AES CORPORATION
May 9, 2006
AES CORPORATIONAES Kazakhstan Business Review
Dale PerryVice President
1www.aes.com
Financial Goals
Revenue Growth
Gross Margin Growth
Earnings Per Share Growth
ROIC Improvement(1)
Cash Flow Growth
Subsidiary Distributions(1)
Restructuring Opportunities
Growth Goals
Platform Expansion
Greenfield Investment
Privatization/M&A
AES Goals AES 2008 Target AES Kazakhstan Role
AES Kazakhstan Strategic Overview
--
$3.5 Billion
13-19% per Year
11%
$2.6-2.9 Billion
--
--
--
--
--
Above Average
Above Average
Above Average
Above Average
Above Average
Increasing
Significant
Significant Opportunities
Focused Opportunities
Focused Opportunities
Contains Forward Looking Statements
(1) Non-GAAP financial measure. See Appendix.
2www.aes.com
Kazakhstan Highlights
15,185,844 Population (July 2005 est.)AlmatyLargest CityAstana Capital
major deposits of petroleum, natural gas, coal, iron ore, manganese, chrome ore, nickel, cobalt, copper, molybdenum, lead, zinc, bauxite, gold, uranium
Economic Drivers
6.9%Inflation Rate (2004 est.)US $7,800Per Capita GDP (2004 est.)
1 (KZT) = 0.007472 (USD) Exchange Rate (01/10/2006)Kazakhstan Tenge (KZT)Currency
Kazakhstan at a Glance
3www.aes.com
40
50
60
70
80
90
1992 1994 1996 1998 2000 2002 2004 2006E 2008E 2010E
Nominal GDP
Kazakhstan Electricity Demand Growth
Source: Company information
TWh
Nom
inal GD
P (U
S$ B
illions)
60
50
40
30
20
10
0
Generation (TWh)
Contains Forward Looking Statements
Recent correlation between electricity demand and GDP growth expected to continue
4www.aes.com
Kazakhstan Electricity Market Characteristics
Generation Distribution Commercial BaseTransmission
18,200MW installed capacity (approximate)
67% Coal 11% Other thermal22% Hydroelectric
50% private sector ownership(approximate)
AES is largest private sector generator
Three regional transmission systems – government owned
23,000 km of 220 KV – 500KV linesTransmission dispatchManages system ancillary services
9 - 500KV interconnections to the Russian grid
Zonal transmission tariff ranges from $3.15 - $6.50/MWH
12 major distribution & regulated supply companies, predominantly government owned
Annual tariff review
Tariff methodology is cost plus profit
Moving away from Electricity Supply Organization (ESO) price regulation
ESO contracts typically range from hourly to quarterly
Bi-lateral contracts between generators/traders and consumers/traders
Government entities are required to purchase directly from generators (i.e. no traders)
5www.aes.com
Overview of AES Kazakhstan Power Assets
(1) Management only with no revenuesNote: Capacities are gross
Ekibastuz Gres I4,000MW (coal)Maikuben mine
Western System
Southern
Northern, Central and Eastern
Russia
Uzbekistan
Kyrgyzstan
RussiaShulbinsk702MW (hydro)
Ust-Kamenogorsk331MW (hydro)1,356MW (coal CHP)
Sogrinsk CHP301MW (coal)
Distribution BusinessesUnder Management
Eastern Kazakhstan REC(1)
280,000 CustomersSemipalatinsk REC(1)
180,000 CustomersUst-Kamenogorsk Heat Net(1)
260MW (coal)
6www.aes.com
Kazakhstan Generation Market Profile
www.aes.com
2005 Generation (MWh) Market Share (%)(1)
KarGRES 10%
Total Installed Capacity = 18,200MW
AES 29%
Imports and Other 20% Aksu GRES
22%
GRES-2 12%Bukhtarma HPP 7%
AES Ekibastuz 18% AES UK HPP 4%AES Shulba HPP 4%
AES UK & SograCHPs 3%
(1) Excluding Western Kazakhstan 2005 generation figures
7www.aes.com
Kazakhstan Electricity Market History
Electricity sector functions as a single vertically integrated system operated by the Ministry of Energy
Sector is bankrupted by barter and non-transparent transactions
Rapid un-bundling of Generation
Creation of national grid company , Kazakhstan Electricity Grid Operating Company (KEGOC)
Stalled attempt to privatize distribution
Creation of a regulatory body to form electricity market and ensure its effective functioning
Cash collection and barter transaction issues are significant business issues
Kazakhstan and Russia are electrically disconnected due to high non-payment issues from Kazakhstan
Bi-lateral contract relationships develop
Lack of long term regulatory certainty
Reserve margins drop, with some load shedding seen in peak winter season
Convoluted mix of free market and regulated market begins to clear up
Implementation of zonal transmission tariff methodology
