AES CORPORATION, S-3/A, 1996-06-12

AES CORPORATION
S-3/A, 1996-06-12
COGENERATION SERVICES & SMALL POWER PRODUCERS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1996

REGISTRATION NO. 333-01286
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE AES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 54-1163725
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

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1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)

BARRY J. SHARP
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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Copies to:

<TABLE>
<S> <C>
PHILIP D. BEAUMONT RICHARD D. TRUESDELL, JR.
CHADBOURNE & PARKE LLP DAVIS POLK & WARDWELL
30 ROCKEFELLER PLAZA 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10017
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment, check the following box. /X/

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration number for the same
offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Debt Securities............ $225,000,000(2) 100% $225,000,000(2) $77,586(2)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated pursuant to Rule 457(o) under the Securities Act. The Registrant
filed a Registration Statement relating to $150,000,000 of Debt Securities
on February 12, 1996. In connection therewith, the Registrant paid a filing
fee of $51,724.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.

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<PAGE> 2

PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 12, 1996

(THE AES CORPORATION LOGO)
$225,000,000
Debt Securities
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The AES Corporation (the "Company" or "AES") intends to offer from time to time
up to $225,000,000 aggregate principal amount of its debt securities (the "Debt
Securities") in one or more series on terms to be determined at the time or
times of sale, and otherwise as more fully described under "Description of Debt
Securities". The specific designation, aggregate principal amount, authorized
denominations, purchase price, maturity, rate and time of payment of interest,
any redemption terms or other specific terms and any listing on a securities
exchange of any Debt Securities in respect of which this Prospectus is being
delivered ("Offered Debt Securities") will be set forth in a Prospectus
Supplement to be delivered at the time of the offering and sale of such Offered
Debt Securities.

SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The Company may sell the Debt Securities through underwriters, dealers or
agents, directly to one or a limited number of purchasers, or through a
combination of the foregoing. See "Plan of Distribution." The Prospectus
Supplement will set forth the names of the underwriters, dealers or agents, if
any, any applicable commissions or discounts and the net proceeds to the Company
from the sale of the Offered Debt Securities. Any such underwriter (or any
representative thereof), dealer or agent may include J.P. Morgan Securities Inc.
and Goldman, Sachs & Co.

No dealer, salesperson or other person is authorized to give any information or
to make any representations other than those contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained or incorporated by reference herein is correct as of any
time subsequent to its date. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the securities offered hereby by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation.

J.P. MORGAN & CO. GOLDMAN, SACHS & CO.

The date of this Prospectus is , 1996
<PAGE> 3

AVAILABLE INFORMATION

The AES Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
These reports, proxy and information statements and other information may be
inspected without charge and copied at the public reference facilities
maintained by the Commission at its principal offices at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such materials also can be obtained at prescribed rates
from the Public Reference Section of the Commission at the principal offices of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Debt Securities offered hereby (including all amendments and
supplements thereto, the "Registration Statement"). This Prospectus, which forms
a part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits filed thereto, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. Statements contained herein concerning the provisions of any
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
can be inspected and copied at the public reference facilities and regional and
other offices referred to above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company hereby incorporates in this Prospectus by reference thereto and
makes a part hereof the following documents, heretofore filed with the
Commission pursuant to the Exchange Act: (i) the Company's Annual Report on Form
10-K for the year ended December 31, 1995; (ii) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 and (iii) the Company's
Current Reports on Form 8-K filed on June 12, 1996, February 26, 1996 and
February 6, 1996.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to
termination of the offering being made hereby shall be deemed to be incorporated
in this Prospectus by reference and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein, modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus or
such Registration Statement. Without limitation of the foregoing, the financial
statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 have been superseded by the financial statements of the
Company included herein.

The Company hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon written or oral request of any
such person, a copy of any and all of the documents referred to above which have
been or may be incorporated in this Prospectus by reference, other than exhibits
to such documents which are not specifically incorporated by reference into such
documents. Requests for such copies should be directed to William R. Luraschi,
General Counsel and Secretary, The AES Corporation, 1001 North 19th Street,
Arlington, Virginia 22209, telephone (703) 522-1315.

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<PAGE> 4

THE COMPANY

The AES Corporation is a global power company which supplies electricity to
customers world-wide. The Company markets power principally from electric
generating and other related facilities that it owns and operates. AES was one
of the original entrants in the independent power market and today is one of the
world's largest independent power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction.

Over the last five years, the Company has experienced significant growth. This
growth has resulted primarily from the development and construction of new
plants ("greenfield development") and also from the acquisition of existing
plants, primarily through competitively bid privatization initiatives outside
the United States. Since 1991, the Company's total generating capacity in
megawatts has grown by 293%, with the total number of plants in operation
increasing from 6 to 20. Additionally, the Company's revenues have increased
106% from $333 million in 1991 to $685 million in 1995, while EBITDA has grown
from $5 million to $110 million over the same period.

Through its subsidiaries and affiliated companies, AES operates and owns
(entirely or in part) a diverse portfolio of electric power plants with a total
generating capacity of 4,158 megawatts. Of that total, 1,069 are produced by
plants located in the United States, 1,420 in the United Kingdom, 840 in
Argentina, 788 in Brazil and 41 in China. Of the total megawatts, 29% are
produced by plants fueled by solid fuel, 19% are produced by plants fueled by
natural gas, 24% are produced by hydroelectric facilities and the remaining 28%
are produced by plants capable of burning multiple fossil fuels.

AES is now in the process of adding 1,462 megawatts to its operating portfolio
by constructing two oil-fired power plants in Pakistan totaling 674 megawatts, a
180 megawatt coal-fired plant in the United States and four plants totaling 608
megawatts in China that will be coal and oil-fired. In total, AES's net equity
ownership in plants in operation and construction is 3,233 megawatts.

On May 30, 1996, a subsidiary of AES acquired common shares representing an
11.35% interest (the "Light Interest") in Light Servicos de Eletricidade S.A.
("Light"), a publicly-held corporation that operates as the concessionaire of an
approximately 3,800 megawatt electric power generation, transmission and
distribution system in Rio de Janeiro, Brazil. In connection with the
acquisition of the Light Interest, AES, through a subsidiary, is participating
in a consortium with certain other successful bidders, and the ownership
interest held by the consortium represents a controlling interest in Light.

THE GLOBAL INDEPENDENT POWER MARKET

The market for independent power generation has expanded from a U.S. market,
consisting of cogeneration and small power production projects, to a global
competitive market for power generation. Although many foreign countries
initiated restructuring policies after the advent of the independent power
market in the United States, many of these countries have put in place market
structures that the Company believes are more competitive than most markets
existing in the United States today. A part of AES's business strategy is to
participate in competitive generation markets both in the United States and
world-wide.

The Company believes that the growth in the need for new capacity in the United
States has and will continue to slow, partly because utilities are making more
efficient use of their existing resources by improving plant availability,
extending plant lives, repowering and taking advantage of attractive bulk power
purchases, and partly because utilities have initiated programs to reduce the
demand for electricity. As a result of the reduced need for new capacity in the
United States, AES and many of its competitors are seeking new business in
markets outside the United States. In addition, a number of foreign countries
have privatized (or are in the process of privatizing) their generation
capacity, which provides opportunities to purchase existing generation assets.
AES, through subsidiaries and affiliates, now operates 14 plants in non-U.S.
countries, is constructing six others overseas, and has offices in numerous
foreign locations to take advantage of the opportunities in these new markets.

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BUSINESS STRATEGY

The Company's primary objective is to help meet the need for electricity
world-wide by participating in competitive electricity markets as a clean, safe
and reliable power supplier. The Company's strategy is to participate in
competitive power generation markets as they develop either by greenfield
development or by acquiring and operating existing facilities in these markets.

Other elements of the Company's strategy include:

- Supplying energy to customers at the least cost possible, taking into
account factors such as reliability and environmental performance.

- Constructing or acquiring projects of a relatively large size (generally
larger than 100 megawatts).

- Entering into power sales contracts with electric utilities or other
customers with credit strength.

The Company also strives for operating excellence as a key element of its
strategy, which it believes it accomplishes by minimizing organizational layers
and maximizing company-wide participation in decision-making. AES has attempted
to create an operating environment that results in safe, clean and reliable
electricity generation. Because of this emphasis, the Company prefers to operate
all facilities which it develops or acquires; however, there can be no assurance
that the Company will have operating control of all of its facilities in the
future.

The Company's strategy also has been to attempt to finance its projects
primarily without credit recourse to the Company or to other projects, and to
construct new plants under fixed or guaranteed-maximum price contracts with
contractor-guaranteed performance standards ("turnkey" contracts). In addition,
the Company engages in careful site selection, taking into consideration
transportation, water and transmission access and attempting to gauge local
government and community receptivity to the environmental permitting process.

The Company is a Delaware corporation that was formed in 1981. The principal
office of the Company is located at 1001 North 19th Street, Arlington, Virginia
22209, and its telephone number is (703) 522-1315.

RISK FACTORS

Purchasers of the Debt Securities should read this entire Prospectus carefully.
Ownership of the Debt Securities involves certain risks. The following factors
should be considered carefully in evaluating AES and its business before
purchasing the Debt Securities offered by this Prospectus.

Leverage and Subordination. On a pro forma basis after giving effect to the
application of the net proceeds of the offering of $225 million in aggregate
principal amount of Debt Securities and the Company's recent acquisition of the
Light Interest, the Company and its subsidiaries had approximately $1.8 billion
of outstanding indebtedness at March 31, 1996. As a result of the Company's
level of debt, the Company might be significantly limited in its ability to meet
its debt service obligations, to finance the acquisition and development of
additional projects, to compete effectively or to operate successfully under
adverse economic conditions. As of March 31, 1996, the Company would have had,
on a pro forma basis after giving effect to the application of the net proceeds
from the offering of $225 million in aggregate principal amount of Debt
Securities and the Company's recent acquisition of the Light Interest, a
consolidated ratio of total debt to total book capitalization (including current
debt) of approximately 75%.

The Debt Securities will be subordinated to all Senior Debt, including, but not
limited to, the Company's current $425 million credit facility. As of March 31,
1996, on a pro forma basis after giving effect to the application of the net
proceeds of the offering of $225 million in aggregate principal amount of Debt
Securities and the Company's recent acquisition of the Light Interest, the
Company had approximately $271 million in aggregate principal amount of Senior
Debt. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshaling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of
Senior Debt will first be entitled to receive payment in full of all amounts due
or to become due under all Senior Debt before the holders of the Debt Securities
will be entitled to receive any payment in respect of the principal of, premium,
if any, or interest on the

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Debt Securities. No payments on account of principal, premium, if any, or
interest in respect of the Debt Securities may be made if there shall have
occurred and be continuing a default in any payment under any Senior Debt or,
during certain periods, an event of default under certain Senior Debt permitting
the lenders thereunder to accelerate the maturity thereof. See "Description of
Debt Securities -- Subordination".

The Debt Securities will be effectively subordinated to the indebtedness and
other obligations (including trade payables) of the Company's subsidiaries. At
March 31, 1996, the indebtedness and obligations of the Company's subsidiaries,
on a pro forma basis after giving effect to the application of the net proceeds
of the offering of $225 million in aggregate principal amount of Debt Securities
and the Company's recent acquisition of the Light Interest, aggregated
approximately $1.2 billion. The ability of the Company to pay principal of,
premium, if any, and interest on the Debt Securities will be dependent upon the
receipt of funds from its subsidiaries by way of dividends, fees, interest,
loans or otherwise. Most of the Company's subsidiaries with interests in power
generation facilities currently have in place, and the Indenture for the Debt
Securities will, under certain circumstances, permit the Company's subsidiaries
to enter into, arrangements that restrict their ability to make distributions to
the Company by way of dividends, fees, interest, loans or otherwise. The
Company's subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the Debt
Securities or to make any funds available therefor, whether by dividends, loans
or other payments, and do not guarantee the payment of interest on or principal
of the Debt Securities. Any right of the Company to receive any assets of any of
its subsidiaries upon any liquidation, dissolution, winding up, receivership,
reorganization, assignment for the benefit of creditors, marshaling of assets
and liabilities or any bankruptcy, insolvency or similar proceedings of the
Company (and the consequent right of the holders of the Debt Securities to
participate in the distribution of, or to realize proceeds from, those assets)
will be effectively subordinated to the claims of any such subsidiary's
creditors (including trade creditors and holders of debt issued by such
subsidiary). The Company currently conducts substantially all of its operations
through its subsidiaries. See "Description of Debt Securities -- Subordination".

Doing Business Outside the United States. The Company's involvement in the
development of new projects and the acquisition of existing plants in locations
outside the United States is increasing and most of the Company's current
development and acquisition activities are in respect of projects and plants
outside the United States. The Company, through subsidiaries and joint ventures,
has ownership interests in 20 power plants outside the United States in
operation or under construction. Five of such power plants are located in
Argentina; four in Brazil; one in England; two in Northern Ireland; two in
Pakistan; and six in the People's Republic of China.

The financing, development and operation of projects outside the United States
entail significant political and financial uncertainties (including, without
limitation, uncertainties associated with first-time privatization efforts in
the countries involved, currency exchange rate fluctuations, currency
repatriation restrictions, currency convertibility, political instability, civil
unrest, and expropriation) and other structuring issues that have the potential
to cause substantial delays in respect of or material impairment of the value of
the project being developed or operated, which AES may not be capable of fully
insuring or hedging against. The ability to obtain financing on a commercially
acceptable non-recourse basis in developing nations may also require higher
investments by the Company than historically have been the case. In addition,
financing in countries with less than investment grade sovereign credit ratings
may also require substantial participation by multilateral financing agencies.
There can be no assurance that such financing can be obtained when needed.

The uncertainty of the legal environment in certain countries in which the
Company, its subsidiaries and its affiliates are or in the future may be
developing, constructing or operating could make it more difficult for the
Company to enforce its respective rights under agreements relating to such
projects. In addition, the laws and regulations of certain countries may limit
the Company's ability to hold a majority interest in some of the projects that
it may develop or acquire. International projects owned by the Company may, in
certain cases, be expropriated by applicable governments. Although AES may have
legal recourse in enforcing its rights under agreements and recovering damages
for breaches thereof, there can be no assurance that any such legal proceedings
will be successful.

Competition. The global power production market is characterized by numerous
strong and capable competitors, many of whom may have extensive and more
diversified developmental or operating experience (including both

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domestic and international experience) and greater financial resources than the
Company. Further, in recent years, the power production industry has been
characterized by strong and increasing competition with respect to both
obtaining power sales agreements and acquiring existing power generation assets.
In certain markets, these factors have caused reductions in prices contained in
new power sales agreements and, in many cases, have caused higher acquisition
prices for existing assets through competitive bidding practices. The evolution
of competitive electricity markets and the development of highly efficient
gas-fired power plants have also caused, or are anticipated to cause, price
pressure in certain power markets where the Company sells or intends to sell
power. There can be no assurance that the foregoing competitive factors will not
have a material adverse effect on the Company.

Development Uncertainties. The majority of the projects that AES develops are
large and complex and the completion of any such project is subject to
substantial risks. Development can require the Company to expend significant
sums for preliminary engineering, permitting, legal and other expenses in
preparation for competitive bids which the Company may not win or before it can
be determined whether a project is feasible, economically attractive or capable
of being financed. Successful development and construction is contingent upon,
among other things, negotiation on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales contracts with other
project participants, receipt of required governmental permits and consents and
timely implementation and satisfactory completion of construction. There can be
no assurance that AES will be able to obtain new power sales contracts, overcome
local opposition, if any, obtain the necessary site agreements, fuel supply and
ash disposal agreements, construction contracts, steam sales contracts, licenses
and certifications, environmental and other permits and financing commitments
necessary for the successful development of its projects. There can be no
assurance that development efforts on any particular project, or the Company's
efforts generally, will be successful. If these development efforts are not
successful, the Company may abandon a project under development. At the time of
abandonment, the Company would expense all capitalized development costs
incurred in connection therewith and could incur additional losses associated
with any related contingent liabilities. The future growth of the Company is
dependent, in part, upon the demand for significant amounts of additional
electrical generating capacity and its ability to obtain contracts to supply
portions of this capacity. Any material unremedied delay in, or unsatisfactory
completion of, construction of the Company's projects could, under certain
circumstances, have an adverse effect on the Company's ability to meet its
obligations, including the payment of principal of, premium, if any and interest
on Notes. The Company also is faced with certain development uncertainties
arising out of doing business outside of the United States. See "-- Doing
Business Outside the United States."

Uncertainty of Access to Capital for Future Projects. Each of AES's projects
under development and those independent power facilities it may seek to acquire
may require substantial capital investment. Continued access to capital with
acceptable terms is necessary to assure the success of future projects and
acquisitions. AES has primarily utilized project financing loans to fund the
capital expenditures associated with constructing and acquiring its electric
power plants and related assets. Project financing borrowings have been
substantially non-recourse to other subsidiaries and affiliates and to AES as
the parent company and are generally secured by the capital stock, physical
assets, contracts and cash flow of the related project subsidiary or affiliate.
The Company intends to continue to seek, where possible, such non-recourse
project financing in connection with the assets which the Company or its
affiliates may develop, construct or acquire. However, depending on market
conditions and the unique characteristics of individual projects, the Company's
traditional providers of project financing, particularly multinational
commercial banks, may seek higher borrowing spreads and increased equity
contributions.

Furthermore, because of the reluctance of commercial lending institutions to
provide non-recourse project financing (including financial guarantees) in
certain less developed economies, the Company, in such locations, has and will
continue to seek direct or indirect (through credit support or guarantees)
project financing from a limited number of multilateral or bilateral
international financial institutions or agencies. As a precondition to making
such project financing available, these institutions may also require
governmental guarantees of certain project and sovereign related risks.
Depending on the policies of specific governments, such guarantees may not be
offered and as a result, AES may determine that sufficient financing will
ultimately not be available to fund the related project.

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generally taken the form of equity investments or loans, which are subordinated
to the project financing loans. The funds for these investments have been
provided by cash flows from operations and by the proceeds from issuances of
senior subordinated notes, convertible debentures and common stock of the
Company.

The Company's ability to arrange for financing on either a fully recourse or a
substantially non-recourse basis and the costs of such capital are dependent on
numerous factors, including general economic and capital market conditions, the
availability of bank credit, investor confidence in the Company, the continued
success of current projects and provisions of tax and securities laws which are
conducive to raising capital in this manner. Should future access to capital not
be available, AES may decide not to build new plants or acquire existing
facilities. While a decision not to build new plants or acquire existing
facilities would not affect the results of operations of AES on its currently
operating facilities or facilities under construction, such a decision would
affect the future growth of AES.

