AES Reports Second Quarter 2003 Income from Continuing Operations of $0.11 Per Share.Business Editors ARLINGTON Arlington, county, United States Arlington, county (1990 pop. 170,936), N Va., across the Potomac River from Washington, D.C. Arlington is a residential and commercial suburb of Washington. , Va.--(BUSINESS WIRE)--July 30, 2003 $991 Million In Parent Company Liquidity Provides Renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. Flexibility For Delevering And Growth The AES Corporation AES Corporation AES (NYSE) is a Fortune 1000 company that generates and distributes electrical power. It was founded on January 28, 1981 by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. (NYSE NYSE See: New York Stock Exchange :AES) announced today that income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the quarter ended June June: see month. 30, 2003, was $65 million, or $0.11 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, up from a loss of $(101) million, or $(0.19) per diluted share for the second quarter of 2002. Income from continuing operations for the six months ended June 30, 2003, was $142 million, or $0.25 per diluted share, up from income of $11 million, or $0.02 per diluted share, for the six months ended June 30, 2002. Net loss for the quarter ended June 30, 2003 was $(129) million, or $(0.22) per diluted share compared to a loss of $(115) million, or $(0.22) per diluted share for the second quarter of 2002. Net loss for the six months ended June 30, 2003 was $(35) million, or $(0.06) per diluted share compared to a loss of $(428) million, or $(0.80) per diluted share, for the six months ended June 30, 2002. The net losses for all periods included charges for discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . For the second quarter of 2003, the charges in discontinued operations primarily arise from the Company's decision to classify clas·si·fy tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies 1. To arrange or organize according to class or category. 2. To designate (a document, for example) as confidential, secret, or top secret. it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have businesses in The Republic of Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. as held for sale. Revenues for the quarter ended June 30, 2003 were $2.2 billion, up from $2.0 billion for the quarter ended June 30, 2002. Revenues for the six months ended June 30, 2003 were $4.4 billion, up from $4.2 billion for the six months ended June 30, 2002. Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the quarter ended June 30, 2003 was $459 million, up from $409 million for the quarter ended June 30, 2002. Operating Income for the six months ended June 30, 2003 was $1.04 billion, down from $1.05 billion for the six months ended June 30, 2002. AES also announced that consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net cash provided by operating activities for the second quarter of 2003 was $291 million and $737 million for the first half of 2003. Additionally, its subsidiary distributions to parent and qualified holding companies for the second quarter of 2003 totaled $300 million and $480 million for the first half of 2003. Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Hanrahan, Chief Executive Officer stated, "We are extremely pleased with the progress we have made in improving the financial situation of the Company. Looking back over the last 9 months and culminating with yesterday's completion of our bank loan financing, we have refinanced or raised approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5 billion of debt while increasing the average life of our parent maturities from 5.8 years to 7.8 years. During the quarter we also successfully raised $335 million in a common stock offering. In addition, we now have approximately $1 billion of cash on hand which provides renewed flexibility to continue our deleveraging program and to pursue attractive growth opportunities." Barry Barry, Welsh Barri, town (1991 pop. 45,053) and port, Vale of Glamorgan, S Wales, on the Bristol Channel. Once a major coal-exporting port, its more diversified export products include cement, flour, and steel products. Sharp, Chief Financial Officer, stated, "In addition to the significant improvement in our maturity profile, we also continued to grow our corporate liquidity position with total distributions to the parent and qualified holding companies of $480 million through the first six months of 2003. Along with the proceeds from asset sales, we have also repaid debt at the parent level by over $660 million since December December: see month. 2002 and we plan to continue that progress with our recently announced intention to call our $198 million 10.25% 2006 notes. For the full year of 2003 we continue to expect consolidated net cash provided by operating activities of approximately $1.5 billion, with $737 million generated through the first six months." Conference Call Information This information will be discussed on a conference call to be held on Wednesday Wednesday: see week. July July: see month. 30, 2003, at 9:00 am (Eastern Time). You may access the call via a live web cast which will be available online at http://www.aes.com under the Investor Relations Investor relations The process by which the corporation communicates with its investors. section. This web cast will be available online until Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , August 8, 2003. A telephonic replay of the call will also be available from approximately 12:00 pm on Wednesday, July 30, until 6:00 pm on Friday, August 8 (Eastern Time). Please dial (877) 519 4471. The system will ask for a reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number; please enter 4005505 followed by the pound key (#). International callers should dial (973) 341 3080. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This news release may contain "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " regarding The AES Corporation's business. These statements are not historical facts, but statements that involve risks and uncertainties. Actual results could differ materially from those projected in these forward-looking statements. For a discussion of such risks and uncertainties, see "Risk Factors" in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the most recently ended fiscal year. AES is a leading global power company comprised of contract generation, competitive supply, large utilities and growth distribution businesses. The company's generating assets include interests in 158 facilities totaling over 55 gigawatts of capacity, in 28 countries. AES's electricity distribution network sells 108,000 gigawatt gig·a·watt n. Abbr. GW One billion (109) watts. hours per year to over 16 million end-use customers. For more general information visit our web site at www.aes.com or contact investor relations at investing@aes.com.
