AES CORPORATION

City or location Month XX, 20XX

AES CORPORATIONIPALCO Business Review

Ann MurtlowPresident and CEO, IPALCO and IPL

May 9, 2006

1www.aes.com

Financial Goals

Revenue Growth

Gross Margin Growth

Earnings per Share Growth

ROIC Improvement (1)

Cash Flow Growth

Subsidiary Distributions (1)

Restructuring Opportunities

Growth Goals

Platform Expansion

Greenfield Investment

Privatization/M&A

AES Goals AES 2008 Target IPALCO Role

IPALCO Strategic Overview

--

$3.5 Billion

13-19% per Year

11%

$2.6-2.9 Billion

--

--

--

--

--

Below Average

Below Average

Below Average

Below Average

Below Average

Significant and Stable

Limited

Limited

N/A

Potential(1) Non-GAAP financial measure. See Appendix.

Contains Forward Looking Statements

2www.aes.com

IPALCO History

1881 – Indianapolis Brush Electric Light & Power Co. (IBELP) is first Indianapolis electric utility

1931 – First 132kV loop around city completed & Harding Street plant begins commercial operations

1940 – IPL IPO is first large US investor owned utility to list on the New York Stock Exchange

1949 – Eagle Valley plant begins commercial operations

1967 – Petersburg plant begins operations & IPL forms Kentucky-Indiana Power Pool

1970 – IPL requests first rate increase in its 44 year history

1977 – IPL installs Indiana’s first full-scale FGD for SO2 removal

1983 – IPALCO Enterprises (IPALCO) established for non-utility business growth

1994 – IPL files a case in chief with Indiana Utilities’Regulatory Commission (IURC) for revenue requirements and corresponding tariffs based on fair market value case (concluded in 1995)

1880-1950 1951-1975 1976-2000

2001 – AES acquires IPALCO

2001– IPL submits application with 8 other utilities to join Midwest Independent System Operator (MISO)

2002 – IPL files petition with IURC for tracker recovery of NOx environmental controls

2004 – IPL files petition with IURC for Multi-pollutant Plan addressing SO2 and mercury removal

2001-2005

3www.aes.com

IPALCO Service Area and Facilities

HARDING STREET & GEORGETOWN

Petersburg1,722MW Coal8MW Oil

Harding Street & Georgetown653MW Coal158MW Oil283MW Gas202MW Oil & Gas

Eagle Valley263MW Coal81MW Oil

Indianapolis OperationsCustomer Service Center (CSC)Morris Street Arlington

PETERSBURG

EAGLE VALLEY

528m2 service territory3,222 transmission line miles75 high voltage & 69 distribution substations465,000 customers

MORRIS STREET, ARLINGTON AND CUSTOMER SERVICE CENTER

4www.aes.com

IPALCO Electricity Demand Growth

Source: IPL

IPL’s service territory energy demand and national GDP growth rates maintain a basic correlation.

Energy demand GDP

Gro

wth

(QoQ

)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1999 2000 2001 2002 2003 2004 2005

5www.aes.com

IPALCO Fuel Sourcing Strategy

Sourced From

Generation

Transportation Method

Distance

Key Suppliers

Fuel Flexibility (sulfur, BTU)

Illinois Basin (mainly Indiana)

99%

Rail; Truck

< 100 miles

Black Beauty Coal Company (Peabody), Triad Mining

(James River Coal), Solar Sources, and Sunrise Coal,

LLC.

High> 10,900 BTU/lb

< 10% Ash< 16% Moisture

< 6 lbs/MMBTu SO2

CoalUSA

1%

Texas Gas Transmission(TGT) and Panhandle

Eastern Pipelines (PEPL)

Delivered by local distribution company (LDC)

Proliance Energy

Not applicable

Natural Gas

Note: Fuel Flexibility represents company-wide maximums or minimums.

6www.aes.com

2,175 1,738 1,351 1,615 1,140

5,000 5,073 5,397

7,337 7,417 7,370 7,489

1,955 2,018 1,986 2,028 2,076

5,0114,789

7,663

2001 2002 2003 2004 2005

Wholesale Column 2 ResidentialLarge C&I Small C&ISmall C&I

IPALCO Customer Base

33%

47%

13%

7%

36%

40%

16%

9%

Large Commercial & Industrial 40%

Wholesale & Other 9%

Residential36%

Billed Consumption (GWh)2005

Revenues2005

Electricity Sales Trend (GWh)

16,256 16,184 15,707 16,205

Residential Wholesale

Note: Residential includes public lighting; Wholesale includes Rural Electric Membership Corporation.

