the aes corporation 2011 annual meeting of...

The AES Corporation 2011 Annual Meeting of Stockholders

April 21, 2011

Contains Forward Looking Statements

Safe Harbor Disclosure

2

Certain statements in the following presentation regarding AES’ 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’ current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to accurate projections of future interest rates, commodity prices and foreign currency pricing, continued normal or better levels of operating performance and electricity demand 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 from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see the Appendix to this presentation. 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’ filings with the Securities and Exchange Commission including but not limited to the risks discussed under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Industry Trends & Implications for AES

Industry Trends

Future of fuels

Role of state actors in sector

Energy and climate policies (economy vs. environment)

Growth of emerging

capital markets

3


Summary of AES’ Acquisition of DPL Inc.

n  Attractive regional utility with well-positioned generation fleet

n  Cash flow and earnings accretive1

n  Enhanced returns through synergies and tax attributes

n  Builds upon our successful ownership and management of IPL

n  Leverages global scale for increased purchasing power

3,818 MW

515,000 Customers

4

1.  Excluding acquisition costs.


Major Accomplishments for 2010 – Financial Highlights

$0.94 $1.113

$1.323

2010 2011 Guidance

2012 Guidance

$1,219 $1,250

$1,500

2010 2011 Guidance

2012 Guidance

5

Adjusted Earnings Per Share1 Subsidiary Distributions2

($ in Millions)

1.  A non-GAAP financial measure. See Appendix for definition and reconciliation. 2.  See Appendix for definition. 3.  Excluding costs related to acquisition of DPL. 4.  Mid-point of guidance.

4 4 4 4


Major Accomplishments for 2010 – Construction Projects Completed

Latin America

50%

Europe 38%

Asia 12%

6

846 MW – 12 Projects On-Line (As of April 2011) Torchiarolo

8 MW Solar Italy

St. Nikola (Kavarna) 156 MW Wind Bulgaria

Nueva Ventanas 270 MW Coal

Chile


Major Business Development Accomplishments for 2010

Acquisitions • Ballylumford – 1,246 MW, Northern Ireland •  Jianghe Rural Electrification Development Co.

Ltd. (JHRH) – 379 MW, China

Greenfield Closings • Wind development portfolios in Poland & UK • Saurashtra start of construction – 39 MW, India • Drone Hill financial close – 29 MW, Scotland • Mountain View financial close – 49 MW, US-CA

Greenfield Milestones • OPGC II PPA – 1,320 MW, India • Mong Duong sell down – 1,200 MW, Vietnam • Koc partnership agreement – Turkey

7

Ballylumford – 1,246 MW Gas-Fired, Northern Ireland


Major Accomplishments for 2010 – Mong Duong in Vietnam

n  Mong Duong – 1,200 MW coal-fired project in Vietnam

n  Agreement to sell 49% at a premium w  AES – 51% w  Posco Power Corporation – 30% w  China Investment Corporation –

19%

8


In 2010, AES Continued to Meet Demand for Power Following Earthquakes in Chile

1,331

729 729 1,059

1,331

Pre-Earthquake - Normal System

Demand

24 Hours After Earthquake

1 Week After Earthquake - Low System Demand

(60%)

2 Weeks After Earthquake - Low System Demand

(60%)

3 Weeks After Earthquake - Low System Demand

(60%)

9

AES Gener MW in Service


Operational Excellence – Asset Turnarounds

310 268

1,068 1,110

1,902

2,594

1,420

2,170

3,662

2008 2009 2010

Spot Sales Contract Sales

Net Production

10

Generation & Sales (GWh)

$31

$142

$279

2008 2009 2010

Gross Margin ($ in Millions)

Masinloc – 660 MW, Philippines


Turkey, Southeast Asia, India & European Renewables1

AES’ Growth Strategy of Geographic Concentration Focuses Resources to Improve Shareholder Returns

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Brazil, Chile & U.S. Sub-Markets1

Improved Profitability

n  Increased scale

n  Enhanced market knowledge

n  Earlier origination w  Better quality selection of

opportunities Simplified Investment Thesis

n  Target fewer markets; achieve better results

n  Reduce headline risk from less material businesses

1.  Above markets represent a majority of projected business development spending. These do not include additional markets currently under appraisal.