THE AES CORPORATION
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 2003 AND 2002
----------------------------------------------------------------------
Quarter Quarter
Ended Ended
($ in millions, except per share amounts) 6/30/2003 6/30/2002
----------------------------------------------------------------------
REVENUES:
Sales and services $2,192 $2,038
OPERATING COSTS AND EXPENSES:
Cost of sales and services 1,701 1,602
Selling, general and administrative expenses 32 27
---------- ----------
Total operating costs and expenses 1,733 1,629
---------- ----------
OPERATING INCOME 459 409
OTHER INCOME AND (EXPENSE):
Interest expense, net (521) (415)
Other income (expense), net 162 (90)
Equity in earnings of affiliates (before income
tax) 21 26
Loss on sale of investments - (59)
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST 121 (129)
Income tax expense 34 (7)
Minority interest expense (income) 22 (21)
---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 65 (101)
Income (loss) from operations of discontinued
components (net of income taxes of $0 and $(2),
respectively) (194) (141)
---------- ----------
LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (129) (242)
Cumulative effect of accounting change (net of
income taxes of $83, respectively) - 127
---------- ----------
NET LOSS $(129) $(115)
========== ==========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $0.11 $(0.19)
Discontinued operations (0.33) (0.27)
Cumulative effect of accounting change - 0.24
---------- ----------
Total $(0.22) $(0.22)
========== ==========
Diluted weighted average shares
outstanding (in millions) 577 535
========== ==========
THE AES CORPORATION
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
----------------------------------------------------------------------
Six Months Six Months
Ended Ended
($ in millions, except per share amounts) 6/30/2003 6/30/2002
----------------------------------------------------------------------
REVENUES:
Sales and services $4,385 $4,214
OPERATING COSTS AND EXPENSES:
Cost of sales and services 3,283 3,109
Selling, general and administrative expenses 62 54
---------- ----------
Total operating costs and expenses 3,345 3,163
---------- ----------
OPERATING INCOME 1,040 1,051
OTHER INCOME AND (EXPENSE):
Interest expense, net (1,022) (809)
Other income (expense), net 205 (147)
Equity in earnings of affiliates (before income
tax) 45 55
Loss on sale of investments - (116)
---------- ----------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 268 34
Income tax expense (benefit) 73 54
Minority interest expense (income) 53 (31)
---------- ----------
INCOME FROM CONTINUING OPERATIONS 142 11
Income (loss) from operations of discontinued
components (net of income taxes of $7 and $43,
respectively) (175) (93)
---------- ----------
LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (33) (82)
Cumulative effect of accounting change (net of
income taxes of $1 and $72, respectively) (2) (346)
---------- ----------
NET LOSS $(35) $(428)
========== ==========
DILUTED EARNINGS PER SHARE:
Income from continuing operations $0.25 $0.02
Discontinued operations (0.31) (0.17)
Cumulative effect of accounting change - (0.65)
---------- ----------
Total $(0.06) $(0.80)
========== ==========
Diluted weighted average shares outstanding (in
millions) 569 536
========== ==========
Business Segment Results AES's business segments, which include Contract Generation, Large Utilities, Competitive Supply and Growth Distribution, generated combined income before income taxes, excluding the Corporate segment, of $205 million for the second quarter of 2003, as compared with $8 million for the second quarter of 2002. Total income before income taxes, including the Corporate segment, was $99 million for the second quarter of 2003, as compared with a loss of $(108) million for the same period in 2002. On a geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. basis, income before income taxes from the business segments was generated $92 million from North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , $130 million from South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , $37 million from Asia, $(36) million from Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Africa, and $(18) million from the Caribbean.Contract Generation
($ in millions) 2Q 2Q
2003 2002 Variance
-------- -------- --------
Segment revenues $735 $632 $103
% of total revenues 34% 31% 3%
Gross margin $285 $260 $25
% of segment revenues 39% 41% (2)%
Income before income taxes $124 $144 $(20)
% of income before income taxes
from segments 60% 1800% NM
Contract Generation consists of multiple power generation facilities located around the world that have contractually con·trac·tu·al adj. Of, relating to, or having the nature of a contract. con·trac  tu·al·ly adv.Adv. 1. limited their exposure to commodity price risks and electricity price volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the by entering into long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. (5 years or longer) power purchase agreements for 75% or more of their expected output capacity. For the second quarter of 2003, Contract Generation revenues were $735 million and represented 34% of total revenues, an increase of $103 million over the second quarter of 2002. The most significant contributions continued to be from North and South America, which in aggregate comprised 60% of Contract Generation revenue for the quarter as compared to 59% for the same period in 2002. Revenues were enhanced with the addition of recently completed commercial contract generation businesses totaling 1,451 mw (added subsequent to the second quarter of 2002), including Red Oak in New Jersey (832 mw gas), Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. (454 mw coal), Kelanitissa in Sri Lanka Sri Lanka (srē läng`kə) [Sinhalese,=resplendent land], formerly Ceylon, ancient Taprobane, officially Democratic Socialist Republic of Sri Lanka, island republic (2005 est. pop. (165 mw gas), Barka Barka may refer to:
Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Kilroot Kilroot is a small village in County Antrim, Northern Ireland, on the eastern outskirts of Carrickfergus, east of Belfast on the north shore of Belfast Lough. It lies within the Carrickfergus Borough Council area. in Northern Ireland Northern Ireland: see Ireland, Northern. Northern Ireland Part of the United Kingdom of Great Britain and Northern Ireland occupying the northeastern portion of the island of Ireland. Area: 5,461 sq mi (14,144 sq km). Population (2001): 1,685,267. , Tiszai in Hungary Hungary, Hung. Magyarország, officially Republic of Hungary, republic (2005 est. pop. 10,007,000), 35,919 sq mi (93,030 sq km), central Europe. and Ebute in Nigeria Nigeria (nījĭr`ēə), officially Federal Republic of Nigeria, republic (2006 provisional pop. 140,003,542), 356,667 sq mi (923,768 sq km), W Africa. . These improvements were offset by declines at Shady Point in Oklahoma Oklahoma (ōkləhō`mə), state in SW United States. It is bordered by Missouri and Arkansas (E); Texas, partially across the Red R. (S, W); New Mexico, across the narrow edge of the Oklahoma Panhandle (W); and Colorado and Kansas (N). due to a step-down in the contracted capacity payment, Warrior Warrior, river, Ala.: see Black Warrior. Run in Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). , Tiete Tie·tê A river, about 805 km (500 mi) long, of southeast Brazil flowing generally northwest to the Paraná River. in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and Lal Pir and Pak Gen in Pakistan Pakistan (păk`ĭstăn', päkĭstän`), officially Islamic Republic of Pakistan, republic (2005 est. pop. 162,420,000), 310,403 sq mi (803,944 sq km), S Asia. . The gross margin for the Contract Generation segment was $285 million for the quarter, an increase of 10% from the second quarter of 2002. Gross margin increases arose at Uruguaiana Uruguaiana is an municipality in the Brazilian state of Rio Grande do Sul. It is located on the left-hand (eastern) shore of the Uruguay River that forms the border with Argentina. and Tiete in Brazil, Los Mina in the Dominican Republic, Kilroot in Northern Ireland and Ebute in Nigeria. Additionally, new plants that came online subsequent to the second quarter of 2002 contributed to the increase. These increases were offset by declines in gross margin at Beaver beaver, either of two large aquatic rodents, Castor fiber and Castor canadensis, known for their engineering feats. They were once widespread in N and central Eurasia except E Siberia, and in North America from the arctic tree line to the S United Valley and Ironwood ironwood: see hornbeam. ironwood Any of numerous trees and shrubs, found worldwide, that have exceptionally tough or hard wood useful for timber, fence posts, and tool handles. in Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York , Shady Point in Oklahoma, the Southland south·land or South·land n. A region in the south of a country or an area. south land·er n.Noun 1. plants in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). and the Chigen plants in China. As a percentage of revenues, the gross margin for the Contract Generation segment was 39% in the second quarter of 2003, a decline from 41% in the second quarter of 2002. Contract Generation generated $124 million of income before income taxes (or 60% of the net total) for the second quarter of 2003, a decrease from $144 million in the second quarter of 2002. South America showed an increase due to Gener GENER. A son-in-law. Dig. 50, 16, 156. in Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. and Uruguaiana in Brazil offset by a decrease at Tiete in Brazil. North America experienced declines due to Beaver Valley in Pennsylvania, Warrior Run in Maryland due to FAS 133 mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. losses and Shady Point in Oklahoma due to a step-down in the contracted capacity payment. These declines were partially offset by increases in the Southland plants in California. The Caribbean experienced an overall decrease due to the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. costs associated with El Faro Faro, town, Portugal Faro (fä`rō), town (1991 pop. 31,966), capital of Faro dist. and of Algarve, S Portugal. The southernmost town in Portugal, it is a seaport from which fish, fruit (especially dried figs), wine, and cork are , a development project in Honduras Honduras (hŏnd r`əs, –dyr`–; Span., ōnd that
was terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: during the second quarter of 2003. This decrease was partially offset by the start of commercial operations at Puerto Rico. Income before taxes was relatively consistent between periods for Asia and for Europe/Africa. Competitive Supply
($ in millions) 2Q 2Q
