AES 2004 20 Financial 20Review20and20200520Outlook_FINAL

AES Corporation2004 Financial Review and 2005 Outlook

February 3, 2005

10:00am EST

The Global Power Company

1

2 www.aes.com2004 Financial Review and 2005 Outlook

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 levels of operating performance and electricity demand at our distribution companies and operational performance at our contract generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth from investments at investment levels and rates of return consistent with prior experience. 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 the caption “Cautionary Statements and Risk Factors”in AES’s most recent annual report on Form 10-K. Readers are encouraged to read AES’s filings to learn more about the risk factors associated with AES’s business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

We urge investors to read our descriptions and discussions of these risks that are contained under the section “Cautionary Statements and Risk Factors” in the Company’s Annual Report on Form 10K for the year ended December 31, 2003 as well as our other SEC filings.


New Projects

Volume/Price/Mix

Currency

Total

Fourth Quarter and2004 Highlights

($ Millions Except Earnings Per Share and Percent)

* Non-GAAP measure. See page 4.** Fourth quarter ROIC annualized. See Appendix.

New Projects

Volume/Price/Mix

Currency

Total

2%

8%

1%

11%

Revenue ComparisonQuarter-Over-Quarter (QOQ)

32%$0.56$0.7491%$0.11$0.21Adjusted EPS*

50 b.p.9.1%9.6%500 b.p5.6%10.6%Return on Invested Capital (ROIC)**

4%$0.56$0.581500%$0.01$0.16Diluted EPS from Continuing Operations

38%$640$884231%$71$235Income Before Income Taxes and Minority Interest (IBT&MI)

30 b.p.28.9%29.2%(20) b.p.28.2%28.0%as % of Sales

14%$2,433$2,76810%$644$709Gross Margin

13%$8,415$9,47111%$2,281$2,528Revenues

% Change20032004

% Change

Fourth Quarter

2003

Fourth Quarter

2004

Revenue ComparisonYear-Over-Year (YOY)

2%

9%

2%

13%


Reconciliation of Adjusted Earnings Per Share

Debt Retirement Gains/(Losses)

Net Asset Gains/(Losses and Impairments)

Adjusted Earnings Per Share*

FAS 133 Mark-to-Market Gains/(Losses)**

Currency Transaction Gains/(Losses)

Diluted EPS from Continuing Operations

0.12

$0.56

(0.24)

$0.56

(0.07)

0.19

--

$0.01

(0.10)

$0.11

--

--

($ Per Share)

--

$0.16

(0.05)

$0.21

0.01

(0.01)

(0.03)

$0.58

(0.05)

$0.74

(0.06)

(0.02)

* Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses associated with (a) mark-to-market amounts related to FAS 133 derivative transactions, (b) foreign currency transaction impacts on the net monetary position related to Brazil, Venezuela, and Argentina, (c) significant asset gains or losses due to disposition transactions and impairments, and (d) early retirement of recourse debt. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and are considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability associated with mark-to-market gains or losses related to certain derivative transactions, and periodic strategic decisions to dispose of certain assets which may influence results in a given period. Certain reclassifications have been made to prior-period amounts to conform to the 2004 presentation.

** The year ended December 31, 2004 includes $(0.03) related to Chile debt restructuring costs included in interest expense in the first quarter of 2004.

Fourth Quarter

2004

Fourth Quarter

2003

Year to Date 2004

Year to Date2003


Fourth Quarter Cash Flow Highlights

Return of Capital from Subsidiaries*

Subsidiary Distributions*

Subsidiary Net Cash from Operating Activities*

Net Cash from Operating Activities

$242

$1,054

$2,325

$1,576

$1,034

$18

$255

$722

$490

$303

($ Millions)

$3

$277

$621

$459

$315

$127

$1,004

$2,156

$1,568

$1,061

Fourth Quarter

2004

Fourth Quarter

2003 2004 2003

Free Cash Flow*

* Non-GAAP measure. See Appendix.

Recourse Debt Repayment (Net) $1,186$158$331 $800

Subsidiary-Only

Consolidated

Parent-Only


Fourth Quarter Subsidiary Distributions

67% of Distributions Were from North American Large Utilities and Worldwide Contract Generation in the Fourth Quarter.

