AES 2Q 08 Review

The AES Corporation
Second Quarter 2008
Financial Review
August 8, 2008

Safe Harbor Disclosure
Contains Forward Looking Statements

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.

2

Second Quarter Results and Key Highlights

Increased full year Adjusted EPS guidance to $1.16 (+0.02)
Lowered consolidated operating cash flow to $2.2 billion (previously $2.3 to 2.4 billion)
reflecting higher working capital and recoverable energy purchase costs
Reaffirmed free cash flow of $1.4 billion at the lower end of previously announced guidance
($1.4 to 1.6 billion)

Amended Corporate debt covenants to achieve financial flexibility

Reported Q2 2008 Adjusted EPS of $0.17, including $0.08 of foreign currency
transaction losses and $0.02 of one-time tax expense related to the repatriation of
a portion of the Kazakhstan sale proceeds

Began construction on four power projects in three countries totaling 954 MW
(100% platform expansion)
Chile: 788 MW; 80 MW in UK; and 86 MW in Cameroon

Expanded wind platform in China by acquiring 49 MW wind farm and reached an
agreement to begin construction on another 49 MW wind project

Registered the Company’s first greenfield methane recovery project in Malaysia

3

Financial Highlights
($ Millions Except Earnings per Share)
Income Before Taxes Equity
Revenue Gross Margin Earnings & Minority Interest
$1,457
$1,029
$4,146
$3,340 $787
$904

Q2 2007 Q2 2008 Q2 2007 Q2 2008 Q2 2007 Q2 2008
(Restated) (Restated) (Restated)

Diluted EPS from
Adjusted EPS1,2
Continuing Operations
$1.31
$0.41

$0.42 $0.17

Q2 2007 Q2 2008 Q2 2007 Q2 2008
(Restated) (Restated)
Key earnings growth drivers were increased demand in Latin America and higher pricing at our European businesses
2007 Adjusted EPS includes a gain of approximately $0.15 related to the acquisition of a leasehold interest in the Eastern
Energy business in New York of $0.12 and the recovery of certain tax assets in Latin America of $0.03
2008 Adjusted EPS includes $0.08 of FX transaction losses primarily in Chile and the Philippines and $0.02 of
one-time tax expense related to the repatriation of a portion of the Kazakhstan sale proceeds
1. A Non-GAAP financial measure. See Appendix
2. Q2 2007 Adjusted EPS excludes FAS 133 mark-to-market (gains)/losses of $(0.01) and net asset (gains)/losses and impairments of $0.01. Q2 2008
Adjusted EPS excludes FAS 133 mark-to-market (gains)/losses of $(0.08) and net asset (gains)/losses and impairments of $(1.30)
4

Financial Highlights (cont’d)
($ Millions)

Free Cash Flow1
Net Operating Cash Flow

$514 $207
$320 $135

Q2 2007 Q2 2008 Q2 2007 Q2 2008

Decrease in net operating cash flow primarily reflects planned outages at our North America generation
businesses, higher corporate interest and previously announced tariff resets at our Latin America utilities
Decrease in free cash flow reflects lower operating cash flow offset in part by reduced maintenance capex

5

Second Quarter 2008 Period Over Period
Earnings from Continuing Operations Bridge
($ per Diluted Share)
$0.02
$1.05

$1.31

$0.03
$0.03
$0.01
$0.42 ($0.01)
($0.15) ($0.08) ($0.01)
$0.27

Q2 2007 NY Lease/ Q2 2007 Operational Other Non- Impairments FX FX SGA Portfolio Tax Rate Q2 2008 Q2
GAAP LatAm Tax EPS, Improvements1 Operating Translation Transaction Management2 GAAP
Recovery Excluding Items1
in 2007 NY &
LatAm Tax

Operational improvements are driven by increased demand in Latin America $0.03 and higher pricing in Europe
$0.02 offset in part by planned outages in North America ($0.03) and higher fuel prices in Asia ($0.01)
The positive impact of the Hawaii mark-to-market derivative adjustment offsets the negative impacts associated
with planned outages in North America and the previously announced tariff resets in Brazil and El Salvador.