2003 2002 Variance
-------- -------- --------
Segment revenues $363 $373 $(10)
% of total revenues 17% 18% (1)%
Gross margin $18 $85 $(67)
% of segment revenues 5% 23% (18)%
Loss before income taxes $(31) $(37) $6
% of income before income taxes
from segments (15)% (463)% NM
Competitive Supply consists primarily of the power plants selling electricity directly to wholesale customers in competitive markets and, as a result, the profitability of such plants are generally more sensitive to fluctuations in the market price of electricity, natural gas and coal, in particular. For the second quarter of 2003, Competitive Supply revenues were $363 million and represented 17% of total revenues for the quarter. The most significant contributions continued to be from the competitive markets of the U.S. and the UK that in aggregate comprised 74% of Competitive Supply revenue for the quarter. Competitive market prices increased quarter over quarter in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , which resulted in increased revenue in the New York plants. Additionally, other plants showed revenue improvements, including Parana in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. and Ekibastuz Ekibastuz (ĕkēbäst s`), city (1990 pop. 134,627), N Kazakhstan. It is the industrial center of a bituminous coal-mining basin, which has coal reserves estimated at 8 billion in
Kazakhstan Kazakhstan or Kazakstan (kä'zäkstän`), officially Republic of Kazakhstan, republic (2005 est. pop. 15,186,000), c.1,050,000 sq mi (2,719,500 sq km), central Asia. . An increase in revenue also resulted from the start of
commercial operations at Granite granite, coarse-grained igneous rock of even texture and light color, composed chiefly of quartz and feldspars. It usually contains small quantities of mica or hornblende, and minor accessory minerals may be present. Ridge in New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). (720 mw gas).
These increases were partially offset by decreased revenues from
Deepwater Deepwater or Deep Water may refer to:
n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. and from Drax Drax could refer to:
TXU Transmitter Unit contract which was terminated during the fourth quarter of 2002. Gross margin as a percentage of revenues for the Competitive Supply segment was 5% in the second quarter of 2003, a decrease from 23% in the second quarter of 2002. Overall, the gross margin for Competitive Supply decreased from $85 million to $18 million. Margins and margin percentages were lower at Deepwater in Texas, Granite Ridge in New Hampshire, Borsod Borsod was the name of a historic administrative county (comitatus) of the Kingdom of Hungary in present-day north-eastern Hungary. The capital of the county was Miskolc. After World War II, the county was merged with the Hungarian parts of Abaúj-Torna and Zemplén counties to form in Hungary, Panama Panama, country, Central America Panama (păn`əmä'), Span. Panamá, officially Republic of Panama, republic (2005 est. pop. and Drax in the UK due to lower prices as a result of the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of the TXU contract and increased cost of sales due to higher volume. These decreases were partially offset by increased margins and margin percentages in North and South America, including the New York plants and Parana. Competitive Supply had a loss before income taxes of $(31) million (or (15)% of the net total) for the second quarter of 2003, which represents a $6 million improvement over the same period in 2002. The Competitive Supply loss before income taxes remained fairly constant between 2002 and 2003. However, second quarter 2002 losses included depreciation of the Argentina Peso at Parana, the write-off of Infovias, and the loss on the CCI CCI Chambre de Commerce et d'Industrie (France) CCI CAM (Complementary and Alternative Medicine) Citation Index CCI Chamber of Commerce and Industry (Western Australia) Investment, as compared to appreciation of the Argentina Peso during the second quarter of 2003 and additional losses at Drax in the UK due to operating in the merchant market in 2003 rather than under the TXU contract in 2002. Additionally Borsod in Hungary, Deepwater in Texas and Granite Ridge in New Hampshire experienced decreased income before income taxes in 2003. Large Utilities
($ in millions) 2Q 2Q
2003 2002 Variance
-------- -------- --------
Segment revenues $777 $863 $(86)
% of total revenues 35% 42% (7)%
Gross margin $164 $185 $(21)
% of segment revenues 21% 21% --
Income before income taxes $90 $50 $40
% of income before income taxes
from segments 44% 625% NM