Residential33%

Large Commercial & Industrial 47%

Wholesale & Other 7%

Small Commercial & Industrial 15%

Small Commercial & Industrial 13%

Large C&I

16,276

7www.aes.com

Indiana Regulatory Framework

Retail tariffs are determined at the state level

Regulatory Bodies Rate Setting Fuel Adjustment Clause

IURC – Indiana Utility Regulatory CommissionOUCC – Office of Utility Consumer Counselor

Other Players

Citizens Action

Coalition

IPL Industrial

Group

Governor’s Office

Indiana Legislature

Rates are determined through a formal public hearing process and based on the record of the proceedings

Determine fair rates & chargesDetermine fair rate of return on fair value of usable assets plus reasonable operating expenses

Fuel costs and fuel portion of power purchases are passed through

Quarterly hearingsExpense and earnings tests

Low, competitive ratesHigh reliability and superior serviceOpen communicationsActive community involvement

IPL’s good regulatory

relationships are supported by

8www.aes.com

The Midwest Independent System Operator

2/1/2002 – MISO becomes operational and addresses:

MISO Day 1 MISO Day 2 Recovery Issues

4/1/2005 – Day Ahead, Real Time and Financial Transmission Rights (FTR) energy markets commence and all generation resources and customer demand are offered/bid into markets

Control Area ConsolidationResource Adequacy Planning Cost Sharing Methodologies

IPL is actively monitoring & lobbying re:

IPL must separate retail and wholesale transactions Fuel costs for jurisdictional retail customers pass through via Fuel Adjustment ClauseAdministration fees, uplift costs & internal compliance costs become deferred regulatory assets

IPL a Transmission Owner (TO)9 industry sectors w/voting rights

MISO Members

Security CoordinationLong-term Regional PlanningTransmission Scheduling and Tariff AdministrationMarket Monitoring & Administration

Participation costs include:Market administration & upliftInternal costs of complianceLocational marginal price (LMP) load/generation differentials

Contains Forward Looking Statements

15 states200 market participants28 utilities250 asset owners3 North America electric reliability regions

9www.aes.com

IPALCO Utility and Generation KPIs

Key Performance Indicator (KPI)

OSHA recordable incident rateLost time accidents (LTAs)Safety Excellence

Equivalent forced outage rate (EFOR)Short term opacity performanceOperational Excellence

Customer satisfaction Average speed of answer (ASA)Customer Service Excellence

System interruption duration (SAIDI)System interruption frequency (SAIFI)Reliability

10www.aes.com

Implementing KPIs at IPL

IPL targets simultaneous operating excellence in seven key areas versus other US electric utility performance through its “Be the Best” (BTB) philosophy .

11www.aes.com

OSHA Recordable Incident Rate

LTA Rate

IPALCO Safety Performance Scorecard

IPL’s top priority is safety in the workplace as demonstrated by the significant safety performance improvements over the last three years.

T & D Reliability48% Improvement in SAIDI

0246

2002 2003 2004 2005

200420032002 2005

59% Improvement

2.72 2.043.605.02

T &D Reliability39% Improvement in SAIFI

0.0

0.5

1.0

2002 2003 2004 2005

200420032002 2005

0.140.21

0.591.00

79% Improvement

Getting Better Getting Better

12www.aes.com

Customer Satisfaction3% Improvement

0400800

1,200

2002 2003 2004 2005

IPALCO Generation Performance Scorecard

T & D Reliability48% Improvement in SAIDI

0%4%8%

12%

2002 2003 2004 2005

2004 200420032002 200320022005 2005

4.6 4.05.7

10.7

226232

961

EFOR Short Term Opacity Exceedances

163

Note: 2002 opacity exceedance figure includes soot blowing exceedances.

IPL’s plants have successfully improved their operations asillustrated by the dramatic EFOR and opacity nonconformance reductions.

