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AES CORPORATION
City or location Month XX, 20XX
AES CORPORATIONAES EMEA Generation Business Review
John McLarenVice President
March 22, 2006
1www.aes.com
AES EMEA Generation Strategic OverviewContains Forward Looking Statements
Financial Goals
Revenue Growth
Gross Margin Growth
Earnings Per Share Growth
ROIC Improvement*
Cash Flow Growth
Subsidiary Distributions*
Restructuring Opportunities
Growth Goals
Platform Expansion
Greenfield Investment
Privatization/M&A
AES Goals AES 2008 Target AES EMEA Generation Role
--
$3.5 Billion
13-19% per Year
11%
--
--
--
--
--
--
Above Average
Above Average
Below Average
Above Average
Average
New Project Contributions
Project Refinancing
Significant Opportunities
Significant Opportunities
Near-term Potential
* Non-GAAP financial measure. See Appendix.
2www.aes.com
Europe Generation Market Characteristics
EU dominated by large regionally focused integrated players
Generators typically sell into power pools or bilateral contracts
EU legislation targets liberalization, competition, renewables and environmental improvements
EU Emissions Trading commenced in 2005 as a precursor to Kyoto
Emissions reduction targets largely born by power generators
EU Generally
8GW of installed capacity
Dual market system
80% of power comes from PPA contracted generators
Power pool system has begun for uncontracted electricity
Privatization of the off-taker MVM underway
Reserve margin around 15%
Net 12% electricity imported
570MW of coal-fired electricity was retired from 2003- 2005
Forecasted 3.7% per year GDP growth through 2010
Joined EU in May 2004
Hungary UK Spain
81GW of installed capacity
Fully liberalized market with low barriers to entry
Low reserve margin around 15%
Northern Ireland primarily based on PPA contracted generation
Northern Ireland market merging with the Rep of Ireland
GDP growth forecasted at 2.4% per year through 2010
UK targets 10% of generation to come from renewables by 2010
74GW of installed capacity
Fully liberalized market dominated by indigenous players
Based on power pool system; bilateral contracts allowed
Reserve margin over 30%
Target 12% of generation to come from renewables by 2010
GDP growth forecasted at 3% per year through 2010
Data from AES EMEA Generation.
Contains Forward Looking Statements
3www.aes.com
Europe Generation Market Characteristics
22GW of installed capacity
Fully liberalized sector
Next exporter of electricity (16.1%)
Dominated by a few integrated players
Generation primarily gas-fired
Electricity demand slow in recent years
Reserve margin above 17%
1.9% per year GDP growth expected through 2010
Netherlands
18GW of installed capacity
Dominated by government controlled utility CEZ – 68% of generation
Large power exporter
Electricity consumers to choose their supplier by 2006
61% of power is coal fired
Reserve margin over 35%
4% per year GDP growth expected through 2010
Joined EU in May 2004
Czech Rep Bulgaria
10GW of installed capacity
Focused on rehabilitating generation
Of 9,762 MW, 77% was available to meet peak demand in 2004
Privatization plan underway
Liberalization targeted for 2007
PPAs will be grandfathered
Scheduled to join the EU in 2007
EU Directives incorporated into 2003 Energy Law
4% per year GDP growth expected through 2010
Data from AES EMEA Generation.
Contains Forward Looking Statements
www.aes.com
% Dependable Reserve Margin
81.4
61.0
UK 15%
Spain 33%
74.2
38.2
Netherlands17%
22.415.6
Czech Republic 41%18.0
14.3
Hungary 13%
8.26.4
Peak Demand (GW)Installed Capacity (GW)
Dependable Reserve Margin in 2004
5.9
Ireland
4.5
15%
Source: Cambridge Energy Research Associates.
