this page: Ceramic bowls in the Grand Bazaar, Istanbul, Turkey; Girl at the ancient Mayan city of Chichen Itza, Yucatan, Mexico; Night sky, São Paulo, Brazil back cover: Mountain valley, Alfalfal, Chile AES is… A global power and alternative energy company. With businesses in 28 countries on fi ve continents, AES generates and distributes power with the capacity to serve 100 million people. We operate in a number of the world’s fastest-growing markets and are continuing to expand into regions where we believe tomorrow’s energy markets are rapidly emerging. Our 13 regulated utilities amass annual sales of over 73,000 GWh and our 121 generation facilities have the capacity to generate approximately 43,000 MW. Renewable sources of energy, which already comprise 20% of our capacity, and climate solutions are a growing part of our energy portfolio. AES’s 28,000 people around the world are committed to operational excellence and meeting the growing global need for power. Our impact e 2 0 0 7 A N N U A L R E P O R T today extends n i e t s n e z t a K d i v a D y b y h p a r g o t o h P m o c . n o s i d d a . w w w n o s i d d A y b n g i s e D s n o i t a c i n u m m o C e t a r o p r o C S E A y b d e c u d o r P cover and inside front cover: Nightscape, Bogotá, Colombia this page: Schoolchildren at an AES Itabo-sponsored corporate responsibility program, Haina, Dominican Republic into the future, I M P A C T : T H E W O R D I M P L I E S A R E S U L T T H A T I S I M M E D I A T E . B U T I T S M E A N I N G I M P L I C I T L Y S P E A K S T O T H E F U T U R E . A N D I T I S T H I S F O C U S O N T H E F U T U R E T H A T I S S H A P I N G A E S T O D A Y . At AES we see the impact of our business on people’s lives every day. The energy we produce provides comfort and convenience, keeps production lines churning and illuminates computer screens. But beyond the present is a broader, more enduring impact that comes from the work we do. The new plant we construct in Chile not only lightens a dark street today, it helps ignite and stimulate the local economy, and build community infrastructure. The facilities we make more effi cient in Mexico and the Philippines not only bring power to more homes and businesses, they also enable rigorous expansion of commerce and educational opportunities for children. The new wind farms we’re building in Huanghua, China and Abilene, Texas, and the climate change solutions we’re developing in Malaysia contribute to improved air quality today and help ensure the environmental future of our planet. We are using our global footprint, along with our development and operational expertise, to explore energy initiatives that support both immediate and positive gains for our business, while also addressing the critical issues of our time: demand for cleaner, more reliable and sustainable energy. The diverse portfolio of energy solutions we are building today refl ects the values that built AES and will defi ne our company’s future for decades to come. left to right: Schoolchildren at an AES Itabo-sponsored corporate responsibility program, Haina, Dominican Republic; Waterfall in El Yungue National Forest, San Juan, Puerto Rico; Oranges at a local food market, Zhangjiajie, China; Participants in the annual folk dance festival, Sambalpur, India; Neon signs, Nanjing, China bringing secure and T H R O U G H O U R C O R E B U S I N E S S , A E S I S G E N E R A T I N G P O W E R I N R E G I O N S O F T H E W O R L D W H E R E E L E C T R I C I T Y I S P A R T O F T H E F A B R I C O F E V E R Y D A Y L I F E , A S W E L L A S I N P L A C E S W H E R E I T H A S N E V E R B E F O R E B E E N A V A I L A B L E . The heightening city skylines, the bustling tra≈c on streets and construction of schools and hospitals are evidence of economic expansion occurring in cities and towns across far reaching parts of the world. To keep these expansions going requires a secure and steady source of energy. Advances we made in 2007 will help bring reliable electricity and its associated benefi ts to people every- where for years to come. By creating a more dependable energy stream from our newly acquired plants in Mexico, we are helping to strengthen that country’s ability to produce materials to build new homes and businesses and mine the potential of its vast mineral wealth. A new plant we are building in Jordan will deliver 20% more energy than currently available in that country, helping the electricity sector keep pace with Jordan’s growing economy and developing consumer culture. And, in India through the planned construction of just one new plant and expansions at another, we will create the capacity for 25 million people to have access to more reliable power to light their homes and enrich their futures. Through our pending acquisition of an existing power plant on the island of Luzon in the Philippines, we will meet the rising demand for electricity on the fourth most populated island in the world by making operational improvements that will increase output and help bolster the island’s expanding economy. Our promise to deliver more energy is focused on the fast-growing regions of the world, with 40% of our medium- to advanced-stage projects in development based in Asia and the Middle East. reliable energy to the world while meeting the needs of people today left to right: Schoolchildren, Cappadocia, Turkey; Marketplace at night, Muscat, Oman; Woman waiting for