Growth Target Market – Chile

n  Central Grid (SIC) w  Energy demand is projected to increase by

72% in the next 10 years, requiring new capacity of 4,600 MW

n  Northern Grid (SING) w  Energy demand is projected to increase by

61% in the next 10 years; new capacity of 2,100 MW is required within the next 10 years

n  Strong relationships and brand name

n  Approved and tested environmental permits (2,000 MW)

n  High water quality rights (2,400 MW)

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Chile

Market Characteristics AES’ Competitive Differentiators


Growth Target Market – Turkey

n  Market opportunity of 38 GW through: w  Privatization

§  3.7 GW hydro §  11.8 GW thermal

w  Greenfield development §  Estimated annual investment of 3 GW

n  Strong partner (Koc) with successful commercial operations

n  Greenfield experience in Turkey

n  Turnaround experience with old/inefficient assets

n  Global sourcing

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Turkey

Market Characteristics AES’ Competitive Differentiators


Growth Target Market – India

0

2,000

4,000

6,000

10 Years 20 Years

China India U.S. n  Well-established relationships with government, regulators and industry

n  Recognized for development, execution and O&M capabilities

n  OPGC II (platform expansion – 1,320 MW coal-fired project)

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India

Investment in Infrastructure, $ in Billions AES’ Competitive Differentiators


Growth Target Market – U.S.

n  Cash flow and earnings accretive1

n  Enhanced returns through synergies and tax attributes

n  Builds upon our successful ownership and management of IPL

n  Leverages global scale for increased purchasing power $500

$300

$100

$50

$100

15

U.S.

Acquisition of DPL Inc. Investment Needed in U.S. Power Infrastructure 2011-2021, $ in Billions

1.  Excluding acquisition costs.

Generation

Distribution

Transmission

Environmental

Other


Projects Under Construction

Latin America

50%

Europe 39%

Asia 4%

North America

7%

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2,038 MW – 12 Projects Under Construction (As of April 2011)

Angamos 518 MW Coal Chile

Changuinola 223 MW Hydro

Panama

Niksar 40 MW Hydro Turkey


Thank You

02/18/2011 6pm eSlide - P7752 - AES TEMPLATE - DARK

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Appendix

n  Construction Program Slide 19

n  Reconciliations Slides 20-24

n  Assumptions & Definitions Slides 25-27

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2,038 MW Under Construction as of April 21, 2011

Generation (Thermal) Generation (Renewables)

Bulgaria Chile Chile Panama Italy China U.S.-WV France U.S.-CA India Turkey UK

Project Maritza Angamos Campiche Changuinola AES Solar3 Chen Qi4 Laurel Mountain InnoVent2 Mountain

View IV Saurashtra Niksar Drone Hill

% Owned 100% 71% 71% 100% 50% 49% 100% 40% 100% 100% 51% 100%

Type Coal Coal Coal Hydro Solar Wind Wind Wind Wind Wind Hydro Wind

Gross MW 670 MW 518 MW 270 MW 223 MW 24 MW 49.5 MW 98 MW 29 MW 49 MW 39 MW 40 MW 28.6 MW

Expected Commercial Operations Date

2011 2H 2011 1H 2013 2H 2011 2H 2011 2H 2011 2H 2011 2011 2011 2011 1H 2012 2H 2012

n  More than 95% of capacity is under long-term contracts

n  Maritza expected to commence commercial operations for at least some of the project’s capacity in 2011

n  Angamos Unit 1 achieved commercial operations in April 2011

1. Joint Venture with I.C. Energy. 2. InnoVent plants: Allery, Audrieu, Lamballe, Lefaux and Vron. 3. AES Solar projects: Cellino San Marco, Il Terzo and Torchiarolo. 4. Joint Venture with Guohua Energy Investment Co. Ltd. Note: These are some of our construction projects. Other projects not currently on this Slide, whether developed through acquisitions or otherwise, may be brought on-line before these projects. In addition, some of these examples may not close or be completed as anticipated due to uncertainty inherent in the development process.