5www.aes.com
Reserve Margin—EU Weighted Average
Planning Reserve Margin 15%
0%
5%
10%
15%
20%
25%
30%
35%
1995 2000 2005 2010
Percent
0
200
400
600
800
Gigawatt
Dependable CapacityTotal PeakWeighted Average Reserve Margin
Contains Forward Looking Statements
Source: Cambridge Energy Research Associates, UCTE.Note: non-coincidental peak.Reserve Margin is (Dependable Capacity minus Peak Demand) divided by Peak Demand.Chart includes plants under construction from 2005 on but for wind and planned retirements.
6www.aes.com
Capacity Additions—EU
0
10
20
30
40
50
60
70
80
90
100
1980 1985 1990 1995 2000 2005 2010
Nuclear HydroCoal Natural GasOil WindOther Needed Capacity
History Pipeline
Equilibrium Need
Contains Forward Looking Statements
Gigawatt
Source: Cambridge Energy Research Associates, Platts.
7www.aes.com
Middle East and Africa Generation Market Characteristics
6GW of installed capacity
Maximum Load is 3GW
Demand exceeds firm supply by 69%
Ebute provides 8% of generation
Government owns the transmission, distribution and 81% of generation
Privatization of generation and distribution planned for 2006
GDP growth expected to be 5% per year through 2010
Nigeria
3GW of installed capacity
AES provides 16% of the nation’s electricity capacity and 20% of its water
Generation based on long-term PPAs
Government manages the power sector
Privatization plans underway
Annual growth in peak demand around 5%
GDP growth expected to be 3% per year through 2010
Oman Qatar
3GW of installed capacity
State owns transmission and distribution and contracts with generators through long-term PPAs
AES first IPP in the country
100% gas-fired generation
Annual growth in peak demand 6%
GDP growth to be 8% per year through 2015
19GW of installed capacity
Demand exceeds firm supply by 3%
Generation, transmission, and distribution is undertaken by two vertically integrated utilities: WAPDA (state owned) and KESC (newly privatized)
The State owns 70% of Pakistan’s installed capacity
Privatization of generation and distribution is planned
IPPs based on long-term PPAs
Pakistan
Data from AES EMEA Generation.
Contains Forward Looking Statements
8www.aes.com
AES EMEA Generation Financial Overview
(US$ Million)Nine Months
Ending September 30,
20052004
$957
$372
$226
$129
2003
$771
$306
(1)$162
$202
$746
$302
$194
$121
Revenue
Gross Margin
Income Before Tax &Minority Interest
Distributions to AES Corporation
Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated. (1) Excludes any impact of the partial sale of Barka and Pakistan.
9www.aes.com
AES Europe Generation
Coal
Natural GasOilBiomass
Indian Queens, UK140MW100% AES Owned
Maritza (UC), Bulgaria670MW100% AES Owned
Tisza II, Hungary900MW100% AES Owned
Tiszapalkonya, Hungary116MW100% AES Owned
Tisza II, Hungary900MW100% AES Owned
Elsta, Netherlands630MW50% AES Owned
Kilroot, NI UK520MW97% AES Owned
Tiszapalkonya, Hungary116MW100% AES Owned
Kilroot, NI UK520MW97% AES Owned
Cartagena (UC), Spain1,200MW71% AES Owned
Bohemia, Czech Republic50MW100% AES Owned
Borsod, Hungary96MW100% AES Owned
OilGas CoalBiomass
UC – under construction
10www.aes.com
AES Africa and Middle East Generation
Natural GasOil
Ebute, Nigeria305MW95% AES Owned
Pak Gen, Pakistan365MW55% AES Owned
Ras Laffan, Qatar756MW55% AES Owned
Lal Pir, Pakistan362MW55% AES Owned
Barka, Oman456MW35% AES Owned
OilGas
11www.aes.com
AES EMEA Generation Portfolio – Diverse Geography and Impacts of New Capacity
Balanced Revenues(% of Total)
Impact on Revenue Growth from Capacity Additions (MW)
0
200
400600
800
1,000
1,200
2003 2004 2005
Existing Additions
Europe48%
Middle East46%
Africa6%
Positive future contribution from Cartagena in 2006/07 and Maritza in 2009/10
Data as of September 30, 2005
12www.aes.com
AES EMEA Generation Portfolio Largely Contracted with Fuel Pass Through
Portfolio Primarily Contract Generation
88%
12%
Fuel Pass Through Fuel Margin Risk
Fuel Risk as % of Capacity
0%
20%
40%
60%
80%
100%
2003 2004 2005
Contract Generation Competitive Supply
Data as of September 30, 2005
13www.aes.com
EMEA Generation KPIs
Key Performance Indicator (KPI)
Lost time accidents (LTAs)Days since last LTANear-miss reporting
Safety Excellence
Equivalent availability factor Equivalent forced outage rate (EFOR)Non-fuel O&M costs
Operational Excellence
SOx emissions NOx emissionsOpacity CO2 emissions
Environmental Excellence
14www.aes.com
Implementing KPIs in EMEA Generation
Safety, protecting the environment and operational excellence are the prime focus of the KPIs within the EMEA group.