$277$8$38$73$54$104Total*

101342--Growth Distribution

31----11182Competitive Supply

14073573457Contract Generation

$96$--$-$51$--$45Large Utilities

TotalEurope/AfricaAsiaCaribbean

South America

North America

Fourth Quarter 2004 Subsidiary Distributions*


($ Millions)


2004Subsidiary Distributions

71% of 2004 Distributions Were from North American Large Utilities and Worldwide Contract Generation.

Over 70% of Distributions For the Past Five Years Were from North American Large Utilities and Contract Generation.

$1,004$82$110$134$194$484Total*


169281840101Competitive Supply


$254$--$--$77$--$177Large Utilities


South America

North America

Total Year 2004 Subsidiary Distributions*


($ Millions)


Revenues

Gross Margin

as % of Sales

IBT&MI

($ Millions Except As Noted)

$1,009

$248

25%

$145

Fourth Quarter

2004

$913

$191

21%

$89

Fourth Quarter

2003

Volume/Price/Mix

New Projects

Currency (Net)

Total

Revenue Comparison (QOQ)11%

--

--

11%

% Change

Segment Highlights

• Revenues Increased as a Result of Tariff Increases, Favorable Currency Effects and an Improved Mix of Customers in Brazil Along With Revenue Recovery For Pollution Control Programs and Increased Demand in the U.S., Partially Offset by Unfavorable Exchange Rates and Lower Demand in Venezuela.

• Gross Margin Increased as a Result of Net Improvements in Revenues, Partially Offset by Slightly Higher Costs in the U.S. and Venezuela.

Large UtilitiesSegment Highlights

11%

30%

--

63%

% Change


Revenues

Gross Margin

as % of Sales

IBT&MI


$350

$28

8%

$87

Fourth Quarter

2004

$303

$42

14%

$8

Fourth Quarter

2003

Volume/Price/Mix

New Projects

Currency (Net)

Total


--

3%

16%

% Change

Segment Highlights

• Revenue Increased as a Result of Higher Tariffs in Brazil, Argentina and El Salvador Along With Increased Demand in Cameroon, El Salvador and Ukraine and Positive Foreign Currency Effects in Cameroon and Brazil.

• Gross Margin Includes a $16mm Severance Charge in Cameroon.

• IBT&MI Includes a $64mm Gain on Extinguishment of Non-Recourse Debt in Argentina.

Growth DistributionSegment Highlights

16%

(33)%

--

988%

% Change


Contract GenerationSegment Highlights

Revenues

Gross Margin

as % of Sales

IBT&MI


$905

$378

42%

$173

Fourth Quarter

2004

$840

$364

43%

$185

Fourth Quarter

2003

Volume/Price/Mix

New Projects

Currency (Net)

Total


3%

2%

8%

% Change

Segment Highlights

• Revenue Increased Because of Contract-Related Price Escalations, New Projects On Line and Favorable Foreign Currency Effects.

• Gross Margin as a Percentage of Sales Declined Slightly Due to Higher Plant Dispatch Rates in Several of our Contracted Businesses

8%

4%

--

(6)%

% Change


Revenues

Gross Margin

as % of Sales

IBT&MI


$264

$55

21%

$10

Fourth Quarter

2004

$225

$47

21%

$(8)

Fourth Quarter

2003

Volume/Price/Mix

New/Expansion Projects

Currency (Net)

Total


4%

4%

17%

% Change

Segment Highlights

• Revenue and Gross Margin Increased Due to Favorable Pricing and Higher Production in Several Markets, Contribution from New Hydroelectric Investment in Panama and Favorable Foreign Currency Effects

Competitive SupplySegment Highlights

17%

17%

--

225%

% Change


2005 Guidance Elements:Income Statement

43%37%12%8%

Allocated by Segment as a % of Total • Contract Generation• Large Utilities• Competitive Supply• Growth Distribution

