愛依斯電力 (AES) 2001 Q1 法說會逐字稿

AES CORPORATION FIRST QUARTER CONFERENCE CALL

Ladies and gentlemen, thank-you for standing by. Welcome to the AES Corporation first quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in the question and answer session. At that time, if you have a question, you will need to press the '1' followed by the '4' on your telephone. As a reminder, this conference is being recorded Thursday, April 26th, 2001. I would now like to turn the conference over to Mr. Dennis W. Bakke, President and Chief Executive Officer. Please go ahead Sir.

Thank-you. Good afternoon everyone. It is a pleasure for us to get a chance to have a discussion with you about the things that are happening at AES, and the quarter economic results and whatever you would like to talk about. On the call, this afternoon, usual suspects, of course Barry is here and he will be following me after preliminary remarks and Ken of course is here, Rob Venerus who did the IPALCO transaction with Tom, Paul Hanrahan who of course as you know runs a lot of the activities in Brazil, David is on for some follow up in Brazil as well, Michael Armstrong from England and other parts of Europe, our Group Manager Naveed Ismail is the same for Argentina and Chile, and of course, Garry Levesley who is celebrating in Kiev, who operates a lot of the CIS Nation operations for AES, so that is on, and we will spend most of the time hopefully on questions. I thought just a few opening comments before Barry and I will come back after that and talk a little bit more before going into the questions. My first point is just a reminder that's on the release, but we did elect Phil later to the Board. This is especially a pleasure for me, a long time friend of the company, just to give you an idea, he bought up the second private round, which was at that time $10 a share, which is ¢6 a share today, a long time holder of AES, just recently has been the Ambassador to the UK, President of Sea Pines Plantation in Hilton Head, a road scholar, and just really a wonderful addition. I will also note that we have three new group managers, Ned Hall splitting some of [_______________] territory and he has basically Central America and Florida, Haresh Jaisinghani has taken over for Lenny in Singapore on the Transpower, and he will add to his work the India businesses, and then Mike Scholey who is now into [_______________] Georgia is going to take a new group operating out of Istanbul, covering North Africa and Central-Eastern Europe and the Balkans. The second thing is that there have been a few questions regarding FERC action yesterday and what our thoughts are on their capping of the prices on California, we are generally okay with it and actually, maybe some parts of it are really good. The first thing is that it really doesn't affect us too much because almost everything we are doing out there is not real-time sales through the California ISO. We are not in that real-time market much, most of our things are sold in bilateral contracts and so that doesn't really affect us very much going forward. The second point probably that is more important is that FERC has asked California to file a regional transmission plan, that was sort of lost in the shuffle here, but that's a really important thing it means that California can't really operate their transmission system just for California, but have to cooperate in a regional way and we think that is a very big plus. The next set of comments are just been on the IPALCO deal, it finished, and we've talked about it the last time we were on the call, but this turns out right now to be, it looks really, really good to us and we are very pleased that's it done. I mean, I think the IR range probably is above, may very well turn out to be above our range, which is pretty good for such a big purchase. I think you just also remember right now that the coal plants are really valuable in the country as a hedge against gas and maybe you can keep gas honest, and we are just very pleased to have those coal facilities in that part of the country. The next point, I guess is, judging from the question we have been getting, we are assuming that the weakness in our stock tends to be around the storm clouds in Argentina and Brazil, don't know that for sure, but that may be the case. It is now our 6th or 7th storm cloud in the last 6 or 7 years from California to Pakistan to Brazil to several other kind of places, and it is always a big question for everybody, I guess you and us alike us whether this storm cloud turns into a nice spring rain, we have do it right while its raining, but come back out when the springs flowers and beauty and growth and all wonderful things, or does it turn into a killer in a 100-year hurricane or cyclone like the one in Orissa a couple of years ago. We don't really know, we are going in and so we are trying to assess that. Certainly in Argentina, 3% of our income in 2001 comes from that economy, and I think if you look at it that's pretty small and the ups and down possibilities regardless of what happens are really pretty small. I guess Naveed can talk to this, but I think we would sort of generally say that in the short term you could get a little bit of hit if things just fall completely apart. We are very well protected legally and all that, whether be it dollarized businesses, but who knows, if you get a big, big devaluation, you could get hurt, and it could hurt us a little bit on the down side, but we are talking fractions of it, you know, more like a penny-type deal or two pennies at the most I think. Something you probably would have a harder time seeing. On the other hand, if in fact anything they do actually improves the economy, we actually a have bigger chance for upside, it is not a huge amount because we are on a 3% base, but it is a very significant long-term possibility of doing things better if we could get the economy going, especially since our distribution companies are very much tied to the general GMP growth in terms of their economics over time. So, I don't think Argentina is the big problem. And in Brazil, again the storm clouds are there; the fundamentals, I think, Naveed or David would say are really good. We have been extremely well in Brazil now, but there are again, probably short-term possibility problems that are rationing. I think that it is clear to us that there is really no chance of the California squeeze on distribution companies really there and to a significant way. There is no way that the State or Federal Government can rally in and buy things for the state and put this kind of a squeeze, but that could very well be rationing and that will hurt, and also the US economy could hurt Brazil and slowdown things there. So in the short term, there could be a little bit of blip in Brazil, but we are doing so well right now that it is not necessarily something that could certainly take us below of what we expected very easily, and in the long term, the fundamentals are really good and foreseen, especially the rationing and the lack of power is not a force. We think the government to get more sensible about how they set up the rules for new generation, and so we are in a very good position to add generation there, a little like California where the rules get a little bit more rational for people to build, and long-term California looks much better today than it did before all this stuff happened for us and for others as well, but Brazil is similar in that respect. So the fundamentals look good. We may have some short-term things, but we think it is a pretty solid deal going forward from here, and we certainly can answer more questions on that later. Now in terms of the quarter - remember when we talked about, and we have said several times, we came out with 18% to 22% of our earnings coming out at this time and earnings of 170 to 195 and that is what we said, and what happened in the quarter is the ¢42 is at the top of both of those ranges and that's more than we expected. I would say we are ¢4 or ¢5 better than one would expect it, and so those of you who are down and a little bit lower than that, we are much more accurate, and rightly so. So, we are sort of ahead of where we would normally see there. It is not a bowl out exactly, like it has already been experiencing with some of our brothers and sisters in this business. I must say, I was talking to Stu Ryan today about that and there is a little pang of MV, but then we remember what we were supposed to be doing and we were in this long term and that we are trying to do the right thing and the diversification all around the world is really good and that our growth rate is still solid and going forward, and so you shouldn't expect rollouts, and we don't think they are necessarily that good for us even though it sure sounds good sometimes when we hear it from some of these other folks. But right now, you are not going to see that from AES, and although we had a great quarter, we really had it where we thought it would be at this point. As usual there are lot of ups and downs, China, Brazil, Panama, and the New York businesses. Barry is going to maybe mention that, you can mention it again, and maybe I was wrong, but those are the ones I would think are correct, and we are better in Coast of Belize, and we talked about that, we are having some problems because of the winter corrections and some of the UK businesses we're a little under budget as well. So those are some of up and downs, more ups than down obviously or we wouldn't have done better than expected. I will come back after Barry now and just talk a little bit about the rest of the year and then going forward the next five years just to reiterate where we think we are in that given the first quarter. So, Barry why don't you go?

