Segments

3 Months Ended

Jun. 30, 2012

SEGMENTS

12. SEGMENTS

During the first quarter of 2012, the Company completed its operational management and reporting restructuring. The management reporting structure is organized along two lines of business – Generation and Utilities, each led by a Chief Operating Officer. The segment reporting structure primarily uses the Company's management reporting structure as its foundation to reflect how the Company manages the business internally with further aggregation by geographic regions to provide better socio-political-economic understanding of our business.For the three and six months ended June 30, 2012, the Company applied the segment reporting accounting guidance, which provides certain quantitative thresholds and aggregation criteria.The Company concluded that Tietê, our 2,663MW hydro generation business in Brazil, met the quantitative thresholds to require separate presentation.As such, an additional reportable segment which consists solely of the results of Tietê is now reported as Generation – Tietê.Tietê was formerly reported within the Latin America –Generation segment. The previously disclosed Latin America – Generation segment is now reported as Generation – Latin America – Otherand, with the exception of Tietê, includes the results of all remaining businesses as previously reported. All prior period results have been retrospectively revised to reflect the new segment reporting structure.The Company has increased from six to the following seven reportable segments:

•       Generation – Latin America – Other;

•       Generation – Tietê;

•       Generation – North America;

•       Generation – Europe;

•       Generation – Asia;

•       Utilities – Latin America;

•       Utilities – North America.

Corporate and Other—The Company's Europe Utilities, Africa Utilities, Africa Generation, Wind Generation operating segments and other climate solutions and renewables projects are reported within “Corporate and Other” because they do not meet the criteria to allow for aggregation with another operating segment or the quantitative thresholds that would require separate disclosure under segment reporting accounting guidance. None of these operating segments are currently material to our presentation of reportable segments, individually or in the aggregate. AES Solar and certain other unconsolidated businesses are accounted for using the equity method of accounting; therefore, their operating results are included in “Net Equity in Earnings of Affiliates” on the face of the Condensed Consolidated Statements of Operations, not in revenue or gross margin. “Corporate and Other” also includes corporate overhead costs which are not directly associated with the operations of our seven reportable segments and other intercompany charges such as self-insurance premiums which are fully eliminated in consolidation.

The Company uses adjusted gross margin, a non-GAAP measure, to evaluate the performance of its segments. Adjusted gross margin is defined by the Company as gross margin plus depreciation and amortization less general and administrative expenses.

Total revenue includes inter-segment sales related to the transfer of electricity from generation plants to utilities within Latin America. No material inter-segment revenue relationships exist between other segments. Corporate allocations include certain self-insurance activities which are reflected within segment adjusted gross margin. All intra-segment activity has been eliminated with respect to revenue and adjusted gross margin within the segment. Inter-segment activity has been eliminated within the total consolidated results. Asset information for businesses that were discontinued or classified as held for sale as of June 30, 2012 is segregated and is shown in the line “Discontinued Businesses” in the accompanying segment tables.

Information about the Company's operations by segment for the three and six months ended June 30, 2012 and 2011 was as follows:

Three months ended	Total Revenue				Intersegment				External Revenue
June 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	1,029	$	1,122	$	(9)	$	(11)	$	1,020	$	1,111
Generation - Tietê		274		256		(248)		(251)		26		5
Generation - North America		328		339		-		(4)		328		335
Generation - Europe		233		328		(1)		-		232		328
Generation - Asia		181		162		-		-		181		162
Utilities - Latin America		1,446		1,944		-		-		1,446		1,944
Utilities - North America		678		280		-		-		678		280
Corp and Other		284		273		(3)		(3)		281		270
Total Revenue	$	4,453	$	4,704	$	(261)	$	(269)	$	4,192	$	4,435

Six Months Ended	Total Revenue				Intersegment				External Revenue
June 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	1,988	$	2,000	$	(19)	$	(20)	$	1,969	$	1,980
Generation - Tietê		579		509		(530)		(493)		49		16
Generation - North America		645		673		-		(4)		645		669
Generation - Europe		683		728		(1)		(1)		682		727
Generation - Asia		362		277		-		-		362		277
Utilities - Latin America		3,180		3,784		-		-		3,180		3,784
Utilities - North America		1,410		569		-		-		1,410		569
Corp and Other		640		574		(5)		(5)		635		569
Total Revenue	$	9,487	$	9,114	$	(555)	$	(523)	$	8,932	$	8,591

Three months ended	Total Adjusted Gross Margin				Intersegment				External Adjusted Gross Margin
June 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	232	$	326	$	6	$	3	$	238	$	329
Generation - Tietê		210		191		(248)		(251)		(38)		(60)
Generation - North America		116		110		4		(1)		120		109
Generation - Europe		84		93		-		1		84		94
Generation - Asia		64		53		1		-		65		53
Utilities - Latin America		44		340		250		253		294		593
Utilities - North America		193		89		1		1		194		90
Corp and Other		14		(9)		(12)		(9)		2		(18)
Reconciliation to Income from Continuing Operations before Taxes
Depreciation and amortization										(341)		(295)
Interest expense										(385)		(381)
Interest income										83		96
Other expense										(15)		(35)
Other income										15		34
Gain on sale of investments										5		1
Asset impairment expense										(18)		(33)
Foreign currency transaction gains (losses)										(101)		37
Other non-operating expense										(1)		-
Income from continuing operations before taxes and equity in earnings of affiliates									$	201	$	614

Six Months Ended	Total Adjusted Gross Margin				Intersegment				External Adjusted Gross Margin
June 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	519	$	594	$	10	$	6	$	529	$	600
Generation - Tietê		449		393		(530)		(493)		(81)		(100)
Generation - North America		222		216		6		3		228		219
Generation - Europe		321		199		(7)		2		314		201
Generation - Asia		122		98		1		1		123		99
Utilities - Latin America		211		660		535		498		746		1,158
Utilities - North America		406		179		1		1		407		180
Corp and Other		61		34		(26)		(22)		35		12
Reconciliation to Income from Continuing Operations before Taxes
Depreciation and amortization										(692)		(576)
Interest expense										(801)		(719)
Interest income										174		191
Other expense										(44)		(50)
Other income										33		50
Gain on sale of investments										184		7
Asset impairment expense										(29)		(33)
Foreign currency transaction gains (losses)										(102)		70
Other non-operating expense										(50)		-
Income from continuing operations before taxes and equity in earnings of affiliates									$	974	$	1,309

Assets by segment as of June 30, 2012 and December 31, 2011 were as follows:

	Total Assets
	June 30, 2012		December 31, 2011
	(in millions)
Assets
Generation - Latin America - Other	$	9,120	$	9,067
Generation - Tietê		1,422		1,645
Generation - North America		3,568		3,625
Generation - Europe		3,340		3,276
Generation - Asia		2,099		1,717
Utilities - Latin America		8,491		9,468
Utilities - North America		9,245		9,344
Discontinued businesses		-		1,531
Corp and Other		5,464		5,620
Total assets	$	42,749	$	45,293