Getting Better Getting Better

63% Improvement 83% Improvement

13www.aes.com

IPALCO Service Reliability vs. Indiana Peers

SAIFI SAIDI

IPL Indiana Average Highest Indiana rate

IPL has consistently outperformed the average of Indiana peer utilities.Source: IURC 2005 Reliability Report

200420032002 2005

66.565.773.8 53.20

100

200

300

400

200420032002 2005M

inut

es

Getting Better Getting Better

1.03 0.79 0.71 0.90

0.0

0.5

1.0

1.5

2.0

14www.aes.com

T & D Reliability48% Improvement in SAIDI

84%

88%

92%

2002 2003 2004 2005

Plant Forced Outage Rate70% Improvement in EFOR

0

40

80

2002 2003 2004 200570% Improvement20042004 200320032002 20022005 2005

Consistent Performance

89.0%91.7%

89.0%87.0% 51 574759

IPL offers the most competitive retail residential rates in Indiana and in the top 20 U.S. investor owned utilities (KB Parrish, 2005)

IPL ranks 2nd out of 15 Midwestern utilities in “price and value” perception as part of a customer satisfaction survey (JD Power & Associates, 2005)

IPALCO Customer Service Performance Scorecard

Customer Satisfaction Average Speed of Answer

Sec

onds

5% Improvement

Getting Better

15www.aes.com

Projected Capital Spending Through 2008 ($ Millions)

IPALCO Environmental Investments

IPL’s near term growth will come in part from environmental control capital expenditures which qualify for independent tracker recovery.

$140 $120 $213 $112 Total Capex

$302 $132$72 $98 $56 Maintenance & Other Capex

$171 $8 $48 $115 $56 Total Environmental Capex

$0 $0 $0 $0 $28 NOx SIP Call

$171 $8 $48 $115 $27 Multi-Pollutant Plan

Total(2006-2008E)2008E 2007E2006E2005

$473

Contains Forward Looking Statements

16www.aes.com

Debt to Capital Ratio

Credit Rating Objectives (1)

S&P/Fitch

Moody’s

Interest Coverage Ratio (1)

Funds from Operations to Total Debt (1)

Fixed to Floating Rate (1)

Average Maturity

Capital Structure Elements Target

IPALCO Capital Structure Objectives

50 to 55%

Investment Grade

BBB-

Baa3

> 2.5 times

12 to 20%

85 to 90% fixed rate

9.4 years

(1) Represents IPALCO consolidated debt.

Contains Forward Looking Statements

17www.aes.com

IPALCO Amortization Schedule and Interest Rate Breakdown

5%

45%50%

0

100

200

300

400

500

600

700

IPALCO IPL IPL Variable

IPL Fixed45%

IPALCO50%

IPL Variable5%

$ M

illion

s

Interest Rate Breakdown of Consolidated Co.December 31, 2005Amortization Schedule

59 80

375 375

542

72

2006E 2008E 2010E 2012E+

Contains Forward Looking Statements

18www.aes.com

Fitch S&P's Moody’s

IPALCO Credit Rating Trends

2001 2002 2003 2005A-/A3

BBB+/Baa1

BBB/Baa2

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3

B+/B1

B/B2

B-/B3

2004

Fitch upgraded IPALCO in October 2005 citing, among other factors, “low business risk associated with IPL’s utility operations”, “ring-fencing mechanisms” & “AES credit profile improvement”.

19www.aes.com

IPALCO Financial Overview

Note: Information presented on an AES basis. Certain intercompany transactions may not be eliminated. Distributions to AES Corporation include common stock dividends and cash paid for income taxes.

Revenue

Gross Margin

Income Before Tax &Minority Interest

Distributions to AES Corporation

2002

$823

$632

$208

$271

$211

2003

$832

$282

$175

$176

2004

$884

$304

$194

$177

2005

$951

$305

$189

$208

($ Millions)

20www.aes.com

IPALCO Strategic Issues

Long Term Fuel Supply

Strategic Issues

Achieve more flexible fuel mix and supplier diversityContinued fuel cost recovery through Fuel Adjustment ClauseValue and treatment of emission credits related to coal sulfur content

Strategic Supply Plan

Maintenance and outage planning and schedulingTiming and magnitude of environmental capital expendituresPotential retirement of assets and timing thereofNew capacity additionsRegulatory planning and implementation

Contains Forward Looking Statements