the train, Colombo, Sri Lanka; Neon signs, Nanjing, China; Lanterns for sale in the Grand Bazaar, Istanbul, Turkey H Y D R O P O W E R E N J O Y S T H E L O N G E S T U S E F U L L I F E O F A N Y E N E R G Y G E N E R A T I O N F O R M . S I N C E 1 9 9 4 , W E H A V E B E E N P R O V I D I N G P O W E R F R O M T H I S C L E A N E N E R G Y S O U R C E . The world’s abundant waterfalls and rushing rivers are revered for their beauty. And when harnessed, they can electrify countries and get prosperity fl owing. Today, only a quarter of the potential global hydro resources have been tapped to provide power. AES has the experience to capture and deliver more clean energy from hydropower. We own or currently operate 32 hydropower stations in nine countries. These plants generate enough electricity (7,454 MW) to potentially power more than 14 million homes. The groundwork we laid to develop several small hydropower facilities in the newly privatized Turkish market will help keep the wheels of progress turning as the country’s vibrant economy grows. The need is great: energy demand will soon exceed supply. As we broke ground on the fi rst of two hydropower projects on the banks of Turkey’s Göksu River in 2007, we took a step toward delivering more power to help meet demand within two and a half years. Our pipeline of more than a dozen other hydropower projects will help Turkey reach its economic potential. Smaller hydropower projects that are less than 50 MW make both economic and environmental sense. Turkey is one of many countries where we plan to grow our hydropower portfolio through acquisitions or extensions to our existing platforms, bringing the promise of this clean energy source to many more markets around the world. left to right: Detail of seascape on the north shore of Puerto Rico; Children visiting the market at the Montserrat Church, Bogotá, Colombia; Native palms in rain forest, El Yungue National Forest, Puerto Rico; Sunset at the AES BuΩalo Gap wind farm, Texas, USA; Evening on the Charles Bridge, Prague, Czech Republic and creating alternative energy I N V I R T U A L L Y E V E R Y C O U N T R Y I N W H I C H W E H A V E A P R E S E N C E T O D A Y , T H E R E I S R E N E W A B L E P O W E R P O T E N T I A L A N D A G R O W I N G M A N D A T E T O D E V E L O P I T . The world is rich in renewable power sources like wind, solar and biomass. Each has a place in today’s energy mix, as countries strive to meet their renewable energy targets. AES is well-positioned to help meet worldwide desire for energy options. We are in many parts of the world today where alternative energy will play an increasingly signifi cant role tomorrow. Acquisitions and expansions we made at some of our wind sites in California and Texas, combined with purchases of new wind farms in the Midwest, made AES one of the fastest-growing wind energy producers in the US in 2007. Our new projects not only are generating clean energy, they are helping to reinvigorate rural communities by pumping money into local economies, and by creating jobs and a new revenue source for farmers and other landowners who lease their property to our projects. Over 150 new wind turbines stand tall across the fi elds at our BuΩalo Gap wind farm in Texas, their blades spinning breezes into a clean and low cost renewable energy. When new expansions we began at Bu≈alo Gap in 2007 are completed, this project will be one of the largest wind farms in the US. We are also helping China meet its goal to develop 30,000 MW of wind power by 2020. Through our partnership with Guohua Energy Investment Co. Ltd., AES has the distinction of being one of the fi rst US-based power companies to invest in a wind generating facility in China, the fi rst of many we plan to develop there. solutions for a brighter tomorrow in ways that ensure a sustainable future. left to right: Students at an AES Barka- sponsored corporate responsibility program, Rustaq, Oman; Zailisky Alatau Mountains and Big Almaty Lake, the countryside outside of Almaty, Kazakhstan I N A D D I T I O N T O H E L P I N G G R O W O U R B U S I N E S S , O U R C L I M AT E C H A N G E P R O J E C T S W I L L H E L P P R E S E R V E T H E E N V I R O N M E N T F O R F U T U R E G E N E R A T I O N S . The detergent you wash with, the face cream you apply, the shortening you use to bake—these are likely made with oil from the fruit of a palm tree growing in Malaysia. An unfortunate by-product of palm oil production, however, is the release of methane, a potent greenhouse gas. AES has been working with palm oil mill owners in Malaysia to develop projects that capture and destroy these methane emissions. These projects are a small part of a growing new business for AES—the creation, qualifi cation and sale of Carbon Emission Reductions. The international market for emissions reductions is estimated to be $10–15 billion annually. The initiatives we have begun span from Eastern Europe to China and through Indonesia’s vast island chain. Our approach to integrate and manage the many steps involved in identifying and reproducing scalable solutions is gaining traction in markets we have entered. Concurrently, through Greenhouse Gas Services, our venture with GE Energy Financial Services, AES is pursuing development of a large volume of high quality emissions reductions in the evolving US carbon marketplace. This venture is focused on producing 10 million tons worth of voluntary