The Large Utilities segment is comprised of the large integrated utilities that serve nearly 7 million customers in North America, the Caribbean and South America. Businesses include IPALCO IPALCO Indianapolis Power and Light Company in Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). , EDC EDC See: Export Development Corp. in Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. and Eletropaulo AES Eletropaulo (also known simply as Eletropaulo) is a major Brazilian power distributor in the state of São Paulo. The company's full name is Eletropaulo Metropolitana Eletricidade de São Paulo. Eletropaulo has around 5 million customers. in Brazil. For the second quarter of 2003, revenues for Large Utilities were $777 million and represented 35% of total revenues for the quarter. Revenues for Large Utilities decreased $86 million, or 7%, from the second quarter of 2002. Despite an increase in Eletropaulo's electricity sales, revenues for the second quarter of 2003 decreased when compared to the second quarter of 2002 due to higher average exchange rates in effect for 2003 compared to 2002. The quarter over quarter devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the Venezuelan Bolivar negatively impacted the U.S. Dollar translated revenues of EDC and offset the impact of an increase in revenues resulting from a tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic increase. IPALCO also had a slight decrease quarter over quarter due to milder weather in 2003. The gross margin as a percentage of revenues for the Large Utility segment was 21% for the second quarter of 2003 and 2002. Eletropaulo's gross margin decreased mainly due to higher average exchange rates in the second quarter of 2003 and higher pension cost compared to the second quarter of 2002. Additionally, IPALCO experienced a lower margin and margin percentage due to milder weather and higher operating and maintenance costs in 2003. Overall, gross margin for Large Utilities declined to $164 million for the second quarter of 2003 from $185 million in the second quarter of 2002. Large Utilities generated $90 million of income before income taxes (or 44% of the net total) for the second quarter of 2003, up from $50 million for the same period in 2002. The increase relates primarily to appreciation of the month end Brazilian Real The real (IPA: [xe'aw] or [ʁe'aɫ], symbol: R$, ISO 4217 code: BRL, plural: reais) is the currency of Brazil. It is also the name of the earliest Brazilian currency (see from the Colonial period to 1942. rates from March 31, 2003 to June 30, 2003 and one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charges taken in 2002 for the loss on sale of securities at EDC. The increases were offset by lower gross margin and substantially reduced foreign currency transaction gains at EDC during 2003, due to the devaluation in the Venezuelan Bolivar quarter over quarter, and a lower gross margin at IPALCO. Growth Distribution
($ in millions) 2Q 2Q
2003 2002 Variance
-------- -------- --------
Segment revenues $317 $170 $147
% of total revenues 14% 8% 6%
Gross margin $24 $(94) $118
% of segment revenues 8% (55)% 63%
Income (loss) before income taxes $22 $(149) $171
% of income before income taxes
from segments 11% (1863)% NM
The Growth Distribution segment, serving nearly 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 second quarter of 2003, revenues were $317 million, an 86% increase over the second quarter of 2002, and represented 14% of total revenues for the quarter. The Caribbean represents the most significant contributor with 38% of Growth Distribution revenues, while South America represents 35% and Europe/Africa contributes the remaining 27%. The increase in revenues is due primarily to the one-time charge taken in 2002 for the MAE (1) (Metropolitan Area Exchange) Originally known as Metropolitan Area Ethernets, MAEs are junction points on the Internet where data is exchanged between carriers. See IXP and NAP. write-off at Sul. Operationally, there were increases in revenues at Eden & Edes and Edelap in Argentina, Sonel in Cameroon Cameroon, country Cameroon (kăm'ər  n`), Fr. Cameroun, officially Republic of Cameroon, republic (2005 est. pop. , Clesa and Caess in El Salvador El Salvador (ĕl sälväthōr`), officially Republic of El Salvador, republic (2005 est. pop. 6,705,000), 8,260 sq mi (21,393 sq km), Central America. . These were partially offset
by reductions at Sul in Brazil because of the higher average exchange
rates during the second quarter of 2003 and Ede Este Este, Italian noble familyEste (ĕs`tā), Italian noble family, rulers of Ferrara (1240–1597) and of Modena (1288–1796) and celebrated patrons of the arts during the Renaissance. in the Dominican Republic. The gross margin as a percentage of revenues for the Growth Distribution segment was 8% in the second quarter of 2003, an increase from (55)% in the second quarter of 2002. Gross margin and gross margin percentages declined at Ede Este in the Dominican Republic and Sonel in Cameroon. These declines were offset by an increased gross margin at Caess in El Salvador and the one-time adjustment taken in 2002 for the MAE write-off at Sul. Overall, the gross margin for the Growth Distribution segment increased to $24 million for the second quarter of 2003. Growth Distribution businesses generated $22 million of income before income taxes for the second quarter of 2003, an increase of $171 million from a loss before income taxes of $(149) million for the second quarter of 2002. Income before income taxes increased at Sul in Brazil, Eden & Edes in Argentina and Caess in El Salvador. These increases were partially offset by decreases at Ede Este in the Dominican Republic due, in part, to foreign exchange transaction losses caused by the devaluation of the Dominican Peso Noun 1. Dominican peso - the basic unit of money in the Dominican Republic; equal to 100 centavos peso centavo - a fractional monetary unit of several countries: El Salvador and Sao Tome and Principe and Brazil and Argentina and Bolivia and Colombia and Cuba during the second quarter of 2003 as well as lower operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: .