Safety
Implementation of a Safety Management SystemRegular Safety AuditsOnline Safety SystemSafety Task ForceSafety Walkdowns
Environment
Regular Environmental AuditsStandardized auditing protocols based on ISO 14001Online Environmental SystemEnvironmental Task Force
Operational Excellence
Best practice implementation initiativeHeat Rate Task ForceGlobal sourcingStrategic Asset Risk ReviewsPeer to peer reviews
15www.aes.com
EMEA Generation Safety Performance
Safety Statistics
All plants have more than a year without an AES LTA
Three plants have more than seven years without an AES LTA
1,461 near misses reported in 2005
Lost Time Accidents
2003 2004 2005
20042003 2005
36
0
Getting Better
EMEA Generation’s top priority is safety in the workplace as demonstrated by the significant safety performance improvements over the last three years.
16www.aes.com
EMEA Generation Environmental Performance
SOx Emissions Dust Emissions
70% Improvement 85% Improvement
Getting BetterGetting Better
200420032002 2005
10259
120196
200420032002 2005
7.76.48.6
1.3
Favorable trends through a strategy of pursuing alternate fuelsand plant improvements.
17www.aes.com
EMEA Generation Operational Excellence
EAF EFOR
2.3% Improvement 2.8% Improvement
20042003 2005
5.2%3.2%
6.0% Getting Better
20042003 2005
86.0%92.3%
90.0%
The drive to operational excellence is key to the success of the plants.
18www.aes.com
Ebute Performance Improvement
Performance Initiatives
Hot Gas Path managementStaff training and performanceLTSA management
Plant Challenges
Nine barge mounted Frame 6 CTsUnknown maintenance historyPoor availability of technical supportPoor local infrastructure
EFOR
T &D Reliability39% Improvement in SAIFI
14.3 9.6
32
2003 2004 200520042003 2005
14.3%32.0%
9.6%
22.4% Improvement
Getting Better
Ebute has significantly improved its availability while working in a difficult environment but real benefits are still to be gained.