emissions reductions by 2010. Standards we jointly created in 2007 will provide a much needed framework for achieving this target. A E S G R O W T H I S H A V I N G A P O W E R F U L I M P A C T A E S C O R P O R A T I O N Growing at Our Core In 2007, we continued to develop our existing power facilities and advanced greenfi eld projects to generate more reliable power from conventional fuels. We expanded into markets where we are bringing new effi ciencies, safer work conditions and power to an ever larger number of people. N E W E F F I C I E N C I E S F O R P L A N T S I N M E X I C O P O W E R I N G U P I N T H E P H I L I P P I N E S AES saw great opportunity at two fi ve-year-old plants we acquired in Tamuín, Mexico last year. The two facilities—TEG and TEP—had been providing electricity exclusively to two of Mexico’s largest and oldest industrial customers, but were not operating at maximum capacity. Applying our expertise in operations and a technology that provides cleaner burning coal, we delivered improvements that increased energy output from the two plants by 20 MW in less than one year. We also signifi cantly enhanced the safety environment for our people who work at the plants, reducing Lost Time Accidents by 75%. The improvements added $50 million to the plants’ long-term value and brought annual savings of $2.5 million. The type of improvements we made at our plants in Mexico will be replicated at a 10-year-old plant we are acquiring on the island of Luzon, 250 km northwest of the capital of Manila in the Philippines. A new market for AES, the Philippines is particularly attractive because of the progressive approach the government has taken to create a competitive wholesale electricity market. We will own and operate the country’s fi rst privatized thermal market-based plant and have the opportunity to expand this 600 MW facility we expect to acquire in early 2008. Near-term, improvements we will make should increase capacity and help keep this facility online more often, a signifi cant step toward meeting the rising electricity demands driven by the growing Philippine economy. O N A S T R O N G G R O W T H P A T H I N C H I L E The Chilean electric generation sector will need to double in the next 10 years in response to the country’s growing economic needs. Plant expansions and new greenfi eld projects that AES Gener and our subsidiaries in Chile are working on today will play a major role in ensuring reliable energy supply. Our path to growth leads from the country’s northern city of Mejillones, south to the city of Cabrero. Across this region, we have eight plants in various stages of development and construction. When completed, the plants will double AES Gener’s existing generation capacity by an additional 2,700 MW. pictured: Serglio Point on the Golden Horn as seen from Galata Tower at dusk, Istanbul, Turkey M O V I N G Q U I C K L Y T O M E E T D E M A N D I N J O R D A N Energy demand in Jordan has been growing at 7% per year for the past fi ve years. AES will help answer the country’s need for more power with a 370 MW power plant we began to construct in Amman, Jordan in 2007. When the plant is completed and operational, we will reduce the average cost of generation by approximately 10%. A nearby farming village, meanwhile, will benefi t from the extension of a water distribution network being built by AES that will help irrigate local crops. And, a scholarship program established by AES will foster higher education opportunities for exceptional local students. F U R T H E R I N V E S T I N G I N E N E R G I Z I N G I N D I A Endeavoring to support soaring growth in industry and commerce with the necessary energy supply, India has found a long-term partner in AES. The progress made over the last eight years at our plant in the state of Orissa, owned in partnership with the Government of Orissa, has helped reduce outages, and improve the lives of area residents. In 2007, the government awarded our plant, OPGC (Orissa Power Generation Corporation), coal mining rights to support the development of up to 2,400 MW of new coal-fi red generation capacity. In addition, AES was awarded coal mining rights to support the development of a new 1,200 MW plant in Chhattisgarh. With the completion of these projects, we will have the capacity to provide more dependable power to 25 million people in India. A E S G R O W T H I S H A V I N G A P O W E R F U L I M P A C T A E S C O R P O R A T I O N Growing Our Renewables Portfolio We continued to expand our hydropower and wind generation businesses, further extending our reach in renewables around the world. AES also is pursuing the wind energy business in a major way. Our strategy to develop new wind farms, as well as to acquire existing wind operations and projects in development, has enabled us to grow our wind business faster than many of our competitors. In the US alone, we increased the size of our wind business by more than 66% in 2007. Wind farms we plan to add in the future will extend our reach in the US from coast-to-coast, putting us closer to our goal of tripling our global wind business by 2011. In addition to our joint venture to construct a 49.5 MW wind project in China—that could eventually quadruple to 200 MW—we advanced several development projects in Bulgaria, Greece, Scotland and Turkey, and brought online a small operation in France. A F U T U R E F O R S U N P O W E R A T A E S Solar power will