Unlocking value from existing utility assets NARUC Meeting – February 2012 www.aesenergystorage.com chris.shelton@aes.com Safe Harbor Disclosure Certain statements in the following presentation regarding AES’s business operations may constitute “forward-looking statements.” Such forward-looking statements include, but are not limited to, those related to future earnings growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute AES’s current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to accurate projections of future interest rates, commodity prices and foreign currency pricing, continued normal or better levels of operating performance and electricity demand at our distribution companies and operational performance at our generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see the Appendix to this presentation. Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES’s filings with the Securities and Exchange Commission including but not limited to the risks discussed under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2 © 2011 The AES Corporation, All rights reserved. Our Mission: Safe, Reliable, Sustainable. © 2011 The AES Corporation, All rights reserved. AES battery-based capacity offering 4 © 2011 The AES Corporation, All rights reserved. 72 MW, 4 Sites, 3 Markets 2009: Los Andes, Chile (12MW) 2010: Johnson City, NY (8MW) 2011: Laurel Mountain, WV (32MW) and Angamos, Chile (20MW) 5 © 2011 The AES Corporation, All rights reserved. Storage - Unlocking value for decades... FirstEnergy 435 MW Seneca pumped storage facility in PA. 6 © 2011 The AES Corporation, All rights reserved. Prudent & Progressive (back then) 7 © 2011 The AES Corporation, All rights reserved. Gas: Untapped Value & Insurance Policies 800 MW Combined Cycle Gas • Efficient (6800 BTU/kWh) • Among cleanest <50% utilization* *U.S. fleet average capacity factors for similar plants, EIA. 50 MW Gas Peaker • Inefficient (10500 BTU/kWh) • Higher emissions <10% utilization* 8 © 2011 The AES Corporation, All rights reserved. Reliable, but Sustainable? Prudent, but Progressive? NYISO Load Curve, July 6th, 2010 40% 9 Source: FERC, EIA © 2011 The AES Corporation, All rights reserved. Energy Storage: Reliable & Sustainable absorbs as generated Nuclear EmissionsFree Demand Response (4%) Wind CCS Capacity Emissions Profile (2%) Hydro (3%) Solar Geothermal (42%) Emissionbearing Nat. Gas Coal (46%) (3%) Inflexible Flexibility Profile Size represents share of planned capacity additions in the U.S. 2010-2025, Source: EER Highly Flexible 10 © 2011 The AES Corporation, All rights reserved. 11 © 2011 The AES Corporation, All rights reserved. AES battery-based capacity offering 12 © 2011 The AES Corporation, All rights reserved. Energy Storage Capacity: Unlocking Value Flexible Emissions-Free Capacity Project Cost/Benefit vs. New LM6000 on LI ($/kW-month) Actual Project Example \ AES Emissions Free Capacity Modularity / Scaling Benefits Lower Energy Environmental Distributed Cost (vs. Benefits (Solar Deployment LM6000) Equivalent) Benefits Effective New on-island Project Costs LM6000 (For Comparison) © 2011 The AES Corporation, All rights reserved. 32 MW, less than 1 acre, no emissions 98 MW Laurel Mountain Wind Project with 32 MW BESS Serving PJM Regulation Market 14 © 2011 The AES Corporation, All rights reserved. Years of reliable performance… 12 MW Los Andes Project, Chile COD: Size: CA: Dec-2009 12 MW 100% 1:02 am 1:16 am Loss of 200 MW in Grid: November 24th Pre-programmed digital response when frequency dropped below 50 Hz © 2011 The AES Corporation, All rights reserved. Reliable & Sustainable, Prudent & Progressive • No local emissions from the facility. • The most flexibility to support reliability needs and high penetration for renewables at system level. • Ability to create load to maintain or increase the value of nuclear, wind, and low CF CCGT. 16 © 2011 The AES Corporation, All rights reserved. More regulatory support is needed… • Planning: RPS (renewable portfolio standard) programs should consider capacity in addition to energy and plan for coordinated deployment goals. • Procurement: Regulators should encourage long-term contract structures from markets and utilities for emissions-free, flexible capacity resources. • Market Updates: Market mechanisms should reward flexibility and precision in “pay-for-performance” models. • Incentives: Full ITC (investment tax credit) treatment for energy storage to level the playing field with other emissions-free grid resources (such as solar). 17 © 2011 The AES Corporation, All rights reserved.