1. Includes fuel derivatives
2. Portfolio Management includes: $1.31 net gain on sale of Northern Kazakhstan businesses, ($0.21) tax impact on repatriation of approximately $636
million of Kazakhstan sale proceeds; and ($0.05) of corporate debt refinancing charges
6

Second Quarter 2008 Period Over Period
Adjusted EPS Bridge

$0.01 $0.03

($0.15)
$0.41
($0.04) $0.02
($0.08)
($0.01)
$0.26 ($0.02)
$0.17

Q2 2007 NY Lease/ Q2 2007 Operational Other Non- FX FX SGA One Time Tax Rate Q2 2008 Q2
Adjusted LatAm Tax Adjusted Improvements Operating Translation Transaction Asset Sale Adjusted
EPS Recovery EPS, Items1 Tax Expense
in 2007 Excluding
NY &
LatAm Tax

Operational improvements are driven by increased demand in Latin America of $0.03 and higher pricing in Europe
of $0.02 offset in part by planned outages in North America ($0.03) and higher fuel prices in Asia ($0.01)
Foreign currency transaction losses ($0.08) primarily reflect the impact of a stronger US dollar on our businesses
in the Philippines (Masinloc – Philippine peso functional currency with US dollar denominated debt) and Chile
(Gener – US dollar functional currency with peso denominated receivables)

1. Negative $0.04 balance primarily reflects increased interest expense, $0.02 of which is attributable to higher average debt balances at Corporate related
to $600 million net borrowing in Q4 2007 and $625 million debt issuance in Q2 2008
7

Appendix

8

Financial Highlights
($ Millions)

Free Cash Flow1
Net Operating Cash Flow

Contribution from EDC, a
Business AES Sold in Q2 2007
$151
$107

$963 $496
$791 $427

YTD Q2 2007 YTD Q2 2008 YTD Q2 2007 YTD Q2 2008

Decrease in net operating cash flow primarily reflects sale of EDC in May 2007 combined with increased working
capital due to higher energy prices, higher corporate interest costs, and the impact of tariff resets in Latin America
Decrease in free cash flow reflects lower operating cash flow offset in part by reduced maintenance capex

9

Second Quarter 2008 YTD Period Over Period
Earnings from Continuing Operations Bridge
($ per Diluted Share) $1.05

$1.65
$0.05
$0.01
$0.05
$0.13
($0.05) ($0.03)
$0.59 ($0.15)
$0.44

Q2 YTD NY Lease/ Q2 YTD Operational Other Non- Impairments FX FX SGA Portfolio Q2 YTD
2007 LatAm Tax 2007 EPS, Improvements Operating Translation Transaction Management2 2008 Q2
GAAP Asset Excluding Items1 GAAP
Recovery for NY &
in 2007 LatAm Tax

Operational improvements primarily reflect higher rates and volumes in the Southern Cone region of Latin America
of $0.12 and our generation businesses in Europe of $0.07 offset in part by planned outages in North America
($0.03) and higher fuel prices in Asia ($0.02)
YTD results show significant improvement period over period after excluding both $0.15 of one-time gains in 2007
and net Portfolio Management adjustments of $1.05 in 20082

1. Includes FAS 133 mark-to-market fuel derivative adjustments, including $0.08 net gain in Q2 2008 related primarily to Hawaii and Deepwater
2. Portfolio Management adjustments of $1.05 reflect a $908 million or $1.31 net gain on sale of Northern Kazakhstan businesses, offset in part by a $144
million or ($0.21) tax expense associated with the repatriation of approximately $636 million of Kazakhstan sale proceeds and $55 million or ($0.05) of
corporate debt refinancing charges
10

Second Quarter 2008 YTD Period Over
Period Adjusted EPS Bridge
$0.05
$0.13

($0.03) ($0.05)
($0.03) ($0.02)
($0.15)