Dependence on Utility Customers and Certain Projects. The nature of most of
AES's power projects is such that the facility generally relies on one power
sales contract with a single customer for the majority, if not all, of its
revenues over the life of the power sales contract. During 1995, four customers
accounted for 73% of the Company's revenues. The prolonged failure of any one
utility customer to fulfill its contractual obligations could have a substantial
negative impact on AES's primary source of revenues. AES has sought to reduce
this risk in part by entering into power sales contracts with utilities or other
customers of strong credit quality and by locating its plants in different
geographic areas in order to mitigate the effects of regional economic
downturns.

Four of the Company's plants collectively represented approximately 61% of AES's
consolidated total assets at December 31, 1995 and generated approximately 80%
of AES's consolidated total revenues for the year ended December 31, 1995.

Regulatory Uncertainty. AES' cogeneration operations are subject to the
provisions of various laws and regulations, including the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA") and the Public Utility
Holding Company Act, as amended ("PUHCA"). PURPA provides to qualifying
facilities ("QFs") certain exemptions from substantial federal and state
legislation, including regulation as public utilities. PUHCA regulates public
utility holding companies and their subsidiaries. AES is not and will not be
subject to regulation as a holding company under PUHCA as long as the domestic
power plants it owns are QFs under PURPA. QF status is conditioned on meeting
certain criteria, and would be jeopardized, for example, by the loss of a steam
customer. The Company believes that, upon the occurrence of an event that would
threaten the QF status of one of its domestic plants, it would be able to react
in a manner that would avoid the loss of QF status (such as by replacing the
steam customer). In the event the Company were unable to avoid the loss of such
status for one of its plants, to avoid public utility holding company status,
AES could apply to the Federal Energy Regulatory Commission ("FERC") to obtain
status as an Exempt Wholesale Generator ("EWG"), or could restructure the
ownership of the project subsidiary. EWGs, however, are subject to broad
regulation by FERC and may be subject to state public utility commissions
regulation regarding non-rate matters. In addition, any restructuring of a
project subsidiary would likely result in, among other things, a reduced
financial interest in such subsidiary, which could result in a gain or loss on
the sale of the interest in such subsidiary, the removal of such subsidiary from
the consolidated income tax group or the consolidated financial statements of
the Company, or an increase or decrease in the results of operations of the
Company.

The United States Congress is considering proposed legislation which would
repeal PURPA entirely, or at least repeal the obligation of utilities to
purchase from QFs. There is strong support for grandfathering existing QF
contracts if such legislation is passed, and also support for requiring
utilities to conduct competitive bidding for new electric generation if the
PURPA purchase obligation is eliminated. Various bills have also proposed repeal
of PUHCA. Repeal of PUHCA would allow both independents and vertically
integrated utilities to acquire retail utilities in the United States that are
geographically widespread, as opposed to the current limitations of PUHCA which
require that retail electric systems be capable of physical integration. In
addition, registered holding companies would be free to acquire non-utility
businesses, which they may not do now, with certain limited exceptions.
Competition for independent power generators from vertically integrated
utilities would likely increase. Repeal of PURPA and/or PUHCA may or may not be
part of comprehensive legislation to restructure the electric

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utility industry, allow retail competition, and deregulate most electric rates.
The effect of any such repeal cannot be predicted, although any such repeal
could have a material adverse effect on the Company.

Electric Utility Industry Restructuring Proposals. The FERC and many state
utility commissions are currently studying a number of proposals to restructure
the electric utility industry in the United States to permit utility customers
to choose their utility supplier in a competitive electric energy market. The
FERC issued a final rule in April 1996 which requires utilities to offer
wholesale customers and suppliers open access on utility transmission lines, on
a comparable basis to the utilities' own use of the lines. The final rule is
subject to rehearing and may become the subject of court litigation. Many
utilities have already filed "open access" tariffs. The utilities contend that
they should recover from departing customers their fixed costs that will be
"stranded" by the ability of their wholesale customers (and perhaps eventually,
their retail customers) to choose new electric power suppliers. The FERC final
rule endorses the recovery of legitimate and verifiable "stranded costs." These
may include the costs utilities are required to pay under many QF contracts
which the utilities view as excessive when compared with current market prices.
Many utilities are therefore seeking ways to lower these contract prices or
rescind the contracts altogether, out of concern that their shareholders will be
required to bear all or part of such "stranded" costs. Some utilities have
engaged in litigation against QFs to achieve these ends. In addition, future
United States electric rates may be deregulated in a restructured United States
electric utility industry and increased competition may result in lower rates
and less profit for United States electricity sellers. Falling electricity
prices and uncertainty as to the future structure of the industry is inhibiting
United States utilities entering into long-term power purchase contracts. The
effect of any such restructuring on the Company cannot be predicted, although
any such restructuring could have a material adverse effect on the Company.

Risk of Litigation Involving Light. Light is the subject of certain lawsuits by
industrial customers who have alleged that increases in electricity tariffs
introduced by Light and all other electric utilities in Brazil during a price
freeze imposed by the federal government of Brazil from March through November
1986 (the "Cruzado Period") were illegal. The plaintiffs are seeking
reimbursement for amounts relating to (i) increases paid during the Cruzado
Period, which Light estimates may range up to approximately $75 million, and
(ii) increases paid subsequent to the Cruzado Period on the basis that all
tariff increases after the Cruzado Period were illegal because they took into
account the allegedly illegal increase introduced during the Cruzado Period,
which Light estimates may range up to $700 million. The Company has been
informed by Light that the Superior Tribunal of Justice in Brazil has affirmed
lower court decisions that Light and the other utilities are required to
reimburse their industrial customers for the tariff increase during the Cruzado
Period and that the Superior Tribunal of Justice has, in an appellate proceeding
involving two other utilities, ruled that the plaintiffs in that proceeding are
not entitled to reimbursement for tariff increases introduced after the Cruzado
Period. Although Brazilian counsel has advised the Company that such counsel
does not believe that it is likely that the lawsuits involving Light will be
decided differently by the Superior Tribunal of Justice, no assurance can be
given that amounts in excess of $75 million (attributable to tariff increases
after the Cruzado Period) will not be required to be reimbursed by Light.
Although Light has informed the Company that it may be able to recover amounts
it is required to reimburse to industrial customers through tariff rate
increases, the Company believes that, in the event that the government does not
allow such recovery, such claims for recovery may not be legally enforceable.
There can be no assurance that if Light were required to reimburse amounts for
tariff increases after the Cruzado Period, this would not have a material
adverse effect on the financial condition of Light.

Business Subject to Stringent Environmental Regulations. AES's activities are
subject to stringent environmental regulation by federal, state, local and
foreign governmental authorities. In addition, the Clean Air Act Amendments of
1990 impose more stringent standards than those previously in effect, and
require states to impose permit fees on certain emissions. Congress and other
foreign governmental authorities also may consider proposals to restrict or tax
certain emissions, which proposals, if adopted, could impose additional costs on
the operation of AES's power plants. There can be no assurance that AES would be
able to recover all or any increased costs from its customers or that its
business, financial condition or results of operations would not be materially
and adversely affected by future changes in domestic or foreign environmental
laws and regulations. The Company has made and will continue to make capital and
other expenditures to comply with environmental laws and regulations. There can
be no assurance that such expenditures will not have a material adverse effect
on the Company's financial condition or results of operations.

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Control by Existing Stockholders. As of February 1, 1996, AES's two founders,
Roger W. Sant and Dennis W. Bakke, and their immediate families together owned
beneficially approximately 28% of AES's outstanding Common Stock. As a result of
their ownership interests, Messrs. Sant and Bakke may be able to significantly
influence or exert control over the affairs of AES, including the election of
the Company's directors. As of February 1, 1996, all of AES's officers and
directors and their immediate families together owned beneficially approximately
39% of AES's outstanding Common Stock. To the extent that they decide to vote
together, these stockholders would be able to significantly influence or control
the election of AES's directors, the management and policies of AES and any
action requiring stockholder approval, including significant corporate
transactions.

Adherence to AES's Principles -- Possible Impact on Results of Operations. A
core part of AES's corporate culture is a commitment to "shared principles": to
act with integrity, to be fair, to have fun and to be socially responsible. The
Company seeks to adhere to these principles not as a means to achieve economic
success, but because adherence is a worthwhile goal in and of itself. However,
if the Company perceives a conflict between these principles and profits, the
Company will try to adhere to its principles -- even though doing so might
result in diminished or foregone opportunities.

No Prior Public Market -- Possible Price Volatility of Debt Securities. Prior
to the offering, there has been no public market for the Debt Securities. There
can be no assurance that an active trading market for the Debt Securities will
develop or be sustained. If such a market were to develop, the Debt Securities
could trade at prices that may be higher or lower than their initial offering
price depending upon many factors, including prevailing interest rates, the
Company's operating results and the markets for similar securities.
Historically, the market for non-investment grade debt has demonstrated
substantial volatility in the prices of securities similar to the Debt
Securities. There can be no assurance that the future market for the Debt
Securities will not be subject to similar volatility.

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USE OF PROCEEDS

The Company intends to use the net proceeds from the Offering to either repay
amounts outstanding under a credit agreement dated as of May 20, 1996, between
the Company and Morgan Guaranty Trust Company of New York, as Agent (the "Bank
Credit Agreement"), repay amounts outstanding under a reimbursement agreement
dated as of May 20, 1996 between AES Light, Inc. and Morgan Guaranty Trust
Company of New York (the "Reimbursement Agreement") or for general corporate
purposes.

The Reimbursement Agreement bears interest at the rate of LIBOR plus 2.50% and
matures on November 20, 1997. The Company may use the full amount of the net
proceeds of the Offering to repay the amount outstanding of $225 million under
the Reimbursement Agreement, which was incurred in connection with the Company's
acquisition of the Light Interest.

The Bank Credit Agreement, the Company's working capital facility which was
used, in part, to finance its acquisition of the Light Interest bears interest
at a rate of LIBOR plus 1.75% and matures on May 19, 1999. As of the date
hereof, an amount of $202 million is outstanding under the Bank Credit
Agreement. If the Company uses the proceeds of the Offering to repay
indebtedness under the Bank Credit Agreement, the Company intends to use the
remainder of the net proceeds of the Offering for general corporate purposes.
See "Description of Corporate Credit Facility."

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DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The AES Corporation and its subsidiaries and affiliates are primarily in the
business of selling electricity to customers in the U.S., England, Northern
Ireland, Argentina and China. Electricity sales accounted for 97% of total
revenues during 1995 and 95% during 1994. Other sales arise from the sale of
steam and other commodities related to the Company's cogeneration operations.
Service revenues represent fees earned in connection with energy consulting,
wholesale power services and services provided by AES to its affiliates.

Electricity is generated (or manufactured) by power plants owned or leased by
the Company's subsidiaries and affiliates. AES now operates and owns (entirely
or in part) a diverse portfolio of electric power plants with a total capacity
of 4,158 megawatts. Of that total, 1,069 megawatts are produced by plants
located in the U.S., 1,420 in the U.K., 840 in Argentina, 788 in Brazil and 41
in China. Of the total megawatts, 29% are produced by plants fueled by solid
fuel, 19% are produced by plants fueled by natural gas, 24% are produced by
hydroelectric facilities and the remaining 28% are produced by plants capable of
burning multiple fossil fuels. AES has grown its portfolio of generating assets
by developing and constructing new plants ("greenfield development") and by
acquiring existing plants, primarily through competitively bid privatization
initiatives outside the U.S.

AES is now in the process of adding 1,462 megawatts to its operating portfolio
by constructing two oil-fired power plants in Pakistan totalling 674 megawatts,
a 180 megawatt coal-fired plant in the U.S. and 4 plants totalling 608 megawatts
in China that will be coal and oil-fired. In total, AES's net equity ownership
in plants in operation and construction is 3,233 megawatts.

Because of the significant magnitude and complexity of building electric
generating plants, construction periods often range from two to four years,
depending on the technology and location. AES currently expects that certain
projects now under construction will reach commercial operation and begin to
sell electricity at various dates through 1999. The commercial operation date is
generally supported by a guarantee from each plant's construction contractor;
however, it remains possible, due to changes in the economic, political,
technological, regulatory or logistical circumstances surrounding individual
plants and their locations, that commercial operations may be delayed or, in
extreme circumstances, prohibited.

AES believes that there is significant demand for both new and more efficiently
operated electric generating capacity in many regions around the world. In an
effort to further grow and diversify the Company's portfolio of electric
generating plants, AES is pursuing, through its integrated divisions, additional
greenfield developments and acquisitions in North America, India, Pakistan,
China, other areas in Southeast Asia, South America, Europe, the Middle East and
Africa.

Certain subsidiaries of the Company (domestic and non-U.S.) have signed
long-term contracts for the sale of electricity and are in various stages of
developing the related greenfield projects. Because these potential projects
have yet to begin construction or procure committed long-term financing
("financial closing"), there exist substantial risks to their successful
completion, including, but not limited to, those relating to failures of siting,
financing, construction, permitting, governmental approvals or termination of
the power sales contract as a result of a failure to meet milestones. As of
December 31, 1995, capitalized costs for projects under development were
approximately $41 million. The Company believes that the costs are recoverable;
however, no assurance can be given that changes in circumstances related to
individual projects will not occur or that any of these projects will be
completed.

As discussed above, AES has been successful in acquiring a portion of its
portfolio of generating capacity by participating in competitive bidding under
government sponsored privatization initiatives and has been particularly
interested in acquiring existing assets in electricity markets that are
promoting competition, such as the U.K. and Argentina. Sellers generally seek to
complete competitive solicitations in less than one year, much quicker than
greenfield development, and require payment in full on transfer. AES believes
that its experience in competitive

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markets and its divisional structure, with geographically dispersed locations,
enable it to react quickly and creatively in such situations.

Because of this relatively quick process, it may not be possible to arrange
"project financing" (the Company's historically preferred financing method which
is discussed further under "Cash Flows, Financial Resources and Liquidity") for
specific potential acquisitions. As a result, during 1996, the Company enhanced
its financial capabilities to respond to these more accelerated opportunities by
entering into the $425 million Bank Credit Agreement. In addition to using
additional indebtedness, AES may consider an exchange of project ownership
interests or the issuance of its common stock to fund future acquisition
opportunities.

RESULTS OF OPERATIONS

First Quarter 1996 and 1995

Revenues increased approximately $1 million (1%), to $172 million from the first
quarter of 1995 to the first quarter of 1996. Cost of sales and services
decreased approximately $3 million (3%), to $100 million from the first quarter
of 1995 to the first quarter of 1996. Gross margin, which represents total
revenues reduced by cost of sales and services, increased approximately $4
million (6%), to $72 million during the same period. Gross margin as a
percentage of total revenues was 42% for the first quarter of 1996 and 40% for
the same period of 1995. The increase in gross margin is primarily due to
improved results at Deepwater due to higher gas prices during the first quarter
of 1996, and better performance at Central Termica San Nicolas S.A. ("San
Nicolas") due to cost reduction efforts at the plant.

Selling, general and administrative expenses increased approximately $1 million
(13%) from the first quarter of 1995 to the first quarter of 1996, and as a
percentage of total revenue, remained constant at 5% of revenues.

Operating income increased approximately $3 million (5%), to $63 million from
the first quarter of 1995 to the first quarter of 1996. This increase is the
result of the factors discussed above.

Interest expense decreased approximately $3 million (10%), to $28 million from
the first quarter of 1995 to the first quarter of 1996. The decrease is
primarily due to the declining balances of project financing debt at U.S. plants
and at San Nicolas.

Interest income decreased approximately $2 million (29%), to $5 million from the
first quarter of 1995 to the first quarter of 1996. This decrease is primarily
due to investments in new projects at AES Chigen and a decrease in the balance
of corporate unrestricted cash and cash equivalents.

Equity in net earnings of affiliates increased approximately $5 million (67%)
from the first quarter of 1995 to the first quarter of 1996. The increase is
primarily due to Medway, which was not in operation in 1995.

Income taxes increased approximately $1 million (7%), to $15 million from the
first quarter of 1995 to the first quarter of 1996. This increase resulted
primarily from an increase in the Company's estimated effective income tax rate
from approximately 38% in 1995 to 39% in 1996, and higher income before taxes.

Fiscal Years 1995, 1994 and 1993

Revenues. Total revenues increased $152 million (29%) to $685 million in 1995
after increasing $14 million (3%) to $533 million in 1994 as compared to each
applicable preceding year. The increase in 1995 primarily reflects the
additional revenues arising from the acquisitions of a controlling interest in
San Nicolas and the outstanding debt of AES Deepwater during the year, improved
capacity factors at AES Thames and AES Barbers Point and increases in revenues
associated with wholesale power services provided by AES Power, the Company's
power marketing subsidiary. These increases were offset, in part, by decreased
energy revenues at AES Placerita. The 1994 increase was primarily attributable
to a higher capacity factor and contract rate increases at AES Beaver Valley and
increased service revenues associated with an affiliated plant under
construction, offset, in part, by an earthquake in California which temporarily
shut down AES Placerita in early 1994 and lower energy revenues at AES Shady
Point.

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The nature of most of the Company's operations is such that each power plant
generally relies on one power sales contract with a single electric utility
customer or a regional or national transmission and distribution customer for
the majority, if not all, of its revenues. During 1995, four customers accounted
for 73% of the Company's revenues. The prolonged failure of any one customer to
fulfill its contractual payment obligations in the future could have a
substantial negative impact on AES's primary source of revenues. Where possible,
the Company has sought to reduce this risk, in part, by entering into power
sales contracts with customers that have their debt or preferred stock rated
"investment grade" by nationally recognized rating agencies and by locating its
plants in different geographic areas in order to mitigate the effects of
regional economic downturns.

A portion of the electricity sales at San Nicolas is not subject to a contract
and is available for sale, when economically advantageous, in the competitive
Argentine spot electricity market. The prices paid for electricity in the
Argentine market are significantly dependent on the behavior of the Argentine
economy, including the demand for and retail price of electricity and the
competitive price and availability of power from other suppliers, including
hydroelectric facilities. During 1994 and 1995, prices paid for electricity in
the Argentine spot market were often lower than San Nicolas's marginal cost of
production and as a result, sales of electricity in excess of its contracts were
curtailed. Such economic conditions may continue.

Costs of Sales and Services. Total costs of sales and services increased $136
million (51%) to $405 million in 1995 after remaining constant at $269 million
in 1994 as compared to each applicable preceding year. The increase in 1995 was
caused primarily by the additional operating costs arising from the acquisitions
of a controlling interest in San Nicolas and the purchase of the outstanding
debt of AES Deepwater during the year, increased fuel costs arising from a
higher capacity factor at AES Barbers Point and increased costs associated with
AES Power's wholesale power services, offset, in part, by decreased fuel and
operating costs at AES Placerita due to operating efficiency and cost reduction
efforts. Operating costs at both AES Thames and AES Shady Point were lower in
1994 as compared to 1993 due to operating efficiency and cost reduction efforts.
In addition, operating costs at AES Placerita were lower in 1994 due to the
temporary shutdown resulting from the earthquake. These reductions in costs were
offset by increases in operating costs at AES Beaver Valley due to higher
capacity factors in 1994 and increases in costs associated with operating and
construction services performed for affiliates.