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$ in Millions, Except Earnings Per Share 2011 Guidance (as of 4/20/11)1

Consolidated Adjustment Factors2 Proportional2.3

Income Statement Elements Gross Margin $4,000-$4,200 $1,550 $2,450-$2,650 Adjusted Gross Margin3 $4,850-$5,050 $1,850 $3,000-$3,200 Diluted Earnings Per Share from Continuing Operations $0.93-$0.99 Adjusted Earnings Per Share Factors3 $0.044

Adjusted Earnings Per Share3 $0.97-$1.034

Cash Flow Elements Net Cash from Operating Activities $2,650-$2,850 $1,250 $1,400-$1,600 Operational Capital Expenditures (a) $775-$850 $250 $525-$600 Environmental Capital Expenditures (b) $75-$100 - $75-$100 Maintenance Capital Expenditures (a + b) $850-950 $250 $600-$700 Free Cash Flow3 $1,750-$1,950 $1,000 $750-$950 Subsidiary Distributions5 $1,200-$1,300

Reconciliation of Free Cash Flow3

Net Cash from Operating Activities $2,650-$2,850 $1,250 $1,400-$1,600 Less: Maintenance Capital Expenditures $850-$950 $250 $600-$700

Free Cash Flow3 $1,750-$1,950 $1,000 $750-$950 Reconciliation of Adjusted Gross Margin3

Gross Margin $4,000-$4,200 $1,550 $2,450-$2,650 Depreciation & Amortization $1,250-$1,350 $300 $950-$1,050 General & Administrative $450 - $450 Adjusted Gross Margin3 $4,850-$5,050 $1,850 $3,000-$3,200

Reconciliation of 2011 Guidance, Including Proportional Metrics

1.  2011 guidance is based on expectations for future foreign exchange rates and commodity prices as of March 31, 2011, as well as other factors set for in “Guidance” in the press release. 2.  The AES Corporation (the “Company”) is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are not wholly-owned by the Company. Accordingly, the

Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure) to account for the Company’s ownership interest. In many cases, the Company has no legal claim on these cash flows. See “definitions.”

3.  A non-GAAP financial measure as reconciled above. See “definitions.” 4.  Reconciliation of Adjusted EPS includes impairment unrealized foreign currency losses of $0.03, derivative losses of $0.02, debt retirement losses of $0.01 and gain on disposition of assets of $0.02. 5.  See “definitions.”

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$ in Millions, Except Earnings Per Share 2012 Guidance (as of 4/20/11)1

Consolidated Adjustment Factors2 Proportional2.3

Income Statement Elements Diluted Earnings Per Share from Continuing Operations $1.15-$1.25 Adjusted Earnings Per Share Factors3 $0.124

Adjusted Earnings Per Share3 $1.27-$1.374

Cash Flow Elements Net Cash from Operating Activities $3,300-$3,500 $1,275 $2,025-$2,225 Operational Capital Expenditures (a) $925-$1,025 $250 $675-$775 Environmental Capital Expenditures (b) $100-$150 $25 $75-$125 Maintenance Capital Expenditures (a + b) $1,025-$1,175 $275 $750-$900 Free Cash Flow3 $2,200-$2,400 $1,000 $1,200-$1,400 Subsidiary Distributions5 $1,400-$1,600

Reconciliation of Free Cash Flow3

Net Cash from Operating Activities $3,300-$3,500 $1,275 $2,025-$2,225 Less: Maintenance Capital Expenditures $1,025-$1,175 $275 $750-$900

Free Cash Flow3 $2,200-$2,400 $1,000 $1,200-$1,400

Reconciliation of 2012 Guidance, Including Proportional Metrics

1.  2012 guidance is based on expectations for future foreign exchange rates and commodity prices as of March 31, 2011, except for Brazilian Real (BRL), as well as other factors set for in “Guidance” in the press release.

