What are the drivers that are expected to result in higher EPS and higher cash flow forecast for 2008?

The higher EPS forecast is based on the assumption of using free cash flow for funding projects that have been announced a couple of years ago and for paying own debt. AES expects higher net income from the growth programs. The company expects benefit from currency impact and in the interest expense line.

In the fiscal 2006 guidance, why do you expect the gross margin to go up and cash flow to stay flat?

This is predominantly due to some non-cash items in the gross margin or the GAAP accounting numbers. For example, there has been an increase in cash taxes and at the same time, a reduced tax rate according to GAAP income. The tax rate is influenced by where the earnings come from. It can move depending on foreign exchange rates. A number of items like these are causing the cash flow to be flat and an improvement in the GAAP income and the adjusted earnings per share.

Could you comment on the new projects in the pipeline?

A couple of years ago, the company started out thinking that there would be some good acquisition opportunities. Aside from some of the more complex ones that required good operating skills, the acquisition opportunities were fairly competitively priced. Today the company has platform extensions for its existing businesses. There are a lot of good opportunities, like the extension of the Greenidge and Westover facilities, which are putting on environmental controls to allow AES to operate these facilities longer, and extending life of the Deepwater facility. These opportunities will take some time to develop. There is a good opportunity in the BC Hydro bid in developing Greenfield coal plants. The alternative energy area is led by Bill Luraschi’s Corporate Development Group. The climate change business with AES AgriVerde, where AES is selling CO2 or greenhouse gas offsets has an attractive market. It fits well with the business of AES and is helping to mitigate AES'' own potential exposure and to earn a profit from the opportunities to create these at a reasonable cost and sell them in the market.

Are you going to use the sale of the proceeds of Eden to pay down the debt to cure the default?

Yes, the company is swapping the asset with the lender and retaining some equity value. AES is paying the debt without taking money out of its pocket.

Do you believe that you wouldn''t progress with the Ocean Cay project by yourselves, and would have to look for an equity partner with more experience in that area?

No, that is not true. AES is prepared to go forward with that project on its own. There already is a partner in that project. The company looks at that in terms of in sources of capital. The first priority is to bring on non-recourse project financing, and then to consider other sources of capital and whether they could optimize the value longer term.

Could you comment on the $250 million increase in maintenance and capital expenditure forecast for fiscal 2006?

The forecast remains the same in terms of the investments in maintenance capital with the addition of the announcements relative to alternate energy and AgCert. These are incremental to the previous baseline investments.

Do you anticipate lower debt reduction with increased parent investment and capital expenditures?

The aim is to obtain strong BB credit metrics. This can come from different sources, such as, by paying down debt or by adding good projects, depending on the opportunities. The management will look at the available capital and the ways to deploy it, which could very likely involve some addition debt paydown.

If interest rates keep going up, what kind of impact would that have on AES as a whole?

About 80% of AES'' debt is either fixed or swap. In two of the major currencies where AES has local debt in Venezuela and Brazil, rates are coming down. It is a natural hedge against higher LIBOR (London Interbank Offered Rates) and U.S. dollar rates. The management does not think there is a significant exposure to interest rates.

Could you provide an update on the Cartagena project?

Cartagena is still in construction. It had some construction delays primarily associated with the tunneling. To get access to the water there had to be a tunnel built which allowed the water pipeline to get to the source cooling water. It turned out to be a little bit more complicated than thought. That caused some delays and as a result, the company has been in negotiations with the contractor to speed up the construction to have it completed by the end of the year. As part of that negotiation, AES wound up taking a charge by waiving some of the liquidated damages for that construction project from the contractor.

What were the two issues affecting the tax rate in the first half?

In the first quarter, AES had the benefit of the tax resale of the Kingston property. There was a change in legislation that occurred in the second quarter, which will have some recurring benefit for the next several years, but had a one-time six-month retroactive adjustment that took place in the second quarter. Both of these depressed the first-half effective tax rate.