AES Reports Strong First Quarter Results

The AES Corporation (NYSE:AES) today reported strong first quarter 2007 results. Revenues increased 11% to $3.1 billion compared to $2.8 billion for the first quarter of 2006, while net cash from operating activities increased 14% to $581 million compared to $509 million last year.

First quarter income from continuing operations was $119 million, or $0.18 earnings per diluted share. The quarterly results were in line with the Company’s expectations excluding a non-cash charge of $35 million, or $0.05 impact on diluted earnings per share, due to an impairment of a minority investment, and a charge of $22 million, or $0.03 impact on diluted earnings per share, relating to a litigation reserve as a result of a court ruling at our subsidiary in Kazakhstan. Adjusted earnings per share (a non-GAAP financial measure) were $0.24 for the quarter and include the $0.03 charge at our subsidiary in Kazakhstan. These results compare to 2006 first quarter income from continuing operations of $330 million, or $0.49 earnings per diluted share, and adjusted earnings per share of $0.39. First quarter 2006 results included a one-time $87 million gain or $0.13 positive impact on diluted earnings per share associated with the sale of Kingston in Ontario and the sale of an additional $39 million or $0.05 positive impact on diluted earnings per share in excess emission sales.

As anticipated and previously disclosed, the Company recognized an impairment charge of approximately $638 million, or $0.94 impact on diluted earnings per share, in connection with the sale of its equity stake in its Venezuelan subsidiary C.A. La Electricidad de Caracas (EDC), now included in discontinued operations. Including these charges, the Company incurred a net loss of $455 million, or $0.67 diluted loss per share. This compares to net income of $348 million, or $0.52 earnings per diluted share in first quarter 2006.

During the quarter, AES continued to execute its growth plans. The Company signed a Memorandum of Understanding and subsequently entered into a partnership with GE Energy Financial Services to develop greenhouse gas emission reduction projects in the United States. The Company also acquired two new power plants with long-term power agreements in Tamuin, Mexico totaling 460 MW of capacity.

“The quarter reflected strong revenues, cash flow and underlying operating performance,” said Paul Hanrahan, AES President and CEO. “We continued to implement our growth strategy focusing on meeting increasing demand for energy in fast-growing markets while expanding our presence in renewables and the growing market for emission offsets.”

First Quarter 2007 Consolidated Highlights

• Revenues increased by $304 million to $3.1 billion, reflecting higher prices and increased demand primarily in Latin America, the acquisition of two new facilities in Mexico and the consolidation of Itabo, one of the Company’s businesses in the Dominican Republic, and favorable foreign currency translation.
• Gross margin decreased by $49 million to $868 million, primarily due to the benefit of higher emission sales of $39 million recorded in first quarter 2006 and $32 million cost recoveries related to prior periods in the first quarter of 2006 at Eletropaulo in Brazil. This was partially off-set by favorable foreign currency translation, contributions from the two new facilities in Mexico and the consolidation of Itabo, and improved operating performance at various subsidiaries.
• General and administrative expense increased $28 million to $85 million, largely from higher spending related to the strengthening of our financial organization, completion of our recent restatement and increased business development activities to support our growth initiatives.
• Interest expense increased by $4 million to $422 million, reflecting debt at recently acquired businesses, including the two new facilities in Mexico, interest on regulatory liabilities in Brazil and losses on interest rate derivatives. These increases were partially offset by debt retirements and lower interest rates at our Brazil subsidiaries.
• Other expense decreased $37 million to $41 million, largely due to costs associated with debt retirements at the parent company and at our businesses in El Salvador during the first quarter of 2006, partially offset by a $22 million charge in first quarter of 2007 related to a court ruling at our subsidiary in Kazakhstan.
• Gain on sale of investment decreased by $86 million due to the sale of AES Kingston, a 110 MW power plant in Ontario, Canada that resulted in a gain of $87 million in the first quarter of 2006.
• Other non-operating expense increased by $39 million to $39 million, largely due to a $35 million impairment in the Company’s minority investment in AgCert International. An impairment was determined to exist due to the application of accounting rules relating to an “other than temporary” decline in AgCert’s stock price performance during the first quarter of 2007.
• The effective tax rate during the quarter was 41% as compared to 31% in 2006. This increase was primarily due to a change in tax law in China, unfavorable tax impacts of the charges associated with the impairment of our investment in AgCert and with the court ruling in Kazakhstan, and a favorable impact in the first quarter of 2006 associated with the non-taxable sale of Kingston, offset by a tax benefit recorded upon the release of a valuation allowance at one of our subsidiaries in Argentina.
• Income from continuing operations for the first quarter of 2007 was $119 million, or $0.18 diluted earnings per share, versus $330 million, or $0.49 diluted earnings per share for the first quarter of 2006. Adjusted earnings per share for the first quarter of 2007 were $0.24 compared to $0.39 in first quarter 2006.
• During the quarter, free cash flow (a non-GAAP financial measure) increased by $68 million to $377 million, primarily due to decreases in net working capital, lower cash tax payments and contributions from the two new facilities in Mexico and the consolidation of Itabo.