Continued integration with adjacent energy systems of Central Asia, Russia and China
Creation of the Wholesale Electricity Power Pool
New Electricity Law completely un-bundles electricity sector, creating retail supply companies split from distribution (wires) businesses
Sector sees regulatory interaction with both Anti-monopoly Committee (natural monopolies) and Competition Committee (market dominance activities)
Non-payment issues decrease as demand increases, in-line with country’s economic recovery
Kazakhstan and Russia are re-connected
No long term contracts exist in market
1995-1997 1998-2000 2001-2005 2006 and future
Contains Forward Looking Statements
8www.aes.com
Import/export approved by KEGOC
Regulation agreement is in place for all generators
Hot, cold reserve pool are nominated day ahead into
KEGOC
Balanced schedules submitted to KEGOC
Wholesale EnergyMarket
Bi-lateral trades monthly, yearly, multiyear
Kazakhstan Electricity Market Operation Model
Large Industrials
Transmission & Dispatch,System Operator
C
U
S
T
O
M
E
R
SMarket Operator
REC’s and Genco’s
Exports and Traders
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Kazakhstan Power Prices are Some of The Lowest in The World
Source: IEA US DOE, national sources and ECON aggregate
Current Kazakh wholesale power prices are among the lowest in the world
Est
onia
Latv
ia
Lith
uani
a
Bulg
aria
&R
oman
ia
Bos
nia
&H
erze
govi
na
Tran
scau
casu
s
Kyrg
yzst
an
Ukr
aine
Mol
dova
Rus
sia
Kaz
akhs
tan
CEN
TREL
NO
RD
EL
UC
TE
0
20
40
60
US$
/ M
Wh
10www.aes.com
Tight Russian Reserve Margins Expected by 2009
Source: Renaissance Capital Report: “Form and Substance” August 2005
RussiaSiberiaUralNorth
CaucasusEuropean
Russia
Equilibrium energy price (US$/MWh)
Required capacity payment (US$/kW*year)
Total wholesale price (US$/MWh)
Cost of new entry (US$/MWh)
Wholesale price discount to cost of new entry (%)
Peak demand (GW)
Available capacity (GW)
Available peak capacity (GW)
Reserve margin (%)
$16
80
27
27
0%
71
89
80
11%
$16
103
29
29
0%
9
10
9
(1%)
$13
97
26
26
0%
32
38
35
7%
$8
117
23
24
5%
31
35
32
1%
$16
98
29
29
0%
150
181
154
3%
Ekibastutz Target Markets
11www.aes.com
Contains Forward Looking Statements
US
$ C
ents
/ KW
h
2004 2005 2006E 2007E 2008E 2009E 2010E 2011E 2012E 2013E 2014E
300MW(Units 3 - 7)
500MW(Unit 1)
0
1
2
3
Potential AES Ekibastuz Price and Demand Scenario Offers Attractive Growth Prospects
AES Ekibastuz Repowering Investment and Potential Timeline at Assumed Power Prices
500MW(Unit 8)
500MW(Unit 2)
12www.aes.com
AES Kazakhstan Financial Overview
Revenue
Gross Margin
Income Before Tax &Minority Interest
Distributions to AES Corporation
2003
$103
$25
$21
$29
2004
$137
$36
$30
$8
($ Millions)
2005
$158
$40
$33
$18
Note: Information is presented on an AES basis and is unaudited. Certain intercompany transactions may not be eliminated.
13www.aes.com
Pricing Strategy andDemand Growth Phase
CurrentSituation
Lost time accidents (LTAs)
Near-miss reporting
Revenues
SafetyExcellence
OperatingCosts
KPI Implementation in Kazakhstan
Long-TermOperating Model
Asset mix, fuel cost and pricing strategies drive unique operating model.
Contains Forward Looking Statements
Long-term domestic and export PPAs
Pricing strategy supports repowering investments
Low cost fuel strategy
Unit on-stream optimization
Operational excellence KPIs
Retrofit project management
14www.aes.com
Safety is a Top Priority at AES Kazakhstan
LTA
0
10
20
30
2001 2002 2003 2004 2005
Formed Safety Steering Committees
Commenced Risk Assessment Training
Launched NEBOSH Training
2005 Safety ActivityCommenced ISO certification
Continued public safety educational campaign
Getting Better
15www.aes.com
Growth OpportunitiesContains Forward Looking Statements
1,800MW at low incremental capital costEconomics well below greenfield investmentLow cost mine-mouth coal source
Ekibastuz Rehabilitation
Additional low-cost capacity available Leverage remaining 15 year concession termMaikuben Mine Expansion
Leverage grid linkage with former Soviet UnionPotential swaps with other partiesPower Exports
In addition to local platform expansion, we see significant opportunities in adjacent countries leveraging our successful business model in Kazakhstan.