Okay thanks Dennis, and as Dennis did said we had a strong quarter from an operating perspective. As we discussed in early February, at the beginning of the year when we gave our guidance, we did provide guidance for the year based on our expectation of operating results and explained there were certain items that we were excluding from that, in particular the FAS 133 items, the foreign currency transaction losses, as well as the potential for non-recurring kind of costs and transaction expenses related to the acquisition of IPALCO. As it turns out, the first quarter was basically a laboratory for those items, as FAS 133, when effective, we did complete the acquisition of IPALCO in the first quarter, and we had because of the economic turmoil in Argentina primarily kind of the reflective devaluation of the 'real' in Brazil. So as a result of those factors we have presented our financial results and we have probably seen in the press release in two ways - the full GAAP basis that includes those expenses, and one via supplemental schedule that presents financial results excluding the Brazilian FX transaction losses and the IPALCO transaction severance costs. I think probably the exclusion of the IPALCO transaction cost is somewhat self explanatory, but since this is our first and maybe our only pooling, it is probably worth remembering that these costs are merger-related expenses that in normal cases most of our acquisitions have been purchases would be capitalized and then depreciated or amortized over the life of the business. In this pooling or more simply just adding together of the historical results of our two companies, these costs are treated as expenses in the current period. So that's why we have presented adding them back to show the operating results. With respect to the depreciation of the 'real', there are two impacts obviously from the depreciation, one is how it affects our reported revenues and expenses and that does have a current impact on our earnings as well as the current impact on our cash flows, and as I will mention later, though even with those impacts this quarter, we did better than we expected both on a historical basis and better than our budget in Brazil for the quarter, despite the depreciation in the 'real' in the quarter. The second impact though is that of the affect on the dollar debt in the Brazilian companies, affectively marking the debt at Light Metro primarily US dollar debt to the current exchange rate. This results in a calculated loss, not an economic loss, and its a non-cash loss, and so we have used again, in this case we are adding those back to the results to show what we believe is a more accurate representation of our actual operating results, and for most of you who probably remember this, but I think it is important to recall that the distribution compressions in Brazil do adjust annually, based on local inflation and generally devaluation is followed by local currency inflation as we saw following one in early 1999, and as a result our cash flows actually in our businesses will continue to increase, and the future is that debt begins to come due and the inflationary adjustments in the tariff serve back as a hedge against the changes in the value of the 'real'. So, we think it is appropriate to look at the financial results excluding those two items, which is how we will go through most of the rest of this discussion. On an overall basis for the first quarter, our revenues increased 50% at 2.54 billion, that's an increase of about 850 million from the prior year. Of the total revenue for the quarter about 48% was from our generation business and 52% was from the distribution side of the house, that's a minor shift from the same quarter in 2000 where generation was 51 and distribution was 49. In the generation segment, revenue growth was 39% or about 340 million and as Dennis mentioned, it was primarily driven by increases actually related to several businesses including several in North America at Warrior Run, Placerita our plants in New York, as well as increases in South America as new businesses like Alicura and the KMR plants as well as Chivor in Colombia and Uruguaiana a new completed facility in Brazil. The new facilities acquisitions from Gener in Chile, as well as Merida in Mexico, and also included with the increases in Europe at Kilroot and Belfast West and [________________] in Georgia, and Lal Pir in Pak Gen in Pakistan with Ecogen in Australia. So you can see the list is long as Dennis mentioned most of the ups really outweighs the downs. Those increases were offset though by year-on-year decreases primarily in UK, particularly Drax and Berry and at a couple of the Hungarian plants as well as the Thames in US. Growth in the distribution segment represented an increase of 62% on the revenue side and was primarily driven by new businesses at EDC in Venezuela and Kiev and El Salvador, as well as year-on-year growth of significance at [Silk Road] in US, including sales outside at our service territory on a competitive basis, Sul in Brazil and EDE Este in the Dominican Republic as well as growth in the retail revenues in NewEnergy and Power Direct. Those were slightly offset by revenue declines at COESA and IPALCO. It is worth noting that IPALCO was in our in our numbers in this quarter and for comparative purposes on both of our sheets the prior quarter for 2000, as that's how we reflect the results under a pooling. If IPALCO were excluded from the 2000 results revenues in total would have increased about 73%, as compared to the 50% reported with IPALCO included in both years. New businesses as a result in the first quarter of 2001 accounted for about 63% of our growth in revenues with the other 37% coming from businesses existing prior to the second quarter of 2000. On a geographic basis, first quarter revenues were 39% in North America, 38% in South America, 14% in Europe and 9% in Asia. Dropping down the gross margin or sales less cost of sales margins increased 31%, the 624 million for the first quarter, up from 476 million in the first quarter of 2000, again including IPALCO in both periods. On a consolidated basis, and inclusive of the start up competitive retail businesses, gross margin percentage was approximately 25% in the first quarter of 2001 versus about 28% in 2000, and about 59% of the margin arose from the generation business with about 41% coming from the distribution side. Again in the generation side, improvements were across the board, at least geographically including Warrior Run, Placerita, and Southland in New York in particular and Hawaii with improvements in South America, at additions from Alicura, Chivor, The Gener facilities as well as Merida and in the plants in Northern Ireland as well as [________________] in Georgia. These improvements were partially offset by decreases year-over-year at Thames in Connecticut, Tiete in Brazil, and Drax in UK. In the distribution businesses - the margin increases came from the similar improvements on the revenues side at EDC and Kiev as well as a improved margin year-over-year at IPALCO, those were offset partially by declines in margin EDE Este in the Dominican Republic, Telasi in the Republic of Georgia and as Dennis Mentioned in Power Direct in the US. So geographically, first quarter, our margin was distributed 38% in North America, 40% in South America, 18% in Europe, and 4% in Asia. Excluding the results of the competitive retail businesses, the consolidated margin was about 27% for the quarter, down from approximately 30% for the first quarter of 2000, primarily due to lower generation margins in the UK, lower initial margins at Gener in Chile with better than company-wide average margins at EDC, IPALCO, Alicura, and Chivor. SG&A actually decreased for the quarter slightly to $21 million resulting from decreased corporate expenses year-over-year, and as a percentage of sales, SG&A declined to 1% from about 1.7% in 2000. So, as a result, operating income was record for first quarter of 2001, increasing 35% to $602 million, up 447 in the prior year and again includes IPALCO for both years. And as a percentage of revenues, operating income was at 24% for the first quarter of 2001. Net interest expense increased in combination with a significant growth of the company over the last year and increased to $350 million for the quarter, that's net of $70 million of interest income and is up from $264 million net for the first quarter of 2000, where there was $21 million in interest income. Increases were primarily due to additions of new businesses, new project finances that we talked about, as well as additional corporate interest arising from significant investments over the past year. These increases were partially offset on an ongoing basis as we continue to pay down debt at existing facilities, and parent interest expense for the quarter was approximately $120 million. Interest income increased from the $20 million to $70 million range, primarily due to increased cash and investment balances across our larger portfolio businesses. Other income and expense beginning this quarter effectively includes, it's a mark-to-market line for us including the non-Brazilian foreign exchange transaction losses and are in the results of FAS 133, which represent the mark-to-market results for certain interests, currency, and swaps colors and options that don't qualify for hedge accounting as well as some energy contracts that are mark-to-market. The net effects for AES of FAS 133 were slightly positive this quarter as a whole, and the small loss, net loss, and other expenses is primarily foreign currency transaction losses at non-Brazilian business primarily due to the dollar borrowings at Drax. So, FAS 133 had a minimal impact on us in its first quarter. Equity and earnings before considering the transaction losses increased 41% to $141 million in the first quarter, that's up from $99 million last year and is due primarily to improved results across the board of the distribution companies in Brazil, Metro, Light, and Cemig, and that was offset slightly by the reductions due to the fact that we now control NIGEN where it was previously included in this line for income, so a strong quarter for Brazil from an operating perspective. On an estimated basis, our income tax rate has increased from 28% for the year 2000 to an estimated 35% for 2001, an increased results primarily from two things; one, the inclusion of IPALCO, which is a US business with both Federal and State tax obligations and from an anticipated increase in cash flows over the course of rest of the year particularly in dividends from South America. As a result, overall, net income before the transaction losses and the IPALCO costs increased 19% to $226 million; it's up from $190 million on the same basis for the first quarter of 2000. As a result, EPS for the quarter was ¢42, as Dennis mentioned, that's the high end of our expectations going into this year, and that represents an 11% increase over 2000, after including the additional shares in both years. Diluted shares were $558 million on this basis for 2001, and adjusted $495 million as stated for 2000. EBITDA for the quarter - earnings before corporate interest and taxes increased 17% to $463 million and was distributed 40% in North America, 51% from South America, 8% from Europe, and 1% from Asia, and roughly 43% out of generation business with the remaining 57% from distribution. If we include the non-cash transaction losses in Brazil and the IPALCO nonrecurring cost arising from the pooling, those two totaled approximately ¢22 a share about ¢11 each, and so as a result, our net reported income after those transactions and those costs is approximately ¢20 per share. Some other brief financial highlights - Total assets approached $35 billion at the end of the March, that's up from $33 billion at the end of 2000. Total cash and short-term investments at the end of the quarter is approximately $2.2 billion with total debt at 20 of which outstanding parent debt is approximately $5 billion. Equity - including convertibles of about $6 billion. Outstanding borrowings under the revolver at the end of the quarter were $440 million with the additional LCs of $233 million. Our measure of parent cash flow cumulative over the last 12 months also increased significantly over the course of last year to $965 million for the last 12 months, that's up from $871 at the end of last quarter and $387 at this time last year for the previous 12 months. Increases for the quarter of note over the previous last 12 months figures primarily result from significant additional cash flows from Alicura, facilities in New York, Drax and Thames offset by a reduction from Red Oak, because we had distributions from Red Oak in the first quarter of 2000 related to their financial closing. We haven't made any historically restatements to the parent EBITDA for the inclusion of IPALCO in these results, and then one last final note by way of celebration a little bit, although it happened really in the second quarter, and it won't be included in our parent EBITDA measurements, Thames and Connecticut did receive payment under its contract buy-down agreement with CLMP of about US $574 million. After paying off its project debt and other related costs, it was dividended to about $516 million to AES in the second quarter of which about half to date has been used to repay debt. So, some of you have who have followed that, it was somewhat of a lengthy process, but one that the team at Thames has performed admirably on and works well, I think, for both our customer and for us, and obviously provides a fairly significant liquidity event also as it goes. So, with that I will turn it back over to Dennis.