Gross Margin. Gross margin (revenues less costs of sales and services)
increased $16 million (6%) to $280 million in 1995 after increasing $14 million
(6%) in 1994 as compared to each applicable preceding year. The improvement in
1995 reflects the acquisitions of a controlling interest in San Nicolas and the
outstanding debt of AES Deepwater during the year and improved operations at AES
Placerita and AES Thames, offset, in part by lower service revenues from
affiliates. The increase in 1994 was primarily due to improved operations at AES
Beaver Valley and service revenues from affiliates, offset, in part, by lower
revenues at AES Shady Point and the effect of the earthquake on AES Placerita.
As a percentage of total revenues, gross margin decreased to 41% in 1995, down
from 50% in 1994, and 48% in 1993.

Because the Company's operations are located in different geographical areas,
seasonal variations are not generally expected to have a significant effect on
quarterly financial results. However, unusual weather conditions and the
specific needs of each plant to perform routine (including annual or multi-year)
outages or unanticipated facility maintenance may have an effect on quarterly
financial results. In addition, some power sales contracts permit the utility
customer to significantly dispatch the related plant (i.e., direct the plant to
deliver a reduced amount of electrical output) within certain specified
parameters. Such dispatching, however, does not have a material impact on the
results of operations of the related subsidiary because, even when dispatched,
the plant's capacity payments generally are not reduced.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased less than $1 million (2%) to $32 million in
1995 after decreasing $3 million (9%) to $32 million in 1994 as compared to each
applicable preceding year. The 1995 increase is attributable to a slight
increase in administrative costs. The decrease in 1994 was due primarily to a
higher proportion of capitalized costs associated with certain projects under
development in 1994, offset, in part, by increased development and
administrative costs of AES Chigen. As a percentage of total revenue, selling,
general and administrative expenses decreased to 5% in 1995 down from 6% in 1994
and 7% in 1993.

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Operating Income. Operating income improved $16 million (7%) to $248 million in
1995 after increasing $39 million (20%) to $232 million in 1994 as compared to
each applicable preceding year. The increases result from the factors discussed
in the preceding paragraphs.

Other Income and Expense. Other income and expense decreased $6 million (7%) to
$81 million in 1995 after decreasing $17 million (16%) to $87 million in 1994 as
compared to each applicable preceding year. Interest expense increased 1% in
1995 and decreased 3% in 1994. The increase in 1995 reflects the additional
interest expense associated with the acquisition of a controlling interest in
San Nicolas offset almost entirely by declining balances of project financing
debt through the year. The decline in 1994 was also primarily due to declining
balances of project financing debt offset, in part, by the interest expense
associated with the issuance of the Company's 9 3/4% Senior Subordinated Notes
due 2000 in June 1993. AES capitalizes interest incurred during the development
and construction of its facilities. Capitalized interest totaled approximately
$8 million in 1995, $2 million in 1994 and $1 million in 1993.

Interest income increased 23% in 1995 and 100% in 1994. The 1995 increase
reflects higher cash and debt service reserve account balances at operating
plants, higher interest rates and a full year of interest on AES Chigen's
invested cash balances offset, in part, by investments in new projects at AES
Chigen and a decrease in the balance of corporate unrestricted cash and cash
equivalents. The 1994 increase was due to higher cash balances including, most
significantly, the funds raised in the initial public offering of AES Chigen of
approximately $152 million.

Equity in earnings of affiliates (after income taxes) increased 17% in 1995 and
20% in 1994. The increase in 1995 results most significantly from the start of
operations at Medway Power Ltd. ("Medway") in late 1995. Medway is a 660
megawatt gas-fired plant located east of London, England. AES operates the plant
and holds a 25% ownership interest in the joint venture. The increase in 1994
was attributable to improved results from NIGEN, Ltd.

Income Taxes. The Company's effective tax rate increased to 38% in 1995 and to
34% in 1994. The increase in 1995 is due to the elimination of the U.S. federal
valuation allowance resulting from the purchase in 1995 of the previously
outstanding debt of AES Deepwater. The 1994 increase resulted from the absence
of reductions to the valuation allowance that were recorded in 1993 in
connection with the Company's adoption of Statement of Financial Accounting
Standards No. 109 in that year.

Extraordinary Items. During 1994, the Company purchased and retired the
subordinated project financing debt and accrued interest at AES Placerita,
resulting in an extraordinary gain of $4 million, net of taxes. Also, in 1994,
the Company's affiliate, NIGEN, Ltd., refinanced its outstanding project
financing loan through a public debenture offering. The extinguishment of such
debt resulted in an extraordinary loss of $7 million. The Company's share, $2
million, net of taxes, resulted in an extraordinary loss.

OUTLOOK

Although recent activity in the U.S. electricity market has provided
opportunities for independent and competitive power generators like AES, most of
the country's generating capacity along with substantially all of the
transmission and distribution services continue to be regulated under a state
and federal regulatory framework. As consumers, regulators and suppliers
continue the debate about how to further decrease the regulatory aspects of
providing electricity services, the Company believes in and is encouraging an
orderly transition to a more competitive electricity market. Inherent in any
significant transition to competitive markets are risks associated with the
competitiveness of existing regulated enterprises, and as a result, their
ability to perform under long-term contracts such as the Company's electricity
sale contracts. Although AES strongly believes in the integrity of its
contracts, there can be no assurance that each of its customers, in a
restructured and competitive environment, will fulfill or will be capable in all
circumstances of fulfilling their financial and legal obligations.

It is also possible that as more of the world's markets for electricity move
towards competition (as in Argentina and the U.K.), an increasing proportion of
the Company's revenues may be dependent on prices determined in spot markets. In
order to capture a portion of the market share in competitive generation
markets, AES is considering and may elect to invest in and construct
technologically-advanced, low-cost electricity plants. Such an investment, which
would not necessarily be supported by a long-term contract for all or any of the
plant's expected output, would

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most likely require the Company (as well as its competitors) to make larger
equity contributions (as a percentage of the total capital cost) than the more
"traditional" contract-based investments.

CASH FLOWS, FINANCIAL RESOURCES AND LIQUIDITY

Cash from Operations. Cash flows provided by operating activities totaled $197
million during 1995 as compared to $164 million during 1994. The increase in
1995 was primarily due to increased pre-tax income.

Operating cash flows in the first quarter of 1996 provided $45 million.

Cash from Investing Activities. Net cash used in investing activities totaled
$343 million during 1995 as compared to $120 million during 1994. The 1995
amount primarily reflects the Company's investments in the outstanding debt of
AES Deepwater, additional ownership in AES San Nicolas, the acquisition of AES
Rio Juramento, and construction efforts at AES Lal Pir, AES Pak Gen and AES
Warrior Run, and AES Chigen's investments in the Wuxi and Yangchun Fuyang
projects. The 1994 amount primarily reflects the investment of cash in
short-term investments of $72 million and debt service reserves of $17 million,
capital additions of $10 million and investments in projects in development of
$17 million.

Approximately $45 million of cash for investing activities in the first quarter
of 1996 was used to fund construction in progress and to acquire Hidrotermica
San Juan, S.A., an Argentine company which operates two power plants in
Argentina.

Cash from Financing Activities. Net cash provided by financing activities
aggregated $130 million during 1995 as compared to $80 million during 1994.
During 1995, the Company borrowed $133 million in project financing loans
associated with the construction of AES Lal Pir and AES Warrior Run and $50
million under its revolving credit facility. Repayments of project finance
borrowings were $63 million during the year. During 1994, AES Chigen, a
controlled affiliate, raised $152 million (net of issuance costs) through an
initial public offering of 10.2 million shares of Class A common stock. These
proceeds are being used to fund the development, acquisition and construction of
electric power generation and related facilities in China, including equity
investments in, and loans to, joint venture companies, and for general corporate
purposes. Also during 1994, the Company made principal payments on project
financing debt of $72 million.

During the first quarter of 1996, financing activities included $12 million in
repayments on project financing, $19 million in repayments on the revolving
credit facility and $20 million in project finance borrowings related to
projects in construction.

AES has primarily utilized project financing loans to fund the capital
expenditures associated with constructing and acquiring its electric power
plants and related assets. Project financing borrowings have been substantially
non-recourse to other subsidiaries and affiliates and to AES as the parent
company and are generally secured by the capital stock, physical assets,
contracts and cash flow of the related project subsidiary or affiliate. The
Company intends to continue to seek, where possible, such non-recourse project
financing in connection with the assets which the Company or its affiliates may
develop, construct or acquire. However, depending on market conditions and the
unique characteristics of individual projects, the Company's traditional
providers of project financing, particularly multinational commercial banks, may
seek higher borrowing spreads and increased equity contributions.

In addition to the project financing loans, if available, AES provides a
portion, or in certain instances all, of the remaining long-term financing
required to fund development, construction, or acquisition of its projects.
These investments have generally taken the form of equity investments or loans,
which are subordinated to the project

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financing loans. The funds for these investments have been provided by cash
flows from operations and by the proceeds from issuances of senior subordinated
notes, convertible debentures and common stock of the Company.

Interim needs for shorter-term and working capital financing have been met with
borrowings under AES's Bank Credit Agreement. Over the past several years, the
Company has continued to increase the amount of available financing under the
revolver while striving to enhance its flexibility and usefulness. During 1996,
AES entered into a new $425 million revolver, the Bank Credit Agreement, which
provides full availability as borrowings or letters of credit. Under the terms
of the Bank Credit Agreement, AES is required to reduce its direct borrowings to
$125 million for 30 consecutive days during each twelve month period. The terms
of the Bank Credit Agreement also include financial covenants related to net
worth, cash flow and investments and restrictions related to the incurrence of
additional debt and certain other obligations and limitations on cash dividends.
See "Description of Corporate Credit Facility".

The ability of AES's subsidiaries to declare and to pay dividends to AES is
restricted under the terms of existing project financing debt agreements. See
Note 5 to the consolidated financial statements. In connection with its project
financings, AES has expressly undertaken certain limited obligations and
contingent liabilities, most of which will only be effective or will be
terminated upon the occurrence of future events. These obligations and
contingent liabilities, excluding letter of credit obligations under the
revolver, were limited by their terms as of March 31, 1996 to an aggregate of
approximately $176 million. Approximately $14 million of these guarantees are
supported by cash deposits or cash collateralized letters of credit. The Company
is obligated under other contingent liabilities which are limited to amounts, or
percentages of amounts received by AES as distributions from its project
subsidiaries. These contingent liabilities aggregated $37 million as of March
31, 1996. In addition, AES has expressly undertaken certain other contingent
obligations, which the Company does not expect to have a material adverse effect
on its results of operations, but which by their terms are not capped at a
dollar amount. Because each of the Company's plants and projects is a distinct
entity, the plants and projects are geographically diverse and the obligations
related to a single plant or project are based on contingencies of varying
types, the Company believes it is unlikely that it will be called upon to
perform under several of such obligations at any one time. AES's obligations and
contingent liabilities described above in certain cases take the form of, or are
supported by, letters of credit.

INFLATION, INTEREST RATES, EXCHANGE RATES, CHANGING ENERGY PRICES, AND
ENVIRONMENTAL PERFORMANCE

The Company attempts, whenever possible, to hedge certain aspects of its
projects against the effects of fluctuations in inflation, interest rates and
energy prices. AES has generally structured the energy payments in its power
sales contracts to adjust with similar price indices as do its contracts with
the fuel suppliers for the corresponding plants. In some cases a portion of
revenues is associated with operations and maintenance costs, and as such is
indexed to adjust with inflation. AES has also used a hedging strategy to
insulate each plant's financial performance, where appropriate, against the risk
of fluctuations in interest rates. Depending on whether capacity payments are
fixed or vary with inflation, the Company generally hedges against interest rate
fluctuations by arranging fixed-rate or variable rate financing, respectively.
In certain cases, the Company executes interest rate swap agreements to
effectively fix the interest rate on the underlying variable rate financing.
Such swaps effectively increased the Company's weighted average borrowing rate
by 5.0%, 4.1% and 3.5% for the years ended December 31, 1993, 1994 and 1995.
Swap payments included in interest expense for those same periods were $53
million, $44 million and $24 million, respectively. In addition, certain
subsidiaries of the Company have interest rate cap agreements with terms ranging
from one to six years in an aggregate notional amount of $619 million.

The hedging mechanisms described above are implemented through contractual
provisions with fuel suppliers and international financial institutions. As a
result, their effectiveness is dependent, in part, on each counterparty's
ability to perform in accordance with the provisions of the relevant contract.
The Company has sought to reduce this risk by entering into contracts with
creditworthy organizations, where possible, and where not possible, as in the
case of certain local fuel suppliers, to execute standby or option agreements
with a creditworthy organization.

Because of the complexity of hedging strategies and the diverse nature of AES's
operations, the financial performance of its portfolio, although significantly
hedged, will likely be somewhat affected by fluctuations in inflation,

14
<PAGE> 18

interest rates and energy prices. For example, AES's current portfolio of
operating plants generally performs better with higher oil and natural gas
prices and with lower interest rates. Performance is also sensitive to the
difference between inflation and interest rates, and generally performs better
when increases in inflation are higher than increases in interest rates.

Through its equity investments in foreign affiliates, AES operates in
jurisdictions dealing in currencies other than the Company's functional
currency, the U.S. dollar. Such investments were made to fund equity
requirements and to provide collateral for contingent obligations. Due primarily
to the long-term nature of the investments, the Company accounts for any
adjustments resulting from translation as a charge or credit directly to a
separate component of stockholders' equity. The Company had approximately $10
million, net of the applicable tax benefit, in cumulative translation adjustment
losses at December 31, 1995.

Because of the nature of AES's operations, its activities are subject to
stringent environmental laws and regulations by relevant authorities at each
plant location. If environmental laws or regulations were to change in the
future, there can be no assurance that AES would be able to recover all or any
increased costs from its customers or that its business and financial condition
or results of operations would not be materially and adversely affected. The
Company has made and will continue to make capital and other expenditures to
comply with such environmental laws and regulations. There can be no assurance
that such expenditures will not have a material adverse effect on the Company's
financial condition or results of operations.

15
<PAGE> 19

RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
--------------------------------------------
QUARTER
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
1991 1992 1993 1994 1995 1996
----- ----- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................... 1.31 1.37 1.63 2.08 2.18 2.12
</TABLE>

For the purpose of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and minority
interest, plus fixed charges, less capitalized interest, less excess of earnings
over dividends of less-than-fifty-percent-owned companies. Fixed charges consist
of interest (including capitalized interest) on all indebtedness, amortization
of debt discount and expense and that portion of rental expense which the
Company believes to be representative of an interest factor. A statement setting
forth the computation of the above ratios of earnings to fixed charges is on
file as an exhibit to the Registration Statement of which this Prospectus is a
part.

16
<PAGE> 20

DESCRIPTION OF DEBT SECURITIES

The Debt Securities are to be issued under an Indenture (the "Indenture")
between The First National Bank of Chicago, as Trustee (the "Trustee"), and the
Company. A copy of the form of Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is also available
for inspection at the office of the Trustee. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture, including the definitions therein of certain terms. Whenever
particular provisions of the Indenture or terms defined therein are referred to
herein, such provisions or definitions are incorporated by reference as a part
of the statements made, and the statements are qualified in their entirety by
such reference.

GENERAL

The Indenture does not limit the amount of Debt Securities which may be issued
thereunder and provides that Debt Securities may be issued thereunder up to the
aggregate principal amount which may be authorized from time to time by the
Company. Reference is made to the Prospectus Supplement for the following terms
of the Offered Debt Securities: (i) the designation, aggregate principal amount
and authorized denominations of the Offered Debt Securities; (ii) the date or
dates on which the Offered Debt Securities will mature; (iii) the rate or rates
per annum at which the Offered Debt Securities will bear interest; (iv) the
dates on which any such interest will be payable and the record dates for any
such interest payments; (v) any mandatory or optional redemption terms; (vi) the
place where the principal of and interest on the Offered Debt Securities will be
payable; (vii) if other than denominations of $1,000 or multiples thereof, the
denominations in which the Offered Debt Securities will be issuable; (viii)
whether the Offered Debt Securities shall be issued in the form of Global
Securities (as defined below) or certificates; (ix) additional provisions, if
any, relating to the defeasance of the Offered Debt Securities; (x) the currency
or currencies, if other than the currency of the United States, in which payment
of the principal of and interest on the Offered Debt Securities will be payable;
(xi) whether the Offered Debt Securities will be issuable in registered form or
bearer form ("Bearer Securities") or both and, if Bearer Securities are
issuable, any restrictions applicable to the exchange of one form for another
and the offer, sale and delivery of Bearer Securities; (xii) any applicable
United States federal income tax consequences, including whether and under what
circumstances the Company will pay additional amounts on Offered Debt Securities
held by a person who is not a U.S. Person (as defined in the Prospectus
Supplement) in respect of any tax, assessment or governmental charge withheld or
deducted and, if so, whether the Company will have the option to redeem such
Offered Debt Securities rather than pay such additional amounts; and (xiii)
other specific terms, including any additional events of default or covenants
provided for with respect to the Offered Debt Securities.

As described in each Prospectus Supplement relating to any particular series of
Debt Securities offered thereby, the Indenture may contain covenants limiting:
(i) the incurrence of debt by the Company; (ii) the incurrence of debt by
subsidiaries of the Company; (iii) the making of certain payments by the Company
and its subsidiaries; (iv) subsidiary mergers; (v) business activities of the
Company and its subsidiaries; (vi) the issuance of preferred stock of
subsidiaries; (vii) asset dispositions; (viii) transactions with affiliates;
(ix) liens; and (x) mergers and consolidations involving the Company.

The Debt Securities will be unsecured and will rank on a parity with all other
unsecured senior subordinated indebtedness of the Company. See
"-- Subordination."

BOOK-ENTRY SYSTEM

If so specified in the accompanying Prospectus Supplement, Debt Securities of
any series may be issued under a book-entry system in the form of one or more
global securities (each a "Global Security"). Each Global Security will be
deposited with, or on behalf of, a depositary, which, unless otherwise specified
in the accompanying Prospectus Supplement, will be The Depository Trust Company,
New York, New York (the "Depositary"). The Global Securities will be registered
in the name of the Depositary or its nominee.

The Depositary has advised the Company that the Depositary is a limited purpose
trust company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York banking law, a

17
<PAGE> 21

member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of which
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers,
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.

Upon the issuance of a Global Security in registered form, the Depositary will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of participants. The accounts to be credited will be designated by
the underwriters, dealers, or agents, if any, or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in the Global Security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in the Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by such
participants. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a Global
Security.

