AES CORPORATION

 

                CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

                                          Quarter       Nine Months

                                           Ended           Ended

($ in millions, except per share       September 30,    September 30,

 amounts)                              2004     2003    2004     2003

                                     ---------------- ----------------

 

 

Revenues                             $2,423   $2,231  $6,943   $6,134

Cost of sales                        (1,692)  (1,555) (4,884)  (4,345)

                                     -------  ------- -------  -------

 GROSS MARGIN                           731      676   2,059    1,789

 

General and administrative expenses     (40)     (36)   (130)     (97)

Other operating expense, net            (10)      (5)     (5)     (29)

Asset impairment expense                  -      (75)      -     (106)

                                     -------  ------- -------  -------

 

 OPERATING INCOME                       681      560   1,924    1,557

 

Interest expense                       (470)    (500) (1,423)  (1,518)

Interest income                          52       82     191      207

Other nonoperating (expense) income,

 net                                     (2)      12     (20)     112

Foreign currency transaction (losses)

 gains                                  (16)     (35)    (79)     154

Loss on sale of investments               -        -      (1)       -

Equity in earnings of affiliates         18       12      57       57

                                     -------  ------- -------  -------

 

 INCOME BEFORE INCOME TAXES AND

  MINORITY INTEREST                     263      131     649      569

 

Income tax expense                      (78)     (33)   (201)    (160)

Minority interest expense, net          (52)     (36)   (174)     (77)

                                     -------  ------- -------  -------

 

 INCOME FROM CONTINUING OPERATIONS      133       62     274      332

 

Income (loss) from operations of

 discontinued components (net

 of income tax benefit (expense) of

  $4, $(28), $8, and $0,

  respectively)                           7       14     (48)    (290)

                                     -------  ------- -------  -------

 

 INCOME BEFORE CUMULATIVE EFFECT OF

  ACCOUNTING CHANGE                     140       76     226       42

 

Cumulative effect of accounting

 change (net of income tax benefit of

 $1)                                      -        -       -       (2)

                                     -------  ------- -------  -------

 

 NET INCOME                            $140      $76    $226      $40

                                     =======  ======= =======  =======

 

 

DILUTED EARNINGS PER SHARE

Income from continuing operations     $0.20    $0.10   $0.42    $0.56

Discontinued operations                0.01     0.02   (0.07)   (0.49)

Cumulative effect of accounting

 change                                   -        -       -        -

                                     -------  ------- -------  -------

Total                                 $0.21    $0.12   $0.35    $0.07

                                     =======  ======= =======  =======

 

Diluted weighted average shares

 outstanding (in millions)              651      624     643      588

                                     =======  ======= =======  =======

 

AES CORPORATION

 

SEGMENT INFORMATION

 

                                         Quarter        Nine Months

                                          Ended             Ended

                                       September 30,    September 30,

($ in millions)                        2004     2003    2004     2003

                                    ----------------- ----------------

 

BUSINESS SEGMENTS

 

REVENUES

 Contract Generation                   $906     $817  $2,642   $2,268

 Competitive Supply                     265      230     756      655

 Large Utilities                        938      908   2,590    2,388

 Growth Distribution                    314      276     955      823

                                     -------  ------- -------  -------

 

   Total revenues                    $2,423   $2,231  $6,943   $6,134

 

GROSS MARGIN

 Contract Generation                   $372     $327  $1,057     $903

 Competitive Supply                      64       59     181      173

 Large Utilities                        234      244     635      572

 Growth Distribution                     61       46     186      141

                                     -------  ------- -------  -------

 

   Total gross margin                  $731     $676  $2,059   $1,789

 

INCOME BEFORE INCOME TAXES AND

 MINORITY INTEREST

 Contract Generation                   $211     $103 *  $609     $414

 Competitive Supply                      47       37     140      148

 Large Utilities                        119      127     329      291

 Growth Distribution                     47       12      86      107

 Corporate                             (161)    (148)   (515)    (391)

                                     -------  ------- -------  -------

 

   Total income before income taxes

    and minority interest              $263     $131    $649     $569

 

----------------------------------------------------------------------

 

GEOGRAPHIC SEGMENTS

 

REVENUES

 North America                         $586     $581  $1,666   $1,634

 Caribbean                              401      387   1,198    1,107

 South America                        1,022      907   2,810    2,378

 Europe/Africa                          235      218     748      663

 Asia                                   179      138     521      352

                                     -------  ------- -------  -------

 

   Total revenues                    $2,423   $2,231  $6,943   $6,134

 

INCOME BEFORE INCOME TAXES AND

 MINORITY INTEREST

 North America                         $146     $134    $387     $353

 Caribbean                               37       82     150      159

 South America                          150       64     303      276

 Europe/Africa                           38      (54)*   143       31

 Asia                                    53       53     181      141

 Corporate                             (161)    (148)   (515)    (391)

                                     -------  ------- -------  -------

 

   Total income before income taxes

    and minority interest              $263     $131    $649     $569

 

 

  *Includes a $76 million asset impairment charge.