Thanks Barry. Well, just a couple of more thoughts and we will go to questions. Wanted just to focus a little bit on going forward. One of the things that's very exciting, I think, it to see now we added just the plants, the generation plants under construction, I think there are something like 13 of them, although there is some discrepancy there, almost 7000 megawatts around the world in construction. This has been accepted as a new business arena. This is stuff that's already in construction, and I think we had great expectations for the year in business development, new business kind of things, and certainly in the first quarter, it's been every bit as strong as we thought, maybe, maybe even better and so we still have those great expectations for a year of that again. I don't whether to call a blowout, but it's certainly very, very strong after the strongest year of our life in 2000, and 2001 has started out extremely good for us. I mean, the Ukraine thing, it sounds probably obscure on some of your maps, but those businesses may be if we have both of them, it's a million customers or so, the utilities are probably in terms of the shape they are in fall close to IPALCO than they do to Tbilisi. They are in between obviously, but it is a, we think very, very high potential good businesses and we are very pleased to be able to have a chance to make a difference in that part of the world. And the breakthroughs in the Middle East have been significant coming through here in the last number of months. So, we are very pleased with that in the course of the list you have what's happened thus far, and we frankly expect a lot more to come. That now takes us then to the rest of the year and beyond. I have started with the fact that we think we are probably ¢4 or ¢5 cents ahead with the first quarter than we might have thought we would be, what I would like start with is, don't add that to your numbers for next quarter or for the year. I think the chances are we will come back to where we thought we were going to be by the end of the year because of some of the storm clouds or whatever happens, we just turned out, it's more like, you know, that doesn't happen, but I wouldn't, if right now just keep the powder dry in terms of going forward and think we are going to stay with what we have had. And remember that, as we go in second quarter, the 15% to 18% of year's income we gave you the estimate, I think Barry gave those in January. I just guess don't go to the top of the range, be in the middle of those ranges, on both the earnings side and that just because for one thing, some of the things that we have in place that were, they make up for some of the places we aren't doing quite as well like Mohave where we had to make up something along the way. We feel good about those make ups, but almost all of them are filtered toward the third and fourth quarter. So piling up on the second quarter is not going to be helpful for us, on the other hand, we really do think we are on the right straight on the same track we've been on since beginning. I don't like the quarter stuff anyway because I think we are not a very easily predictable quarterly business, but we're right on track for the year, right at this point. Just to give a little example, what I am talking about, we have, there is some chance even if doing a little better, in a place like Drax, for example, where we don't know for sure but to need a system is too early in the game but both in March and in April, we were real close to [_______________] which is encouraging. Its too early as I said, but we've been working very well, and the plan works extremely well in this system and our people have just done a superb job thus far, even they were sending some of the potential earnings into August, and later by taking some outages in April, Drax is still doing pretty well and so that's encouraging to us, and Board is well I think for the part that we will do, we should be able to do pretty well for the year. So that's the longer shot of it is stay with it, steady as we go. It looks pretty good even though I don't know that we are going to be ¢4 or ¢5 ahead of what we expected at the end of the year. Again, going forward from that even with this big acquisition and things we've done, we been looking at the 5-year plan and right now, I don't see any significant change, if anything, I have seen numbers a little bit higher than what we gave to you, although I won't bet on them yet, but certainly its not been a deterioration in the 5 year numbers for AES in terms of its growth. The 25% to 30% range we talked about after one quarter of the 5 years looks very, very solid right now, as solid as something can look 5 years out, so no deterioration as of now on going forward. Lets go to questions now and we'll see if we can answer things you really want to know about.

Thank-you. Ladies and gentlemen, if you wish to register a question for today's question and answer session. You will need to please press the '1' followed by '4' on your telephone. You will hear a three-tone prompt to acknowledge your request. If you question has been answered and you wish to withdraw you polling request, you may do so by pressing the '1' followed by the '3'. If you are on speakerphone please pick up your handset before entering your request. One moment please for the first question. Craig Shere with Standard and Poor's. Please go ahead with your question.

Hi! guys, good quarter.

That's great quarter.

That's a great quarter and the world is a better place and the shareholders are better off because you are doing the work that you should do, but I wonder if you could put my mind at ease on a couple of questions. First - Dennis you talked about Brazil and Argentina but you talked about Brazil more with the economy. Two years ago you wrote in the annual report, that was one of the areas where you all take a hit on currency exchange that you felt that you didn't deserve an 'A', and I know you are not top down. You don't tell people what to do, with Brazil on a free flow, if Argentina breaks, Brazil is going to obviously have to respond with its currency, otherwise their economy has been benefited by the fact that Argentina is tied to the dollar and they couldn't respond to devaluation, and the question, I guess, where the concern is, it's not just an economic thing in Brazil, it's another potential serious devaluation issue on not just on few cents, and we have managed to hedge our power exposure sometimes to the shareholder detriment but with all the diversification and everything you are doing that's fine, but are we hedged against these kinds of exposures? And also you mentioned that, and I agree on macroeconomic thought it makes sense, you know, if you have a devaluation, you make it up in inflation, but the real exchange rate for the 'real' is higher than it was 2 years ago. We haven't seen the appropriate inflation to follow through on the prior devaluations. So, I guess my first question relates to that, and then my second question kind of feeds into that, and that is, I think it was on the fourth quarter call, and if I remember correctly, the stock took a couple of points hit that day because we are talking about the growth rates and the question was asked 2 or 3 times. What is the growth off, is it the operating numbers? Or is it that these numbers that are net all-in including the currency numbers? And then, if I remember correctly, which kind of hit the stock that day, you had mentioned no, it's a strong growth rate coming off the all-in numbers, the reported numbers, and you all appropriately sold a reporting after all the one-time items try and clarify things, this is good, this is what the Street does, but I want to get a sense for what it this 25% to 30% growth, what does it offer? Do you have so many things, so many places, you always expect these things to happen so it really isn't all-in number that you expect 5 years from now, can you clarify that?