So long as the Depositary or its nominee is the owner of record of a Global
Security, the Depositary or such nominee, as the case may be, will be considered
the sole owner or holder of the Debt Securities represented by such Global
Security for all purposes under the Indenture. Except as set forth below, owners
of beneficial interests in a Global Security will not be entitled to have the
Debt Security represented by such Global Security registered in their names, and
will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture. Accordingly, each person owning a beneficial
interest in a Global Security must rely on the procedures of the Depositary and,
if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a holder
of record under the Indenture. The Company understands that under existing
industry practices, if the Company requests any action of holders or if any
owner of a beneficial interest in a Global Security desires to give or take any
action which a holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instruction of beneficial owners holding through
them.

Payments of principal of, premium, if any, and interest on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to such Depositary or such nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in such Global
Security or for maintaining, supervising, or reviewing any records relating to
such beneficial ownership interests.

The Company has been advised by the Depositary that the Depositary will credit
participants accounts with payments of principal, premium, if any, or interest
on the payment date thereof in amounts proportionate to their respective
beneficial interests in the principal amount of the Global Security as shown on
the records of the Depositary. The Company expects that payments by participants
to owners of beneficial interests in the Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name," and will be the responsibility of such participants.

A Global Security may not be transferred except as a whole by the Depositary to
a nominee or successor of the Depositary or by a nominee of the Depositary to
another nominee of the Depositary. A Global Security representing all but not
part of the Debt Securities being offered hereby is exchangeable for Debt
Securities in definitive form of like tenor and terms if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as depositary
for such Global Security or if at any time the Depositary is no longer eligible
to be or in good standing as

18
<PAGE> 22

a clearing agency registered under the Exchange Act, and in either case, a
successor depositary is not appointed by the Company within 90 days of receipt
by the Company of such notice or of the Company becoming aware of such
ineligibility, or (ii) the Company in its sole discretion at any time determines
not to have all of the Debt Securities represented by a Global Security and
notifies the Trustee thereof. A Global Security exchangeable pursuant to the
preceding sentence shall be exchangeable for Debt Securities registered in such
names and in such authorized denominations as the Depositary for such Global
Security shall direct. The Debt Securities of a series may also be issued in the
form of one or more bearer global Debt Securities (a "Bearer Global Security")
that will be deposited with a common depositary for Euro-clear and CEDEL, or
with a nominee for such depositary identified in the Prospectus Supplement
relating to such series. The specific terms and procedures, including the
Specific terms of the depositary arrangement, with respect to any portion of a
series of Securities to be represented by a Bearer Global Security will be
described in the Prospectus Supplement relating to such series.

SUBORDINATION

The payment of principal of, premium, if any, and interest on the Debt
Securities will, to the extent and in the manner set forth in the Indenture, and
as more fully described in the Prospectus Supplement, be subordinated in right
of payment to the prior payment in full, in cash or cash equivalents, of all
Senior Debt.

By reason of such subordination, in the event of insolvency, funds that would
otherwise be payable to holders of Debt Securities will be paid to the holders
of Senior Debt to the extent necessary to pay the Senior Debt in full, and the
Company may be unable to meet fully its obligations with respect to the Debt
Securities.

"Senior Debt" is defined to mean the principal of (and premium, if any) and
interest on all Debt of the Company whether created, incurred or assumed before,
on or after the date of the Indenture; provided that Senior Debt shall not
include (i) the Company's 9 3/4% Senior Subordinated Notes Due 2000 which rank
pari passu to the Debt Securities, (ii) the Company's 6 1/2% Convertible
Subordinated Debentures Due 2002 which rank junior to the Debt Securities, (iii)
Debt that, when incurred and without respect to any election under Section 1111
(b) of Title 11, U.S. Code, was without recourse to the Company, (iv) Debt of
the Company to any affiliate, (v) any other Debt of the Company which by the
terms of the instrument creating or evidencing the same are specifically
designated as not being senior in right of payment to the Debt Securities and
(vi) redeemable stock of the Company.

"Debt" is defined to mean, with respect to any person at any date of
determination (without duplication), (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
person in respect of letters of credit or bankers' acceptances or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of such person to pay the deferred purchase price of property or
services, except trade payables, (v) all obligations of such person as lessee
under capitalized leases, (vi) all Debt of others secured by a lien on any asset
of such person, whether or not such Debt is assumed by such person; provided
that, for purposes of determining the amount of any Debt of the type described
in this clause, if recourse with respect to such Debt is limited to such asset,
the amount of such Debt shall be limited to the lesser of the fair market value
of such asset or the amount of such Debt, (vii) all Debt of others guaranteed by
such person to the extent such Debt is Guaranteed by such person, (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends and (ix) to the extent
not otherwise included in this definition, all obligations of such person under
currency agreements and interest rate agreements.

EVENTS OF DEFAULT

An Event of Default, as defined in the Indenture and applicable to Debt
Securities, will occur with respect to the Debt Securities of any series if: (i)
the Company defaults in the payment of principal of (or premium if any, on) any
Debt Security of such series when the same becomes due and payable at maturity,
upon acceleration, redemption, mandatory repurchase, or otherwise; (ii) the
Company defaults in the payment of interest on any Debt Security of such series
when the same becomes due and payable, and such default continues for a period
of 30 days; (iii) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in the Indenture with respect to the
Debt Security of such series or under the Debt Securities of such Series and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or by the holders

19
<PAGE> 23

(as defined in the Indenture) of 25% or more in aggregate principal amount of
the Debt Securities of all series affected hereby; (iv) a court having
jurisdiction in the premises enters a decree or order for (A) relief in respect
of the Company or any of its subsidiaries in an involuntary case under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official of the Company or any of its subsidiaries or
for all or substantially all of the property and assets of the Company or any of
its subsidiaries or (C) the winding up or liquidation of the affairs of the
Company or any of its subsidiaries and, in each case, such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; (v) the
Company or any of its subsidiaries (A) commences a voluntary case under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official of the Company or any of its subsidiaries or for all or substantially
all of the property and assets of the Company or any of its subsidiaries or (C)
effects any general assignment for the benefit of creditors; and (vi) any other
Events of Default set forth in the applicable Prospectus Supplement occur.

If an Event of Default (other than an Event of Default specified in clause (iv)
or (v) above that occurs with respect to the Company) occurs with respect to the
Debt Securities of any series then outstanding and is continuing under the
Indenture, then, and in each and every such case, except for any series of Debt
Securities the principal of which shall have already become due and payable,
either the Trustee or the holders of not less than 25% in aggregate principal
amount of the Debt Securities of any such series then outstanding under the
Indenture (each such series voting as a separate class) by written notice to the
Company (and to the Trustee if such notice is given by the holders (the
"Acceleration Notice")), may, and the Trustee at the request of such holders
shall, declare the principal of, premium, if any, and accrued interest on the
Debt Securities of such series to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall be immediately due and payable. If an Event of Default specified
in clause (iv) or (v) above occurs with respect to the Company, the principal
of, premium, if any, and accrued interest on the Notes then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder. The holders of at least a
majority in principal amount of the outstanding Debt Securities of any Series
may, by written notice to the Company and to the Trustee, waive all past
defaults with respect to Debt Securities of such series and rescind and annul a
declaration of acceleration with respect to Debt Securities of such series and
its consequences if (i) all existing Events of Default applicable to Debt
Securities of such series, other than the nonpayment of the principal of,
premium, if any, and interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. For information as to the waiver of defaults, See "-- Modification
and Waiver."

The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of any series may direct the time, method, and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or the Indenture, that
may involve the Trustee in personal liability, or that the Trustee determines in
good faith may be unduly prejudicial to the rights of holders of such series of
Debt Securities not joining in the giving of such direction and may take any
other action it deems proper that is not inconsistent with any such direction
received from holders of Debt Securities of such series. A holder may not pursue
any remedy with respect to the Indenture or the Debt Securities of any Series
unless: (i) the holder gives the Trustee written notice of a continuing Event of
Default; (ii) the holders of at least 25% in aggregate principal amount of
outstanding Debt Securities of such series make a written request to the Trustee
to pursue the remedy; (iii) such holder or holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense; (iv) the
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period, the
holders of a majority in aggregate principal amount of the outstanding Debt
Securities of such Series do not give the Trustee a direction that is
inconsistent with the request. However, such limitations do not apply to the
right of any holder of a Debt Security to receive payment of the principal of,
premium, if any, or interest on, such Debt Security or to bring suit for the
enforcement of any such payment, on or after the due date expressed in the Debt
Securities, which right shall not be impaired or affected without the consent of
the holder.

20
<PAGE> 24

The Indenture will require certain officers of the Company to certify, on or
before a date not more than four months after the end of each fiscal year, that
to the best of such officers knowledge, the Company has fulfilled all its
obligations under the Indenture. The Company will also be obligated to notify
the Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture.

MODIFICATION AND WAIVER

The Indenture provides that the Company and the Trustee may amend or supplement
the Indenture or the Debt Securities of any series without notice to or the
consent of any holder: (i) to cure any ambiguity, defect, or inconsistency in
the Indenture; provided that such amendments or supplements shall not adversely
affect the interests of the holders in any material respect; (ii) to comply with
Article 5 of the Indenture; (iii) to comply with any requirements of the
Commission in connection with the qualification of the Indenture under the Trust
Indenter Act of 1939, as amended; (iv) to evidence and provide for the
acceptance of appointment with respect to the Debt Securities of any or all
series by a successor Trustee; (v) to establish the form or forms or terms of
Debt Securities of any series or of the coupons pertaining to such Debt
Securities as permitted by the Indenture; (vi) to provide for uncertificated
Debt Securities and to make all appropriate changes for such purpose; and (vii)
to make any change that does not materially and adversely affect the rights of
any holder.

The Indenture also provides that modifications and amendments of the Indenture
may be made by the Company and the Trustee with the consent of the holders of
not less than a majority in aggregate principal amount of the outstanding Debt
Securities of each series affected thereby (each series voting as a separate
class); provided, however, that no such modification or amendment may, without
the consent of each holder affected thereby, (i) change the stated maturity of
the principal of, or any sinking fund obligation or any installment of interest
on, any Debt Security, (ii) reduce the principal amount of, or premium, if any,
or interest on, any Debt Security, (iii) reduce the above-stated percentage of
outstanding Debt Securities the consent of whose holders is necessary to modify
or amend the Indenture with respect to the Debt Securities of any series, (iv)
reduce the percentage or aggregate principal amount of outstanding Debt Security
of any series the consent of whose holders is necessary for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults. A
supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture which has expressly been included solely for the
benefit of one or more particular series of Debt Securities, or which modifies
the rights of holders of Debt Securities of such series with respect to such
covenant or provision, shall be deemed not to affect the rights under the
Indenture of the holders of Debt Securities of any other series or of the
coupons appertaining to such Debt Securities. It shall not be necessary for the
consent of the holders under this section of the Indenture to approve the
particular form of any proposed amendment, supplement, or waiver, but it shall
be sufficient if such consent approves the substance thereof. After an
amendment, supplement, or waiver under this section of the Indenture becomes
effective, the Company shall give to the holders affected thereby a notice
briefly describing the amendment, supplement, or waiver. The Company will mail
supplemental indentures to holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.

RESTRICTION ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS

The Company may not consolidate with, merge with or into, or transfer all or
substantially all off its assets (as an entirety or substantially an entirety in
one transaction or a series of related transactions), to any Person unless: (i)
the Company shall be the continuing Person, or the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or to
which properties and assets of the Company are transferred shall be a solvent
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume in writing
all the obligations of the Company under the Notes; (ii) immediately after
giving effect to such transaction no Event of Default or event or condition
which through the giving of notice of lapse of time or both would become an
Event of Default shall have occurred and be continuing, and (iii) such other
conditions as may be established in connection with the issuance of the Debt
Securities of any series then outstanding.

21
<PAGE> 25

DEFEASANCE AND DISCHARGE

The Indenture provides that the Company shall be deemed to have paid and shall
be discharged from any and all obligations in respect of the Debt Securities of
any series, on the 123rd day after the deposit referred to below has been made,
and the provisions of the Indenture will no longer be in effect with respect to
the Debt Securities of such series (except for, among other matters, certain
obligations to register the transfer or exchange of the Debt Securities of such
series, to replace stolen, lost or mutilated Debt Securities of such series, to
maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof, in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes, on the due date thereof or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be, in accordance with the terms of the Indenture and the Debt
Securities, (B) the Company has delivered to the Trustee (i) either (x) an
opinion of counsel to the effect that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of the Company's exercise of
its option under this "Defeasance" provision and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred, which opinion of counsel must be based upon a ruling of the Internal
Revenue Service to the same effect unless there has been a change in applicable
federal income tax law or related treasury regulations after the date of the
Indenture such that a ruling is no longer required or (y) a ruling directed to
the Trustee received from the Internal Revenue Service to the same effect as the
aforementioned opinion of counsel and (ii) an opinion of counsel to the effect
that the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and after the passage of 123 days following the deposit, the
trust fund will not be subject to the effect of Section 547 of the U.S.
Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, (C)
immediately after giving effect to such deposit on a pro forma basis, no Event
of Default, or event that after the giving of notice or lapse of time or both
would become an Event of Default, shall have occurred and be continuing on the
date of such deposit or during the period ending on the 123rd day after the date
of such deposit, and such deposit shall not result in a breach or violation of,
or constitute a default under, any other agreement or instrument to which the
Company is a party or by which the Company is bound, (D) the Company is not
prohibited from making payments in respect of the Notes by the subordination
provisions contained in the Indenture and (E) if at such time the Debt
Securities are listed on a national securities exchange, the Company has
delivered to the Trustee an opinion of counsel to the effect that the Debt
Securities will not be delisted as a result of such deposit, defeasance and
discharge.

As more fully described in the Prospectus Supplement, the Indenture also
provides for defeasance of certain covenants and certain events of default.

PLAN OF DISTRIBUTION

The Company may sell the Debt Securities in any of three ways (or in any
combination thereof): (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser; or (iii) through agents.
The Prospectus Supplement with respect to any Offered Debt Securities will set
forth the terms of the offering of such Offered Debt Securities, including the
name or names of any underwriters, dealers or agents and the respective amounts
of such Offered Debt Securities underwritten or purchased by each of them, the
initial public offering price of such Offered Debt Securities and the proceeds
to the Company from such sale, any discounts, commissions or other items
constituting compensation from the Company and any discounts, commissions or
concessions allowed or reallowed or paid to dealers and any securities exchanges
on which such Offered Debt Securities may be listed. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.

If underwriters are used in the sale of any Offered Debt Securities, such
Offered Debt Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Such Offered Debt Securities may
be either offered to the public through underwriting syndicates represented by
managing underwriters, or directly by underwriters. Such managing underwriters
or underwriters may include

22
<PAGE> 26

J.P. Morgan Securities Inc. and Goldman, Sachs & Co. Unless otherwise set forth
in the Prospectus Supplement, the obligations of the underwriters to purchase
such Offered Debt Securities will be subject to certain conditions precedent and
the underwriters will be obligated to purchase all of such Offered Debt
Securities if any are purchased.

Debt Securities may be sold directly by the Company or through agents designated
by the Company from time to time. Any agent involved in the offer or sale of
Offered Debt Securities in respect of which this Prospectus is delivered will be
named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.

If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase Offered Debt Securities from the Company at the public offering price
set forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject only to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.

Agents and underwriters may be entitled under agreements entered into with the
Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for the Company in the ordinary course of business.

LEGAL MATTERS

The legality of the Debt Securities offered hereby will be passed upon for the
Company by Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New York
10112. Unless otherwise indicated in the Prospectus Supplement relating to any
Offered Debt Securities, certain legal matters in connection with the offering
of the Offered Debt Securities will be passed upon for any underwriters or
agents by Davis Polk & Wardwell.

EXPERTS

The consolidated financial statements in this Prospectus, and the consolidated
financial statement schedules incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K, for the year ended December 31, 1995
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are included herein and incorporated by reference, herein,
respectively, and have been so included and incorporated, in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

The financial statements of Light in this Prospectus by reference for the years
ended December 31, 1995 and 1994 and for the years then ended have been audited
by Deloitte Touche Tohmatsu, Rio de Janeiro, Brazil, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.

23
<PAGE> 27

THE AES CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants............................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1994 and March 31, 1996
(unaudited).......................................................................... F-3
Consolidated Statements of Operations -- For the Years Ended December 31, 1995, 1994
and 1993 and For the Three Months Ended March 31, 1996 and 1995 (quarterly
unaudited)........................................................................... F-4
Consolidated Statements of Cash Flows -- For the Years Ended December 31, 1995, 1994
and 1993 and For the Three Months Ended March 31, 1996 and 1995 (quarterly
unaudited)........................................................................... F-5
Notes to Consolidated Financial Statements -- For the Years Ended December 31, 1995,
1994 and 1993........................................................................ F-8
</TABLE>

The Financial Statements at December 31, 1995 and 1994, and For the Three Years
Ended December 31, 1995 contained herein supersede the Financial Statements
incorporated by reference in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.

