Segments

3 Months Ended

Sep. 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 nine months ended September 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 intersegment sales related to the transfer of electricity from generation plants to utilities within Latin America. No material intersegment 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. Intersegment activity has been eliminated within the total consolidated results. Asset information for businesses that were discontinued or classified as held for sale as of September 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 nine months ended September 30, 2012 and 2011 was as follows:

Three Months Ended	Total Revenue				Intersegment				External Revenue
September 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	1,036	$	984	$	(10)	$	(8)	$	1,026	$	976
Generation - Tietê		268		317		(260)		(320)		8		(3)
Generation - North America		359		334		-		-		359		334
Generation - Europe		245		397		-		-		245		397
Generation - Asia		191		172		-		-		191		172
Utilities - Latin America		1,667		1,898		-		-		1,667		1,898
Utilities - North America		796		321		-		-		796		321
Corp and Other		297		214		(2)		(2)		295		212
Total Revenue	$	4,859	$	4,637	$	(272)	$	(330)	$	4,587	$	4,307

Nine Months Ended	Total Revenue				Intersegment				External Revenue
September 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	3,024	$	2,984	$	(29)	$	(28)	$	2,995	$	2,956
Generation - Tietê		847		826		(790)		(813)		57		13
Generation - North America		1,004		1,007		-		(4)		1,004		1,003
Generation - Europe		928		1,125		(1)		(1)		927		1,124
Generation - Asia		553		449		-		-		553		449
Utilities - Latin America		4,847		5,682		-		-		4,847		5,682
Utilities - North America		2,206		890		-		-		2,206		890
Corp and Other		937		788		(7)		(7)		930		781
Total Revenue	$	14,346	$	13,751	$	(827)	$	(853)	$	13,519	$	12,898

Three Months Ended	Total Adjusted Gross Margin				Intersegment				External Adjusted Gross Margin
September 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	301	$	258	$	5	$	(10)	$	306	$	248
Generation - Tietê		204		248		(260)		(320)		(56)		(72)
Generation - North America		133		119		2		3		135		122
Generation - Europe		98		128		2		2		100		130
Generation - Asia		66		35		-		-		66		35
Utilities - Latin America		147		381		261		322		408		703
Utilities - North America		262		112		-		-		262		112
Corp and Other		44		(68)		2		13		46		(55)
Reconciliation to Income from Continuing Operations before Taxes
Depreciation and amortization										(327)		(303)
Interest expense										(401)		(418)
Interest income										89		102
Other expense										(15)		(76)
Other income										7		57
Gain on sale of investments										30		-
Goodwill impairment										(1,850)		(17)
Asset impairment expense										(43)		(130)
Foreign currency transaction losses										(8)		(90)
Other non-operating expense										-		(82)
Income from continuing operations before taxes and equity in earnings of affiliates									$	(1,251)	$	266

Nine Months Ended	Total Adjusted Gross Margin				Intersegment				External Adjusted Gross Margin
September 30,	2012		2011		2012		2011		2012		2011
	(in millions)
Generation - Latin America - Other	$	820	$	852	$	15	$	(4)	$	835	$	848
Generation - Tietê		653		641		(790)		(813)		(137)		(172)
Generation - North America		355		335		8		6		363		341
Generation - Europe		419		327		(5)		4		414		331
Generation - Asia		188		133		1		1		189		134
Utilities - Latin America		358		1,041		796		820		1,154		1,861
Utilities - North America		668		291		1		1		669		292
Corp and Other		105		(34)		(24)		(9)		81		(43)
Reconciliation to Income from Continuing Operations before Taxes
Depreciation and amortization										(1,019)		(879)
Interest expense										(1,202)		(1,137)
Interest income										263		293
Other expense										(59)		(126)
Other income										40		107
Gain on sale of investments										214		7
Goodwill impairment										(1,850)		(17)
Asset impairment expense										(72)		(163)
Foreign currency transaction losses										(110)		(20)
Other non-operating expense										(50)		(82)
Income from continuing operations before taxes and equity in earnings of affiliates									$	(277)	$	1,575

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

	Total Assets
	September 30, 2012		December 31, 2011
	(in millions)
Assets
Generation - Latin America - Other	$	9,168	$	9,067
Generation - Tietê		1,486		1,645
Generation - North America		3,584		3,625
Generation - Europe		3,398		3,276
Generation - Asia		2,281		1,717
Utilities - Latin America		8,500		9,468
Utilities - North America		7,430		9,397
Discontinued businesses		24		1,576
Corp and Other		5,485		5,575
Total assets	$	41,356	$	45,346