be a business that moves into the spotlight for the first time at AES in 2008. Growing at an annual rate of 20–25% in the developed world, solar is a promising power source. During 2007, AES laid the groundwork for entering this market. By adding solar power to our portfolio of energy solutions in 2008 and beyond, we can create a valuable new revenue stream for AES that helps the world meet its need for new sources of renewable energy. H A R N E S S I N G R I V E R P O W E R I N T U R K E Y At the crossroads of three continents, Turkey is undergoing remarkable economic growth. With that expansion comes an ever increasing need for the infrastructure and energy necessary to fuel a healthy economy. An additional 3,000 MW of new capacity must be brought online every year through at least 2015 to meet the country’s projected energy demand. The presence we established in hydropower in Turkey in 2007 with our new partner, İC Ibrahim Çeçen Yatirim Holding A.Ş., provides AES future opportunities to participate in wind, thermal and hydropower developments. We also expect to engage in regional power trading, as Turkey moves forward with its power generation and distribution privatization initiatives. A T H I R S T F O R M O R E P O W E R I N P A N A M A In Panama, the government is looking for investors to fund production of an estimated 50 MW of new energy generation demand each year. AES Changuinola is helping to answer the need for more power by undertaking hydropower projects on the Changuinola River. AES’s Changuinola I hydropower project ranks as the second largest infrastructure project in Panama— second only to the expansions of the Panama Canal. The facility we currently have under construction will add 223 MW of clean, renewable power annually to Panama’s national transmission grid. W I D E S P R E A D E X P A N S I O N S I N W I N D From the dry summer hills of California to the lush farmlands of Normandy, people are using the wind that once pollinated their crops to grow a new cash crop called electricity. Throughout the world, the farming of megawatts from wind is an important and growing phenomenon. A E S G R O W T H I S H A V I N G A P O W E R F U L I M P A C T A E S C O R P O R A T I O N pictured: River and rainforest trees, El Yungue National Forest, Puerto Rico Developing Climate Solutions Our goal is to build a portfolio of emissions reduction projects that will reduce over 20 million tons per year of greenhouse gas emissions from the atmosphere by the end of 2011. E S T A B L I S H I N G G L O B A L L I N E S O F C A R B O N C R E D I T S Our strategy to build a business in climate solutions has taken us to agricultural wastewater and landfi ll sites in Central and South America, China, Indonesia, Malaysia, Poland, Russia, Thailand, Ukraine and Vietnam. We also are pursuing lighting e≈ciency projects in India that will systematically replace incandescent with fl uorescent lighting. The projects we are developing to create emissions reductions meet the standards under the Clean Development Mechanism of the Kyoto Protocol. The emissions reductions we create through these and other projects can be used by AES businesses or sold into international carbon markets where they benefi t other organizations looking for compliance solutions. In the past year, we moved closer toward purchasing a landfi ll gas to energy project in El Salvador. The project will convert gas to up to 25 MW of renewable energy while generating an average of 400,000 emissions reductions per year over the project’s life. Our pipeline of current greenhouse gas emissions reduction projects is growing, with global projects identifi ed that could produce up to 13.5 million emissions reductions annually. Our lighting e≈ciency project in India could produce up to 300,000 emissions reductions annually, based on the savings in electricity usage that it promotes. C H A I R M A N A N D C E O L E T T E R A E S C O R P O R A T I O N The actions we took in 2007 position AES for ongoing growth. They also furthered our expansion into renewable energy and climate solutions as we continued our transformation from a global power company to a global power and alternative energy company. As we look back on 2007, we do so with a mixture of satisfaction and sadness. We were pleased with the progress we made in growing our core businesses and furthering our expansions into renewable energy and climate solutions. But, as we acknowledged our many accomplishments, we mourned the passing in January 2008 of AES’s Chairman of the Board, Dick Darman—a leader, visionary, mentor, and friend. Our message of “impact” takes on deeper meaning as we recall the tremendous impact Dick had on AES. He had the foresight to see the need for expanding the world’s production and use of renewable sources of energy. He advocated better ways to deliver energy to ensure its safe and secure supply in the future. Dick’s leadership in these areas defi nes the direction of our company today. In his early days as a member of our Board, and then as Chairman, Dick helped guide us through our most challenging days and brought a disciplined and systematic approach to our growth that worked. Outside of AES, working for fi ve United States presidents, he had far reaching infl uence on public policies that helped shape our nation. As we move forward, AES is well positioned to continue meeting the world’s growing need for power and providing solutions for a