Sure, Barry will you clarify the second part of that question then David we'll go to you okay, and talk about Brazil.

Yeah, that's a good question, our growth expectations do have built into them expectations for devaluation over a period of time, but the 25% to 30% doesn't include these transaction losses on the dollar debt in Brazil, and that's there for several reasons. One - because it's, like I mentioned, it's not really an economic loss, and in that context, so it's coming through the earnings statement as a calculated transaction. And the real economic exposure is the long-term exposure which you point out which is whether or not our revenue stream adjusted for inflation appropriately over time adjust for the changes in devaluation, and although it hasn't caught up from 1999, we have seen inflation and increases over the last 2 or 3 years, averaging probably 15% to 18%...

That's pretty good..

..in the tariff increases. We probably expect larger than that actually this year. So as you see even some of the results from Brazil show that improving for us. So, our long-term expectations do include devaluation and a relative decline and effective purchasing power of the 'real' embedded in the tariff arrangement offset by cash cost of the company. Because we do look at this on an IRR basis not on an earnings basis, although the growth numbers we've given are based on earnings expectations. So it's not perfect, but we are also not taking into account any possible appreciation in that. I think David might have a comment on where her thinks the 'real' stands and what might happen to it and whether or not we've kind of over shot to some extent the real economic underlying results of the country, but we are not trying to gain from that kind of artificial increase, nor are we trying to benefit from it. We are trying to look at the long-term operations for the business. So, we gave our guidance exclusive of those items because we are not trying to take credit for them when they go in our direction in any significant way and therefore are not trying to penalize when they go in the opposite direction because its not really an economic hit. The economic hit is how our competitors doing relative to the changes in the purchasing power of the 'real'.

David, make a few comments

Yes, I think there are two portions of the question that we could split. One is with regard to the debt and the 1999 devaluation, and the real devaluation that remains from that devaluation. I think that the IGPM has not caught up in total with the devaluation that we experienced over the last 2 years, but we did have a reaction of the IGPM to a certain extent at [_______________] almost to two-thirds after devaluation and also had an increased improved amount on the energy service, and the growth rate of sales in the company.

Uh-uh.

Added to that, the operating results, and the efficiency that we have been able to get have exceeded the devaluation who have also been able to catch up the results or breaking better than the company. Also, right after the devaluation during 1999, remember that we shuffled around for shares of Light, Electropaulo, and also we bought [_______________] at very low price and that has rebounded directly. We have decreased from that. We have positioned ourselves in a very good condition to have the results that we are having on a bigger base. Now the current situation, I think Argentina is different from the past where Brazil had to release, had the fixed affect, and now we have the negative effects. I think Argentina pretty much factored in. We may have some swings if that situation gets terrible there, but I do believe that the effect has already reflected on most of the situation in Argentina. And we may be trouble shootings periods, and if you see what happened today in the market given that the change in Argentina happened, we dropped the stocks that we had to 228 and now we are at 224 today. So the stock markets reacted very favorably both in Argentina and Buenos Aires and Sao Paulo. The IGPM has already started to react, we had for April 1% so that natural hedge was to always claimed as no stocks to pick back to their effect and also we have in the Electropaulo today on the operating debt, that we have in dollars, almost 80% is hedged. I'll just add on saying that the fundamentals of Brazil are very strong, I think the economy is picking up very well with write offs and devaluation, the arrangement of the fiscal discipline and all of that. In the long term I'm pretty sure that Brazil will continue with this fundamentals going forward. I don't think Argentina can hurt the fundamentals of Brazil, can have a very short-term impact, not just an [________________] our neighbor here that not everyone can make friction between the countries in terms of economy as we've had in the past.

You all have a lot of operations in Brazil including telecom, are you saying that 80% of your 'real' exposure is hedged? And also, what exactly is the base EPS number that incorporates the assumed currency numbers but not one-time numbers, what should we be basing our 25% to 30% growth off?

From last year would be the $42. Sorry, $46, which excludes the following, excuse me, $46.

Okay, and is the hedge on the 'real' for all of your businesses approximately 80% or do you have an idea?

No, the hedges will be 80% exclusive of all Light operating debt is around that 70% to 80%, and the only big exposure we have is under the Light Gas debt that is based on back off occurrence with the [_______________] which is the holding company of Electropaulo that was the subsidiary of Light and that isn't hedged. So on average, I can't tell if our problems but I know operating business would play a big role as we have Electropaulo 80% debt-free.

The Light Gas that David mentioned is the debt that is effectively at Light for the purchase of Electropaulo, as you know we're going through a restructuring that debt will also be reconfigured, some of that will remain in Light and some of that will remain in Electropaulo and with the partnership we may have different incentives to hedge than as an individual company, and so as we refinance that debt and take control of Electropaulo, you will also see that either be a holding company or hedged debt.

Can you give a total revenue number for the operations that you said were unhedged, the third one? You had Light, Electropaulo and there was another one, can you give a total

We will get back to you on that. 00:445:1 CRAIG K. SHERE: Okay.

Thank-you.

Your next question comes from Neil Stein with Credit Suisse First Boston. Please go ahead Sir.

Good afternoon. There are a couple of questions. There has been a lot of talk about PUCO lately it's been in the papers and so forth, do you think that will lead you to acquire more US utilities? And then the second part of that, would you hold on to Silco's wire business if PUCO was indeed a appeal.

I don't think we know the answer to either one of those questions. My own personal feeling is I'd assume PUCO; it would appeal. I think AES does better in the nest out situation, it's probably better for the country; however, if it did, but we don't know. I don't think you'll see us jumping in, I've said this before. We are not going to jump in and buy lots of utilities that have cost plus regulation. It just is not our kind of thing, if there is a really sensible regulation, you know that you have long-term price regulation, we might do some, but its not really something we're very excited about getting into in a lot of ways. In terms of Silco - I don't know, we had always planned to restructure that and try to keep the generation if we could. This was the plan originally, and some time over the period of 6 years or so to divest off the distribution side anyway. That was our intent. We said that in the very first phone call, and I don't know that we've changed that view at this point, so it may have to be done a little bit quicker if there is no quicker reform, maybe it takes a little bit longer if there is, but I don't think it really changes the long-term plan for AES.

Just one other question, you talked about IPALCO's low-cost coal capacity, is there any way for you to get the benefit of that, those low cost assets, could you is there any excess capacity maybe that you can market into the wholesale markets surrounding their service territory?

Rob do you have any comments on that?

Sure, obviously the net capacity that IPALCO has depends on the time of the year. If you look at the year as a whole IPALCO essentially net would be next generation, so we are benefiting from the higher prices on the competitive side in the non-summer months.

Remember its not cost plus regulation at IPALCO. I mean that's important to know so it is the appropriate, pretty complicated but its essentially, as mentioned we do get to benefit.

I guess a couple of follow on from that, could you quantify maybe your average excess capacity at the utility and then what markets do you have access to from IPALCO?

I'll have to get back to you on quantifying that. I guess it does change by months and frankly by temperature, and its just like Mid West markets, IPALCO is well interconnected to move power pretty much anywhere in the Mid West, but we will have to get back to you on an exact number.

Thank-you very much.

Elizabeth Parrella with Merrill Lynch. Please go ahead.

