THE AES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED MARCH 31, 2002 AND 2001 -------------------------------------------------------------------------------- Quarter Quarter Ended Ended ($ in millions, except per share amounts) 3/31/02 3/31/01 -------------------------------------------------------------------------------- REVENUES: Sales and services $2,719 $2,492 OPERATING COSTS AND EXPENSES: Cost of sales and services 1,990 1,854 Selling, general and administrative expenses 28 15 ------- ------- Total operating costs and expenses 2,018 1,869 ------- ------- OPERATING INCOME 701 623 OTHER INCOME AND (EXPENSE): Interest expense, net (411) (349) Other income (expense), net 24 (11) Equity in earnings of affiliates (before income tax) 29 50 Loss on sale of investment (57) -- Nonrecurring severance and transaction costs -- (94) ------- ------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 286 219 Income tax provision 106 65 Minority interest (income) expense (12) 32 ------- ------- INCOME FROM CONTINUING OPERATIONS 192 122 Loss from operations of discontinued components (net of income taxes of $13 and $6, respectively) (32) (11) ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 160 111 Cumulative effect of accounting change (net of income taxes of $155) (473) -- ------- ------- NET INCOME (LOSS) $(313) $111 ======= ======= DILUTED EARNINGS PER SHARE: Income from continuing operations $0.36 $0.23 Discontinued operations (0.06) (0.02) Cumulative effect of accounting change (0.88) -- ------- ------- Total $(0.58) $0.21 ======= ======= Diluted weighted average shares outstanding (in millions) 541 544 ======= ======= THE AES CORPORATION --- Supplemental Schedule Reconciliation of GAAP Net Income before discontinued operations and accounting change to Net Income excluding Brazil, Argentina and Venezuela foreign currency effects, effects of FAS No. 133 and nonrecurring items. FOR THE PERIODS ENDED MARCH 31, 2002 AND 2001 ($ in millions, except per share amounts) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Quarter ended Quarter ended 3/31/2002 3/31/2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Amount Amount Amount Amount per share per share ------- ---------- ------- ----------- Net Income before discontinued operations and accounting change $192 $0.36 $122 $0.23 South America foreign currency transaction losses, net (1) 27 0.05 52 0.10 Mark to market gains from FAS No. 133 (2) (75) (0.14) (4) (0.01) Loss on sale of investment (3) 50 0.09 -- -- Transaction and severance costs related to IPALCO transaction -- -- 61 0.11 ------- ---------- ------- ----------- Net Income from recurring operations $194 $0.36 $231 $0.43 ======= ========== ====== =========== Diluted weighted shares outstanding (in millions) 541 558 ========== =========== (1) South America foreign currency transaction losses, net, consist of the following in 2002: a loss of approximately $10 million after income tax, or $0.02 per share, from Brazil; a loss of approximately $82 million after income tax, or $0.15 per share, from Argentina; and a gain of approximately $65 million after income tax, or $0.12 per share, from Venezuela. For 2001, South America foreign currency transaction losses, net, consist of the following: a loss of approximately $59 million after income tax, or $0.11 per share, from Brazil, and a gain of approximately $7 million after income tax, or $0.01 per share, from Venezuela. (2) Mark to market gains from FAS No. 133 consist of the following in 2002: a gain of approximately $9 million after income tax, or $0.02 per share, from interest rate instruments, a gain of approximately $4 million after income tax, or $0.01 per share, from foreign exchange rate instruments, and a gain of $62 million after income tax, or $0.11 per share, from commodity contracts. For 2001, mark to market gains from FAS No. 133 consist of the following: a loss of approximately $16 million after income tax, or $0.03 per share, from interest rate instruments, a gain of approximately $15 million after income tax, or $0.03 per share, from foreign exchange rate instruments, and a gain of approximately $5 million after income tax, or $0.01 per share, from commodity contracts. (3) Loss on sale of investment relates to the loss realized, net of income tax, on the sale of CANTV shares in March 2002. Business