cleaner and more sustainable energy future. For this, we owe much gratitude to Dick. N O B E T T E R T I M E T O B E A N E N E R G Y C O M P A N Y We see economic expansion underway in so many of the countries we operate in today, from the emergence of a more upwardly mobile middle class in China to the strengthening of Panama City, Panama as a center of international trade and commerce to the votes of confi dence foreign investors are making in fast-growing countries in Southeast Europe. These expansions are creating unprecedented global demand for power while overall energy consumption is increasing worldwide. At the same time, concerns about global warming and world energy supply are driving policy and business decisions. For AES, there could not be a more exciting and opportune time to be in the energy industry. By 2030, worldwide demand for energy will increase by 50%. Roughly 70% of this expanded demand will come from growing economies in developing countries— the type of countries in which AES is already providing, or has plans to provide, power generation and distribution. The convergence of this ever growing demand for more energy combined with escalating global concerns about climate change and energy supply, plays to the development strengths that helped build our company. We have the capability and reach to improve and extend reliable electricity to millions of people now and into the future. In parallel, we are able to help those countries in which we already operate meet the challenging renewable energy and carbon emissions reduction targets they have set. Our long-term growth strategy aligns with these trends, and focuses on expansion in three major areas: core power generation and distribution, renewable power, and climate solutions that emphasize greenhouse gas emissions reductions. O U R C O R E S T R E N G T H Through continued expansions in our core power generation portfolio—which today forms the backbone of our business—we will help light more of the world’s communities and cities. New projects we are building in Chile and developing in India, and operational improvements we made to two plants we recently acquired in Mexico will expand reliable and cost-effective electricity to millions of people. We also are expanding our business into fast-growing countries such as Jordan and the Philippines. To each new project, we apply more than two decades of experience to identify ways to make workplaces safer, to improve operations, and to provide dependable and affordable power. R E N E W A B L E S O N T H E R I S E Our renewables business grew signifi cantly in 2007 and now comprises 20% of our overall portfolio. Last year, we were one of the fastest growing wind generators in the US, increasing our wind business by 66% and ending the year with more than 1,000 MW in operation. We plan to continue our growth in the US and accelerate our eΩorts in other AES markets around the world. We started construction of our fi rst pictured: The beauty of Bariloche, Argentina wind farm in China and see tremendous opportunity for further expansion of our wind business there. We expanded our operations into Turkey and started construction on the fi rst of many hydropower projects we plan to build and operate there. Our strategy to build small hydros aΩords us rapid market entry with limited environmental disruption. P A R T O F T H E C L I M A T E S O L U T I O N Mitigating the eΩects of greenhouse gases is good for the environment; it is also a good business for us. In 2007, construction began on nearly a dozen of our initiatives around the world ranging from palm oil projects in Malaysia to landfi ll gas energy projects in China to a biomass project in Indonesia, which not only creates carbon oΩsets but also will put clean power on the grid. We made signifi cant progress toward acquiring a landfi ll gas to energy project in El Salvador, our fi rst acquisition of an operating Clean Development Mechanism project that is fully registered and already receiving Carbon Emission Reductions credits. K E Y F I N A N C I A L H I G H L I G H T S We continued to meet expectations in the key indicators we believe best measure our fi nancial performance. During 2007, AES generated record revenues of $13.6 billion, reflecting annual revenue growth of $2 billion, or 17.4%, over 2006. We also recorded record cash fl ow from operations of $2.4 billion. Free cash fl ow* was $1.48 billion, exceeding our guidance of $1.2–$1.4 billion. We also continued to aggressively manage our portfolio of businesses for maximum value and fl exibility. To free up capital for future investments, we sold a portion of our interest in our Chilean generation company, AES Gener, and reached an agreement to sell some of our facilities in northern Kazakhstan, which we will continue to operate under a management agreement until 2010. These transactions are good examples of how active portfolio management creates opportunities to increase value for our shareholders. The capital markets exhibited confi dence in AES with their response to our senior unsecured bonds oΩering. We initially oΩered $500 million but quadrupled the amount issued to $2 billion based on strong investor demand in an otherwise weak market. The October offering was the largest single corporate fi nance deal in AES history. Our ability to execute this o,ering in such di≈cult times underscores the positive changes we made to strengthen our fi nancial