$0.76Diluted EPS

($0.07)Adjusted EPS Factors*

$0.83Adjusted EPS*

36%Tax Rate

$2.0 billionBusiness Segment IBT&MI(Excludes Corporate Costs of $650 Million)

50 b.p.Gross Margin Expansion(Increase As % of Revenues)

4%Revenue Growth

2005 GuidanceGuidance Element


Contains Forward Looking Statements


2005 Guidance Elements:Cash Flow and Sensitivities

$1.2 - $1.3 billionFree Cash Flow*

$700 millionMaintenance Capital Expenditures

2005 GuidanceGuidance Element

$600 million by Early 2006Parent Debt Repayment

$150 millionParent Growth Investments and Capital Expenditures**

$1.0 billionSubsidiary Distributions

$1.9 - $2.0 billionNet Cash From Operating Activities

* Non-GAAP measure. See Appendix.** Excludes $200 million for project in Spain financed through financing cash flows and interim parent financing of $165 million Texas wind project.

100 b.p. Move in Short-Term Interest Rates is Approximately +/- $0.03 per Diluted Share

Interest Rate Sensitivity (Annual)

10% Move in Currency Basket is Approximately +/- $0.06 per Diluted Share

Foreign Currency Sensitivity (Annual)

Sensitivities

Contains Forward Looking Statements


2005 Guidance Elements: Subsidiary Distributions

$1,000$79$154$155$84$528Grand Total


160--191129101Competitive Supply


$318$--$--$107$--$211Large Utilities


South America

North America

($ Millions) Contains Forward Looking Statements

69% of Distributions from North American Large Utilities and Worldwide Contract Generation.

Expected 2005 Subsidiary Distributions*


Appendix


Parent Sources and Uses of Cash

* For the definition of total subsidiary distributions and liquidity and a reconciliation to the most directly comparable GAAP measure, see page 21.

($1,150)Total Uses

Fourth Quarter

2004Sources

(643)

(24)

(473)

(156)

(477)

($1,138)

$2,911

1,071

127

200

480

13

$1,004

(643)Ending Liquidity *

42Other

(152)Cash Payments for Interest

(30)Cash for Development, Selling, General and Administrative and Taxes

(36)Investments in Subsidiaries, Net

($331)Repayments of Debt

Uses

$1,150Total Sources

863Beginning Liquidity*

3Total Returns of Capital Distributions and Project Financing Proceeds

--Increased Revolver Commitments

--Refinancing Proceeds, Net

(2)Proceeds from Asset Sales, Net

$277Total Subsidiary Distributions *

($ Millions)

9Issuance of Common Stock, Net 16

($2,911)

Year to Date 2004


* Argentina Gencos includes Alicura and CTSN.** For the definition of total subsidiary distributions and a reconciliation to the most directly comparable GAAP measure, see page 21.

Fourth Quarter and Full Year Subsidiary Distributions

($ Millions)Year to

Date 2004

Fourth Quarter

2004

7751EDC

$1,004$277Total Subsidiary Distributions**

17850Other826227Total Top Distributions & TSP637Tax Sharing Payments (TSP)1910Chigen154Warrior Run219Barka155Puerto Rico1911Panama10--Ras Laffan3918Argentina Gencos*281Southland4712Hawaii33--Ebute

Shady Point

GenerIPALCOEastern Energy

7626

1513411938$94$1


Reconciliation of Changes to Recourseand Related Debt Balances

(34)End of Year Cash Sweep

* Amounts reflect recourse debt of $5,939 million and $70 million of letters of credit under the parent revolver. Revolver availability at 12/31/03 was $180 million.

** Other includes $28 million increase in letters of credit and $13 million increase due to foreign currency changes.

Debt Reconciliation

$5,152Recourse Debt (Excluding Letters of Credit) at 12/31/04(98)Less: Letters of Credit Outstanding At 12/31/04

**

*$6,009Recourse Debt (Including Letters of Credit) at 12/31/03

500Senior Note Due 2014(500)Debt Prepayments with February Financing Proceeds

February Refinancing:

(45)Prepayments from Asset SalesMandatory Debt Repayments:

Discretionary Debt Repayments:(721)Prepayment of Debt

$5,250Recourse Debt (Including Letters of Credit) at 12/31/0441Other

--Scheduled Debt Maturities:

($ Millions)


(138)----(138)Decrease in Debt Service Reserves and Other Assets

13----13Sale of Short Term Investments, Net of Purchases

ConsolidatedEliminationsAES Corp & QHCs *Subsidiaries

Certain amounts have been netted, condensed, and rounded for presentation purposes.* Includes qualified holding companies.