Thank-you. Staying on IPALCO for a minute. Do you have what the quarters for 2000 look like now on the restated basis including the IPALCO, the first quarter obviously you've given us, but the subsequent quarters?

We don't have the financial results restated. The supplemental schedule that we provided with the percentages does include IPALCO for all four quarters.

Okay.

So you probably have their numbers as well as I do. You could almost get to the same answer.

Okay, and any thoughts on refreshing your guidance on IPALCO, is it running on track or could you just refresh us as to what your guidance was on IPALCO for '01-'02?

I think it was ¢20 to ¢25 flat starting next year.

And what would you indicate for this year, is it a partial year or ..

It was a partial year and a loss. No, I don't think we gave any particular guidance for this year.

Okay. In California, I don't know if Stu is on the online, but I had a question on the...

I told him he couldn't get on.

He is not on, but he deputized me, so that I could answer for him.

Okay, on the show cause proceeding, as FERC has instituted with respect to the Southland Plant, you and Williams have been given several extensions in terms of replying to that show cause proceeding, should we read anything into that, in the sense that, are there some behind the scene discussions going on maybe to settle this thing?

I don't think you should read anything into it, because we can't talk about anything like that at this ongoing. I mean, I wouldn't read anything negative or positive just that we can't comment at this point.

Okay, and then moving to Latin America, I know that you all talked about this at the analysts' meeting, but maybe given developments in Argentina and Brazil, you could just refresh us as to any financing needs or plans that you might have locally for meaning in Argentina and Brazil for '01 and '02.

No, its not near like, that was one of the big problems exactly 2 years ago, when we were sitting there, Paul Hanrahan [________________] we were sitting there with huge amounts of debt refinancing in the middle of the crisis, and in fact, either Paul or David, you might comment, but I don't think we have much at the moment huge amount of refinancing to deal with it now.

It's worth pointing out that we refinanced Sul before this crises started just before $400 million, so we stretched it out for 3 to 5 years. We are in good shape at Sul.

And David?

Our debt in Electropaulo is pretty much on track from, we did a very good job last year on lowering the cost and stretching out. We have something to do just in August and went back, we are anticipating the refinancing next month, so I don't see an uneven lag, which we need. Whatever is there, it is very small, so we don't have that problem that we had there in 1999, when we refinanced [______________] in Electropaulo for instance; we are in very good shape.

Naveed, do you have anything significant?

Not really, I mean, we have a couple of very, very small things I know we are in good shape.

Couple of other just quick questions on Brazil. You mentioned that in the supplemental schedule it excludes the Brazilian, the currency drag on the upset line, is that on a pretax basis, in other words, is it the 90 million figure, or should we look at it as being the 59 million after tax figure on the percentage schedule?

That's all done on a pretax basis.

Okay, and Dennis you mention that the outsets where your Argentine percentage EPS contribution is, would you care to give us the Brazilian comparable figure?

I don't know what that is. Anybody know? Brazil's 2001 income percentage...

South American members Argentina Brazilian and Chile with a little bit from Colombia, so significantly in Brazil. Not exactly...

Two-thirds or something in Brazil, and if you take all that and if you take all that.. 0053:35 PAUL HANRAHAN: ...and Venezuela as well.

We'll have to get back to you as I don't know what it is, because we've got to put Venezuela in there too, so you take that numbers and that's a significant number. We've got Venezuela and Chile which were getting fairly significant and in there and Argentina, which you already know, so I don't know what those numbers are. We can get back to you Elizabeth.

Okay. Thanks very much.

Andre Meade with Commerzbank. Please go ahead.

Hi! I had couple of quick questions. First, I just want to make sure I know what's going on in Argentina, on the distribution companies you have a bad component that's linked to the dollar, so it looks like that adjusts semiannually and keeps you hold, could you just, one is that - is that correct and when does it actually change?

Naveed?

We are very, very confident, yes I mean it is US dollar denominated and industry PPI-CPI, and it gets actually picked up in every month that billing that we do.

So it is not biannual, its monthly.

That's the difference between that one and Brazil.

Okay. Now, what about the generators in Argentina, are they largely selling to the pool or to yourself? Is that in local terms?

The capacity payment figure is in US dollar, and the energy component, of course, with the fuel prices in international market in dollars also based it is the procedures of COMESA, it is calculated tariff in US dollars.

So both capacity and energy are in US dollars.

Right.

Okay. Great.

Remember, I remember in, just thinking about Argentina a little bit is that we have been in very low prices for a long time in Argentina, and our generators have being living on pretty low prices there. So, there is a lot more upside here than downside on the generation side. If that economy ever picks up and the demand for electricity gets going, we have a far better chance there of doing better in Argentina.

Okay. Just two real quick ones on different issues. One - did you get your SCRA permits in California yet?

We've got the SCRA for the other facilities. For the Knox facilities, we do not have the final permit on 3 and 4 yet.

Okay. And how is that going to expect to?

We don't know. We made the offer for the Governor, and the Governor has to decide whether he wants to take it and sometimes they don't show much interest.

Okay.

So you don't know.

Right. Just lastly, the NYSEG assets in New York, I believe they are fully merchant going into the summer. Is that correct?

No. Is that so simplistic? They do a very sophisticated type of hedging and sometimes long term and sometimes short term and some is market following, and so it's much more of a mix, and we don't break that out.

Okay. All right. Great. Thanks.

[_______________] with Morgan Stanley. Please go ahead.

Good afternoon. You had indicated that IPALCO may well come in above you, IRR range. I am just wondering how much that would be due to the fact of the favorable exchange ratio you had on the shares and whether without that you could still make that?

There is a debate inside as to whether that should be used at all.

My own feeling is that that doesn't count, but Rob thinks that it should be. So, it's a bit of a debate, and if you use the favorable exchange rate, it rolls number out of the water. If you don't it is down close to where we modify it a little bit better.

Okay. Barry, with regard to SFAS 133, so you said it was a positive benefit, can you tell us, number one, how much generally it was? Number two, is there anyway to predict what it's going to be going forward and is that anyway incorporated in your guidance.

I think the answers are, for the first piece, it is just a few million positive, and it is harder to predict exactly where it will be, in part, because probably some of the hedging mechanisms will be reconfigured so that they fit the rules, I suppose, with the economics that were there, so some of it is a little foam driven, but most part of it was just a very small positive. We did give our guidance for the year excluding SFAS 133, and there still are some open issues, although they will not be decided probably now until the third quarter with respect to power contracts. The FASB is kind of bouncing around on that one a little bit, and although we feel pretty good about what's coming out. There are still some open issues, and it has not been decided yet, so the things that are in SFAS 133 for us in the first quarter are financial instrument type activities related to slops and colors and options that operate it hedges but don't fit the definition for SFAS 133, I don't know if I answered all three questions.

I am just trying to get a sense, I mean, could it be those swing factors or couple of cents, either way?

Its depending on how much interest rates and currency rates move. In general to the extent interest rates go down, since the kind of things we're marking the markets are instruments that we use to fix interest rate. If the interest rates go down, we will lose money, and if expenditure rates go up, we will make money on those mark-to-markets. Again, the hedge is working well it is just your marking it to market that transaction, and on the currency side, it tends to be that we make money when the dollar strengthens a little bit.

Okay, and also with regard to the power rationing situation in Brazil, maybe if could just understand a little bit better, what could be the worse case and best case scenario for AES, I mean, obviously Uruguaiana provides potentially upside I guess.

That's right.

But what would be the downside case?

David you want... I don't know if you can quantify it, but you can talk about it.