structure and report fi nancials in a more accurate and timely way. A L A S T I N G I M P A C T We are well positioned to continue our long-term commitment to growth. Today, we are a global power and alternative energy company serving markets that have long known the convenience of reliable electricity. At the same time, we continue to expand our reach in markets that are just beginning to realize the possibilities that access to energy brings. Our development pipeline refl ects this dynamic: 40% of our medium- to advanced-stage projects are in the fast-growing economies of Asia and the Middle East. We can bring these countries the power they require to fuel their growth, but our lasting impact will always be broader than the energy we provide. As we look ahead, we will continue to answer the world’s growing demand for energy, and do so in a way that endeavors to both preserve our environment and ensure a dependable energy future for generations to come. That is our mission and our passion. P H I L I P A . O D E E N C H A I R M A N O F T H E B O A R D P A U L H A N R A H A N P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R * defi ned as cash fl ow from operations less maintenance capital expenditures of $878 million. M A R C H 1 7 , 2 0 0 8 O P E R A T I N G W I T H E X C E L L E N C E A E S C O R P O R A T I O N A Culture of Continuous Improvement Keeping a power plant running at top e≈ciency requires dedicated focus. Maintenance outages must be scheduled; networks upgraded; people kept safe on the job. And the systems to keep track of it all must provide both local and global insight into our business. We measure our operational performance by how well AES people manage the complex activities at our plants and offi ces around the world. S T R I V I N G F O R S A F E T Y A N D E N V I R O N M E N T M A N A G E M E N T E X C E L L E N C E Working in the power industry can be dangerous, which is why we make safety our fi rst priority. During 2007, we introduced enhanced global safety and environmental standards throughout our businesses. These, and newly implemented safety and environmental management systems, were designed to help eliminate potential accidents in our highest risk areas and provide a consistent approach to administrating safety programs across our global operations. The adoption of these systems in 2007 enabled all AES facilities in Asia and the Middle East, and many of our other facilities to obtain recognized occupational health and safety certifi cations through the OHSAS 18001 and ISO 14001 processes. G E N E R A T I N G I N D U S T R Y R E C O G N I T I O N F O R O P E R A T I O N A L E X C E L L E N C E Heading a long list of achievements for operational excellence was a top industry award from the Edison Electric Institute that recognized AES’s Latin American region for outstanding improvements across its businesses and for contributions that advanced the overall power industry. The award is a testament to the caliber of our people and operations in Latin America which currently serve the energy needs of more than eight million people through 47 generation and nine distribution operations. Empowering people to fi nd innovative ways to advance the business and share ideas on everything from procedures to halt the erosion of Pelton runners on hydroelectric turbines in Chile to eΩective call center management systems in Brazil, dramatically improved our operations in Latin America. Our businesses there experienced an 8% increase in net generation, a 15% reduction in outages, an 8% reduction in energy losses and higher customer satisfaction rates. In North America, best practices initiatives showed their value in both immediate and longer-term achievements. Our plant in Connecticut, AES Thames, completed a scheduled maintenance service outage in record time, shaving 15 days oΩ industry standard timetables. Ongoing environmental emissions reduction initiatives at Indianapolis Power & Light Company brought a new fl ue gas desulfurization system online at the Harding Street Station that is reducing sulfur dioxide emissions by 97%, making the air cleaner for everyone in the area. At AES Shady Point in Oklahoma and AES Puerto Rico, our plants ended the year running at 100% of contracted power availability. AES Hawaii, meanwhile, celebrated 15 years of power generation operation that far exceeded industry standards for service availability. B A N K I N G O N N E W I M P R O V E M E N T S Across our businesses, AES people continually strive to provide stronger results by identifying and implementing process improvements and cost reductions. We accel- erated the roll-out of a problem-solving methodology called APEX (AES Performance Excellence), and began to realize benefi ts and cost reductions that together have saved us $15 million since the program’s start in 2006. We also began implementing enterprise resource planning software to help standardize our fi nancial reporting processes and policies. Early projects are underway at our businesses in Chile, El Salvador, Spain and Ukraine. pictured: Saris for sale, Bhubaneswar, India Building on a Rich History of Corporate Responsibility Our global presence reminds us that 1.6 billion people still live in “energy poverty,” without life-changing conveniences that electricity aΩords. If we can do something more to address that reality, we have an opportunity to make an impact that is distinctive, far reaching