Segment Results AES's business segments, which include Contract Generation, Large Utilities, Competitive Supply and Growth Distribution generated combined income from recurring operations before income taxes (EBT) of $ 419 million for the first quarter of 2002 as compared to $490 million during the same period last year. Contract Generation Contract Generation consists of our power plants located around the world that have contractually limited their exposure to commodity price risks (primarily electricity prices) for a period of at least five years and for 75% or more of their expected output capacity. For the first quarter of 2002, Contract Generation revenues were $641 million and represented 24% of total revenues for the quarter. The most significant contributions continued to be from North and South America, which in aggregate comprised 63% of Contract Generation revenue for the quarter. Revenues were enhanced with the addition of a global mix of new businesses totaling 2,002 MW (added subsequent to the first quarter of 2001), including Ironwood in Pennsylvania (705 MW natural gas), Ebute in Nigeria (290 MW gas), Medina Valley in Illinois (47 MW natural gas), Haripur in Bangladesh (360 MW natural gas) and Kelvin in South Africa (600 MW coal). The operating margin (as a percentage of sales) for our Contract Generation segment showed continued and growing strength at 42% in the first quarter of 2002, with stronger margins at the Gener plants in Chile, Kilroot in Northern Ireland, Tisza in Hungary, Lal Pir and Pak Gen in Pakistan and Jiaozuo in China. Also, better than segment average margin percentages resulted from several new businesses, including Ironwood, Ebute and Haripur. As a result, Contract Generation delivered $176 million of EBT (or 42% of the total) for the first quarter of 2002, a slight increase from 2001 first quarter EBT of $168 million (or 34%). The margin improvements across the several businesses mentioned above in 2002 were offset by Tiete in Brazil due to lower demand resulting from the effects of power rationing (which ended in mid-March 2002) and from Thames in Connecticut, because of contractual price decreases in 2002 as compared to 2001. Competitive Supply Competitive Supply consists of our power plants and retail supply businesses that sell electricity directly to wholesale and retail customers in competitive markets and as a result are generally more sensitive to fluctuations in the market price of electricity, natural gas and coal, in particular. For the first quarter of 2002, revenues for this segment were $737 million and represented 27% of total revenues for the quarter. The most significant contributions continued to be from the competitive markets of North America and Europe, which in aggregate comprised 86% of Competitive Supply revenue for the quarter. Growth in revenues was approximately 6% and was driven primarily by a significant increase at NewEnergy, our competitive retail supplier of commercial and industrial electricity customers, where revenues doubled over first quarter 2001 along with increases associated with new businesses at Ottana in Italy (140 MW oil) and Delano in California (50 MW gas). The operating margin (as a percentage of sales) for our Competitive Supply segment was 17% in the first quarter of 2002, with significant progress in margins reflected in the retail component, primarily NewEnergy. These improvements were slightly outweighed by lower competitive wholesale electricity prices in some regions due to the devaluation of the peso in Argentina, a mild winter in the Northeastern U.S. and lower prices created by excess generating capacity in the U.K. As a result, and notwithstanding lower wholesale prices in several regions during the first quarter of 2002, Competitive Supply, with the strength of the retail component, generated $60 million of EBT (or 14% of the total) for the first quarter of 2002, a variation from the 2001 first quarter EBT of $80 million (or 16%). Large Utilities The Large Utilities segment is comprised of our five large integrated utilities that serve over 11 million customers in North America, the Caribbean and South America. Businesses include IPALCO in Indiana, CILCORP in Illinois, EDC in Venezuela along with CEMIG (an equity affiliate) and Eletropaulo in Brazil. For the first quarter of 