$1,408$--$291$1,117Ending Cash and Cash Equivalents Balance 1,582--5381,044Beginning Cash and Cash Equivalents Balance

26----26Effect of FX and Discontinued Operations (200)--(247)47Increase (Decrease) in Cash & Cash Equivalents

(195)244(322)(117)Net Cash (for) from Financing (27)----(27)Other

--3--(3)Returns of Capital to Parent --277--(277)Distributions to Parent --(36)--36Equity Contributions by Parent

(28)----(28)Payments for Financing Costs (1,109)--(331)(778)Repayments, Net (Including Refinancings)

9--9--Equity Proceeds 960----960Financing Proceeds from Other Financings Including Refinancing

--------Financing Proceeds for Growth Capital Expenditure

(464)33(40)(457)Net Cash (for) from Investments (25)----(25)Other

(13)----(13)Increase in Restricted Cash

(1)--(2)1Net Proceeds from Asset Sales --(3)3--Returns of Capital from Subsidiaries --36(36)--Investment in Subsidiaries

(156)----(156)Growth Capital Expenditure (144)--(5)(139)Maintenance Capital Expenditure

$459($277)$115$621Net Cash from Operating Activities

Fourth Quarter 2004Consolidated Cash Flow

($ Millions)


55----55Sale of Short Term Investments, Net

(32)--(4)(28)Increase in Restricted Cash

ConsolidatedEliminationsAES Corp & QHCs *Subsidiaries

Certain amounts have been netted, condensed and rounded for presentation purposes.* Includes qualified holding companies.

$1,408$--$291$1,117Ending Cash and Cash Equivalents Balance 1,737--891846Beginning Cash and Cash Equivalents Balance

25----25Effect of FX and Discontinued Operations (354)--(600)246Increase (Decrease) in Cash & Cash Equivalents

(936)654(647)(943)Net Cash (for) from Financing (109)----(109)Other

--127--(127)Returns of Capital to Parent --1,004--(1,004)Distributions to Parent --(477)--477Equity Contributions by Parent

(109)--(14)(95)Payments for Financing Costs (3,183)--(649)(2,534)Repayments, Net (Including Refinancings)

16--16--Equity Proceeds 2,341----2,341Financing Proceeds from Other Financings Including Refinancings

108----108Financing Proceeds for Growth Capital Expenditures

(986)350(369)(967)Net Cash (for) from Investments (23)----(23)Other

(151)----(151)Increase in Debt Service Reserves and Other Assets

63--1350Net Proceeds from Asset Sales --(127)127--Returns of Capital from Subsidiaries --477(477)--Investment in Subsidiaries

(391)----(391)Growth Capital Expenditures (507)--(28)(479)Maintenance Capital Expenditures

$1,568$(1,004)$416$2,156Net Cash from Operating Activities

Year to Date 2004 Consolidated Cash Flow

($ Millions)


Reconciliation of Subsidiary Distributions and Parent Liquidity

($ Millions)

* See page 22.** See page 22.

December 31, September 30, June 30, March 31, December 31, September 30, June 30, Total subsidiary distributions & returns of capital to Parent 2004 2004 2004 2004 2003 2003 2003

Actual Actual Actual Actual Actual Actual ActualSubsidiary distributions to Parent 286$ 209$ 292$ 204$ 248$ 312$ 312$ Net distributions to/(from) QHCs * (9) 12 10 - 7 7 (12) Total subsidiary distributions 277 221 302 204 255 319 300

Returns of capital distributions to Parent 3 110 - 3 17 199 24 Net returns of capital distributions to/(from) QHCs * - 11 - - 1 (7) 6 Total returns of capital distributions 3 121 - 3 18 192 30