We can't quantify because it all depends on a bunch of variables, but we do know that what we heard somehow by the next two quarters, because of the rationing, I think AES as a whole will make up for that, and what we have so far is that there is the public awareness campaign that urge people to consume less and see if there is a reaction on that to the limit that at this point is expected, and then for the second phase will be the definition of total consumption, and whatever units the consumer exceeds, he pays the penalty, so we do have some penalty revenues on the quarters, when they exceed, and the third case is a little shabby, [_______________] big suitcase open so those are the three scenarios we haven't quite tried these numbers.

Okay, and just give me some sense of the magnitude in terms of what the upside would be with Uruguaiana out of all this?

Paul?

It's not like Sul, Uruguay is covering Sul through a pre-agreed contract, which Sul can then pass through. We have got maybe anywhere between 50 and 100 megawatts depending on what happens with Sul and how much it grows, but you are probably talking about something in that order of magnitude. I would say 50 megawatts that could go in the free market and then it just depends on what the prices are going to be in the market.

Okay, all right. Thank-you.

[_______________] Stewardship. Please go ahead.

Good afternoon, for the second straight call my questions has been asked and answered. Thank-you. Congrats on the good quarter.

Thank-you.

[________________] Tanaka Capital. Please go ahead.

Thank-you, most of my questions have been answered, I was just hoping you could give me a few cash flow numbers, like your depreciation, amortization for the quarter and capital expenditures?

We have the depreciation and amortization, which is also on the supplemental schedule. For the quarter it was $209 million. I don't have the capital expenditure number across the company. Yeah, we will have that when we release the quarter.

Okay, is it going to be significantly different from last quarter's.

From a construction activity standpoint, there is a fair amount of construction activity in terms of operating capital expenditures, no real significant changes other than the fact that we are putting SCRA in California.

Okay, great. Thank-you.

Raymond Niles from Salomon Smith Barney. Please go ahead.

Good afternoon. Questions on two topics. First of all, I wonder if you can give a little more flavor on new energy, and how that's performing with just a little detail on your expectations there?

I think, I don't know if Stu had mentioned in the first year when we thought we would breakeven, but I would say just from a flavor standpoint, we have cut out the areas where we were having trouble, I mean, cut way back, and we are starting to build back and those are little bit, places like California and cut back in Pennsylvania, in fact the whole PGM market has been a difficult one for us. We are doing very well in New York, Illinois, I think even somewhere in Ohio, we are very well positioned in Texas, and there is very little less competition frankly at this point. So I think there is a cautious optimism here in terms of how we are doing in that portion of the retail business we are very pretty pleased. I mean, I talked about nurturing the new businesses last year and gave ourselves a 'C'. Certainly, in the first part of this year I would say it's more like a 'B', and NewEnergy might even be higher than that.

And your target date, were currently stands for profitability in that business.

I can't remember, I think it is somewhere roughly this year, and late part of this year.

Okay, and maybe just one additional question there. Are you doing much on the gas side of the equation or is it primarily power customers?

It is all electricity.

Okay, and then just one other question on a different topic. In terms of I think it was mentioned earlier Barry was talking about the IRR goal, just in general, what kind of IRR do you see achieving kind of on an all-in basis in Latin America over the next several years, I mean, do you have target, and maybe you can share it with us, and do you think you are going to be on track to achieve that?

I think it is too complicated to have. We don't have one target. Each one of these businesses had a plan to start with, it starts at one level and moves, some of them are flat, some of them move from lower to higher, and you are talking about incremental IRR's, it's very hard to just generalize I think on that. We do have what we call wordbook of every single one, we know and are they typically on plan? I will say, on an average they are, we wouldn't be doing as well as we are doing, if we wouldn't be because that's the plan we based our budget and everything else on. It is also important to remember that the IRR, we are looking at, is a long-term number. It's not a one-year ROE, it's a long-term IRR, so we are concentrating on the overall returns of that business over a long period of time. So in one year they may be lower and another year they may be higher in terms of how the kind of a long-term contribution to that IRR is calculated, but as these guys said, we are doing pretty well on South America relative to what we expected it to be.

I don't know if you heard, we did the study of everything right from the start of the company till now, and we showed that [_______________] and we showed that in Florida where we were there. We were somewhat surprised that we were right on the nose of where we have said and in terms on average, of course, there is lots of which much worse and lots of it much better, but on an average, we were right on the button, and going forward just guessing going forward from there, we were a couple of points below what we had projected in our board books, but I think still close to 20% or something like that. But none of that guarantees what's going to happen. On the other hand, we don't see any particular deterioration right now, although all those things continue to happen day after day, quarter after quarter, and year after year to a lot of good assumptions, and strong performance will have to take place or we will never reach...

Okay, great. Thank-you very much.

Ali Agha with Banc of America. Please go ahead.

Thank-you. Couple of questions, to clarify some of the numbers, Barry, could you tell us what was sort of the on going or operating impact of the currency in Brazil?

No, I don't have a quantified number for that Ali, all I can tell you is that we did increase in all businesses year-over-year, after adjusting for the average currency rate this quarter, and we did beat our budget on the distribution businesses. So it was a positive impact in all regards, but roughly the devaluation on average in the quarter had us translating the real all around 206 or 208 from the end of last year. So it did have some impact, but it obviously reduces revenues, but it also reduces worth of currency expenses. So the net impact on the margin is not as dramatic.

Fine and that impact Barry is kept in the numbers right in both income statements?

That's correct

Okay. When I look at the instant breakdown, the geographic breakdown, and I look at the absolute numbers year-over-year, there was a pretty big drop in both Europe and Asia. Could you give us a reason for that?

Primarily two, one I would say that the numbers grew year-over-year, rather dramatically, and the two biggest impacts were the impacts to Telasi, as Dennis mentioned, where we had kind of a rocky first quarter in that distribution business and a little bit of additional reserves on our receivables in Chigen and no growth in Asia.

And we have not added anything in China, India, the Middle East stuff, I am not sure where we are going to put it, but that has not come on yet, and nothing has happened and we don't have a new stuff in Pakistan, so none of the, I guess Australia comes in there too, and we have had little bit there, but none of the things that are in the hopper have come through in this, and probably won't see it for a little bit anyway even the new stuff takes a while to have an impact. So that is just automatically, it is going to push it down because we are going gangbusters in other parts of the world Kiev will help a little bit.

Right, now I understand that, but if we do the math, unless I am missing something, the absolute number, not the percentage, the absolute number went from 95 to 37 in Europe and from 32 to 5 in Asia, so I was really referring to that drop.

Yeah, I gave you for most part the impacts from Asia. We also have, you know, some differential impacts in terms of SFAS 133. In Europe, the primary impact was reductions at Drax, as we said in the margins of Drax, because prices were lower this quarter than they were last year when we went into contract, and it also had an affect on Barry, and as I mentioned, although the net impacts from SFAS 133 were just barely minimally positive, they were actually negative at Drax and positive in the US.

Okay, and Barry, if I excluded the restructuring items from IPALCO as you have done in the income statement net-net, what would be the impact from the IPALCO to March quarter results?

Improvement year-over-year. They have had an improved margin and improved results.

And so incrementally and again in absolute terms added a couple of pennies to this quarter.

They did add incrementally, yeah.

Okay, and when you book your new businesses retail and telecom together, what was that impact in absolute terms in that quarter?

A few cents negative.

And coming back to Brazil, conceptually to just understand the impact of the rationing. Is it fair to say that Cemig, Light, and Metro or Electropaulo all would be currently net short of power, so if there is rationing, the impact is less volume of sales or is there any other penalty or something else that occurs as well through rationing.

David?

Yes, most of sales are contracted, in fact to have almost 100% contracted. The problem is not what you had incurred it for and where you short and then you just [_______________] the contracts will not be fulfilled by the generator, so the rationing will be as a result of that. So what you have is will be a dollar decrease, defining how it is going to be, and you will have a drop on the revenues.