2.  The AES Corporation (the “Company”) is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are not wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure) to account for the Company’s ownership interest. In many cases, the Company has no legal claim on these cash flows. See “definitions.”

3.  A non-GAAP financial measure as reconciled above. See “definitions.” 4.  Reconciliation of Adjusted EPS includes impairment unrealized foreign currency losses of $0.03, derivative losses of $0.01 and debt retirement losses of $0.08. 5.  See “definitions.”

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Reconciliation of Adjusted Earnings Per Share1

Fourth Quarter Full Year

2010 2009 2010 2009

Diluted EPS from Continuing Operations ($0.56)2 $0.07 ($0.11)2 $1.06

Derivative Mark-to-Market (Gains)/Losses3 - ($0.04) ($0.01) $0.02

Currency Transaction (Gains)/Losses4 $0.01 ($0.02) ($0.04) ($0.04)

Disposition/Acquisition (Gains)/Losses - - -5 ($0.19)6

Impairment Losses $0.767 $0.208 $1.079 $0.2110

Debt Retirement (Gains)/Losses $0.0211 - $0.0312 -

Adjusted EPS1 $0.23 $0.21 $0.94 $1.06

1.  A non-GAAP financial measure as reconciled above. See “definitions.” 2.  For the quarter and year ended December 31, 2010 the Company reported a loss from continuing operations. For purposes of measuring loss per share under GAAP, common stock equivalents were

excluded from weighted average shares as their inclusion would be anti-dilutive. However, for purposes of computing Adjusted EPS (a non-GAAP measure), the Company has included the impact of dilutive common stock equivalents as the inclusion of the defined adjustments result in income for Adjusted EPS. The inclusion of dilutive common stock equivalents in the calculation of non-GAAP loss from continuing operations does not change the GAAP loss of $0.56 and $0.11 per share for the quarter and year ended December 31, 2010, respectively.

3.  Derivative mark-to-market (gains)/losses were net of income tax per share of $0.01 and ($0.01) in the three months ended December 31, 2010 and 2009, respectively, and of $0.00 and $0.01 for the twelve months ended December 31, 2010, and 2009, respectively.

4.  Unrealized foreign currency transaction (gains)/losses were net of income tax per share of $0.00 and $0.01 in the three months ended December 31, 2010 and 2009, respectively, and of $0.00 and $0.01 in the twelve months ended December 31, 2010 and 2009, respectively.

5.  The Company has not adjusted for the gain or the related tax effect from the sale of its indirect investment in CEMIG, disclosed in Note 7—Investments in and Advances to Affiliates, of the Form 10-K, in its determination of adjusted EPS because the gain was recognized by an equity method investee. The Company does not adjust for transactions of its equity method investees in its determination of adjusted EPS.

6.  Amount includes: Kazakhstan gain of $98 million, or $0.15 per share, related to the termination of a management agreement as well as a gain of $13 million, or $0.02 per share, related to the reversal of a withholding tax contingency. In addition, there was a gain on sale associated with the shutdown of the Hefei plant in China of $14 million, or $0.02 per share. There were no taxes associated with any of these transactions.

7.  Amount primarily includes asset impairments at Eastern Energy of $827 million, and Deepwater of $79 million ($537 million, or $0.68 per share, and $51 million, or $0.06 per share, net of income tax, respectively).

8.  Amount includes: Goodwill impairments at Kilroot of $118 million or $0.18 per share and in the Ukraine of $4 million or $0.01 per share; write-off of development project costs in Latin America and Asia of $19 million ($11 million net of noncontrolling interest, or $0.01 per share). There was no income tax impact associated with any of these transactions.