$0.66
$0.56
$0.51

Q2 YTD NY Lease/ Q2 YTD 2007 Operational Other Non- FX FX SGA Portfolio Q2 YTD
2007 LatAm Tax Adjusted EPS, Improvements Operating Translation Transaction Management 2008 Q2
Adjusted Asset Excluding for Items Adjusted
EPS Recovery NY & LatAm
in 2007 Tax

Operational improvements primarily reflect higher rates and volumes in the Southern Cone region of Latin America of $0.12 and higher
pricing in Europe of $0.07 offset by planned outages in North America ($0.03) and higher fuel prices in Asia ($0.02)
Foreign currency transaction losses ($0.08) are attributable primarily to the impact of a stronger US dollar on our businesses in the
Philippines (Masinloc – Philippine peso functional currency with US dollar denominated debt) and Chile (Gener – US dollar functional
currency with peso denominated receivables)
The $0.02 loss in Portfolio Management reflects tax expense associated with the repatriation of a portion of the Kazakhstan sale proceeds

• Excludes net period over period adjustments of $0.09 corresponding to $0.08 of mark-to-market derivative gains in Q2 2008 (primarily at Hawaii and
Deepwater) and a $0.01 loss in Q2 2008 associated with debt refinancing charges at IPALCO, an Indiana utility; negative balance reflects increased
interest expense, $0.02 of which is attributable to higher average debt balances at Corporate
11

Parent Sources and Uses of Liquidity
($ Millions)

Second Quarter

2008 2007
Sources
Total Subsidiary Distributions1 269 259
1,093 734
Proceeds from Asset Sales, Net
616 -
Refinancing Proceeds, Net
- -
Increased Credit Facility Commitments
12 14
Issuance of Common Stock, Net
81 34
Total Returns of Capital Distributions and Project Financing Proceeds
Beginning Liquidity1 1,523 878
3,594 1,919
Total Sources
Uses
(1,037) -
Repayments of Debt
(755) (362)
Investments in Subsidiaries, Net
(105) (67)
Cash for Development, Selling, General and Administrative and Taxes
(172) (133)
Cash Payments for Interest
(15) 21
Changes in Letters of Credit and Other, Net
Ending Liquidity1 (1,510) (1,378)
Total Uses (3,594) (1,919)

1. A Non-GAAP financial measure. See Slide 27.
12

Second Quarter Subsidiary Distributions
($ Millions)

Second Quarter 2008 Subsidiary Distributions1
North Latin Europe
Other2
Asia Total
America America & Africa
Utilities 43 - - - 43
Generation 42 84 60 27 213
Other 13 13
Total 85 84 60 27 13 269

Top 10 Second Quarter 2008 Subsidiary Distributions1
Business Amount Segment Business Amount Segment
Gener 48 LA Generation Ras Laffan 12 Asia Generation
Cartagena 48 E&A Generation Hawaii 10 NA Generation
IPALCO 43 NA Utilities Shady Point 10 NA Generation
Andres 19 LA Generation Eastern Energy 8 NA Generation
Panama 17 LA Generation TEG TEP 7 NA Generation

1. See “Definitions”
2. Other includes wind and other alternative energy projects
13

Second Quarter Consolidated Cash Flow
($ Millions)
Second Quarter
2008 2007 (Restated)
Net Cash Provided by Operating Activities1 $320 $514
Capital Expenditures (752) (640)
Acquisitions - Net of Cash Acquired (951) (141)
Proceeds from the Sale of Businesses 1,093 781
Proceeds from the Sale of Assets 72 3
Proceeds from the Sale of Short-Term Investments 1,607 428
Purchase of Short-Term Investments (1,514) (715)
Increase in Restricted Cash (52) (165)
Increase in Debt Service Reserves and Other Assets (47) (12)
Equity Investments and Advances to Affiliates 120 (1)
Loan Advances (173) -
Repayment of Affiliate Loan 40 -
Other Investing 32 (13)
Net Cash Used in Investing Activities ($525) ($475)
Borrowings under the Revolving Credit Facilities, Net 21 (357)
Issuance of Recourse Debt 625 -
Repayments of Recourse Debt (1,037) -
Issuance of Non-Recourse Debt 1,307 428
Repayments of Non-Recourse Debt (576) (238)
Payments for Deferred Financing Costs (31) (17)
Distributions of Minority Interests (240) (212)
Contributions from Minority Interests 157 325
Financed Capital Expenditures (42) (4)
Other Financing 13 15
Net Cash Provided by (Used in) Financing Activities $197 ($60)
Effect of Exchange Rate Changes on Cash (15) 33
Total (Decrease) Increase in Cash & Cash Equivalents (23) 12
Cash & Cash Equivalents, Beginning 1,766 1,443
Cash & Cash Equivalents, Ending $1,743 $1,455