Combined distributions & return of capital received 280 342 302 207 273 511 330 Less: combined net distributions & returns of capital to/(from) QHCs * 9 (23) (10) - (8) - 6 Total subsidiary distributions & returns of capital to Parent 289$ 319$ 292$ 207$ 265$ 511$ 336$

Liquidity **($ in millions) December 31, September 30, June 30, March 31, December 31,

2004 2004 2004 2004 2003Actual Actual Actual Actual Actual

Cash at Parent 287$ 525$ 310$ 268$ 865$ Availability under revolver 352 325 331 371 180 Cash at QHCs * 4 13 15 17 26 Ending liquidity 643$ 863$ 656$ 656$ 1,071$

Balance at

Quarter Ended


Assumptions

** 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.

* The cash held at qualifying holding companies (QHCs) represents cash sent to subsidiaries of the company domiciled outside of the US. 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 US. These investments included equity investments and loans to other foreign subsidiaries as well as development and general costs and expenses incurred outside the US. Since the cash held by these qualifying holding companies is available to the parent, AES uses the combined measure of subsidiary distributions to parent and qualified holding companies as a useful measure of cash available to the parent to meet its international liquidity needs.

Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to the following:

• We assume continued normal levels of operating performance and electricity demand at our distribution companies.

• We assume operational performance at our contract generation businesses remain consistent with historical levels and in accordance with the provisions of the relevant contracts.

• We assume achievements of planned productivity improvements.• We assume incremental growth from investments at investment levels and rates of return

consistent with prior experience.In addition, benefits from performance improvements include avoided cost savings, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. These benefits may not be fully reflected in the Company’s consolidated financial results.


Definition

• Free Cash Flow – Net Cash from Operating Activities Less Maintenance Capital Expenditures

Free Cash Flow

Maintenance Capital Expenditures

Net Cash Provided by Operating Activities

$0.303

0.187

$0.490

$1.034

0.542

$1.576

Fourth Quarter

2003

Reconciliation of Cash Flow Items

$0.315

0.144

$0.459

Fourth Quarter

2004

Reconciliation of Free Cash Flow ($ Billions)

Yearto Date

2004

$1.061

0.507

$1.568

Yearto Date

2003

$1.2 to $1.3

0.7

$1.9 to $2.0

2005Guidance

ConsolidatedEliminationsAES Corp &

QHCs*Subsidiaries

$1,576$(1,054)$305$2,3252003 Year to Date$490$(255)$23$722Fourth Quarter 2003

Net Cash from Operating Activities – Fourth Quarter 2003 and Year to Date 2003 ($ Millions)

* Includes qualified holding companies.


Calculation ofReturn on Invested Capital

5.6%10.6%Annualized (Quarter Results Only)

$20,191$20,690Average Capital

$19,910 $20,471 $20,909 Total Capital

(508)(617)(737)Debt Service Reserves

(341)605 1,737 Shareholders Equity

657 845 1,326 Minority Interest

$20,102 $19,638 $18,583 Total Debt

December2002

December2003

December2004Invested Capital

30.3%29.0%47.9%23.4%Effective Tax Rate

9.1%9.6%1.4%2.7%Return on Invested Capital

$1,830 $1,984 $281 $552 Net Operating Profit After Tax

602 553 224 114 Less: Tax Benefit on Interest Expense

1942563455Less: Income Tax Expense

1,9861,909468486Add: Interest Expense

$640$884$71$235IBT&MI

Yearto Date

2003

Yearto Date2004

FourthQuarter

2003

FourthQuarter

2004Net Operating Profit After Tax

• Return on Invested Capital is defined as Net Operating Profit After Tax divided by Average Capital.• Net Operating Profit After Tax is defined as Income Before Tax and Minority Expense plus Interest Expense less Income Taxes less Tax Benefit on

interest expense at Effective Tax Rate.• Total Capital is defined as Total Debt plus Minority Interest plus Shareholders Equity less Debt Service Reserves.• Average Capital is defined as the average of beginning and ending capital.

Economy & Finance

AES 2004 20 Financial 20Review20and20200520Outlook_FINAL