2002, revenues for this segment were nearly $1 billion at $975 million and represented 36% of total revenues for the quarter. The significant increase in revenues of 39% resulted from consolidating the results of Eletropaulo (serving Sao Paulo, Brazil) beginning in February 2002 when AES acquired control of that business with a 70% ownership interest (increased from 50% prior to that date when Eletropaulo was treated as an equity affiliate). Mild weather dampened comparable revenues in our North American large utilities. The operating margin (as a percentage of sales) was 26% and benefited from improvements at IPALCO during the quarter resulting from cost reductions and efficiency improvements since AES's acquisition in March 2001. Large Utilities generated $140 million of EBT (or 34% of the total) for the first quarter of 2002, down from 2001 first quarter EBT of $242 million (or 50%). The reduction in first quarter 2002 results from reduced contributions (after associated interest costs) from Eletropaulo and CEMIG (an equity method affiliate serving Minais Gerais, Brazil) that arise primarily from reduced demand because of power rationing in Brazil through mid-March 2002. Growth Distribution Our Growth Distribution businesses showed strengthened profitability during the first quarter of 2002. This segment, serving over 5 million customers consists of electricity distribution companies that are generally located in developing countries or regions where the demand for electricity is expected to grow at a rate higher than in more developed regions. For the first quarter of 2002, revenues were $366 million and represented 13% of total revenues for the quarter. The most significant contributions continued to be from the Caribbean and South America, which in aggregate comprised 75% of growth Distribution revenue for the quarter. Growth Distribution revenues increased at Sul in Brazil and Telasi in Georgia as well as from new distribution companies including Sonel in Cameroon and Kievoblenergo and Rivnooblenergo in Ukraine. These increases were offset by reductions in Argentina because of the devaluation of the Argentine peso and the change to an equity affiliate at Cesco in India in the third quarter of 2001. The operating margin (as a percentage of sales) was 22% and showed growing strength and improvement across most of the segment, particularly at Sul, Telasi and Ede Este, offset only by reductions from the Argentine businesses. As a result, Growth Distribution generated $43 million of EBT (or 10% of the total) for the first quarter of 2002, a significant increase from breakeven in the first quarter of 2001. THE AES CORPORATION --- Supplemental Data ------------------2001----------------- -2002-- 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr ------- ------- ------- ------- ---- ------- GEOGRAPHIC - % of Total North America Revenues 38% 37% 44% 37% 39% 35% Income before Taxes (1) 41% 29% 58% 40% 42% 39% Caribbean (2) Revenues 21% 22% 19% 17% 20% 15% Income before Taxes (1) 17% 29% 14% 27% 21% 11% South America Revenues 17% 20% 17% 21% 19% 28% Income before Taxes (1) 34% 37% 20% 22% 29% 24% Europe/Africa Revenues 16% 14% 17% 20% 17% 17% Income before Taxes (1) 4% (2)% 1% 6% 2% 15% Asia Revenues 8% 7% 3% 5% 5% 5% Income before Taxes (1) 4% 7% 7% 5% 6% 11% SEGMENTS - % of Total Contract Generation Revenues 28% 28% 26% 26% 27% 24% Operating Margin (3) 38% 37% 30% 45% 38% 37% Income before Taxes (1) 34% 22% 20% 58% 33% 42% Competitive Supply Revenues 28% 27% 33% 30% 29% 27% Operating Margin (3) 26% 17% 24% 15% 21% 17% Income before Taxes (1) 16% 4% 22% 3% 12% 14% Large Utilities Revenues 28% 27% 27% 23% 26% 36% Operating Margin (3) 31% 37% 36% 26% 32% 35% Income before Taxes (1) 50% 71% 58% 18% 50% 34% Growth Distribution Businesses Revenues 16% 18% 14% 21% 18% 13% Operating Margin (3) 5% 9% 10% 14% 9% 11% Income before Taxes (1) - 3% - 21% 5% 10% FINANCIAL HIGHLIGHTS - $ in millions, except Total Assets in billions Revenues $2,492 $2,187 $2,261 $2,347 $9,287 $2,719 Gross Margin Percentage 26% 21% 23% 29% 25% 27% Income before Taxes (1) $490 $412 $374 $357 $1,633 $419 Net Income Excluding Extraordinary and Other Items (4) $231 $178 $158 $159 $726 $194 Total Assets (billions) $36 $36 $36 $37 $37 $40 Deprec./Amort. $204 $210 $222 $221 $857 $192 (1) Income before taxes excludes the