Right, but David there is no penalty right, if there is no volume, no electricity for them to sell, they book penalty on them ,is there for that..

The penalty on whichever customer exceeds the quota defined for then you receive the penalty of the new [____________] and that's what you expect, but if all the consumers start to roll their quotas and then the ration will have to be more severe in the sense that ... for load shedding ... reaction of the society.

Okay, moving to Argentina quickly, if they change the peg on the currency away from the dollar to a dollar, euro or whatever they are doing, do your contracts remain, sort of, dollar pegged or do they move with that?

Naveed?

Currently, we are looking at the details of the law, but so far all the indications are that if the contract stays it remains in dollar.

I think it is reasonable that you had a complete collapse if something were to happen, but that is not what is contemplated at this point. We are a huge ... I think Ali, that it would end up in some kind of workout situation. We will put it out in some other way and get together because this could raise the prices enough .. handle it.

Right, I do understand that and sort of shifting geography out of the UK, I know NETA is in early stages, but have we had any success in locking in some more of the output on contract?

Michael?

Well under NETA you try and contract for as much as you can. We are entering into contracts every day some of them for half an hour, some of them for a day, some of them for a week. We have got two longer-term contracts one for 3 years and one for about one year, but just to give you an idea on the kind of contracting that you have to do under NETA. We entered into 66 contracts in the first 10 days of the NETA coming live. Lets say some of them were only for half an hour but some were for week and some were for a little bit longer. But in general, I think we are finding out that the market is quite liquid and most days we can contract for whatever level we think is necessary for that day.

And Michael the 3 and 1 year contract how much of our output would be covered by that?

Those contracts are typically for 700 megawatts each.

Okay and final question Dennis coming back to you when we look at the sort of deal for opportunity right now in front of you. You know you are doing a fair amount of this on a small amount of transactions getting a lot of success there. Are there any other major transactions in the front burner that you are pursuing or should we be looking at the news flow similar to some of the recent announcements?

Yeah, bigger transaction always there but the bigger the transaction less chances we always have it happen. You know we have some discussions going on for big things, but more than half of them never happen, so I do not get too excited about that. We are just doing really well. We have got lot of businesses as possible and whether we get them one at a time or ten at a time it does not really matter to us.

Dennis, I do not know how you are going to keep the scorecard, I keep getting lost in the numbers, but where are you today and where do you think you would be during the new opportunities for the year.

I thought I said 20 to 25, but I do not know how you count it up, I mean there is a lot in the Tecogen thing. There are a whole bunch of businesses, so I think we already sold a couple of them though, so I don't know how you count those, but we could probably one way or another we are up in the 10 or 12 range probably already in terms of new business. We might get to settle your team. I'd be surprised if we do not blow through that 20 to 25 pretty fast.

Okay thank-you.

David Silverstein with TD Securities. Please go ahead.

Hi! Just as a review of your South American situation - of your 965 million in parent EBITDA that you disclosed. How much of that right now is coming from Brazil on a recurring basis.

I do not have an exact percentage here for you on a recurring basis annually, but it is probably about 15% to 20%.

Okay, and then just to review the liquidity situation you got the payment on Thames, and I just wanted to get an idea, you also disclosed in your 10-K that you had around 1.3 billion in various loans where you had contributed shares as collateral. I was wondering given some of the transactions given the $600 million bond issue the 85 sterling issue that you sold and also the Thames repayment. Where do you stand on those various loans? And also kind of your cash, balance, borrowing issues that you have right now?

I think I gave the numbers for the revolver at the end of the quarter. The money that came in from Thames, half of it is still in the company, the other half went down to pay down some of those loans that you mentioned so we are down a little bit but less than a billion at this point on those.

Okay, and then in terms of some of your cash needs that you have over the next 6 to 12 months. I guess you are still in a net borrowing situation here.

And would probably expect to be in that, although cash flows have increased to near a billion dollars on our run rate. A lot of it depends on what kind of new business activities happen over the next six months.

Sure, but under your current schedule assuming no new deals come in.

It is hard an assumption to get through from one year to other end, but it is for the most part we are reasonably well funded. As David said, we have the restructuring of the ownership configuration at Electropaulo to go through. Although that's not a significant requirement for capital, but there is some that goes into that, but for the most part we are in pretty good shape.

Okay. Great. Thank-you very much.

[_______________] with Alliance Capital. Please go ahead.

Good afternoon. I just want to clarify in terms of Brazil, the power-rationing thing that's going on. Going forward, I read some of the Brazilian analysts' reports and I just wanted to clarify something that they said that's going to go hit from the rationing that's going to hit from the month of May to October of this year, and that's going to shave off the volume growth to allow distribution company, for instance the volume growth will be according to the company's guidance, originally will be 4.5% volume growth, now it's going to be flat. Can you clarify that?

I don't know where you got this information, but in fact, if you can have no growth or even be able to boost number, but a [_______________] is that going back on our action of reduced volume. No, you do have an impact on the penalties and all that. That's why I am saying that we will be hurt somehow, in terms of the numbers we expect to get from Brazil from the next two quarters because of what exactly what you said million through a [_______________] where they will have a dry season, but at this point it is all speculation.

Thank-you.

Peter [_______________] with [_______________], please go ahead.

Hi! Thanks. I just have a general question, I am curious about the extent of the real-time information at your disposal, when you walk in the office in the morning, what you want to know is sort of all right there and MIS system somewhere or do you need to wait days, or weeks, or months, or make too much of phone calls, or what do you have to do to get what you want to know when you come into the office in the morning?

Only when you come in the office, why would you.

When you are at home or when you are on the road?

So, some phone company may have messed up, if you know anybody, yes. It is not crucial, but I know anything frankly, because we don't want the company that way, and so in terms of a short-term thing that the information that NewEnergy needs to make their decisions, they have at their disposal every minute, all night long, the information is in the New York plants, that they are making decisions every minute, every other hour. They are making decisions as to how they are going to sell and play in the market place, and the same in Placerita. They have that information in their offices all the time, 24 hours a day, 365 days a year. So, all that information is available to the people who have to make decisions on a real time basis in every one of our businesses. I don't know if any of them that are not linked to all the right business information they need to make real-time decisions, and that's all that is really important.

All right. I think I understand that, but I am serious about it is the linkage of it all and what the whole thing looks like, and maybe the guys in one area think of it going well and ... is there some way to link it all together or do you just sort of wait and see what it looks like or you put it in a pot at the end of the quarter or do you sort of link it all together and from a macro point of view sometime every week or month, or what?

Obviously, we put together all the information financials together when the information comes in, but in terms of knowing, and anybody who needs to know, they want to know, get advice on something that they are doing and they want to know what's happening in some other part of the world, with some other part of business, as instantaneous access to every single person in the world immediately on an [________________] basis. So, we get all the information on any particular business that's operating, as in operating issues that they are dealing with, and they put out 'here is our situation', what do you think and can you give me any information that would help it, make a decision on what to do with this situation that's on new business, that's on existing business, on any special problem that comes up that turns all worldwide for everyone in the company. So, I think everyone has access. What we have said is that everyone has access to every piece of information that I might have access to. There are no secrets inside of AES, and no matter what is going on, I don't care if it was [_______________] information to details on hiring and firing, to what's going on in any part of the world at any particular time. We just don't run the company, it is not since it was a central set of computers here, that they have all the information in a place that nobody that doesn't matter to anybody else, I mean, if Barry and I sit around here what would we do with all that stuff. We don't make the decision, would make no difference. The information should be with the people who are going to be making the decisions, and they have it.

Okay, thank-you.

Next from Sandra Boente with Salomon Smith Barney. Please go ahead.

Thank-you, couple of questions on Brazil. There is an asset that's coming up for sale in May, this [_______________] in Sao Paulo, are you looking at acquiring this asset?