THE AES CORPORATION --- Supplemental Data
----------------------------------------------------------------------
($ in millions, except Total Assets in billions)
-------------2002-------------- ----------2003----------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr
------- ------- ------- -------- -------- ------- -------
GEOGRAPHIC:
North America
Revenues $491 $492 $570 $539 $2,092 $552 $516
Income before
Income Taxes
(4) $136 $138 $5 $(4) $275 $117 $92
Caribbean (1)
Revenues $373 $365 $334 $383 $1,455 $400 $410
Income before
Income Taxes
(4) $59 $73 $41 $(62) $111 $13 $(18)
South America
Revenues $787 $708 $713 $688 $2,896 $679 $800
Income before
Income Taxes
(4) $(10) $(265) $(289) $(960) $(1,524) $55 $130
Europe/Africa
Revenues $425 $365 $369 $450 $1,609 $455 $359
Income before
Income Taxes
(4) $76 $23 $4 $(1,135) $(1,032) $28 $(36)
Asia
Revenues $100 $108 $88 $97 $393 $107 $107
Income before
Income Taxes
(4) $36 $39 $23 $18 $116 $41 $37
Corporate (3)
Income before
Income Taxes
(4) $(124) $(116) $(96) $(144) $(480) $(137) $(106)
SEGMENTS:
Contract
Generation
Revenues $652 $632 $599 $668 $2,551 $716 $735
Gross Margin
(2) $272 $260 $242 $291 $1,065 $291 $285
Income before
Income Taxes
(4) $181 $144 $144 $148 $617 $154 $124
Competitive
Supply
Revenues $409 $373 $394 $452 $1,628 $459 $363
Gross Margin
(2) $88 $85 $93 $(137) $129 $113 $18
Income before
Income Taxes
(4) $(41) $(37) $(166) $(1,286) $(1,530) $33 $(31)
Large
Utilities
Revenues $768 $863 $783 $736 $3,150 $703 $777
Gross Margin
(2) $232 $185 $199 $71 $687 $165 $164
Income before
Income Taxes
(4) $134 $50 $(175) $(951) $(942) $69 $90
Growth
Distribution
Revenues $347 $170 $298 $301 $1,116 $315 $317
Gross Margin
(2) $77 $(94) $48 $(14) $17 $42 $24
Income before
Income Taxes
(4) $23 $(149) $(19) $(54) $(199) $(2) $22
Corporate (3)
Income before
Income Taxes
(4) $(124) $(116) $(96) $(144) $(480) $(137) $(106)
ADDITIONAL
INFORMATION:
Revenues $2,176 $2,038 $2,074 $2,157 $8,445 $2,193 $2,192
Gross Margin
(2) $669 $436 $582 $211 $1,898 $611 $491
Gross Margin
Percentage
(2) 31% 21% 28% 10% 22% 28% 22%
Income before
Income Taxes
(4) $173 $(108) $(312) $(2,287) $(2,534) $117 $99
Total Assets
(billions) $40 $39 $37 $34 $34 $33 $34
Depreciation
and
Amortization $195 $198 $191 $197 $781 $176 $188
FAS 133 Gain
(Loss)(5) $17 $25 $(6) $(48) $(12) $(14) $(24)
Foreign
Exchange
Gain (Loss)
from
Brazil(5) $(10) $(85) $(203) $46 $(252) $22 $82
Foreign
Exchange
Gain (Loss)
from
Argentina(5) $(82) $(52) $- $(5) $(139) $33 $21
Foreign
Exchange
Gain (Loss)
from
Venezuela(5) $65 $25 $21 $(72) $39 $4 $(17)
Foreign
Exchange
Gain (Loss)
from
Dominican
Republic(5) $(3) $(2) $(7) $(12) $(24) $(23) $(13)
(1) Includes Venezuela and Colombia.