and inspiring for all AES people. Corporate Responsibility at AES is not a program: it is integral to the value system that has shaped the conduct of our business since our inception. As we expand our existing businesses or enter a new market, we are often presented with opportunities to leverage our competencies and infrastructure in ways that go beyond our day-to-day business. K N O W L E D G E L E A D S T O P O W E R I N B R A Z I L In Brazil, AES Eletropaulo works hard to make electric power aΩordable for everyone. But the lack of regular income for some residents in poorer areas has meant that customers who use and want power often have a tough time paying for it. Recognizing that information about how to use electricity more e≈ciently might help customers, Eletropaulo has spearheaded several ongoing educational programs to help people learn conservation techniques that will lower their monthly payments. Going door-to-door to customers’ homes, AES people helped consumers by replacing older appliances and lamps with more energy-e≈cient models (many of them donated by AES), and by improving electrical wiring in homes and businesses. This initiative, along with another program AES undertook with the US Agency for International Development and the International Copper Association in a low- income neighborhood of São Paulo, has helped ensure that electricity remains a staple of everyday life for 800,000 people. C O N N E C T I N G C A M E R O O N As an early mover in the African energy market, we know that expanding access to electricity is a key contributor to growth in this region of 18 million people comprised of over 130 ethnic groups and more than 240 dialects. We met our commitment to connect 50,000 new customers last year—and aim to connect up to a total of 750,000 customers by the year 2022. We also made it easier and more aΩordable for residential customers to get access to electricity by lowering rates, creating payment options that allow them to pay for the initial connection fee over a period of 12 months and simplifying the sign-up process. S E E I N G S O L U T I O N S T H R O U G H T H E T R E E S Twenty years ago, well before carbon credit oΩsets were considered a saleable commodity, AES initiated the voluntary planting of more than 20 million trees in Guatemala to mitigate emissions from our newly built power plant, AES Thames, in Connecticut. Today, one of our businesses in Brazil continues that tradition. Over the past six years, AES Tietê has developed an advanced reforestation methodology that can be used to accelerate natural regeneration of deforested areas. In 2007, this eΩort was approved by the United Nations as a new Clean Development Mechanism. AES will soon begin implementing our new methodology by planting more than 10,000 hectares of indigenous species of trees around ten hydropower plants we operate in southeast Brazil, generating an estimated three million emissions reductions over the project’s life. The methodology can be replicated in other reforestation projects around the world. North America Operating facilities since 1985 Number of AES people: 3,500 Total generation capacity: 14,595 MW1,2 Total distribution: 16,967 GWh2 The Power of Being Global Countries in which AES has operations, including distribution businesses, generation facilities, plants under construction and facilities AES operates under management or O&M agreements 1 Total generation megawatts in North America include wind generation facilities owned by AES and facilities operated by AES under management or O&M agreements 2 Figures include facilities AES owns or operates, and facilities AES operates under management or O&M agreements Latin America Operating facilities since 1993 Number of AES people: 9,300 Total generation capacity: 11,224 MW2 Total distribution: 48,755 GWh2 Europe, CIS and Africa Operating facilities since 1992 Number of AES people: 14,500 Total generation capacity: 11,457 MW2 Total distribution: 12,756 GWh2 Asia and Middle East Operating facilities since 1994 Number of AES people: 700 Total generation capacity: 5,369 MW2 C O M P A N Y I N F O R M A T I O N A E S C O R P O R A T I O N AES Executive O´ce Paul Hanrahan President and CEO Andrés Gluski Executive Vice President and COO Victoria Harker Executive Vice President and CFO David Gee Executive Vice President and President, North America Ned Hall Executive Vice President and President, AES Wind Generation Robert Hemphill Executive Vice President Jay Kloosterboer Executive Vice President, Business Excellence John McLaren Executive Vice President and President, Europe, CIS and Africa Brian Miller Executive Vice President, General Counsel and Corporate Secretary Roger Naill Senior Vice President, Strategic Planning Richard Santoroski Vice President, Global Risk and Commodity Organization Andrew Vesey Executive Vice President and President, Latin America Mark WoodruΩ Executive Vice President and President, Asia and Middle East AES Board of Directors Philip A. Odeen (Chairman) Non-executive Chairman, Convergys Corporation; former Chairman, Avaya Inc., Reynolds and Reynolds Company, and TRW Inc.; former President and CEO, BDM John H. McArthur Dean Emeritus, Harvard Business School; Chairman, Asia Pacifi c Foundation of Canada; former Senior Advisor to the President, The World Bank; retiring from the AES Board of Directors, April 2008 Paul Hanrahan President and CEO The AES Corporation Kristina M. Johnson