I think David already bought it, didn't you David?

No, it probably our duty and obligation to look at those things because as you remember, [________________] when showed up in our screen, it was in a very nice period and our investors were all scared and they went for a very good price. We feel it happens again...

All right, and this as a company that supposedly coming up for sale later in the year Copel, would you be interested in that and can you buy that given the market limitations in Brazil?

I think the issue here is that our power plants, if you could say that, is still increasing our positioning in generating assets, so probably as an integrated company would be something that will be attracted towards us as well, but we have to balance whatever addition we get from both sides, from the distribution and generation and they have to do something more special to get the generation to us.

This reply is not only to Brazil, but everywhere, and our people are looking at every opportunity that presents itself for us to serve the world, and so, it is very unlikely that anything that has to do with our core business we are going to pass off an opportunity, if it looks like it makes sense. So you should expect that AES is a possible player in every business that comes available. Doesn't mean we will bid, but we'll certainly look at everything.

Okay, that's great. David, on Electropaulo, your transaction with EDF. How's that going and when should we expect the closing of that transfer?

As I said last time, we expect that to grow throughout the year, and we obviously want to do it as earlier as possible, but we foresee a lot of stats in terms of approvals and details within the transaction, so we expect to work with them this year.

I remember in a previous call you had mentioned June would be the date of the closing of the first half of this year. What is holding the process back, is it regulatory approval, is it agreement or disagreement with the partners there?

I don't think we've ever said June, we said the end of the year. That's the only time I've ever heard talk about this.

Okay. Excuse me then, I think I am wrong on that.

I think the only holding up the schedule. I don't think you are behind schedule, are you?

No, I think, I know June would be a very tight schedule. If every thing goes very smooth, June could be possible, but I don't think given all the issues that you have to go through approvals and CVM and it also depends on some contracts that you have between EDF, AES, Light, and Electropaulo, so those changes will take a little bit longer and also the approval [_______________]. We are also going to be as fast as we would like to, so that's why we shooting forward to [_______________] within the year.

But I think the other point you might make, we make as it that we have gone full speed ahead in restructuring the Sao Paulo utility, I mean, there isn't one minute that has been wasted in terms of getting the numbers to the right place and making the changes in the organizational structures, all things are going on. David and his folks have just done a superb job of moving forward in the way we would run this long-term. In fact, I can't wait, I am going down next week to kind of celebrate the first steps in that with the company.

Okay, one more question on the rationing. We know that we are going to have rationing in the Southeast and Northeast of Brazil, but lately, Government officials in Sao Paulo and at the Federal level have been mentioning, sort of bypassing, that there is a possibility of getting into rationing in the South of the country as well later in the year, and that would impact, I believe, AES too. David, do you have any comments on that? Do you think that rationing in the South is unavoidable or is likely it won't happen?

The difficult thing is to forget rain, that's, the south has been, the weather has been up to 97% or reliable. So I think they will be in a very good shape, but I don't know, and if consumption goes very flat and then when there is some draw on the reservoirs more than we expect, maybe because the reservoirs are not that big there and they are mostly they [________________], but I don't think and I don't see possibility for South to happen. I think it's very [________________] you never know.

Okay. Great. Then, one really last question that really has to do with the numbers that the parent company reported. You have a note in the pro forma I think, at the very last page, that you mentioned that parent EBITDA, the way you calculated is casual earnings distributed to parent, less parent operating expenses. When you say distributed do you mean, has it really been distributed or will be distributed as a dividend or you mean the corresponding pro rata EBITDA following total economic stake in the companies?

Distributed is cash, actual distributions. It could be a dividend or it could be a loan payment, depending on how we have capitalized it across the company, but dividends effectively out of the spheres so actual dividends.

Right. Thank-you very much.

We will take one more question.

Thank-you. Don Riley with Goldman Sachs. Please go ahead.

Barry you mentioned earlier on the call several areas where you think that you guys are going to be able to do better than expected. I was wondering if you could list some of those for us and also give us some sort of sense as to what you are doing in order to achieve those better than expected results and whether any of them are going to add materially from a financial perspective?

I think, I am the one that mentioned, it [________________] if I was right. I think, I said we were doing better in China, let's see, Brazil, Panama, and New York. Do we expect this to, you never know that you can continue for the rest of the year in terms of packing things up, but those are, and we are not going to quantify how much of each one and all that, we don't do that, but just trying to give you a sense of, that some things are going better and then we've mentioned a couple of business areas that were going worse and there's of course, many, many more ups and downs in this, but we're just taking some of the big ones and give you an idea that they aren't located in any part of the world or in any particular network. I mean, there are better ones and the worse ones are located all over the place and so it is a kind of a grab bag - Panama, of course, is, either does a bad job of budgeting or they just keep doing better, better all the time, and New York has sort of a similar kind of a situation with regard to a lot of our competitors. There people are doing better and that's been a good one and we certainly don't think that that's going to change at least for this year, but you don't know for sure. I think we'd say that all these have a chance of continuing throughout the year, except for the Brazil thing, as we've said, I think, the next two quarters we probably will not see the Brazilian thing go as high as it has been in these past in this quarter and the last quarter, and we will see a drift downward and then before the fourth quarter, when we start coming back up again. So, I think that's about as good as we can give you in terms of the, do you have any other thoughts on that, anyone having any other thoughts on that question?

Okay fine. I guess I was just trying to, we were just trying to figure out whether it was you seeing increased prices and that's why you were feeling you were potentially going to do better than expected or was it you're selling more megawatt hours, was it some sort of those types of things that were causing you to going to beat expectations or potentially beat expectations if the same conditions that you witnessed in the first quarter persisted throughout the rest of the year?

It's a combination of all those kinds of things and whether better prices, obviously in New York, and better volume probably in Panama, whether in some places, I think that's one of the benefits of the diversification of the company as we have the benefit and the opportunity to capitalize on several different types of upsides, as well as be affected by the downsides, but that diversification doesn't mean that we are tried to adjust prices going up or adjust improvement in margins or exorbitant prices in one locations. So, I think the reasons that we have the ups this quarter are pretty varied as are the downs, and we expect that to continue.

I don't think you can get any trend and I will finish with this. We'll close the call. I think that, just summarizing again, it was a great quarter, probably better than we could really expect, but it was also a great start to the year, but I don't think anyone, because of the situation in Brazil that we've talked about and some others that we shouldn't jump to conclusions that we are somehow going to breakthrough the guidance we gave for the year. I mean, we'll just stay as I said steady as we go. It's just proof again, the strength of the diversity, and the sort of central limits theory that while we will have some ups, we will have some downs, we are very, very diversified in so many different ways, so that weather and political and economic situations, turn downs and ups, none of those things seem to do much damage to our long term or even our shorter term kind of look. Now that just seems incredible, because we've seen some pretty significant changes in all those variables, but what we're seeing so far again is just one thing gets counteracted by two others and two other things get counteracted by something else in another part of the world and it has been worked out as a pretty steady thing. Now a lot of you would probably see [________________] where you will never, you never really come close to 25% above your estimates and the answer is we probably won't and hopefully, we won't also have anything 25% below even on quarter basis, but certainly on year basis, we feel really good about the way it works and I think that's going forward. For the rest of this year, I'd say steady as it goes, just stay right there. We assume no evidence at this point to change our guidance year up or down in that area, despite all the things you hear and see that are either up or down we're not changing anything at this point because we have no evidence to suggest that we should and then, finally, going forward 4 or 5 years, we see no evidence that we should be changing the sort of, targets that we've been looking at as not to catch our goal to grow at 25 to 30, but that's an expectation given what we are doing and what we think the new business is going to add going forward, so that's the story really. Excellent quarter and steady as you go for this year and for the next five years. Talk to you soon. Good night.