Corporate and Business Development segment. The following items are included in the Corporate and Business Development segment: corporate interest, other corporate costs, business development expenses, Brazilian affiliates foreign currency effects, Argentine affiliates foreign currency effects, Venezuelan affiliates foreign currency effects, effects of FAS No. 133, nonrecurring items, discontinued operations and cumulative effect of accounting change. (2) Includes Venezuela and Colombia. (3) Operating Margin is revenues reduced by cost of sales, depreciation and amortization and other operating expenses. (4) Net Income excludes Brazilian affiliates foreign currency effects, Argentine affiliates foreign currency effects, Venezuelan affiliates foreign currency effects, effects of FAS No. 133, nonrecurring items, discontinued operations and cumulative effect of accounting change. THE AES CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 2002 AND DECEMBER 31, 2001 March 31, December 31, ($ in millions) 2002 2001 ---------- ------------ Assets: Current assets: Cash and cash equivalents $ 1,313 $ 922 Short term investments 573 588 Accounts receivable, net of reserves of $443 and $247, respectively 1,987 1,582 Inventory 550 625 Receivable from affiliates 9 10 Deferred income taxes 289 260 Prepaid expenses and other assets 1,136 606 Current assets of discontinued operations 52 59 ---------- ----------- Total current assets 5,909 4,652 Property, Plant and Equipment: Land 1,004 580 Electric generation and distribution assets 23,765 21,263 Accumulated depreciation (4,337) (3,312) Construction in progress 4,794 4,729 ---------- ----------- Property, plant and equipment, net 25,226 23,260 Other assets: Deferred financing costs, net 435 477 Project development costs 64 68 Investment in and advances to affiliates 1,737 3,100 Debt service reserves and other deposits 396 474 Goodwill, net 3,105 3,208 Long-term assets of discontinued operations 247 427 Other assets 3,082 1,069 ---------- ----------- Total other assets 9,066 8,823 ---------- ----------- Total Assets $ 40,201 $ 36,735 ========== =========== Liabilities & Stockholders' Equity Current liabilities: Accounts payable $ 1,388 $ 816 Accrued interest 379 283 Accrued and other liabilities 1,488 1,181 Current liabilities of discontinued operations 240 89 Recourse debt-current portion 425 488 Non-recourse debt-current portion 3,526 2,184 ---------- ----------- Total current liabilities 7,446 5,041 Long-term liabilities Recourse debt 5,351 4,912 Non-recourse debt 15,268 14,545 Deferred income taxes 2,051 1,905 Long-term liabilities of discontinued operations 8 286 Other long-term liabilities 3,570 1,999 ---------- ----------- Total long-term liabilities 26,248 23,647 Minority interest 1,270 1,530 Company obligated convertible mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of AES 978 978 Stockholders' equity: Common stock 5 5 Additional paid-in capital 5,232 5,225 Retained earnings 2,496 2,809 Accumulated other comprehensive loss (3,474) (2,500) ---------- ----------- Total stockholders' equity 4,259 5,539 ---------- ----------- Total Liabilities and Stockholders' Equity $ 40,201 $ 36,735 ========== =========== March 31, December 31, Capitalization: 2002 2001 ------------------- ------------------- Recourse debt $ 5.78 $ 5.40 Non-recourse debt 18.79 16.73 ------------------- ------------------- Total debt 24.57 22.13 Preferred Securities 0.98 0.98 Minority Interest 1.27 1.53 Stockholders' equity 4.26 5.54 ------------------- ------------------- Total capitalization $ 31.08 $ 30.18 =================== =================== Selected Balance Sheet Data by Geographic Region: Property, Plant Total Non-recourse March 31, 2002 & Equipment Assets Debt -------------------------------------------------------------------------------- North America 30% 25% 28% Caribbean 19% 17% 17% South America 25% 34% 35% Europe/Africa 19% 16% 15% Asia 7% 7% 5% Discontinued operations - - - Corporate - 1% - December 31, 2001 North America 32% 27% 31% Caribbean 20% 19% 19% South America 20% 28% 27% Europe/Africa 22% 18% 18% Asia 6% 6% 5% Discontinued operations - 1% - Corporate - 1% - Selected Balance Sheet Data by Line of Business: Property, Plant Total Non-recourse March 31, 2002 & Equipment Assets Debt -------------------------------------------------------------------------------- Contract