(2) Gross Margin is revenues reduced by cost of sales and services.
(3) Corporate consists of interest expense and selling, general and
administrative expenses. Revenue and Gross Margin for Corporate
equal zero.
(4) Amount is net of pre-tax minority interest.
(5) Amount is net of the income tax effect.
THE AES CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
($ in millions) June 30, December 31,
2003 2002
------------ ------------
Assets:
Current assets:
Cash and cash equivalents $1,653 $767
Restricted cash 498 160
Short term investments 216 209
Accounts receivable, net of reserves of
$362 and $375, respectively 1,127 1,082
Inventory 396 368
Receivable from affiliates 15 25
Deferred income taxes - current 127 130
Prepaid expenses 82 66
Other current assets 752 929
Current assets of held for sale and
discontinued businesses 453 613
------------ ------------
Total current assets 5,319 4,349
Property, Plant and Equipment:
Land 764 702
Electric generation and distribution
assets 20,409 18,347
Accumulated depreciation (4,577) (4,051)
Construction in progress 2,430 3,212
------------ ------------
Property, plant and equipment, net 19,026 18,210
Other assets:
Deferred financing costs, net 442 398
Project development costs 6 15
Investment in and advances to affiliates 704 678
Debt service reserves and other deposits 393 508
Goodwill, net 1,374 1,388
Deferred income taxes - noncurrent 1,038 939
Long-term assets of held for sale and
discontinued businesses 3,769 6,055
Other assets 2,087 1,690
------------ ------------
Total other assets 9,813 11,671
------------ ------------
Total Assets $34,158 $34,230
============ ============
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $1,180 $1,115
Accrued interest 528 361
Accrued and other liabilities 1,405 1,122
Current liabilities of held for sale and
discontinued businesses 2,682 588
Recourse debt-current portion 3 26
Non-recourse debt-current portion 4,545 3,299
------------ ------------
Total current liabilities 10,343 6,511
Long-term liabilities:
Recourse debt 5,585 5,778
Non-recourse debt 9,800 10,635
Deferred income taxes 849 981
Long-term liabilities of held for sale and
discontinued businesses 1,480 5,109
Pension liabilities 1,357 1,166
Other long-term liabilities 2,765 2,595
------------ ------------
Total long-term liabilities 21,836 26,264
Minority interest, including discontinued
operations of $41 in 2002 863 818
Company obligated convertible mandatorily
redeemable preferred securities of
subsidiary trusts holding solely junior
subordinated debentures of AES 910 978
Stockholders' equity (deficit):
Common stock 6 6
Additional paid-in capital 5,688 5,312
Accumulated deficit (735) (700)
Accumulated other comprehensive loss (4,753) (4,959)
------------ ------------
Total stockholders' equity (deficit) 206 (341)
------------ ------------
Total Liabilities and
Stockholders' Equity (Deficit) $34,158 $34,230
============ ============
THE AES CORPORATION
CAPITAL RESOURCES AND OTHER BALANCE SHEET DATA
($ in billions)
June 30, December 31,
Capitalization: 2003 2002
------------ ------------
Recourse debt $5.59 $5.80
Non-recourse debt 14.35 13.93
------------ ------------
Total debt 19.94 19.73
Preferred Securities 0.91 0.98
Minority Interest 0.86 0.82
Stockholders' equity 0.21 (0.34)
------------ ------------
Total capitalization $21.92 $21.19
============ ============
Selected Balance Sheet Data by Geographic Region:
Property, Non-
June 30, 2003 Plant & Total recourse
Equipment Assets Debt
--------------------------------
North America $6.09 $7.46 $4.24
Caribbean 4.68 5.98 2.46
South America 5.28 10.25 5.40
Europe/Africa 1.38 5.90 0.82
Asia 1.59 2.53 1.43
Discontinued Operations - 0.81 -
Corporate 0.01 1.23 -
December 31, 2002
North America $6.13 $7.41 $4.26
Caribbean 5.13 6.54 2.90
South America 4.26 8.69 4.97
Europe/Africa 1.30 5.68 0.74
Asia 1.38 2.20 1.06
Discontinued Operations - 3.31 -
Corporate 0.01 0.40 -
Selected Balance Sheet Data by Line of Business:
Property, Non-
June 30, 2003 Plant & Total recourse
Equipment Assets Debt
--------------------------------
Contract Generation $9.07 $13.37 $7.33
Competitive Supply 2.43 6.68 1.32
Large Utilities 5.93 9.12 4.61
Growth Distribution 1.59 2.95 1.09
Discontinued Operations - 0.81 -