1. Depreciation & amortization from continuing operations was $255 million for 2Q08 and $227 million for 2Q07. Changes in net working capital were $271
million for 2Q08 and ($289) million for 2Q07
Note: Certain amounts have been netted, condensed and rounded for presentation purposes
14

Second Quarter Segment Highlights
Latin America Generation
($ Millions)

2007 %
2008 Latin America Generation revenue increased by
(Restated) Change
$358 million to $1.2 billion, primarily due to higher
contract and spot prices at Gener of $151 million in
Revenues $1,176 $818 44% Chile, higher volumes, contract and spot prices at
our businesses in Argentina, the Dominican
Republic and Panama of $152 million, combined
Gross Margin $319 $198 61% with favorable foreign currency translation of
approximately $52 million in Brazil
IBTEE&MI $212 $294 (28%) Gross margin increased by $121 million to $319
million, primarily due to higher volume and spot
prices at our businesses in Argentina of $47
million, lower fixed costs of $36 million at Tiete in
Gross
% Change Comparison Revenue Brazil, foreign currency translation of $29 million,
Margin higher spot prices at our businesses in the
Dominican Republic of $19 million, and higher
Volume/Price/Mix 38% 46% volume at Tiete of $17 million, offset in part by
lower volumes and increased purchased electricity
costs at Gener of $32 million
New Businesses/Projects 0% 0%
IBTEE&MI decreased by $82 million to $212
million, primarily due to a $93 million tax asset
Currency (Net) 6% 15% recovery at Brazilian subsidiaries in 2007,
approximately $36 million of higher interest
expense at Tiete and approximately $34 million of
Total 44% 61% foreign currency transaction losses at Gener

15

Latin America Utilities
($ Millions)

2007 %
2008 Latin America Utilities revenue increased by $257
(Restated) Change
million to $1.6 billion, primarily due to
approximately $231 million in favorable foreign
Revenues $1,563 $1,306 20% currency translation and increased volume of
approximately $29 million at Eletropaulo and Sul in
Brazil
Gross Margin $268 $304 (12%)
Gross margin decreased by $36 million to $268
million, primarily due to decreased rates at
IBTEE&MI $335 $247 36% Eletropaulo of $74 million, combined with an
increase in fixed costs at Eletropaulo of
approximately $20 million due to higher labor
contingencies and provisions for bad debts, offset
Gross
% Change Comparison Revenue in part by favorable foreign currency translation in
Margin Brazil of $41 million and higher volume at
Eletropaulo of approximately $33 million
Volume/Price/Mix 2% 13%
IBTEE&MI increased by $88 million to $335
million, primarily due to a $117 million gain related
New Businesses/Projects 0% 0% to the extinguishment of a non-income tax liability
at one of the Company’s subsidiaries in Brazil
offset in part by the decline in gross margin
Currency (Net) 18% (25%)

Total 20% (12%)

16

North America Generation
($ Millions)

2007 %
2008 North America Generation revenue decreased by
(Restated) Change
$12 million to $539 million, primarily due to a $30
million variance in the mark-to-market derivative
Revenues $539 $551 (2%) adjustment at Deepwater in Texas and lower
volume in New York of approximately $11 million,
partially offset by higher revenue at Merida in
Gross Margin $242 $187 29% Mexico of $17 million and higher volume at TEG
TEP in Mexico of approximately $11 million
IBTEE&MI $187 $272 (31%) Gross margin increased by $55 million to $242
million, primarily due to a $110 million mark-to-
market derivative gain on a coal supply agreement
at Hawaii, offset in part by a $30 million variance in
Gross
% Change Comparison Revenue the mark-to-market derivative adjustment at
Margin Deepwater, as well as lower volumes primarily due
to scheduled outages at Eastern Energy in New
Volume/Price/Mix (3%) 29% York and at Ironwood in Pennsylvania of $25
million
New Businesses/Projects 0% 0% IBTEE&MI decreased by $85 million to $187
million, primarily due to the $135 million contract
settlement gain in 2007 related to the acquisition of
Currency (Net) 1% 0% the New York leasehold interest