F-1
<PAGE> 28

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of The AES Corporation:

We have audited the accompanying consolidated balance sheets of The AES
Corporation and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The AES Corporation and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Washington, DC
February 20, 1996, except for Note 14,
as to which the date is May 30, 1996

F-2
<PAGE> 29

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
------------------------------
MARCH 31
DECEMBER 31 1996
In millions, except par values 1995 1994 -----------
------ ------ (unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 239 $ 255 $ 207
Short-term investments................................................ 58 94 50
Accounts receivable................................................... 54 33 50
Inventory............................................................. 36 23 42
Receivable from affiliates............................................ 11 10 11
Prepaid expenses and other current assets............................. 27 20 34
------ ------ ---------
Total current assets.................................................... 425 435 394
Property, Plant and Equipment:
Land.................................................................. 9 2 10
Electric and steam generating facilities.............................. 1,594 1,328 1,619
Furniture and office equipment........................................ 11 7 11
Accumulated depreciation, depletion, and amortization................. (222) (162) (235)
Construction in progress.............................................. 158 9 198
------ ------ ---------
Property, plant and equipment, net...................................... 1,550 1,184 1,603
Other Assets:
Deferred costs, net................................................... 32 33 31
Project development costs............................................. 41 38 43
Investments in and advances to affiliates............................. 48 93 52
Debt service reserves and other deposits.............................. 168 122 178
Goodwill & other intangible assets, net............................... 37 -- 37
Other assets.......................................................... 19 10 15
------ ------ ---------
Total other assets...................................................... 345 296 356
------ ------ ---------
Total................................................................... $2,320 $1,915 $ 2,353
====== ====== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................................... $ 33 $ 12 $ 43
Income taxes payable.................................................. -- 2 4
Accrued interest...................................................... 12 9 17
Accrued and other liabilities......................................... 49 23 33
Revolving bank loan................................................... 50 -- 31
Project financing debt -- current portion............................. 84 61 84
------ ------ ---------
Total current liabilities............................................... 228 107 212
Long-Term Liabilities:
Project financing debt................................................ 1,098 1,019 1,108
Other notes payable................................................... 125 125 125
Deferred income taxes................................................. 149 73 159
Other long-term liabilities........................................... 13 5 9
------ ------ ---------
Total long-term liabilities............................................. 1,385 1,222 1,401
Minority Interest....................................................... 158 21 158
Redeemable Common Stock of AES Chigen................................... -- 164 --
Commitments and Contingencies........................................... -- -- --
Stockholders' Equity:
Preferred stock (no par value; 1 million shares authorized; none
issued)............................................................. -- -- --
Common stock ($.01 par value; 100 million shares authorized; shares
issued and outstanding: 1995 -- 74.8 million; 1994 -- 74.7
million)............................................................ 1 1 1
Additional paid-in capital............................................ 293 240 294
Retained earnings..................................................... 271 164 300
Unrealized loss on investment securities available-for-sale........... -- (1) --
Cumulative foreign currency translation adjustment.................... (10) (3) (10)
------ ------ ---------
Less treasury stock at cost (.3 million shares)......................... (6) -- (3)
------ ------ ---------
Total stockholders' equity.............................................. 549 401 582
------ ------ ---------
Total................................................................... $2,320 $1,915 $ 2,353
====== ====== =========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 30

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
----------------------------------------
YEAR ENDED THREE MONTHS
DECEMBER 31 ENDED MARCH 31
In millions, except per share amounts 1995 1994 1993 1996 1995
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales.................................................. $ 672 $ 514 $ 508 $ 170 $ 167
Services............................................... 13 19 11 2 4
----- ----- ----- ----- -----
Total revenues........................................... 685 533 519 172 171
OPERATING COSTS AND EXPENSES:
Costs of sales......................................... 393 256 260 99 99
Costs of services...................................... 12 13 9 1 4
Selling, general and administrative expenses........... 32 32 35 9 8
Provision to reduce carrying value of leasehold
oil interests....................................... -- -- 22 -- --
----- ----- ----- ----- -----
Total operating costs and expenses....................... 437 301 326 109 111
----- ----- ----- ----- -----
Operating Income......................................... 248 232 193 63 60
OTHER INCOME AND (EXPENSE):
Interest expense....................................... (122) (121) (125) (28) (31)
Interest income........................................ 27 22 11 5 7
Equity in earnings of affiliates (net of income tax)... 14 12 10 5 3
----- ----- ----- ----- -----
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM..................................... 167 145 89 45 39
INCOME TAXES............................................. 57 44 18 15 14
MINORITY INTEREST........................................ 3 3 -- 1 --
----- ----- ----- ----- -----
INCOME BEFORE EXTRAORDINARY ITEM......................... 107 98 71 29 25
Extraordinary item-net gain on extinguishment of debt
(less applicable income taxes of $1)................... -- 2 -- -- --
----- ----- ----- ----- -----
NET INCOME............................................... $ 107 $ 100 $ 71 $ 29 $ 25
===== ===== ===== ===== =====
NET INCOME PER SHARE:
Before extraordinary gain.............................. $1.41 $1.30 $0.98 $0.38 $0.33
Extraordinary gain..................................... -- 0.02 -- -- --
----- ----- ----- ----- -----
NET INCOME PER SHARE..................................... $1.41 $1.32 $0.98 $0.38 $0.33
===== ===== ===== ===== =====
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 31

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
----------------------------------------
YEAR ENDED THREE MONTHS
DECEMBER 31 ENDED
MARCH 31
In millions 1995 1994 1993 1996 1995
----- ----- ----- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 107 $ 100 $ 71 $ 29 $ 25
Adjustments to net income:
Depreciation, depletion and amortization............... 55 43 42 14 12
Provision for deferred taxes........................... 48 39 15 14 14
Undistributed earnings of affiliates................... 3 (3) (11) (4) (2)
Provision to reduce carrying value of leasehold oil
interests........................................... -- -- 22 -- --
Payments for deferred financing costs.................. (3) (6) (4) -- --
Other.................................................. 4 -- 4 1 1
Changes in working capital............................. (17) (9) (16) (9) (7)
----- ----- ----- ----- -----
Net cash provided by operating activities................ 197 164 123 45 43

INVESTING ACTIVITIES:
Property additions....................................... (158) (10) (14) (45) (11)
Acquisitions, net of cash acquired....................... (121) -- -- (20) (65)
Sale (purchase) of short-term investments................ 36 (72) (22) 8 23
Affiliate advances and investments....................... (10) -- (46) (1) --
Project development costs................................ (35) (17) (2) (2) (2)
Debt service reserves and other assets................... (55) (21) (46) (6) --
----- ----- ----- ----- -----
Net cash used in investing activities.................... (343) (120) (130) (66) (55)

FINANCING ACTIVITIES:
Net borrowings (repayments) under the revolver........... 50 -- -- (19) --
Issuance of project financing debt and other notes
payable................................................ 133 -- 75 20 --
Repayments of project financing debt..................... (63) (72) (65) (12) (15)
Other liabilities........................................ 8 -- (1) -- --
Payments (to)/from minority partners..................... 7 152 -- (1) 3
Sale (repurchase) of common stock........................ (5) -- 69 1 1
Dividends paid........................................... -- -- (13) -- --
----- ----- ----- ----- -----
Net cash provided by financing activities................ 130 80 65 (11) (11)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS......... (16) 124 58 (32) (23)
CASH AND CASH EQUIVALENTS, BEGINNING..................... 255 131 73 239 255
===== ===== ===== ===== =====
CASH AND CASH EQUIVALENTS, ENDING........................ $ 239 $ 255 $ 131 $ 207 $ 232
===== ===== ===== ===== =====
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest............................... $ 120 $ 127 $ 124 $ 25 $ 28
Cash payments for income taxes........................... 6 3 2 1 --
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The AES Corporation and its subsidiaries and affiliates, (collectively "AES" or
the "Company") is a global power company primarily engaged in developing, owning
and operating electric power generating facilities.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements of the
Company include the accounts of AES, its subsidiaries and controlled affiliates.
Investments in 50% or less owned affiliates over which the Company has the
ability to exercise significant influence, but not control, are accounted for
using the equity method. The accounts of AES China Generating Co. Ltd. ("AES
Chigen"), a controlled affiliate, are included on the basis of a fiscal year
ended November 30. Intercompany transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS -- The Company considers cash on hand, deposits in
banks, certificates of deposit and short-term marketable securities with an
original maturity of three months or less as cash and cash equivalents.

INVESTMENTS -- During 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Securities that the Company has both the positive intent
and ability to hold to maturity are classified as held-to-maturity and are
carried at historical cost. Other investments that the Company does not intend
to hold to maturity are classified as available-for-sale, and any unrealized
gains or losses are recorded as a separate component of stockholders' equity.
Interest and dividends on investments are reported in interest income.
Short-term investments consist of investments with original maturities in excess
of three months but less than one year. Debt service reserves and other
deposits, which might otherwise be considered cash and cash equivalents are
treated as noncurrent assets (see Note 3).

INVENTORY -- Inventory, valued at the lower of cost or market (first in, first
out method), consists of coal, raw materials, spare parts, and supplies.
Inventory consists of the following (in millions):

<TABLE>
<CAPTION>
------------
DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
Coal and other raw materials................................... $24 $14
Spare parts, materials and supplies............................ 12 9
---- ----
Total.......................................................... $36 $23
==== ====
</TABLE>

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at cost
including the cost of improvements. Depreciation, after consideration of salvage
value, is computed using the straight-line method over the estimated composite
lives of the assets, which range from 3 to 40 years. Maintenance and repairs are
charged to expense as incurred. Emergency and rotable spare parts inventories
are included in electric and steam generating facilities and are depreciated
over the useful life of the related components. In 1993, the Company recorded a
total after tax charge of $17 million ($.23 per share) related to the write-down
of leasehold oil interests in connection with enhanced oil recovery operations
at the AES Placerita facility due to economic impairment.

INTANGIBLE ASSETS -- Goodwill and other intangible assets are amortized on a
straight-line basis over their estimated periods of benefit or their estimated
lives. No amortization period exceeds 30 years. Intangible assets at December
31, 1995 are shown net of accumulated amortization of $1 million. The Company
will review its goodwill and intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

CONSTRUCTION IN PROGRESS -- Construction progress payments, engineering costs,
insurance costs, wages, interest and other costs relating to construction in
progress are capitalized. Construction in progress balances are transferred to
electric and steam generating facilities when the assets are ready for their
intended use. Capitalized interest during development and construction totaled
$8 million, $2 million and $1 million in 1995, 1994 and 1993, respectively.

F-6
<PAGE> 33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED COSTS -- Financing costs are deferred and amortized using the
straight-line method over the related financing period. Deferred costs are shown
net of accumulated amortization of $31 million and $26 million for 1995 and
1994, respectively.

PROJECT DEVELOPMENT COSTS -- The Company capitalizes the costs of developing new
projects. These costs represent amounts incurred for professional services,
salaries, permits, options, capitalized interest and other related costs. These
costs are included in investment in affiliates, or property when financing is
obtained, or expensed at the time the Company determines that a particular
project will no longer be developed. The continued capitalization is subject to
on-going risks related to successful completion, including those related to
political, siting, financing, construction, permitting and contract compliance.

FOREIGN CURRENCY TRANSLATION -- Foreign subsidiaries and affiliates translate
their assets and liabilities into U.S. dollars at the current exchange rates in
effect at the end of the fiscal period. The gains or losses that result from
this process which the Company does not intend to repatriate, and gains and
losses on intercompany transactions which are long-term in nature, are shown in
the cumulative translation adjustments balance in the stockholders' equity
section of the balance sheet, net of applicable taxes. The revenue and expense
accounts of foreign subsidiaries and affiliates are translated into U.S. dollars
at the average exchange rates that prevailed during the period.

REVENUE RECOGNITION AND CONCENTRATION -- Revenues from the sale of electricity
and steam are recorded based upon output delivered and capacity provided at
rates as specified under contract terms. Most of the Company's power plants rely
primarily on one power sales contract with a single customer for the majority of
its revenues. Four customers accounted for 24%, 18%, 18% and 13% of revenues in
1995; four customers accounted for 31%, 23%, 22% and 11% of revenues in 1994,
and three customers accounted for 33%, 23% and 23% of revenues in 1993. The
prolonged failure of any customer to fulfill its contractual obligations could
have a substantial negative impact on AES's revenues. However, the Company does
not anticipate non-performance by the customers under these contracts.

INTEREST RATE SWAP AND CAP AGREEMENTS -- The Company enters into interest rate
swap and cap agreements as a hedge against interest rate exposure on floating
rate project financing debt. The transactions are accounted for as a hedge and
interest is expensed or capitalized, as appropriate, using the effective
interest rates. Any fees or payments are amortized as yield adjustments. These
derivative financial instruments are classified as other than trading.

INCOME TAXES -- The Company uses an asset and liability approach in reporting
income taxes.

NET INCOME PER SHARE -- Net income per share is based on the weighted average
number of common stock and common stock equivalents outstanding, after giving
effect to stock splits and stock dividends. Common stock equivalents result from
dilutive stock options, warrants and deferred compensation arrangements. The
effect of such common stock equivalents on net income per share is computed
using the treasury stock method. The shares used in computing net income per
share were 75.9 million, 75.8 million, and 73.0 million for 1995, 1994 and 1993,
respectively. Primary and fully diluted earnings per share are approximately the
same.

USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates. Actual
results could differ from those estimates.

RECLASSIFICATIONS -- Certain reclassifications have been made to prior period
amounts to conform with the 1995 presentation.

UNAUDITED QUARTERLY DATA -- Such data includes all such adjustments considered
necessary for a fair presentation. Such information is not indicative of the
results for a full year.

F-7
<PAGE> 34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. ACQUISITIONS

On January 20, 1995, a subsidiary of the Company acquired the remaining
outstanding debt of AES Deepwater, a 140 megawatt cogeneration plant in
Pasadena, Texas, for $65 million from a syndicate of lenders. Prior to that
date, the Company did not maintain or exercise control over the utilization of
the AES Deepwater facility, and accordingly, recorded its investment using the
cost method. The acquisition resulted in the creation of goodwill of
approximately $24 million which is being amortized over the remaining estimated
life of the plant.

In June and July 1995, a subsidiary of the Company increased its ownership
interest in Central Termica San Nicolas, S. A. ("San Nicolas"), a 650 megawatt
power plant located in San Nicolas, Argentina from approximately 34% to
approximately 69% by purchasing the interests of two former minority
shareholders. The 1995 purchase price was $24 million. The net results
attributable to the Company's non-owned portion of earnings from San Nicolas in
1995 is reflected as minority interest.

In addition, in December 1995, another subsidiary of the Company purchased
Hidroelectrica Rio Juramento S.A. ("AES Rio Juramento") a 112 megawatt
hydroelectric system in the province of Salta, Argentina for $43 million. As a
result of this acquisition, the Company acquired intangible assets of $14
million which are being amortized over the life of the hydroelectric concession
of 30 years.

These acquisitions were accounted for as purchases. The accompanying financial
statements include the operating results of AES Deepwater from January 20, 1995,
the operating results of San Nicolas as of January 1, 1995 and the operating
results of AES Rio Juramento from December 1, 1995. The following table presents
supplemental unaudited proforma operating results as if the acquisitions of AES
Deepwater, San Nicolas, and AES Rio Juramento had occurred at the beginning of
1994 (in millions, except per share amounts):

<TABLE>
<CAPTION>
-----------------
YEAR ENDED
DECEMBER 31
1995 1994
----- -----
<S> <C> <C>
Revenues................................................... $ 690 $ 694
Income before extraordinary item........................... 108 96
Net income................................................. 108 97
Earnings per share before extraordinary item............... 1.42 1.28
Earnings per share......................................... 1.42 1.29
</TABLE>

The pro forma results are based upon assumptions and estimates which the Company
believes are reasonable. The proforma results do not purport to be indicative of
the results that actually would have been obtained had the acquisitions occurred
on January 1, 1994, nor are they intended to be a projection of future results.

3. INVESTMENTS

At December 31, 1995 and 1994, the Company's investments were classified as
either held-to-maturity or available-for-sale. The amortized cost and estimated
fair value of the investments at December 31, 1995 classified as held-to-
maturity and available-for-sale were approximately the same. A $1 million
unrealized loss, net of tax, was recorded by the Company as a separate component
of stockholders' equity on December 31, 1994 relating to $26 million of U.S.
Federal Agency securities classified as available-for-sale.

F-8
<PAGE> 35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS (CONTINUED)
The short-term investments and debt service reserves and other deposits were
invested as follows (in millions):

<TABLE>
<CAPTION>
----------------------------
DECEMBER 31
1995 1994
------------ ------------
<S> <C> <C>
Restricted cash................................................... $144 $ 81
Held-to-maturity
US treasury and government agency securities...................... 33 29
Securities issued by foreign central governments.................. -- 5
Foreign certificates of deposit................................... 3 23
Commercial paper.................................................. 3 --
Corporate bonds................................................... -- 20
Floating rate notes............................................... 6 31
Asset-backed securities........................................... -- 2
------ ------
Subtotal.......................................................... 45 110
Available-for-sale
US treasury and government agency securities...................... 30 25
Certificates of deposit........................................... 4 --
Foreign certificates of deposit................................... 3 --
------ ------
Subtotal.......................................................... 37 25
------ ------
Total............................................................. $226 $216
=========== ===========
</TABLE>

Short-term investments classified as held-to-maturity and available-for-sale
were $44 and $14 million, respectively, at December 31, 1995. The short-term
investments of $94 million at December 31, 1994 were classified as held-to-
maturity.

4. INVESTMENTS IN AND ADVANCES TO AFFILIATES

The following table presents summarized financial information (in millions) for
equity method affiliates on a combined 100% basis. Amounts presented include the
accounts of NIGEN, Ltd. (47% owned UK affiliate) and Medway Power Ltd. (25%
owned UK affiliate) at 1995 and 1994, and for the years then ended, and the
accounts of San Nicolas (34% owned Argentine affiliate) at December 31, 1994 and
for the year then ended.

<TABLE>
<CAPTION>
-------------
1995 1994
---- -----
<S> <C> <C>
Sales......................................................................... $276 $ 335
Operating income.............................................................. 86 75
Net income.................................................................... 49 33
Current assets................................................................ 171 156
Noncurrent assets............................................................. 949 1,030
Current liabilities........................................................... 70 133
Noncurrent liabilities........................................................ 973 945
Stockholders' equity.......................................................... 77 108
</TABLE>

In 1994, NIGEN, Ltd. refinanced its outstanding project financing loan through a
public debenture offering. The extinguishment of such debt resulted in an
extraordinary loss of $7 million. The Company's share, $2 million, net of taxes,
is included in the accompanying financial statements as an extraordinary loss.

The Company's share of undistributed earnings of affiliates included in
consolidated retained earnings was $13 million and $19 million at December 31,
1995 and 1994, respectively. The Company charged and recognized

F-9
<PAGE> 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS IN AND ADVANCES TO AFFILIATES (CONTINUED)
management fees and interest on advances to its affiliates which aggregated $8
million, $18 million and $10 million for each of the years ended December 31,
1995, 1994 and 1993, respectively.

5. DEBT

PROJECT FINANCING DEBT -- Project financing debt at December 31, 1995 and 1994
consisted of the following (in millions):

<TABLE>
<CAPTION>
-----------------------------------------
INTEREST RATE
12/31/95 MATURITY 1995 1994
------------- -------- ------ ------
<S> <C> <C> <C> <C>
Senior Debt -- floating AES Beaver Valley............... 7.8% 1998 $ 33 $ 43
AES Thames.............................................. 7.0% 2004 181 199
AES Shady Point......................................... 8.3% 2004 320 336
AES Barbers Point....................................... 7.1% 2007 340 354
AES Lal Pir............................................. 5.3% 2007 28 --
AES Warrior Run......................................... 7.0% 2014 22 --
Senior Debt -- fixed
AES Placerita -- capital lease.......................... 8.2% 2009 111 115
AES Warrior Run-tax exempt bonds........................ 7.4% 2019 74 --
Subordinated Debt....................................... 11.3% 2010 73 33
------ ------
Subtotal................................................ 1,182 1,080
Less current maturities................................. (84) (61)
------ ------
Total................................................... $1,098 $1,019
====== ======
</TABLE>

Project financing debt borrowings are primarily collateralized by the capital
stock of the project subsidiary, the physical assets of such facility and all
project agreements associated with such facility.

In 1994, the Company purchased and retired subordinated project financing debt
and accrued interest at AES Placerita, resulting in an extraordinary gain of $4
million, net of taxes.

The Company has interest rate swap agreements in an aggregate notional principal
amount of $613 million at December 31, 1995. The swap agreements effectively
change the interest rate on the portion of the debt covered by the notional
amounts, to a weighted average fixed rate ranging from approximately 9.5% to
10.5%. The agreements expire at various dates from 1997 through 2007. In the
event of nonperformance by the counterparties, the subsidiaries may be exposed
to increased interest rates, however, the Company does not anticipate
nonperformance by the counterparties, which are multinational financial
institutions. At December 31, 1995, subsidiaries of the Company have interest
rate cap agreements with terms ranging from one to six years in an aggregate
notional amount of $619 million.