19www.aes.com
Platform Expansion Opportunities
Construction of a 400MW CCGTNew PPA being negotiated with WAPDALal Pir Pakistan
400MW CCGT A tolling agreement to be negotiatedTiszapalkonya Hungary
400MW CCGT Negotiate a tolling agreementKilroot N. Ireland
Creation of a strategic oil reserve Negotiations in progress with a European Govt.Cloghan Point N. Ireland
Installation of an additional 65 - 115MWNegotiations in progress with the PHCNEbute Nigeria
Contains Forward Looking Statements
20www.aes.com
Platform Extension - Kilroot Biomass TrialsContains Forward Looking Statements
Biomass is now being co-fired at the Kilroot power station in Northern IrelandIn burning biomass the business is able to generate a revenue stream through its generation of ‘renewables credits’In addition, the energy produced does not require the allocation of CO2 allowancesWith a minimal capital investment from AES, the station can now burn up to 6% biomass by volumeThis initiative is expected to contribute positively from 2006The business is exploring the possibility of increasing its biomass % consumption by burning palm oil
Fast Growing Coppice For Biomass Production
21www.aes.com
Greenfield Example: BulgariaContains Forward Looking Statements
670MW lignite-fired power plant$1.4 billion project cost15 year contract with NEK (national utility)15 year lignite supply agreement minimizes energy supply risksLetter of government support€790 million non-recourse financing closed in December with commercial and multilateral banksCompleting site acquisition and permittingTarget early 2006 start of construction$300 million+ new revenues expected by 2010
Proposed AES Maritza Plant, Bulgaria(artist rendition)
22www.aes.com
Greenfield Example: CartagenaContains Forward Looking Statements
1,200MW gas-fired CCGT power plant$860 million project cost21 year contract with Gaz de France International (GDFi) for fuel and the purchase of powerFuel and electricity off-take contracts insulate AES from market risksGDFi to provide fuel through LNG terminal 1.5 km awayNon-recourse commercial financing closed and construction began in November 2003Construction contractor delays have pushed back start-up dateCommissioning planned for Q3 2006$130 million+ revenues expected annually beginning late 2006
AES Cartagena Power PlantCartagena, Spain
0www.aes.com
Appendix - Assumptions
Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: 1) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; 2 ) 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; 3) new business opportunities are available to AES in sufficient quantity so that AES can capture its historical market share; 4) no major disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; 5) negative factors do not combine to create highly negative low-probability business situations; 6) business-specific risks as described in the Company’s SEC filings do not occur.
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. These benefits will not be fully reflected in the Company’s consolidated financial results.
1www.aes.com
Appendix - DefinitionsFree Cash Flow - Net cash from operating activities less maintenance capital expenditures. Maintenance capital expenditures reflect property additions less growth capital expenditures.Lost Time Accident (LTA) - An incident in which the injured person is kept away from work beyond the day of the incident.Near Miss - An incident that occurred but did not result in any injury. In AES, we have expanded this to include unsafe conditions that have been observed.O&M - Operation and maintenance.Reliability Centered Maintenance (RCM) - An integrated maintenance methodology that optimizes among reactive, interval-based, condition-based, and proactive maintenance practices to take advantage of their respective strengths in order to maximize facility and equipment reliability while minimizing life-cycle costs. Return on invested capital (ROIC) - Defined as net operating profit after tax (NOPAT) divided by average capital. NOPAT 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. Average capital is defined as the average of beginning and ending total debt plus minority interest plus stockholders’ equity less debt service reserves and other restricted deposits.System Average Interruption Duration Index (SAIDI) - A measure of the cumulative duration of electric service forced and sustained interruptions experienced by customers each year, excluding “force majeure” events. SAIDI is calculated as the total number of customer minutes of sustained interruption divided by the number of customers served.System Average Interruption Frequency Index (SAIFI) - A measure of the number of outages per customer per year. SAIFI is calculated by dividing the total number of customer-sustained interruptions by the number of customers served.
2www.aes.com
Appendix – Reconciliation of Subsidiary Distributions(US$ Millions) Nine Months
EndedSep. 30,
2005
Quarter EndedYear EndedDecember 31,
$1905
195
2
--
2
197
(5)
$192
Mar. 31,2005
$170--
170
37
13
50
220
(13)
$207
Jun. 30,2005
$274
$274
Sep. 30,2005
$1,00846
1,054
242
0
242
1,296
(46)
$1,250
2003
$99113
1,004
116
11
127
1,131
(24)
$1,107
2004
Subsidiary distributions to parentNet distributions to/(from) QHCsTotal subsidiary distributions
Returns of capital distributions to parent
Net returns of capital distributions to/(from) QHCs
Total returns of capital distributions
Combined distributions & returns of capital received
Less: combined net distributions & returns of capital to/(from) QHCs
Total subsidiary distributions & returns of capital to parent
--274
--
--
--
274
--
$6345
639
39
13
52
691
(18)
$673
Note: On the regional financial slides included subsequently in this presentation series, subsidiary distributions to parent, which exclude returns of capital and project financing proceeds, have been referred to as “Distributions to AES Corporation.”