Total (2%) 29%

17

North America Utilities
($ Millions)

2007 %
2008 North America Utilities revenue increased by $9
(Restated) Change
million to $267 million, primarily due to an increase
in rate adjustments at IPL related to recoverable
Revenues $267 $258 3% environmental investments of $13 million and the
pass through of higher fuel and purchased power
expenses of $10 million, offset in part by $11
Gross Margin $60 $78 (23%) million of lower retail volumes and $2 million of
lower wholesale revenue
IBTEE&MI $15 $52 (71%) Gross margin decreased by $18 million to $60
million due to higher labor and benefit costs of $4
million, higher maintenance expenses of $3 million
primarily due to storms and outages, and lower
Gross
% Change Comparison Revenue retail margin of $6 million
Margin
IBTEE&MI decreased by $37 million to $15 million
Volume/Price/Mix 3% (23%) due primarily to gross margin changes combined
with $14 million of one-time charges at IPALCO
related to a debt refinancing of approximately $375
New Businesses/Projects 0% 0% million in April

Currency (Net) 0% 0%

Total 3% (23%)

18

Europe & Africa Generation1
($ Millions)

2007 %
2008 Europe & Africa Generation revenue increased by
(Restated) Change
$68 million to $283 million, primarily due to an
increase in capacity income, higher fuel pass-
Revenues $283 $215 32% through revenues and higher volume at Kilroot of
approximately $30 million, favorable foreign
currency translation of approximately $17 million
Gross Margin $69 $43 60% and higher rates of approximately $11 million at
our businesses in Hungary and an increase in
IBTEE&MI $997 $31 3,116% volume and prices of approximately $5 million at
our businesses in Kazakhstan
Gross margin increased by $26 million to $69
million, primarily due to higher rates in Kazakhstan
Gross
% Change Comparison Revenue of approximately $13 million, higher rates and
Margin volume in Hungary of approximately $11 million
and an increase in capacity income at Kilroot of
Volume/Price/Mix 24% 55% approximately $9 million
IBTEE&MI increased by $966 million to $997
New Businesses/Projects 0% 0% million, due primarily to the $908 million net gain
on sale of its Northern Kazakhstan businesses
combined with the improvement in gross margin

Total 32% 60%

1. Includes CIS countries
19

Europe & Africa Utilities1
($ Millions)

2007 %
2008 Europe & Africa Utilities revenue increased by $38
(Restated) Change
million to $195 million, primarily due to increased
tariff rates of approximately $17 million at our
Revenues $195 $157 24% businesses in Ukraine, favorable foreign currency
translation of $14 million and higher volume of $8
million at Sonel in Cameroon
Gross Margin $20 $21 (5%)
million, primarily due to increased fixed costs at
IBTEE&MI $10 $20 (50%) Sonel of approximately $14 million, offset in part
by higher volume at Sonel of approximately $12
million and higher rates of approximately $7 million
in the Ukraine
Gross
% Change Comparison Revenue
Margin IBTEE&MI decreased by $10 million to $10 million,
primarily due to higher interest expense of
Volume/Price/Mix 14% (15%) approximately $5 million at Sonel as a result of a
debt issuance in fourth quarter 2007

New Businesses/Projects 0% 0%


Total 24% (5%)

1. Includes CIS countries
20

Asia Generation1
($ Millions)