AES Shady Point and AES Barbers Point have issued commercial paper supported by
irrevocable letters of credit issued by multinational financial institutions. In
the event of nonperformance or credit deterioration of these institutions, the
Company may be exposed to the risk of higher effective interest rates. The
Company does not believe that such nonperformance or credit deterioration is
likely.

F-10
<PAGE> 37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT (CONTINUED)
OTHER NOTES PAYABLE -- Other notes payable at December 31, 1995 and 1994
consisted of the following (in millions):

<TABLE>
<CAPTION>
--------------------------------------
INTEREST RATE
12/31/95 MATURITY 1995 1994
------------- -------- ---- ----
<S> <C> <C> <C> <C>
Corporate revolving bank loan*............................. 7.70% 1998 $ 50 --
Senior subordinated notes.................................. 9.75% 2000 75 $ 75
Convertible subordinated debentures........................ 6.50% 2002 50 50
---- ----
Subtotal................................................... 175 125
Less current maturities.................................... (50) --
---- ----
Total...................................................... $125 $125
==== ====
</TABLE>

- ---------------
* floating rate loan

Under the terms of the $225 million corporate revolving bank loan and letter of
credit facility ("Revolver"), the Company must reduce its direct borrowings to
zero for 30 consecutive days annually to obtain additional loans. Commitment
fees on the unused portion at December 31, 1995 are .375% per annum, and as of
that date $120 million was available. The Company's senior subordinated notes
("Notes") and convertible subordinated debentures ("Debentures") are general
unsecured obligations of the Company. The Notes are redeemable at the Company's
option, in whole or in part, beginning June 1997 at redemption prices in excess
of par and are redeemable at par beginning June 1999. The Debentures are
convertible into common stock of the Company at the rate of $26.16 per common
share, and redeemable at the Company's option at redemption prices in excess of
par, and at par beginning March 1999.

FUTURE MATURITIES OF DEBT -- Scheduled maturities of long-term debt at December
31, 1995 are (in millions):

<TABLE>
<S> <C>
1996................................................ $ 134
1997................................................ 76
1998................................................ 90
1999................................................ 95
2000................................................ 176
Thereafter.......................................... 786
------
Total $1,357
======
</TABLE>

COVENANTS -- The terms of the Company's Revolver, Notes, Debentures and project
financing debt agreements contain certain covenants and provisions. The
covenants provide for, among other items, maintenance of certain reserves, and
require that minimum levels of working capital, net worth and certain financial
ratio tests are met. The most restrictive of these covenants include limitations
on incurring additional debt and on the payment of dividends to shareholders.

The project financing debt limitations of AES's subsidiaries permit the payment
of dividends to the parent company out of current cash flow for quarterly,
semi-annual or annual periods only at the end of such periods and only after
payment of principal and interest on project loans due at the end of such
periods. As of December 31, 1995, approximately $59 million was available under
project loan documents for distribution by subsidiaries.

6. COMMITMENTS AND CONTINGENCIES

As of December 31, 1995, the Company and its consolidated subsidiaries are
obligated under long-term non-cancelable operating leases, primarily for office
rental and site leases. Rental expense for operating leases was $3 million, $2
million and $2 million in the years ended 1995, 1994 and 1993, respectively. The
future minimum

F-11
<PAGE> 38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
lease commitments under these leases are $3 million for 1996, $2 million each
year for 1997 through 1999, $1 million for 2000, and $52 million for the years
thereafter.

Operating subsidiaries of the Company enter into various long-term contracts for
the purchase of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 4 to 12 years.

GUARANTEES -- In connection with certain of its project financing, acquisition,
disposition, and power purchase agreements, AES has expressly undertaken limited
obligations and commitments most of which will only be effective or will be
terminated upon the occurrence of future events. These obligations and
commitments, excluding letter of credit obligations discussed below, were
limited as of December 31, 1995, by the terms of the agreements, to an aggregate
of approximately $138 million. Approximately $15 million of these guarantees are
supported by cash deposits or cash collateralized letters of credit. The Company
is also obligated under other commitments which are limited to amounts, or
percentages of amounts, received by AES as distributions from its project
subsidiaries. These amounts aggregated $37 million as of December 31, 1995.

LETTERS OF CREDIT -- At December 31, 1995 and 1994, the Company had $56 million
and $11 million, respectively, of letters of credit outstanding under its credit
facility which operate to guarantee performance relating to certain project
development activities and subsidiary operations. The Company pays a letter of
credit fee of 1.75% on the outstanding amounts.

LITIGATION -- In 1992, a shareholder class action suit was filed against the
Company, its directors, certain of its officers and the underwriters of the
Company's 1991 initial public offering of common stock and its 1992 offering of
Debentures. In February 1995, the Company entered into a settlement agreement
with plaintiffs' counsel on behalf of the class. The settlement is on a claims
made basis and consists of up to $4.5 million of cash plus warrants to purchase
up to .7 million shares of AES common stock at $29.43 per share through July
2000. Insurance proceeds are available to cover a portion of the settlement. The
settlement was approved by the federal court in May 1995 and became effective in
July 1995. Plaintiffs' counsel are currently processing claims and, once
concluded, the settlement proceeds will be distributed.

On February 25, 1993, an action was filed in the 10th Judicial District Court,
Galveston County, Texas against the Company, over 25 other corporations
(including major oil refineries and chemical companies) and utilities, a utility
district, 4 Texas cities, McGinnes Industrial Maintenance Corporation, Roland
McGinnes and Lawrence McGinnes, claiming personal injuries, property, and
punitive damages of $20 billion, arising from alleged releases of hazardous and
toxic substances to air, soil and water at the McGinnes waste disposal site
located in Galveston County. This matter was consolidated with two other related
cases in December 1993. The complaint sets forth numerous causes of action,
including fraud, negligence and strict liability, including, among other things,
allegations that the defendants sent hazardous, toxic and noxious chemicals and
other waste products to the McGinnes site for disposal. In March 1995, the
Company entered into a settlement agreement with certain plaintiffs, pursuant to
which the Company paid seven thousand dollars in return for withdrawal of their
claims against the Company. Based on the Company's investigation of the case to
date, the Company believes it has meritorious defenses to each and every cause
of action stated in the complaint and this action is being vigorously defended.
The Company believes that the outcome of this matter will not have a material
adverse effect on its consolidated financial statements.

The Company is involved in certain other legal proceedings in the normal course
of business. It is the opinion of the Company that none of the pending
litigation is expected to have a material adverse effect on its results of
operations or consolidated financial position.

F-12
<PAGE> 39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
--------------------
In millions 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Common stock
Balance at January 1 and December 31................................. $ 1 $ 1 $ 1
===== ===== =====
Additional paid-in capital
Balance at January 1................................................. $240 $203 $103
Issuance of common stock............................................. -- -- 68
Issuance of common stock under benefit plans and exercise of stock
options and warrants.............................................. 2 2 5
Common stock dividends (1993 -- $0.58 per share, 1994 -- 3% per
share)............................................................ -- 47 27
AES Chigen Class A redeemable common stock........................... 51 (12) --
---- ---- ----
Balance at December 31................................................. $293 $240 $203
===== ===== =====
Retained earnings
Balance at January 1................................................. $164 $111 $ 82
Net income for the year.............................................. 107 100 71
Common stock dividends (1993 -- $0.58 per share, 1994 -- 3% per
share)............................................................ -- (47) (42)
---- ---- ----
Balance at December 31................................................. $271 $164 $111
===== ===== =====
Unrealized gain/(loss) on investments
Balance at December 31............................................... $ -- $ (1) $ --
===== ===== =====
Cumulative translation adjustment
Balance at December 31............................................... $(10) $ (3) $ (6)
===== ===== =====
Treasury stock
Balance at December 31............................................... $ (6) $ -- $ --
===== ===== =====
</TABLE>

Common Stock -- During 1993, the Company declared three alternative cash or
stock dividends aggregating to $.58 per share. In connection with the 1993
alternative cash or stock dividends, the Company issued 1.5 million shares of
common stock.

Stock Split and Stock Dividend -- On December 7, 1993, the Board of Directors
authorized a three-for-two split, effected in the form of a stock dividend,
payable to stockholders of record on January 15, 1994. Additionally, on February
17, 1994, the Company declared a 3% stock dividend, payable to stockholders of
record on March 10, 1994. Accordingly, all outstanding share, per share and
stock option data in all periods presented have been restated to reflect the
split and the 3% stock dividend.

Stock Options and Warrants -- The Company has granted options or warrants for
shares of common stock under its stock option plans. One of the plans provides
for the grant of options to directors who are not employed by the Company. Under
the terms of the plans, the Company may issue options to purchase shares of the
Company's common stock at a price equal to 100% of the market price at the date
the option is granted. The options become eligible for exercise under various
schedules. At December 31, 1995, there were .7 million shares reserved for

F-13
<PAGE> 40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)
future grants under the plans. A summary of the warrant and option activity
(with parenthetical prices per share) follows (in thousands of shares):

<TABLE>
<CAPTION>
--------------------------
DECEMBER 31
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Warrants and options outstanding -- beginning of year............. 3,540 2,999 2,995
Exercised during the year (from $1.04 to $22.75).................. (355) (187) (422)
Forfeitures during the year (from $1.55 to $21.36)................ (57) (12) (2)
Granted during the year (from $16.38 to $23.14 ).................. 935 740 428
------ ------ ------
Outstanding -- end of year (from $1.04 to $23.14)................. 4,063 3,540 2,999
====== ====== ======
Eligible for exercise -- end of year.............................. 1,209 990 1,102
====== ====== ======
Percentage of options outstanding to total common stock
outstanding..................................................... 5% 5% 4%
====== ====== ======
</TABLE>

At December 31, 1995, the weighted average exercise price for all options
outstanding was $14.56 per share. Of the total options outstanding,
approximately 1 million are eligible for exercise below the market price of the
common stock at December 31, 1995 and such options, if all were exercised, would
generate proceeds to the Company of approximately $11 million.

AES China Generating Co. Ltd. -- During 1994, AES Chigen completed an initial
public offering for the sale of 10.2 million shares of Class A redeemable common
stock. Prior to the offering, AES contributed $50 million to AES Chigen for 7.5
million shares of Class B common stock. AES, as the sole Class B holder, is
entitled to elect one-half of the board of directors of AES Chigen. As of
December 22, 1995, AES Chigen had entered into binding commitments to invest in
excess of $50 million in power projects in the People's Republic of China and
the previously held right of Class A Shareholders to require AES Chigen to
repurchase their shares has expired. As a result, the Company has allocated the
net proceeds from the issuance of the Class A shares to additional paid-in
capital and minority interest during 1995.

8. INCOME TAXES

Income Tax Provision -- The provision for income taxes attributable to
continuing operations consists of the following (in millions):

<TABLE>
<CAPTION>
--------------------
YEAR ENDED
DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal
Current........................................ $ 4 $ 2 $ 1
Deferred....................................... 47 35 11
State
Current........................................ 5 4 1
Deferred....................................... 1 3 5
---- ---- ----
Total............................................ $57 $44 $18
==== ==== ====
</TABLE>

F-14
<PAGE> 41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)
Effective and Statutory Rate Reconciliation -- A reconciliation of the U.S.
statutory federal income tax rate to the Company's effective tax rate as a
percentage of income before taxes is as follows:

<TABLE>
<CAPTION>
--------------------
YEAR ENDED
DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate............................................. 35% 35% 35%
Change in valuation allowance.......................................... (6) (2) (18 )
State taxes, net of federal tax benefit................................ 6 5 6
Other -- net........................................................... 3 (4) --
---- ---- ----
Effective tax rate..................................................... 38% 34% 23%
==== ==== ====
</TABLE>

Deferred Income Taxes -- Deferred income taxes relate principally to accelerated
depreciation methods used for tax purposes and certain other expenses which are
deducted for income tax purposes, but not for financial reporting purposes.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. These items are stated at the enacted tax rates
that are expected to be in effect when taxes are actually paid or recovered.
Deferred tax assets and deferred tax liabilities are as follows (in millions):

<TABLE>
<CAPTION>
-----------------------
YEAR ENDED
DECEMBER 31
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Differences between book and tax basis of property and total deferred
tax liability........................................................ $ 379 $ 219 $ 182
----- ----- -----
Operating loss carryforwards........................................... (167) (231) (224)
Tax credit carryforwards............................................... (71) (68) (67)
Other deductible temporary differences................................. (1) (15) (31)
----- ----- -----
Total gross deferred tax asset......................................... (239) (314) (322)
Less: valuation allowance.............................................. 9 168 171
----- ----- -----
Total net deferred tax asset........................................... (230) (146) (151)
----- ----- -----
Net deferred tax liability............................................. $ 149 $ 73 $ 31
===== ===== =====
</TABLE>

As of December 31, 1995, the Company had federal net operating loss
carryforwards for tax purposes of approximately $434 million expiring from 2001
through 2009, federal investment tax credit carryforwards for tax purposes of
approximately $61 million expiring in years 2001 through 2006, and federal
alternative minimum tax credits of approximately $5 million which carryforward
without expiration.

The valuation allowance decreased during the year by approximately $159 million
to $9 million at December 31, 1995. The primary reason for this decrease was the
Company's purchase of the outstanding debt of AES Deepwater on January 20, 1995,
which had the effect of reducing certain of the Company's deferred tax assets.
The $9 million valuation allowance at December 31, 1995 relates primarily to
state tax credits and foreign operating losses, the ultimate realization of
which is uncertain. The Company believes that it is more likely than not that
the remaining deferred tax assets will be realized.

Undistributed earnings of certain foreign affiliates aggregated $33 million on
December 31, 1995. The Company considers these earnings to be indefinitely
reinvested outside of the U.S. and, accordingly, no U.S. deferred taxes have
been recorded with respect to the earnings. Should the earnings be remitted as
dividends, the Company may be subject to additional U.S. taxes, net of allowable
foreign tax credits. It is not practicable to estimate the amount

F-15
<PAGE> 42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)
of any additional taxes which may be payable on the undistributed earnings. A
deferred tax asset of $2 million has been recorded as of December 31, 1995 for
the cumulative effects of certain foreign currency translations.

9. PROFIT SHARING AND DEFERRED COMPENSATION PLANS

Profit Sharing and Stock Ownership Plan -- The Company has a profit sharing and
stock ownership plan, qualified under section 401 of the Internal Revenue Code,
which is available to all AES people. The profit sharing plan provides for
Company matching contributions, other Company contributions at the discretion of
the Compensation Committee of the Board of Directors, and discretionary tax
deferred contributions from the participants. Participants are fully vested in
their own contributions and the Company's matching contributions. Participants
vest in other Company contributions over a five-year period. Company
contributions to the plan were $4 million for each of the years ended 1995, 1994
and 1993.

Deferred Compensation Plans -- The Company has a deferred compensation plan
under which directors of the Company may elect to have a portion or all of their
compensation deferred. The amounts allocated to each participant's deferred
compensation account may be converted into common stock units. Upon termination
or death of a participant, the Company is required to distribute, under various
methods, cash or the number of shares of common stock accumulated within the
participant's deferred compensation account. Distribution of stock is to be made
from common stock held in treasury or from authorized but previously unissued
shares. The plan terminates and full distribution is required to be made to all
participants upon any changes of control of the Company (as defined).

In addition, the Company has an executive officers' deferred compensation plan.
At the election of an executive officer, the Company will establish an unfunded,
non-qualified compensation arrangement for each officer who chooses to terminate
participation in the Company's profit sharing and employee stock ownership plan.
The participant may elect to forego payment of any portion of his or her
compensation and have an equal amount allocated to a contribution account. In
addition, the Company will credit the participant's account with an amount equal
to the Company's contributions (both matching and profit sharing) that would
have been made on such officer's behalf if he or she had been a participant in
the profit sharing plan. The participant may elect to have all or a portion of
the Company's contribution converted into stock units. Dividends paid on common
stock are allocated to the participant's account in the form of stock units. The
participant's account balances are distributable upon termination of employment
or death.

During 1995, the Company adopted a supplemental retirement plan covering certain
AES people. The plan provides incremental profit sharing and matching
contributions to participants that would have been paid to their accounts in the
Company's profit sharing plan if it were not for limitations imposed by income
tax regulations. All contributions to the plan are vested in the manner provided
in the Company's profit sharing plan, and once vested are nonforfeitable. The
participant's account balances are distributable upon termination of employment
or death.

The Company is not obligated under any post-retirement benefit plans other than
the profit sharing and deferred compensation plans described in this Note.

F-16
<PAGE> 43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. QUARTERLY DATA (UNAUDITED)

The following table summarizes the unaudited quarterly statements of operations
(in millions, except per share amounts):

<TABLE>
<CAPTION>
-----------------------------------
QUARTER ENDED 1995
MAR 31 JUN 30 SEP 30 DEC 31
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales and services........................................... $ 171 $ 167 $ 174 $ 173
Gross margin................................................. 67 67 73 73
Net income................................................... 25 27 27 28
Net income per share......................................... 0.33 0.35 0.36 0.37
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------
QUARTER ENDED 1994
MAR 31 JUN 30 SEP 30 DEC 31
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales and services........................................... $ 125 $ 136 $ 137 $ 135
Gross margin................................................. 60 69 67 68
Extraordinary item........................................... 4 -- -- (2)
Net income................................................... 25 25 26 24
Net income per share:
Before extraordinary item.................................... 0.28 0.34 0.34 0.35
Extraordinary item........................................... 0.05 -- -- (0.03)
------ ------ ------ -----
Net income per share......................................... 0.33 0.34 0.34 0.32
====== ===== ===== =====
</TABLE>

F-17
<PAGE> 44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. GEOGRAPHIC SEGMENTS

Information about the Company's operations in different geographic areas is as
follows (in millions):

<TABLE>
<CAPTION>
------------------
YEAR ENDED
DECEMBER 31
1995 1994
------ ------
<S> <C> <C>
REVENUES
North America............................................................ $ 548 $ 523
Latin America............................................................ 131 2
Asia..................................................................... 1 --
Other.................................................................... 5 8
------ ------
Total.................................................................... $ 685 $ 533
====== ======
</TABLE>

<TABLE>
<CAPTION>
------------------
YEAR ENDED
DECEMBER 31
1995 1994
------ ------
<S> <C> <C>
OPERATING INCOME
North America............................................................ $ 246 $ 241
Latin America............................................................ 14 --
Asia..................................................................... (8) (11)
Other.................................................................... (4) 2
------ ------
Total.................................................................... $ 248 $ 232
====== ======
</TABLE>

<TABLE>
<CAPTION>
------------------
DECEMBER 31
1995 1994
------ ------
<S> <C> <C>
IDENTIFIABLE ASSETS
North America............................................................ $1,672 $1,569
Latin America............................................................ 230 46
Asia..................................................................... 328 221
Other.................................................................... 90 79
------ ------
Total.................................................................... $2,320 $1,915
====== ======
</TABLE>

- ---------------
In 1993, foreign operations and investments were insignificant.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's assets and liabilities have been
determined using available market information. The estimates are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The fair value of current financial assets, current liabilities, debt service
reserves and other deposits, and other assets are assumed to be equal to their
reported carrying amounts. The fair value of project financing debt is estimated
differently based upon the type of loan. For variable rate loans, the carrying
value approximates fair value. For fixed rate loans, the fair value is estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying value
and fair value of the AES Placerita capital lease have been excluded from this
disclosure. The carrying amount of commitments represents the Company's
aggregate maximum exposure. The fair value of other commitments are estimated
based on the amount of exposure and the Company's estimate of the likelihood of
performance being required. The fair value of swap agreements is the estimated
net amount that the Company would pay to terminate the agreements at

F-18
<PAGE> 45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
the balance sheet date. The estimated fair values of the Debentures and Notes
are based on the quoted market price at December 31, 1995.