 

 

AES CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

                                                    September December

                                                        30,      31,

($ in millions, except per share amounts)              2004     2003

                                                     -------- --------

 

ASSETS

  CURRENT ASSETS

  Cash and cash equivalents                           $1,582   $1,737

  Restricted cash                                        357      288

  Short term investments                                 139      189

  Accounts receivable, net of reserves of $253 and

   $291, respectively                                  1,317    1,211

  Inventory                                              388      376

  Receivable from affiliates                               2        3

  Deferred income taxes - current                        159      136

  Prepaid expenses                                       115       64

  Other current assets                                   801      677

  Current assets of held for sale and discontinued

   businesses                                            250      205

                                                     -------- --------

   Total current assets                                5,110    4,886

 

  PROPERTY, PLANT AND EQUIPMENT

  Land                                                   748      733

  Electric generation and distribution assets         21,969   21,076

  Accumulated depreciation and amortization           (5,087)  (4,587)

  Construction in progress                               827    1,278

                                                     -------- --------

   Property, plant and equipment, net                 18,457   18,500

 

  OTHER ASSETS

  Deferred financing costs, net                          486      430

  Investment in and advances to affiliates               683      648

  Debt service reserves and other deposits               598      617

  Goodwill, net                                        1,376    1,378

  Deferred income taxes - noncurrent                     778      781

  Long-term assets of held for sale and discontinued

   businesses                                            683      750

  Other assets                                         1,785    1,976

                                                     -------- --------

   Total other assets                                  6,389    6,580

                                                     -------- --------

 

    TOTAL ASSETS                                     $29,956  $29,966

                                                     ======== ========

 

LIABILITIES AND STOCKHOLDERS' EQUITY

  CURRENT LIABILITIES

  Accounts payable                                    $1,027   $1,225

  Accrued interest                                       447      561

  Accrued and other liabilities                        1,372    1,156

  Current liabilities of held for sale and

   discontinued businesses                               769      699

  Recourse debt-current portion                            -       77

  Non-recourse debt-current portion                    1,778    2,769

                                                     -------- --------

   Total current liabilities                           5,393    6,487

 

  LONG-TERM LIABILITIES

  Recourse debt                                        5,470    5,862

  Non-recourse debt                                   11,262   10,930

  Deferred income taxes                                1,122    1,113

  Long-term liabilities of held for sale and

   discontinued businesses                                19       94

  Pension liabilities                                    900      947

  Other long-term liabilities                          3,134    3,083

                                                     -------- --------

   Total long-term liabilities                        21,907   22,029

 

  Minority Interest, including discontinued

   businesses of $0 and $12, respectively              1,226      805

 

  STOCKHOLDERS' EQUITY

  Common stock                                             6        6

  Additional paid-in capital                           5,497    5,737

  Accumulated deficit                                   (877)  (1,103)

  Accumulated other comprehensive loss                (3,196)  (3,995)

                                                     -------- --------

   Total stockholders' equity                          1,430      645

                                                     -------- --------

 

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $29,956  $29,966

                                                     ======== ========

 

 

AES CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Nine Months

                                                            Ended

                                                       September 30,

($ in millions)                                         2004     2003

                                                      -------  -------

 

OPERATING ACTIVITIES

 Net income                                             $226      $40

 Adjustments:

  Depreciation and amortization -- continuing and

   discontinued operations                               609      581

  Other non-cash charges                                 543      165

  (Increase) decrease in working capital                (269)     300

                                                      -------  -------

   Net cash provided by operating activities           1,109    1,086

 

INVESTING ACTIVITIES

 Property additions and project development costs       (598)    (878)

 Net proceeds from the sale of assets                     64      707

 Sale (purchase) of short-term investments                42      (25)

 Affiliate advances and equity investments                 6        -

 (Increase) in restricted cash                           (19)    (322)

 (Increase) decrease in debt service reserves and

  other assets                                           (13)     108

 Other investing                                          (4)     (16)

                                                      -------  -------

   Net cash used in investing activities                (522)    (426)

 

FINANCING ACTIVITIES

 (Repayments) under the revolving credit facilities,

  net                                                      -     (228)

 Issuance of non-recourse debt and other coupon

  bearing securities                                   1,980    4,120

 Repayments of non-recourse debt and other coupon

  bearing securities                                  (2,565)  (4,200)

 Payments for deferred financing costs                   (81)    (106)

 (Distributions to) contribution by minority

  interests, net                                         (79)       7

 Proceeds from sale of common stock                        7      335

 Other financing                                          (3)      (2)

                                                      -------  -------

   Net cash used in financing activities                (741)     (74)

   Effect of exchange rate changes on cash                (9)      34

                                                      -------  -------

 

 Total (decrease) increase in cash and cash

  equivalents                                           (163)     620

 Decrease in cash and cash equivalents of discontinued

  operations and businesses held for sale                  8       62

 Cash and cash equivalents, beginning                  1,737      792

                                                      -------  -------

 Cash and cash equivalents, ending                    $1,582   $1,474

                                                      =======  =======

 