2007 %
2008 Asia Generation revenue increased by $70 million
(Restated) Change
to $321 million, primarily due to higher rates at
both Pak Gen and Lal Pir of approximately $35
Revenues $321 $251 28% million and $27 million respectively, as well as the
addition of Masinloc in the Philippines of
approximately $36 million, offset in part by lower
Gross Margin $39 $60 (35%) volumes at Kelanitissa of approximately $15
million due to a decrease in demand from the off-
IBTEE&MI ($25) $36 (169%) taker and lower volume at Lal Pir and Pak Gen of
approximately $5 million each
million, primarily due to higher fuel costs not fully
Gross
% Change Comparison Revenue passed-through to the tariff at Lal Pir, Pak Gen and
Margin Chigen and lower rates at Ras Laffan of
approximately $11 million, combined with the
Volume/Price/Mix 18% (32%) impact associated with unplanned outages of $3
million at Ras Laffan
New Businesses/Projects 14% (5%) IBTEE&MI decreased by $61 million due primarily
to the decline in gross margin and approximately
$30 million of foreign currency transaction losses
Currency (Net) (4%) 2% at Masinloc

Total 28% (35%)

1. Includes the Middle East
21

Reconciliation of Second Quarter
Adjusted Earnings per Share1

Second Quarter


Diluted EPS from Continuing Operations $1.31 $0.42
(0.08) (0.01)
FAS 133 Mark to Market (Gains)/Losses
(0.01) (0.01)
Currency Transaction (Gains)/Losses
(1.30) 0.01
Net Asset (Gains)/Losses and Impairments
0.25 -
Debt Retirement (Gains)/Losses

Adjusted Earnings per Share1 $0.17 $0.41

1. A Non-GAAP financial measure. See “Definitions”
22

Reconciliation of Second Quarter YTD
Adjusted Earnings per Share1

Year-to-Date


Diluted EPS from Continuing Operations $1.65 $0.59
(0.08) 0.01
FAS 133 Mark to Market (Gains)/Losses
- -
Currency Transaction (Gains)/Losses
(1.26) 0.06
Net Asset (Gains)/Losses and Impairments
0.25 -
Debt Retirement (Gains)/Losses

Adjusted Earnings per Share1 $0.56 $0.66

23

Reconciliation of Second Quarter
Cash Flow Items
($ Millions)

Second Quarter


Capital Expenditures
$185 $307
Maintenance Capital Expenditures
609 337
Growth Capital Expenditures

Capital Expenditures $794 $644

Second Quarter


Reconciliation of Free Cash Flow
$320 $514
Net Cash from Operating Activities
185 307
Less: Maintenance Capital Expenditures

Free Cash Flow1 $135 $207

24

Reconciliation of Second Quarter YTD
Cash Flow Items
($ Millions)

Year-to-Date


Capital Expenditures
$364 $511
Maintenance Capital Expenditures
1,072 613
Growth Capital Expenditures

Capital Expenditures $1,436 $1,124

Year-to-Date


Reconciliation of Free Cash Flow
$791 $1,114
Net Cash from Operating Activities
364 511
Less: Maintenance Capital Expenditures

Free Cash Flow1 $427 $603

25

Reconciliation of Subsidiary Distributions
and Parent Liquidity
($ Millions)

Quarter Ended
June 30, Mar. 31, Dec. 31, Sept. 30,
2008 2008 2007 2007
Total Subsidiary Distributions 269 221 343 361

Total Return of Capital Distributions 81 1 21 35

Total Subsidiary Distributions & Returns of Capital to Parent 350 222 364 396

Balance as of
June 30, Mar. 31, Dec. 31, Sept. 30,
Liquidity1
Parent Company 2008 2008 2007 2007
Cash at Parent & QHCs1,2 695 737 1,315 619

Availability Under Revolver 815 786 838 896

Ending Liquidity 1,510 1,523 2,153 1,515

2. Qualified Holding Company. See “Assumptions”
26

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.

27

Definitions

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
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 debt.
Effective January 1, 2008, the Company now includes in its definition of adjusted earnings per share, costs associated with
early retirement of non-recourse debt, in addition to recourse debt. There would be no impact to 2007 reported adjusted EPS
as a result of this change.
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
28

AES 2Q 08 Review

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