The estimated fair values of the Company's financial instruments at December 31,
1995 and 1994 are as follows (in millions):

<TABLE>
<CAPTION>
------------------------------------
1995 1994
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- -----
<S> <C> <C> <C> <C>
Project financing debt...................................... $1,071 $1,078 $965 $ 966
Other notes payable......................................... 175 180 125 119
Interest rate swaps......................................... -- 137 -- 52
Other commitments........................................... 231 19 72 6
</TABLE>

The fair value estimates presented herein are based on pertinent information
available as of December 31, 1995. The Company is not aware of any factors that
would significantly affect the estimated fair value amounts since that date.

13. NEW ACCOUNTING PRONOUNCEMENTS

SFAS No. 123, "Accounting for Stock Based Compensation" becomes effective and
will be adopted by the Company in 1996. The Company does not plan to adopt the
recognition and measurement provisions of SFAS No. 123. SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of " was adopted by the Company in 1995. Such adoption had no effect
on the Company's financial position.

14. SUBSEQUENT EVENT

On May 30, 1996, AES, through its subsidiaries, acquired for $393 million the
common shares representing an 11.35% interest in Light Servicos de Eletricidade
S.A. ("Light"), a publicly-held corporation that operates as the concessionaire
of electric power generation, transmission and distribution public services in
28 municipalities of the state of Rio de Janeiro, Brazil. AES acquired its
interest through participation in a consortium (the "Consortium") that
concurrently won the bid for a controlling interest in Light under the Brazilian
privatization program auction of 60% of Light's outstanding shares held on May
21, 1996. The consortium's aggregate ownership interest of 50.44% represents a
controlling interest in Light.

The Consortium, organized pursuant to a shareholders agreement dated as of May
27, 1996, is comprised of the direct common share ownership interests held in
Light by affiliates of AES (11.35%), Electricite de France ("EDF") (11.35%),
Houston Industries Incorporated ("HI") (11.35%), Companhia Siderurgica Nacional
("CSN") (7.25%), and Banco Nacional de Desenvolvimento Economico e Social
("BNDES") (9.14%). The aggregate ownership interest of 50.44% held by the
members of the Consortium under the Shareholders Agreement represents the
controlling ownership of Light. Under the provisions of the Shareholders
Agreement, principal responsibilities for the various aspects of Light's
business will be allocated among AES, EDF, HI and CSN. AES will have principal
responsibility for the electric generation and bulk power supply operations of
Light.

F-19
<PAGE> 46

SUPPLEMENTAL INFORMATION

The Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "1995 Form 10-K") is attached hereto. The delivery of the 1995 Form
10-K shall not be intended to create an implication that there has been no
change in the affairs of the Company since the date of filing thereof, nor that
the information contained or incorporated by reference therein is correct as of
any time subsequent to its date. Reference is made to the Company's Consolidated
Financial Statements beginning on page F-1 hereof which may include more recent
information. See "Recent Developments."
<PAGE> 47

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Registration filing fee........................................... $ 77,586
Printing and engraving expenses................................... $ 50,000
Blue sky fees and expenses (including counsel).................... $ 25,000
Legal fees and expenses........................................... $125,000
Accounting fees................................................... $ 80,000
Miscellaneous..................................................... $ 2,414
--------
Total........................................................ $360,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under the Company's By-Laws, and in accordance with Section 145 of the Delaware
General Corporation Law ("GCL"), the Company shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than any action or suit by or in the right of the Company
to procure a judgment in its favor, which is hereinafter referred to as a
"derivative action") by reason of the fact that such person is or was a
director, officer or employee of the Company, or is or was serving in such
capacity or as an agent at the request of the Company for another entity, to the
full extent authorized by Delaware law, against expenses (including, but not
limited to, attorneys' fees), judgments, fines and amounts actually and
reasonably incurred in connection with the defense or settlement of such action,
suit or proceeding if such person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful. Agents of the Company may be similarly
indemnified, at the discretion of the Board of Directors.

Under Section 145 of the GCL, a similar standard of care is applicable in the
case of derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of such an action and then, where the person is adjudged to be liable
to the Company, only if and to the extent that the Court of Chancery of the
State of Delaware or the court in which such action was brought determines that
such person is fairly and reasonably entitled to such indemnity and only for
such expenses as the court shall deem proper.

Pursuant to Company's By-Laws, a person eligible for indemnification may have
the expenses incurred in connection with any matter described above paid in
advance of a final disposition by the Company. However, such advances will only
be made upon the delivery of an undertaking by or on behalf of the indemnified
person to repay all amounts so advanced if it is ultimately determined that such
person is not entitled to indemnification.

In addition, under the Company's By-Laws, the Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company or of another corporation against any liability asserted
against and incurred by such person in such capacity, or arising out of the
person's status as such whether or not the Company would have the power or the
obligation to indemnify such person against such liability under the provisions
of the Company's By-Laws.

II-1
<PAGE> 48

ITEM 16. EXHIBITS.

Each of the following Exhibits is filed or incorporated by reference in this
Registration Statement.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ -------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Form of Indenture Agreement.
4.2 -- Form of Global Note.
5.1 -- Opinion of Chadbourne & Parke LLP, counsel to the Company.
12.1 -- Statement Re: Computations of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of Chadbourne & Parke LLP, counsel to the Company.*
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Deloitte Touche Tohmatsu.
24.1 -- Powers of Attorney.**
25.1 -- Form T-1 Statement of Eligibility of Trustee.
27.1 -- Financial Data Schedule.
</TABLE>

- ---------------
* Included in Exhibit 5.1.

** Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in this registration
statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 49

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.

II-3
<PAGE> 50

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Arlington, State of Virginia on June 12, 1996.

THE AES CORPORATION

By /s/ Dennis W. Bakke

------------------------------------
DENNIS W. BAKKE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed below by the following persons in the
capacities indicated on June 12, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ ------------------------------------------------
<C> <S>
/s/ Roger W. Sant* Chairman of the Board
- ------------------------------------------
ROGER W. SANT

/s/ Dennis W. Bakke President, Chief Executive Officer and Director
- ------------------------------------------ (Principal Executive Officer)
DENNIS W. BAKKE

/s/ Vicki-Ann Assevero* Director
- ------------------------------------------
VICKI-ANN ASSEVERO

/s/ Dr. Alice F. Emerson* Director
- ------------------------------------------
DR. ALICE F. EMERSON

/s/ Frank Jungers* Director
- ------------------------------------------
FRANK JUNGERS

/s/ Dr. Henry R. Linden* Director
- ------------------------------------------
DR. HENRY R. LINDEN

/s/ Russell E. Train* Director
- ------------------------------------------
RUSSELL E. TRAIN

/s/ Thomas I. Unterberg* Director
- ------------------------------------------
THOMAS I. UNTERBERG

/s/ Robert H. Waterman, Jr.* Director
- ------------------------------------------
ROBERT H. WATERMAN, JR.

/s/ Barry J. Sharp Vice President and Chief Financial Officer
- ------------------------------------------ (Principal Financial and Accounting Officer)
BARRY J. SHARP

*By /s/ Barry J. Sharp
- ------------------------------------------
BARRY J. SHARP
ATTORNEY-IN-FACT
</TABLE>

II-4
<PAGE> 51

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ------------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement...........................................
4.1 Form of Indenture Agreement..............................................
4.2 Form of Global Note......................................................
5.1 Opinion of Chadbourne & Parke LLP, counsel to the Company................
12.1 Statement Re: Computations of Ratio of Earnings to Fixed Charges.........
23.1 Consent of Chadbourne & Parke LLP, counsel to the Company*...............
23.2 Consent of Deloitte & Touche LLP.........................................
23.3 Consent of Deloitte Touche Tohmatsu......................................
24.1 Powers of Attorney**.....................................................
25.1 Form T-1 Statement of Eligibility of Trustee.............................
27.1 Financial Data Schedule..................................................
</TABLE>

- ---------------
* Included in Exhibit 5.1.
** Previously filed.

<PAGE> 1

EXHIBIT 1.1

$__,___,___

THE AES CORPORATION

_____% ____________ Notes Due ____

UNDERWRITING AGREEMENT

____________, 1996

J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.

c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260

Dear Sirs:

The AES Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell $__________ principal amount of its _____% Notes Due
____ (the "Notes"), to you as representatives of the several underwriters named
in Schedule I hereto (the "Underwriters"). The Notes are to be issued pursuant
to the provisions of an Indenture to be dated as of July __, 1996 (the
"Indenture") between the Company and The First National Bank of Chicago, as
Trustee.

1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively called the "Securities Act"), a registration statement on Form
S-3, including a prospectus, relating to $225,000,000 principal amount of its
debt securities (the
<PAGE> 2
"Shelf Securities") to be issued from time to time by the Company. The Company
also has filed with, or proposes to file with, the Commission pursuant to Rule
424 under the Securities Act a prospectus supplement specifically relating to
the Notes. The registration statement as amended to the date of this Agreement
is hereinafter referred to as the "Base Registration Statement" and any
registration statement filed pursuant to Rule 462(b) under the Securities Act
relating to the Notes is herein referred to as the "Additional Registration
Statement", and, together with the Base Registration Statement, the
"Registration Statement". The related prospectus covering the Shelf Securities
in the form first used to confirm sales of the Notes is hereinafter referred to
as the "Basic Prospectus". The Basic Prospectus as supplemented by the
prospectus supplement specifically relating to the Notes in the form first used
to confirm sales of the Notes is hereinafter referred to as the "Prospectus".
Any reference in this Agreement to the Registration Statement, the Basic
Prospectus, any preliminary form of Prospectus (a "preliminary prospectus")
previously filed with the Commission pursuant to Rule 424 or the Prospectus
shall be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Securities Act which were
filed under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Exchange Act") on
or before the date of this Agreement or the date of the Basic Prospectus, any
preliminary prospectus or the Prospectus, as the case may be; and any reference
to "amend", "amendment" or "supplement" with respect to the Registration
Statement, the Basic Prospectus, any preliminary prospectus or the Prospectus
shall be deemed to refer to and include any documents filed under the Exchange
Act after the date of this Agreement, or the date of the Basic Prospectus, any
preliminary prospectus or the Prospectus, as the case may be, which are deemed
to be incorporated by reference therein.

2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell and each Underwriter
agrees, severally and not jointly, to purchase from the Company the principal
amount of Notes set forth opposite the name of such Underwriter in Schedule I
hereto at ______% of the principal amount thereof (the "Purchase Price").

3. Terms of Public Offering. The Company is advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Notes as

2
<PAGE> 3
soon after the effective date of the Registration Statement as in your judgment
is advisable and (ii) initially to offer the Notes upon the terms set forth in
the Prospectus.

The Company hereby confirms its engagement of Goldman, Sachs &
Co. and Goldman, Sachs & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(o) of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. (the "NASD") with respect to the offering and sale of
the Notes. Goldman, Sachs & Co., in its capacity as qualified independent
underwriter and not otherwise, is referred to herein as the "QIU". As
compensation for the services of acting as the QIU hereunder, the Company
agrees to pay the $10,000 on the Closing Date.

4. Delivery and Payment. Delivery to the Underwriters of
and payment for the Notes shall be made at 10:00 A.M., New York City time, on
____________, or at such other time or such other date as the Underwriters and
the Company may agree upon in writing. The time and date of such payment are
referred to herein as the Closing Date. As used herein, the term "Business
Day" means any day other than a day on which banks are permitted or required to
be closed in New York City.

The Notes shall be registered in such names and issued in such
denominations as you shall request in writing not later than two full business
days prior to the Closing Date. The Notes shall be made available to you for
inspection not later than 9:30 A.M., New York City time, on the business day
next preceding the Closing Date. The Notes shall be delivered to you on the
Closing Date with any transfer taxes thereon duly paid by the Company, for the
respective accounts of the several Underwriters, against payment of the
Purchase Price therefor by wire transfer in immediately available funds to the
account specified by the Company to the Underwriters (no later than noon the
Business Day prior to the Closing Date) at the office of [____________________].

5. Agreements of the Company. The Company agrees with you:

(a) To file the Prospectus in a form approved by you with the
Commission within the time periods specified by Rule 424; and to file
promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the

3
<PAGE> 4
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Notes; and to furnish copies of the Prospectus
to the Underwriters in New York City prior to 10:00 a.m., New York
City time, on the Business Day next succeeding the date of this
Agreement in such quantities as the Underwriters may reasonably
request;

(b) To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when any post-effective amendment
to the Registration Statement has been filed or becomes effective,
(ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Notes for
offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event
during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or
changes in the Registration Statement or the Prospectus in order to
make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable
effort to obtain the withdrawal or lifting of such order at the
earliest possible time.

(c) To furnish to you three signed copies of the Registration
Statement as first filed with the Commission and of each amendment to
it, including all exhibits thereto and documents incorporated by
reference therein, and to furnish to you and each Underwriter
designated by you such number of conformed copies of the Registration
Statement as so filed and of each amendment to it, without exhibits
thereto and documents incorporated by reference therein, as you may
reasonably request.

(d) Not to file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object; and to prepare and file with

4
<PAGE> 5
the Commission, promptly upon your reasonable request, any amendment
to the Registration Statement or supplement to the Prospectus which
may be necessary or advisable in connection with the distribution of
the Notes by you, and to use its best efforts to cause the same to
become promptly effective.

(e) Promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as in the
opinion of counsel for the Underwriters a prospectus is required by
law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish to each Underwriter and dealer as many copies of
the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.

(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the
Prospectus to comply with any law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the
Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with
law, and to furnish to each Underwriter and to such dealers as you
shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.

(g) Prior to any public offering of the Notes, to cooperate
with you and counsel for the Underwriters in connection with the
registration or qualification of the Notes for offer and sale by the
several Underwriters and by dealers under the state securities or Blue
Sky laws of such jurisdictions as you may request, to continue such
qualification in effect so long as required for distribution of the
Notes and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification.

(h) To mail and make generally available to its
securityholders as soon as reasonably practicable an earnings
statement covering a period of at least twelve

5
<PAGE> 6
months after the effective date of the Registration Statement (but in
no event commencing later than 90 days after such date) which shall
satisfy the provisions of Section 11(a) of the Act, and to advise you
in writing when such statement has been so made available.

(i) During the period of five years after the date of this
Agreement, or for such shorter period if the Notes no longer remain
outstanding, (i) to mail as soon as reasonably practicable after the
end of each fiscal year to the record holders of its Notes a financial
report of the Company and its subsidiaries on a consolidated basis
(and a similar financial report of all unconsolidated subsidiaries, if
required by Regulation S-X), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year,
together with comparable information as of the end of and for the
preceding year, certified by independent certified public accountants,
and (ii) to mail and make generally available as soon as practicable
after the end of each quarterly period (except for the last quarterly
period of each fiscal year) to such holders, a consolidated balance
sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if required by Regulation S-X) as of the
end of and for such period, and for the period from the beginning of
such year to the close of such quarterly period, together with
comparable information for the corresponding periods of the preceding
year.

(j) During the period referred to in paragraph (i), to
furnish to you as soon as available a copy of each report or other
publicly available information of the Company mailed to the
securityholders of the Company or filed with the Commission and such
other publicly available information concerning the Company and its
subsidiaries as you may reasonably request.

(k) To pay all costs, expenses, fees and taxes incident to
the performance of its obligations hereunder, including without
limiting the generality of the foregoing, all costs and expenses
incident to [(i) the preparation, issuance, execution, authentication
and delivery of the Notes, including any expenses of the Trustee,]
(ii) the preparation, printing, filing and distribution under the Act
of the

6
<PAGE> 7
Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any
of them prior to or during the period specified in paragraph (e),
(iii) the printing and delivery of the Prospectus and any Preliminary
Prospectus and all amendments or supplements to it during the period
specified in paragraph (e), (iv) the printing and delivery of this
Agreement, the Indenture, Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and
other documents printed and delivered in connection with the offering
of the Notes (including in each case any disbursements of counsel for
the Underwriters relating to such printing and delivery), (v) the
registration or qualification of the Notes for offer and sale under
the securities or Blue Sky laws of the several states (including in
each case the fees and disbursements of counsel for the Underwriters
relating to such registration or qualification and memoranda relating
thereto), (vi) filings and clearance with the National Association of
Securities Dealers, Inc. in connection with the offering, (vii)
furnishing such copies of the Registration Statement, the Prospectus
and all amendments and supplements thereto as may be requested for use
in connection with the offering or sale of the Notes by the
Underwriters or by dealers to whom Notes may be sold and (viii) the
rating of the Notes including, without limitation, fees payable to
rating agencies in connection therewith.

(l) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Notes.

6. Representations and Warranties of the Company. The
Company represents and warrants to each Underwriter that:

(a) The Registration Statement has been declared effective by
the Commission under the Securities Act; no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge
of the Company, threatened by the Commission; and the Registration
Statement and Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) comply, or
will comply, as the case may be, in

7
<PAGE> 8
all material respects with the Securities Act and the Trust Indenture
Act of 1939, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Trust Indenture Act"), and
do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the date of
the Prospectus and any amendment or supplement thereto, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and the Prospectus, as amended or supplemented at the
Closing Date, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; except that the foregoing representations
and warranties shall not apply to (i) that part of the Registration
Statement which constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee,
and (ii) statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use
therein;

(b) The documents incorporated by reference in the
Prospectus, when they were filed with the Commission, conformed in all
material respects to the requirements of the Exchange Act, and none of
such documents contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents are filed with the
Commission will conform in all material respects to the requirements
of the Exchange Act, as applicable, and will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

(c) The Company and each of its subsidiaries which meets the
criteria in the definition of "significant subsidiary" pursuant to
Rule 1-02(w) of Regulation S-X under the Securities Act calculated as

8
<PAGE> 9
of March 31, 1996, after giving pro forma effect to the acquisition of
Light Servicos de Electricidade S.A. ("Light") (each, a "Principal
Subsidiary") has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority required to
carry on its business as it is currently being conducted and to own,
lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the business, financial condition or results of operations of the
Company and the Principal Subsidiaries, taken as a whole.