Provost and Senior Vice President for Academic AΩairs, Johns Hopkins University John A. Koskinen President, the US Soccer Foundation; former Deputy Mayor and City Administrator, the District of Columbia; former President and CEO, The Palmieri Company Philip Lader Chairman, WPP Group plc; Senior Advisor, Morgan Stanley; former US Ambassador to the Court of St. James’s Sandra O. Moose President, Strategic Advisory Services LLC; Chairperson of the Board of Trustees, Natixis Advisor and Loomis Sayles Funds; former Senior Vice President and Director, The Boston Consulting Group Charles O. Rossotti Senior Advisor, The Carlyle Group; former Commissioner, the IRS; former Founder and Chairman, American Management Systems, Inc. Sven Sandstrom Director and Treasurer, the International Union for the Conservation of Nature; Advisor, African Development Bank and the Global Fund to Fight AIDS, TB and Malaria; former Managing Director, The World Bank pictured: AES Buffalo Gap wind farm, Texas, USA Tribute to Dick Darman aes board member 2002–2003 aes chairman of the board 2003–january 2008 Dick was a good friend and valued leader. He set an extraordinarily high standard for himself and for all of those around him. Dick challenged us to maximize our personal potential and the potential of AES, and we all benefi ted as a result. His belief in and enthusiasm for renewable energy helped set a new course and vision for AES. We will greatly miss Dick’s friendship and guidance, but his legacy will live on through the impact he had on our business and the people with whom he worked. We dedicate this year’s annual report to Dick Darman, whose leadership, vision and stewardship at AES will long be remembered and appreciated. C O M P A N Y I N F O R M A T I O N A E S C O R P O R A T I O N Corporate O≈ce AES Corporation 4300 Wilson Boulevard Arlington, VA 22203 USA 703-522-1315 Website www.aes.com Stock Information Common stock of the AES Corporation is traded on the New York Stock Exchange under the symbol AES. Number of Shareholders As of December 31, 2007 there were approximately 6,528 AES shareholders of record and 670,339,855 shares of AES common stock outstanding. Transfer Agent AES Corporation has designated Computershare to be its transfer agent for AES common stock. Please contact Computershare if you need assistance with lost or stolen AES stock certifi cates directly held by you, address changes, name changes and stock transfers. By Mail: Computershare P.O. Box 43078 Providence, RI 02940-3078 By Overnight Delivery: Computershare Investor Services 250 Royall Street Canton, MA 02021 Calls inside the US: 781-575-2879 Calls outside the US: 781-575-2726 www.computershare.com email: shareholder@computershare.com Independent Auditors Deloitte & Touche LLP Investor Relations Information Please visit the Investor Relations section of the AES website at www.aes.com, or you may contact a member of the AES Investor Relations team: General: 703-682-6399 or invest@aes.com Ahmed Pasha, Vice President, Investor Relations: 703-682-6451 Michael Cranna, Director, Investor Relations: 703-682-6334 General and Media Inquiries Please contact Robin Pence, Vice President, Communications at 703-682-6552 or media@aes.com. AES Code of Conduct AES is committed to demonstrating the highest standards of business ethics in all that we do. To that end, AES has adopted a Code of Business Conduct and Ethics. this page: Ceramic bowls in the Grand Bazaar, Istanbul, Turkey; Girl at the ancient Mayan city of Chichen Itza, Yucatan, Mexico; Night sky, São Paulo, Brazil back cover: Mountain valley, Alfalfal, Chile AES is… A global power and alternative energy company. With businesses in 28 countries on fi ve continents, AES generates and distributes power with the capacity to serve 100 million people. We operate in a number of the world’s fastest-growing markets and are continuing to expand into regions where we believe tomorrow’s energy markets are rapidly emerging. Our 13 regulated utilities amass annual sales of over 73,000 GWh and our 121 generation facilities have the capacity to generate approximately 43,000 MW. Renewable sources of energy, which already comprise 20% of our capacity, and climate solutions are a growing part of our energy portfolio. AES’s 28,000 people around the world are committed to operational excellence and meeting the growing global need for power. Our impact e 2 0 0 7 A N N U A L R E P O R T this page: Ceramic bowls in the Grand Bazaar, Istanbul, Turkey; Girl at the ancient Mayan city of Chichen Itza, Yucatan, Mexico; Night sky, São Paulo, Brazil back cover: Mountain valley, Alfalfal, Chile AES is… A global power and alternative energy company. With businesses in 28 countries on fi ve continents, AES generates and distributes power with the capacity to serve 100 million people. We operate in a number of the world’s fastest-growing markets and are continuing to expand into regions where we believe tomorrow’s energy markets are rapidly emerging. Our 13 regulated utilities amass annual sales of over 73,000 GWh and our 121 generation facilities have the capacity to generate approximately 43,000 MW. Renewable sources of energy, which already comprise 20% of our capacity, and climate solutions are a growing part of our energy portfolio. AES’s 28,000 people around the world are committed to operational excellence and meeting the growing global need for power. Our impact e 2 0 0 7 A N N U A L R E P O R T