Generation 33% 31% 34% Competitive Supply 30% 24% 22% Large Utilities 30% 36% 37% Growth Distribution Businesses 7% 8% 7% Discontinued operations - - - Corporate - 1% December 31, 2001 Contract Generation 36% 33% 38% Competitive Supply 34% 28% 24% Large Utilities 21% 25% 30% Growth Distribution Businesses 9% 12% 8% Discontinued operations - 1% - Corporate - 1% - The AES Corporation Parent Operating Cash Flow and Interest Coverage Information Parent Operating Cash Flow, formerly described as "Parent EBITDA", for the twelve months ended March 31, 2002 was $1.31 billion; a 36% increase compared with the $965 million reported for the twelve months ended March 31, 2001. Parent Operating Cash Flow reflects cash payments to the holding company (the "Parent Company") from its subsidiary operating businesses (consisting of dividends, consulting and management fees, tax sharing payments and interest income), less Parent operating expenses. Parent Operating Cash Flow is measured after payment of principal and interest on non-recourse debt as well as maintenance capital expenditures at those businesses. As a result, it represents the cash flow that is available to service the Parent Company's liquidity needs, including debt service. For more detailed information regarding Parent Operating Cash Flow and consolidated cash flows see the tables and notes below. 12 Months 12 Months Ended Ended Year Ended December 31, Mar 31, Mar 31, Parent Only Data 1998 1999 2000 2001 2002 2001 ---- ---- ---- ---- --------- --------- In millions, except percentages and ratios Parent Operating Cash Flow (1) $360 $403 $871 $1,163 $1,314 $965 Parent Interest Charges (2) $118 $164 $216 $391 $428 $254 Interest Coverage Ratio (3) 3.05x 2.46x 4.03x 2.97x 3.07x 3.80x Parent Operating Cash Flow by Region: North America 48% 60% 39% 54% 56% 37% Caribbean 6% 7% 29% 17% 11% 20% South America 25% 8% 17% 12% 15% 27% Europe 20% 19% 11% 9% 8% 13% Asia 1% 6% 4% 8% 10% 3% Parent Operating Cash Flow by Line of Business Contract Generation 67% 67% 44% 39% 46% 40% Large Utilities 14% 3% 39% 31% 36% 35% Competitive Supply 13% 24% 12% 28% 17% 21% Growth Distribution Businesses 6% 6% 5% 2% 1% 4% Parent Only Data 3 Months Ended (Quarterly): Jun 30, Sept. 30, Dec. 31, Mar. 31, Mar. 31, 2001 2001 2001 2002 2001 ------- --------- -------- -------- -------- Parent Operating Cash Flow $258 $335 $390 $331 $180 Parent Interest Charges $80 $112 $120 $116 $79 Interest Coverage Ratio 3.23x 2.99x 3.25x 2.85x 2.28x 12 Months Ended (Last Four Quarters): Jun 30, Sept. 30, Dec. 31, Mar. 31, Mar. 31, 2001 2001 2001 2002 2001 ------- --------- -------- -------- -------- Parent Operating Cash Flow $1,004 $1,160 $1,163 $1,314 $965 Parent Interest Charges $267 $338 $391 $428 $254 Interest Coverage Ratio 3.76x 3.43x 2.97x 3.07x 3.80x Notes: (1) Our Parent Operating Cash Flow, formerly titled "Parent EBITDA", definition may differ from that, or similarly titled measures, used by other companies. Parent Operating Cash Flow is not a substitute for cash flows from operating activities as defined by generally accepted accounting principles, or as an indicator of operating performance or as a measure of liquidity. Parent Operating Cash Flow includes the following amounts (determined without duplication) received in cash by the Parent Company from operating subsidiaries and affiliates less Parent operating expenses: (A) Dividends. (B) Consulting and management fees. (C) Tax sharing payments. (D) Interest and other distributions paid during the period with respect to cash and other temporary cash investments. Parent Operating Cash Flow does not include the following cash payments made to the Parent Company by its subsidiaries and affiliates: (A) Returns of invested capital. (B) Repayments of debt principal. (C) Payments released from debt service reserve accounts upon the issuance of letters of credit for the benefit of subsidiaries or affiliates. (2) Parent Interest Charges include interest payments both expensed and capitalized. It excludes distributions paid for trust preferred securities. This definition may differ from that, or similarly titled measures, used by other companies. (3) Parent Interest Coverage Ratio is defined as the ratio of Parent Operating Cash Flow for such period to Parent Interest Charges for such period.