First Quarter 2007 Segment Highlights

• Latin America Generation revenue increased by $139 million to $738 million, primarily due to higher contract and spot prices at Gener in Chile, the consolidation of Itabo in the Dominican Republic, and increased energy prices in Argentina. Gross margin decreased by $9 million to $250 million, primarily due to increased purchased electricity and fuel costs at Uruguaiana in Brazil and Gener in Chile and higher fixed costs at Gener, partially offset by the consolidation of Itabo and variable margin on the increased revenues in Argentina.
• Latin America Utility revenue increased by $73 million to $1.2 billion, primarily due to the positive impact of foreign currency translation in Brazil and higher tariff rates at Eletropaulo and Sul in Brazil and CAESS-EEO in El Salvador. Gross margin decreased by $19 million to $210 million, primarily due to prior period costs recovered through the tariff in first quarter 2006 at Eletropaulo in Brazil, partially offset by favorable foreign currency translation and the favorable tariff rates at Sul and CAESS-EEO.
• North America Generation revenue increased by $17 million to $510 million, primarily due to the acquisition of the two new facilities in Mexico, higher spot prices at Eastern Energy in New York and planned outages at Warrior Run in Maryland and AES Hawaii in first quarter 2006. These gains were mostly offset by lower emission sales in New York and outages at Merida in Mexico and at Deepwater in Texas. Gross margin decreased by $20 million to $154 million, primarily due to lower emission sales at Eastern Energy in New York.
• North America Utility revenue increased by $8 million to $263 million, primarily due to higher volumes at IPL in Indiana. Gross margin increased by $17 million to $81 million primarily due to higher volume and lower maintenance costs associated with generation unit overhauls in first quarter of 2006 at IPL.
• Europe & Africa Generation revenue increased by $44 million to $252 million, primarily due to higher volume and prices in Kazakhstan, favorable foreign currency translation and higher volume and prices in Hungary. Gross margin increased by $10 million to $90 million, primarily due to higher revenues in Kazakhstan and favorable foreign currency translation, partially offset by lower emission sales at Bohemia in Czech Republic.
• Europe & Africa Utility revenue increased by $14 million to $166 million, primarily due to higher tariff rates in Ukraine and foreign currency translation gains. Gross margin decreased by $19 million to $17 million due to reduced rainfall in Cameroon which led to increased fuel costs and an unfavorable derivative mark-to-market variance at AES SONEL in Cameroon. Additionally, AES SONEL experienced higher fixed costs related to increased staffing and higher depreciation.
• Asia Generation revenue increased by $18 million to $212 million, primarily due to higher volume in Pakistan and an outage at Ras Laffan in Qatar in 2006, partially offset by lower volumes in Sri Lanka. Gross margin decreased by $5 million to $58 million, primarily due to lower volumes in Sri Lanka and higher planned maintenance costs at Barka in Oman.

Non-GAAP Financial Measures

See Non-GAAP Financial Measures for definitions of adjusted earnings per share and free cash flow and reconciliations to the most comparable GAAP financial measure.

Attachments

Condensed Consolidated Statements of Operations, Segment Information, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information.

Conference Call Information

AES will host a conference call on Thursday, June 21, 2007 at 8:30 a.m. Eastern Daylight Time (EDT). The call may be accessed via a live webcast which will be available at www.aes.com by selecting “Investor Information” and then “Quarterly Financial Results” or by telephone in listen-only mode at (888)-802-7346. International callers should dial (973)-582-2785. Please call at least ten minutes before the scheduled start time. You will be requested to provide your name and affiliation. The AES Financial Review presentation will be available prior to the call at www.aes.com by selecting “Investor Information” and then “Quarterly Financial Results.”

A telephonic replay will be available at approximately 12:00 p.m. EDT by dialing (877)-519-4471 or (973)-341-3080 for international callers. The system will ask for a reservation number; please enter 8931602 followed by the pound key (#). The telephonic replay will be available until July 11, 2007. A webcast replay, as well as a replay in downloadable .mp3 format, will be accessible at www.aes.com beginning shortly after the completion of the call.

About AES

AES is one of the world’s largest global power companies, with 2006 revenues of $12.3 billion. With operations in 28 countries on five continents, AES’s generation and distribution facilities have the capacity to serve 100 million people worldwide. Our 13 utilities amass annual sales of over 73,000 GWh and our 121 generation facilities have the capacity to generate approximately 40,000 megawatts. Our global workforce of 32,000 people is committed to operational excellence and meeting the world’s growing power needs. To learn more about AES, please visit www.aes.com or contact AES media relations at media@aes.com.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and of the Securities Exchange Act of 1934. 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 volume at our distribution companies and operational performance at our generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth investments at normalized 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 Item 1A “Risk Factors” in AES’s 2006 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.