9.  Amount primarily includes asset impairments at Eastern Energy of $827 million, Southland (Huntington Beach) of $200 million, Tisza of $85 million, and Deepwater of $79 million ($537 million, or $0.69 per share, $130 million, or $0.17 per share, $69 million, or $0.09 per share, and $51 million, or $0.07 per share, net of income tax, respectively) and goodwill impairment at Deepwater of $18 million (or $0.02 per share, with no income tax impact).

10.  Amount includes the items discussed in Note 7 above in addition to an impairment of $10 million, or $0.01 per share, of the Company’s investment in a company developing “blue gas” (coal to gas) technology. There was no income tax impact associated with any of these transactions.

11.  Amount includes loss on retirement of debt at Andres of $9 million or $0.01 per share, and at the Parent Company of $6 million, ($4 million, or $0.01 per share, net of tax). 12.  Amount includes loss on retirement of debt at the Parent Company of $15 million, at Andres of $10 million, and at Itabo of $8 million ($10 million, or $0.01 per share, net of income tax at the Parent

Company, $0.01 per share at Andres, and $4 million, or $0.01 per share, net of noncontrolling interest at Itabo).

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Reconciliation of Full Year Capex

$ in Millions Consolidated Full Year

2010 2009

Operational Capex (a) $726 $567

Environmental Capex (b) $71 $55

Maintenance Capex1 (a + b) $797 $622

Growth Capex1 (c) $1,535 $1,916

Total Capex2 (a + b + c) $2,332 $2,538

$ in Millions Consolidated Full Year Proportional1,3 Full Year

2010 2009 2010 2009

Operating Cash Flow $3,510 $2,202 $1,901 $1,331

Less Maintenance Capex1 $797 $622 $557 $438

Free Cash Flow1 $2,713 $1,580 $1,344 $893

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1. A non-GAAP financial measure as reconciled above. See “definitions”. 2. Includes capital expenditures under investing and financing activities. 3. The AES Corporation (the “Company”) is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are not

wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure) to account for the Company’s ownership interest. See “definitions.”


Reconciliation of Full Year Gross Margin, Operating Cash Flow & Free Cash Flow, Including Proportional Metrics

$ in Millions Full Year 2010

Consolidated Adjustment Factors1 Proportional1,2

Gross Margin $3,964 $1,671 $2,293

Operating Cash Flow $3,510 $1,609 $1,901

Free Cash Flow2 $2,713 $1,369 $1,344

$ in Millions Full Year 2009

Consolidated Adjustment Factors1 Proportional1,2

Gross Margin $3,433 $1,419 $2,014

Operating Cash Flow $2,202 $871 $1,331

Free Cash Flow2 $1,580 $687 $893

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1. The AES Corporation (the “Company”) is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are not wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure) to account for the Company’s ownership interest. See “definitions.”

2. A non-GAAP financial measure. See “definitions”.


Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: (a) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; (b) 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; (c) new business opportunities are available to AES in sufficient quantity to achieve its growth objectives; (d) no material disruptions or discontinuities occur in GDP, foreign exchange rates, inflation or interest rates during the forecast period; and (e) material business-specific risks as described in the Company’s SEC filings do not occur individually or cumulatively. 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. Also, improvement in certain KPIs such as equivalent forced outage rate and commercial availability may not improve financial performance at all facilities based on commercial terms and conditions. These benefits will not be fully reflected in the Company’s consolidated financial results.

