.73 Continuing Operations FAS 133 Mark to Market 0.02 (0.01) - 0.02 0.03 (Gains)/Losses Currency Transaction - (0.01) - - - (Gains)/Losses Net Asset (Gains)/Losses and 0.05 0.01 0.03 0.09 0.18 Impairments Debt Retirement (Gains)/Losses - - - 0.08 0.08 Adjusted Earnings Per Share(1) $0.24 $0.41 $0.17 $0.19 $1.02 (1)A non-GAAP financial measure. AES Corporation 37 Fourth Quarter & Full Year 2007 Financial Review
  39. 39. » Reconciliation of 2009-2012 Free Cash Flow Reconciliation of Free Cash Flow 2009 2010 2011 2012 Net Cash from Operating Activities $2.2 to 2.5 $2.3 to 2.9 $2.9 to 3.6 $3.3 to 4.1 Less: Maintenance Capital Expenditures 0.8 0.7 0.8 0.8 Free Cash Flow $1.4 to 1.7 $1.6 to 2.2 $2.1 to 2.8 $2.5 to 3.3 AES Corporation 38 Fourth Quarter & Full Year 2007 Financial Review

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