AES CORPORATION

 

RECONCILIATION OF ADJUSTED EARNINGS PER SHARE (1)

 

                                        Quarter         Nine Months

                                         Ended             Ended

                                      September 30,    September 30,

($ per share)                          2004     2003     2004    2003

                                    ----------------- ----------------

 

 

 

Adjusted Earnings Per Share         $  0.21  $  0.26  $  0.52 $  0.45

 

 FAS 133 Mark-to-Market

   Gains/(Losses)(2)                  (0.02)   (0.02)   (0.07)  (0.06)

 Currency Transaction Gains/(Losses)   0.01    (0.05)   (0.01)   0.19

 Net Asset Gains/(Losses and

   Impairments)                           -    (0.10)       -   (0.14)

 Debt Retirement Gains/(Losses)           -     0.01    (0.02)   0.12

                                     -------  -------  ------- -------

 

Diluted EPS From Continuing

 Operations                         $  0.20  $  0.10  $  0.42 $  0.56

                                     =======  =======  ======= =======

 

(1) 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 reflect 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.

 

(2) The Nine Months Ended September 30, 2004 includes $(0.03) related

    to Chile debt restructuring costs included in interest expense in

    the first quarter of 2004.

 

NOTE: AES revised the definition of adjusted EPS in the second quarter

    of 2004 to focus greater attention on only three key currencies

    resulting in foreign currency transaction gains or losses on net

    monetary positions (those of Brazil, Venezuela, and Argentina).

    The prior definition included the effects of all foreign

    currencies. In addition, only significant asset gains or losses

    due to disposition transactions and impairments are included. The

    prior definition included all asset gains or losses due to

    disposition transactions and impairments. Finally, the revised

    definition reflects the specific tax impact of each amount. The

    result is no net effect on the adjusted earnings per share for the

    first half of either 2003 or 2004, with some minor reallocation to

    the first quarter of both 2003 and 2004, and a $0.03 increase in

    the annual adjusted EPS for 2003 from $0.53 to $0.56.

 

 

                         The AES Corporation

                     Parent Financial Information

----------------------------------------------------------------------

Parent only data: last four quarters

($ in millions)                              4 Quarters Ended

                                    September  June    March  December

 Total subsidiary distributions &       30,     30,      31,      31,

  returns of capital to Parent         2004    2004     2004     2003

------------------------------------  Actual  Actual   Actual   Actual

                                    -------- -------  ------- --------

Subsidiary distributions to Parent   $  953  $1,056   $1,076   $1,008

Net distributions to/(from) QHCs (1)     29      24        2       46

                                      ------  ------   ------   ------

Subsidiary distributions                982   1,080    1,078    1,054

 

Returns of capital distributions to

 Parent                                 130     219      243      242

Net returns of capital distributions

 to/(from) QHCs (1)                      12      (6)       -        -

                                      ------  ------   ------   ------

Returns of capital distributions        142     213      243      242

 

Combined distributions & return of

 capital received                     1,124   1,293    1,321    1,296

Less: combined net distributions &

 returns of capital to/(from) QHCs(1)   (41)    (18)      (2)     (46)

                                      ------  ------   ------   ------

Total subsidiary distributions &

 returns of capital to Parent        $1,083  $1,275   $1,319   $1,250

                                      ======  ======   ======   ======

 

 

Parent only data: quarterly

($ in millions)                               Quarter Ended

                                    September  June    March  December

 Total subsidiary distributions &       30,     30,      31,      31,

  returns of capital to Parent         2004    2004     2004     2003

------------------------------------  Actual  Actual   Actual   Actual

                                    -------- -------  ------- --------

Subsidiary distributions to Parent   $  209  $  292   $  204   $  248

Net distributions to/(from) QHCs (1)     12      10        -        7

                                      ------  ------   ------   ------

Subsidiary distributions                221     302      204      255

 

Returns of capital distributions to

 Parent                                 110       -        3       17

Net returns of capital distributions

 to/(from) QHCs (1)                      11       -        -        1

                                      ------  ------   ------   ------

Returns of capital distributions        121       -        3       18

 

Combined distributions & return of

 capital received                       342     302      207      273

Less: combined net distributions &

 returns of capital to/(from) QHCs (1)  (23)    (10)       -       (8)

                                      ------  ------   ------   ------

Total subsidiary distributions &

 returns of capital to Parent        $  319  $  292   $  207   $  265

                                      ======  ======   ======   ======

 

 

Liquidity (2)                                   Balance at

------------------------------------

($ in millions)                     September June    March   December

                                       30,     30,      31,      31,

                                       2004    2004     2004     2003

                                     Actual  Actual   Actual   Actual

                                    -------- -------  ------- --------

Cash at Parent                       $  525  $  310   $  268   $  865

Availability under revolver             325     331      371      180

Cash at QHCs (1)                         13      15       17       26

                                      ------  ------   ------   ------

 Ending liquidity                    $  863  $  656   $  656   $1,071

                                      ======  ======   ======   ======

 

(1) 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.

 

(2) 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.