The cash held at qualified holding companies (“QHCs”) represents cash sent to subsidiaries of the Company domiciled outside of the U.S. Such subsidiaries had no contractual restrictions on their ability to send cash to AES, the Parent Company, however, cash held at qualified holding companies does not reflect the impact of any tax liabilities that may result from any such cash being repatriated to the Parent Company in the U.S. Cash at those subsidiaries was used for investment and related activities outside of the U.S. These investments included equity investments and loans to other foreign subsidiaries as well as development and general costs and expenses incurred outside the U.S. Since the cash held by these QHCs is available to the Parent, AES uses the combined measure of subsidiary distributions to Parent and QHCs as a useful measure of cash available to the Parent to meet its international liquidity needs. 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’ indebtedness.

Assumptions

25


Definitions

n  Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses of the consolidated entity due to (a) mark-to-market amounts related to derivative transactions, (b) unrealized foreign currency gains or losses, (c) significant gains or losses due to dispositions and acquisitions of business interests, (d) significant losses due to impairments, and (e) costs due to the early retirement of debt. The GAAP measure most comparable to Adjusted EPS is diluted earnings per share from continuing operations. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and is considered in the Company's internal evaluation of financial performance. Factors in this determination include the variability due to mark-to-market gains or losses related to derivative transactions, currency gains or losses, losses due to impairments and strategic decisions to dispose or acquire business interests or retire debt which affect results in a given period or periods. Adjusted earnings per share should not be construed as an alternative to earnings per share, which is determined in accordance with GAAP.

n  Adjusted Gross Margin (a non-GAAP financial measure) is defined as gross margin plus depreciation and amortization less general and administrative expenses. AES believes adjusted gross margin is a useful measure for evaluating and comparing the operating performance of its businesses because it includes the direct operating costs of its business including overhead related expenses and excludes potential differences caused by variations in capital structures affecting interest income and expense, tax positions, such as the impact of changes in effective tax rates and the impact of depreciation and amortization expense.

n  Free cash flow (a non-GAAP financial measure) is defined as net cash from operating activities less maintenance capital expenditures (including environmental capital expenditures). AES believes that free cash flow is a useful measure for evaluating our financial condition because it represents the amount of cash provided by operations less maintenance capital expenditures as defined by our businesses, that may be available for investing or for repaying debt. Free cash flow should not be construed as an alternative to net cash from operating activities, which is determined in accordance with GAAP.

n  Parent Company Liquidity (a non-GAAP financial measure) is defined as cash at the Parent Company plus availability under corporate credit facilities plus cash at qualified holding companies (“QHCs”). 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’ indebtedness.

n  Subsidiary Liquidity (a non-GAAP financial measure) is defined as cash and cash equivalents and bank lines of credit at various subsidiaries. n  The AES Corporation (the “Company”) is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are

not wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure) to account for the Company’s ownership interest. Proportional metrics present the Company’s estimate of its share in the economics of the underlying metric. The Company believes that the Proportional metrics are useful to investors because they exclude the economic share in the metric presented that is held by non-AES shareholders. For example, Operating Cash Flow is a GAAP metric which presents the Company’s cash flow from operations on a consolidated basis, including operating cash flow allocable to noncontrolling interests. Proportional Operating Cash Flow removes the share of operating cash flow allocable to noncontrolling interests and therefore may act as an aid in the valuation the Company. Proportional metrics are reconciled to the nearest GAAP measure. Certain assumptions have been made to estimate our proportional financial measures. These assumptions include: (i) the Company’s economic interest has been calculated based on a blended rate for each consolidated business when such business represents multiple legal entities; (ii) the Company’s economic interest may differ from the percentage implied by the recorded net income or loss attributable to noncontrolling interests or dividends paid during a given period; (iii) the Company’s economic interest for entities accounted for using the hypothetical liquidation at book value method is 100%; (iv) individual operating performance of the Company’s equity method investments is not reflected and (v) all intercompany amounts have been excluded as applicable.

Non-GAAP Financial Measures

26


n  Subsidiary Distributions should not be construed as an alternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Subsidiary Distributions are important to the Parent Company because the Parent Company is a holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries’ business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation of difference between the Subsidiary Distributions and Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies.

Definitions, Cont’d.

Subsidiary Distributions

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