Corporate 0.01 1.23 -
December 31, 2002
Contract Generation $8.06 $12.09 $6.55
Competitive Supply 3.06 7.16 1.57
Large Utilities 5.65 8.45 4.64
Growth Distribution 1.43 2.82 1.17
Discontinued Operations - 3.31 -
Corporate 0.01 0.40 -
The AES Corporation
Parent Financial Information
----------------------------------------------------------------------
Parent only data: last four
quarters
($ in millions)
4 Quarters Ended
Total subsidiary distributions & December March June December
returns of capital to Parent 31, 31, 30, 31,
----------------------------------- 2002 2003 2003 2003
Actual Actual Actual Forecast
(1)
--------- -------- ------ --------
Subsidiary distributions to
Parent $804 $658 $773 $1,054
Net distributions to/(from)
QHCs (2) 291 286 208 5
--------- -------- ------ --------
Subsidiary distributions 1,095 944 981 1,059
Returns of capital
distributions to Parent 84 43 54 298
Net returns of capital
distributions to/(from)
QHCs (2) 0 0 6 6
--------- -------- ------ --------
Returns of capital
distributions 84 43 60 304
Combined distributions &
return of capital received 1,179 987 1,041 1,363
Less: combined net distributions &
returns of capital to/(from)
QHCs (2) (291) (286) (214) (11)
--------- -------- ------ --------
Total subsidiary
distributions & returns of
capital to Parent $888 $701 $827 $1,352
========= ======== ====== ========
Parent only data: quarterly
($ in millions)
Quarter Ended
Total subsidiary
distributions & returns of June September December March June
capital to Parent 30, 30, 31, 31, 30,
----------------------------- 2002 2002 2002 2003 2003
Actual Actual Actual Actual Actual
------ --------- -------- ------ --------
Subsidiary distributions to
Parent $197 $176 $149 $136 $312
Net distributions to/(from)
QHCs (2) 66 76 100 44 (12)
------ --------- -------- ------ --------
Subsidiary distributions 263 252 249 180 300
Returns of capital
distributions to Parent 14 4 23 2 24
Net returns of capital
distributions to/(from) QHCs
(2) 0 0 0 0 6
------ --------- -------- ------ --------
Returns of capital
distributions 14 4 23 2 30
Combined distributions &
return of capital received 277 256 272 182 330
Less: combined net
distributions & returns of
capital to/(from) QHCs (2) (66) (76) (100) (44) 6
------ --------- -------- ------ --------
Total subsidiary
distributions & returns of
capital to Parent $211 $180 $172 $138 $336
====== ========= ======== ====== ========
Liquidity (3) Balance at
-----------------------------
($ in millions) June September December March June
30, 30, 31, 31, 30,
2002 2002 2002 2003 2003
Actual Actual Actual Actual Actual
------ --------- -------- ------ --------
Cash at Parent $288 $384 $188 $395 $922
Availability under revolver 69 5 18 28 39
Cash at QHCs (2) 2 6 10 66 29
------ --------- -------- ------ --------
Ending liquidity $359 $395 $216 $489 $991
====== ========= ======== ====== ========
(1) Forecasted financial information is based on certain material
assumptions. Such assumptions include, but are not limited to the
following:
a. We assume continued normal levels of operating performance and
electricity demand at our distribution companies.
b. We assume operational performance at our contract generation
businesses consistent with historical levels and in accordance
with the provisions of the relevant contracts.
c. Our assumptions about asset sales include transactions that are
supported by signed agreements and that have been previously
announced.
(2) 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.
(3) 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.
Certain statements regarding AES's ("the Company's") business
operations may constitute "forward looking statements" as defined by
the Securities and Exchange Commission. Such statements are not
historical facts, but are predictions about the future which
inherently involve risks and uncertainties, which could cause our
actual results to differ from those contained in the forward looking
statement. We urge investors to read our descriptions and discussions
of these risks that are contained under the section "Risk Factors" in
the Company's Annual Report/Form 10K for the year ended December 31,
2002.
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