(d) Except as set forth in the Registration Statement, all of
the outstanding shares of capital stock of, or other ownership
interests in, the Principal Subsidiaries owned by the Company or any
of the Principal Subsidiaries have been duly and validly authorized
and issued and are fully paid and non-assessable, and are owned by
the Company or one of the Principal Subsidiaries free and clear of
any security interest, claim, lien, encumbrance or adverse interest
of any nature, except liens and pledges under project finance and other
related project agreements.

(e) The Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to the Underwriters against payment therefor
as provided by this Agreement, will be entitled to the benefits of the
Indenture, and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by equitable
principles of general applicability.

(f) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by equitable principles of
general applicability.

(g) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid

9
<PAGE> 10
and binding agreement of the Company (except as rights to indemnity
and contribution hereunder may be limited by applicable law).

(h) The Notes conform as to legal matters to the description
thereof contained in the Registration Statement and the Prospectus.

(i) The Company is not in violation of its Restated
Certificate of Incorporation or its By-laws and none of the Principal
Subsidiaries is in violation of its respective charter, or except for
any such violations which would not have a material adverse effect on
the Company and its subsidiaries taken as a whole, in violation of its
by-laws, nor is the Company or any of the Principal Subsidiaries,
except as set forth in the Registration Statement, in default in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
other agreement, indenture or instrument to which the Company or any
of the Principal Subsidiaries is a party or by which it or any of the
Principal Subsidiaries or their respective property is bound except
for any such defaults which, individually or in the aggregate, would
not have a material adverse effect on the business, financial
condition or results of operations of the Company and the Principal
Subsidiaries, taken as a whole.

(j) The execution, delivery and performance of this
Agreement, the Indenture and the Notes and compliance by the Company
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not require any
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except such as may be required under the Act, the Exchange Act, the
Trust Indenture Act, or other securities or Blue Sky laws) and will
not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Company or any of the Principal Subsidiaries or any agreement,
indenture or other instrument to which it or any of the Principal
Subsidiaries is a party or by which it or any of the Principal
Subsidiaries or their respective property is bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Company, any of the Principal Subsidiaries
or their respective property (except state securities or Blue Sky
laws).

10
<PAGE> 11
(k) Except as set forth in the Registration Statement, there
are no material legal or governmental proceedings pending to which the
Company or any of the Principal Subsidiaries is a party or to which
any of their respective property is the subject, and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated. No contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement is not so described
or filed as required.

(l) Except as set forth in the Registration Statement,
neither the Company nor any of the Principal Subsidiaries has violated
any U.S. federal or state law relating to discrimination in the
hiring, promotion or pay of employees nor any applicable U.S. federal
or state wages and hours laws, or any provisions of the Employee
Retirement Income Security Act or the rules and regulations
promulgated thereunder, which in each case could result in any
material adverse change in the business, financial condition or
results of operations of the Company and the Principal Subsidiaries,
taken as a whole.

(m) Except as set forth in the Registration Statement, the
Company and each of the Principal Subsidiaries has good and marketable
title, free and clear of all liens, claims, encumbrances and
restrictions which are required to be described in the Registration
Statement except liens for taxes not yet due and payable, to all
property and assets described in the Registration Statement as being
owned by it. All leases to which the Company or any of the Principal
Subsidiaries is a party are valid and binding and no default by the
Company or any such Principal Subsidiary, or, to the best of the
Company's knowledge, by any other party to any such leases, has
occurred or is continuing thereunder, which could result in any
material adverse change in the business, financial condition or
results of operations of the Company and the Principal Subsidiaries
taken as a whole, and the Company and the Principal Subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any
of them is a party as lessee with such exceptions as do not materially
interfere with the use made by the Company or such Principal
Subsidiary.

(n) Deloitte & Touche are independent public accountants with
respect to the Company as required by the Act.

11
<PAGE> 12
(o) The financial statements, together with related schedules
and notes forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly
the consolidated financial position, results of operations and
statements of cash flow of the Company and its subsidiaries on the
basis stated in the Registration Statement at the respective dates and
for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), in all material respects, present fairly the
information purported to be shown thereby at the respective dates or
for the respective periods to which they apply and have been prepared
on a basis consistent with such financial statements and the books and
records of the Company. The pro forma financial statements and the
related notes thereto included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with
Article XI of Regulation S-X and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein.

(p) Each of the Company and the Principal Subsidiaries has
such permits, licenses, franchises and authorizations of governmental
or regulatory authorities ("permits") which are required to have been
obtained by it prior to the date hereof and which are material to the
ownership or leasing and operation of or construction of its
respective properties and to the conduct of its business in the manner
described in the Prospectus, except for any such permits, the failure
of which to have, individually or in the aggregate, would not have a
material adverse effect on the business, financial condition or
results of operations of the Company and the Principal Subsidiaries,
taken as a whole, and subject to such qualifications as may be set
forth in the Registration Statement; each of the Company and the
Principal Subsidiaries has fulfilled and performed all of its material
obligations with respect to such permits required to have been
fulfilled

12
<PAGE> 13
and performed prior to the date hereof and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or result in any other material impairment of the
rights of the holder of any such permit, subject in each case to such
qualification as may be set forth in the Registration Statement; and,
except as described in the Registration Statement, such permits do not
materially interfere with the use or operation of the electric power
generation facilities of the Principal Subsidiaries as currently used
or operated or as contemplated to be used or operated.

(q) Each of the AES Beaver Valley, the AES Deepwater, the AES
Placerita, the AES Shady Point, the AES Barbers Point and the AES
Thames facilities (each as defined in the Registration Statement) is a
"qualifying cogeneration facility" under the Federal Power Act
("FPA"), as amended by Section 201 of the Public Utility Regulatory
Policies Act of 1978 ("PURPA") and the FERC's regulations promulgated
thereunder, and each such facility's current use, operation and
ownership are consistent with such facility's status as a "qualifying
cogeneration facility".

(r) Neither the Company nor any of the Principal Subsidiaries
is (i) subject to regulation as a "holding company" or a "subsidiary
company" of a holding company or a "public utility company" under
Section 2(a) of the Public Utility Holding Company Act of 1935
("PUHCA"), except that the Company and its subsidiary in the United
Kingdom, Applied Energy Services Electric Limited, are exempt holding
companies under Section 3(a)(5) of PUHCA by order of the Commission,
(ii) subject to regulation under the FPA, other than as contemplated
by 18 C.F.R. Section 292.601(c), or (iii) except as described in the
Registration Statement (other than contained in the exhibits thereto),
subject to regulation by any state law with respect to rates or the
financial or organizational regulation of electric utilities.

(s) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

(t) Except as set forth in the Registration Statement, each
of the Company, each Principal Subsidiary, and any other subsidiary or
entity which

13
<PAGE> 14
the Company may be deemed to operate (together with the Principal
Subsidiaries, the "Subsidiaries") is in compliance with all applicable
foreign, federal, state and local environmental (including, without
limitation, the Comprehensive Environmental Response, Compensation &
Liability Act of 1980, as amended), safety or similar law, rule and
regulation, and there are no costs or liabilities associated with any
such law, rule or regulation, except for any such noncompliances,
costs or liabilities which, individually or in the aggregate, would
not have a material adverse effect on the business, financial
condition or results of operations of the Company and the
Subsidiaries, taken as a whole.

(u) The Company has complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).

7. Indemnification. (a) The Company agrees to indemnify
and hold harmless each Underwriter, the QIU, in its capacity of QIU, and each
person, if any, who controls any Underwriter or the QIU within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and judgments (i) caused by any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (other than that part of the Registration Statement
that constitutes the Form T-1) or the Prospectus (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages, liabilities or judgments
purchased Notes, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Notes to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect

14
<PAGE> 15
giving rise to such losses, claims, damages, liabilities or judgments or (ii)
with respect to the QIU acting as QIU for the Notes caused by, based upon or
arising from the QIU participating, acting or serving as a QIU for such
offering, except for any such losses, claims, damages, liabilities which are
finally judicially determined to have resulted from the bad faith or gross
negligence of the QIU.

(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the Company,
such Underwriter shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses. Any Underwriter or any such controlling person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Underwriter or such controlling person unless (i) the employment of such
counsel has been specifically authorized in writing by the Company, (ii) the
Company has failed to assume the defense and employ counsel or (iii) the named
parties to any such action (including any impleaded parties) include both such
Underwriter or such controlling person and the Company and such Underwriter or
such controlling person shall have been advised by such counsel that there may
be one or more legal defenses available to it which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that the
Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such Underwriters and controlling persons, which
firm shall be designated in writing by J.P. Morgan Securities Inc. and that all
such fees and expenses shall be reimbursed as they are incurred). The Company
shall not be liable for any settlement of any such action effected without the
written consent of the Company but if settled with the written consent of the
Company, the Company agrees to indemnify and hold harmless any Underwriter and
any such controlling person from and against any loss or liability by reason of
such settlement. Notwithstanding the foregoing sentence, if

15
<PAGE> 16
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 10
business days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.

(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to each Underwriter but only
with reference to information relating to such Underwriter furnished in writing
by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus, any preliminary prospectus or any
amendment or supplement thereto. In case any action shall be brought against
the Company, any of its directors, any such officer or any person controlling
the Company based on the Registration Statement, the Prospectus or any
preliminary prospectus or any amendment or supplement thereto and in respect of
which indemnity may be sought against any Underwriter, the Underwriter shall
have the rights and duties given to the Company (except that if the Company
shall have assumed the defense thereof, such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such officers
and any person controlling the Company shall have the rights and duties given
to the Underwriter, by Section 7(b) hereof.

(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu

16
<PAGE> 17
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters and the QIU on the other hand from the offering of the Notes or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Underwriters and the QIU in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Underwriters and the QIU shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by
the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Notes, in each
case as set forth in the table on the cover page of the Prospectus (or, in the
case of the QIU, the total underwriting discounts and commissions received by
Goldman, Sachs & Co.). The relative fault of the Company and the Underwriters
and the QIU shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the QIU and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Underwriter nor the QIU shall be required to contribute any amount in excess of
the amount by which the total price at which the Notes underwritten by it (or
by Goldman, Sachs & Co. in the case

17
<PAGE> 18
of the QIU) and distributed to the public was offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
(or in the case of Goldman, Sachs & Co. in its capacity as QIU, the aggregate
amount of any damages that Goldman, Sachs & Co. has otherwise been required to
pay in such capacity) by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 7(d) are several in proportion to the respective principal amount
of Notes purchased by each of the Underwriters hereunder and not joint.

8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Notes under this Agreement are
subject to the satisfaction of each of the following conditions:

(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the
Closing Date.

(b) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been commenced or shall be pending before or,
to the best of the Company's knowledge, contemplated by the
Commission.

(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have been any
downgrading, nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change that does
not indicate the direction of the possible change, in the rating
accorded any of the Company's securities by any "nationally recognized
statistical rating organization", as such term is defined for purposes
of Rule 436(g)(2) under the Act.

(d)(i) Since the date of the latest balance sheet included in
the Registration Statement, there shall not have been any material
adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the
earnings, affairs or business prospects, whether or

18
<PAGE> 19
not arising in the ordinary course of business, of the Company and the
Principal Subsidiaries, taken as a whole, from that described in the
Registration Statement, (ii) since the date of the latest balance
sheet included in the Registration Statement there shall not have been
any material change, or any development involving a prospective
material adverse change, in the capital stock or in the long-term debt
of the Company from that set forth in the Registration Statement,
(iii) the Company shall have no liability or obligation, direct or
contingent, which is material to the Company and the Principal
Subsidiaries, taken as a whole, other than those reflected in the
Registration Statement and (iv) on the Closing Date you shall have
received a certificate dated the Closing Date, signed by such
executive officers of the Company as you may designate, and such other
certificates of executive officers and key personnel of the Principal
Subsidiaries as you may specify confirming the matters set forth in
paragraphs (a), (b), (c) and (d) of this Section 8.

(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the
Closing Date, of Chadbourne & Parke LLP, counsel for the Company, in
respect of the matters set forth in clauses (iv) through (ix) and
clauses (xvii) through (xix) and, in respect of the matters set forth
in clauses (i) through (iii) and clauses (xii) through (xvi), of
William R. Luraschi, General Counsel of AES, and, in respect of the
matters set forth in clause (xiii), of Murtha, Cullina, Richter and
Pinney with respect to AES Thames, of Hall, Estill, Hardwick, Gable,
Golden & Nelson with respect to AES Shady Point, of Cades Schutte
Fleming Wright and Chadbourne & Parke LLP with respect to AES Barbers
Point, of ___ with respect to AES Deepwater and AES Warrior Run, of
_____ with respect to Kilroot, Belfast West and Medway Power, of _____
with respect to San Nicolas and Rio Juramento, of ______ with respect
to AES Lal Pir and AES Pah Gen, and of ____ with respect to Light
[other Principal Subsidiaries to be included] (as defined in the
Registration Statement), each special counsel to the Company, to the
effect that:

(i) the Company and each of the Principal
Subsidiaries has been duly incorporated, is validly existing
as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and
authority required to carry on its business as it

19
<PAGE> 20
is currently being conducted and to own its properties;

(ii) the Company and each of the Principal Subsidiaries
is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing
of property requires such qualification, except where the
failure to be so qualified would not have a material adverse
effect on the Company and the Principal Subsidiaries, taken as
a whole;

(iii) except as set forth in the Registration Statement or
otherwise set forth on Annex I, all of the outstanding shares
of capital stock of, or other ownership interests in, the
Principal Subsidiaries have been duly and validly authorized
and issued and are fully paid and non-assessable, and are
owned of record, and to the knowledge of such counsel, after
due inquiry, beneficially, by the Company or the Principal
Subsidiary as set forth in such opinion; and such counsel,
after due inquiry, is not aware of any security interest,
claim, lien, encumbrance or adverse interest of any nature on
such shares or other ownership interests except as set forth
in the Registration Statement or in Annex I;

(iv) the Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement,
will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company enforceable in
accordance with their terms except as the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by equitable
principles of general applicability;

(v) this Agreement has been duly authorized,
executed and delivered by the Company and is a valid and
binding agreement of the Company (except as rights to
indemnity and contribution hereunder may be limited by
applicable law);

(vi) the Indenture has been duly qualified under
the Trust Indenture Act, and has been duly authorized,
executed and delivered by the Company

20
<PAGE> 21
and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and be equitable principles of general
applicability;

(vii) the Notes conform as to legal matters to the
description thereof contained in the Registration Statement
and the Prospectus;

(viii) the Registration Statement has become effective
under the Act (assuming compliance with clause (2) of Rule
462(b) in the case of the Additional Registration Statement)
and, to the best of such counsel's knowledge, no stop order
suspending its effectiveness has been issued and no
proceedings for that purpose are pending before or
contemplated by the Commission;

(ix) the statements in the Prospectus under "Description
of Offered Debt Securities", "Certain Tax Considerations" and
"Underwriting", in the Prospectus incorporated by reference
from Item 3 of Part I of the Company's Annual Report on Form
10-K for the year ended December 31, 1995, and in the
Registration Statement in Item 15, insofar as such
statements constitute a summary of the legal matters,
documents or proceedings specifically referred to therein,
fairly present all the material information called for with
respect to such legal matters, documents or proceedings;

(x) the Company is not in violation of its Restated
Certificate of Incorporation or in violation of its By-laws
and none of the Principal Subsidiaries is in violation of its
respective charter or, except for any such violations which
would not have a material adverse effect on the Company and
its subsidiaries taken as a whole, its by-laws;

(xi) the execution, delivery and performance of this
Agreement, the Indenture and the Notes by the Company,
compliance by the Company with all the provisions hereof and
thereof and the consummation of the transactions contemplated
hereby and thereby will not require any consent, approval,
authorization or other order of any

21
<PAGE> 22
court, regulatory body, administrative agency or other
governmental body (except such as may be required under the
Act, the Exchange Act, the Trust Indenture Act or other
securities or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of
the Principal Subsidiaries or any agreement, indenture or
other instrument known to such counsel, after due inquiry, to
which the Company or any of the Principal Subsidiaries is a
party or by which the Company or any of the Principal
Subsidiaries or their respective properties are bound, or
violate or conflict with any laws, administrative regulations
or rulings or court decrees known to such counsel, after due
inquiry, applicable to the Company or any of the Principal
Subsidiaries or their respective properties;

(xii) after due inquiry, such counsel does not know
of any legal or governmental proceeding pending or threatened
to which the Company or any of the Principal Subsidiaries is a
party or to which any of their respective property is subject
which is required to be described in the Registration
Statement or the Prospectus and is not so described, or of any
contract or other document which is required to be described
in the Registration Statement or the Prospectus or is required
to be filed as an exhibit to the Registration Statement which
is not described or filed as required;

(xiii) each of the applicable Principal Subsidiaries
has obtained all permits, licenses, franchises and
authorizations of governmental or regulatory authorities
("permits") which are required to have been obtained by it
prior to the date hereof and which are material to the
construction, ownership or leasing and operation of each of
the Principal Subsidiaries, as the case may be, as
contemplated by the Registration Statement, except for any
such permits, the failure to have obtained which, individually
or in the aggregate would not have a material adverse effect
on the business, financial condition or results of operations
of the Company and the Principal Subsidiaries, taken as a
whole, and subject to such qualifications as may be set forth
in the Registration Statement, and all such

22
<PAGE> 23
permits are in full force and effect; and such counsel has no
reason to believe that any other permits which may be material
to the construction, ownership or leasing and operation of
such facilities will not be obtained in due course;

(xiv) each of the AES Beaver Valley, the AES
Deepwater, the AES Placerita, the AES Shady Point, the AES
Barbers Point and the AES Thames facilities is a "qualifying
cogeneration facility" under the FPA, as amended by Section
201 of PURPA and the FERC regulations promulgated thereunder,
and, to the best of such counsel's knowledge, after due
inquiry, each such facility's current use, operation and
ownership are consistent with such facility's status as a
"qualifying cogeneration facility";

(xv) neither the Company nor any of the Principal
Subsidiaries is (i) subject to regulation as a "holding
company" or a "subsidiary company" of a holding company or an
"affiliate" of a subsidiary or holding company or a "public
utility company" under Section 2(a) of PUHCA, except that the
Company and its subsidiary in the United Kingdom, Applied
Energy Services Electric Limited, are exempt holding companies
under Section 3(a)(5) of PUHCA by order of the Commission,
(ii) subject to regulation under the FPA, other than as
contemplated by 18 C.F.R. Section 292.601(c), or (iii) except
as described in the Registration Statement, subject to
regulation under any state law with respect to the rates or
the financial or organizational regulation of electric
utilities;

(xvi) the Company is not an "investment company" or
a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;

(xvii) except for the order of the Commission making
the Registration Statement effective and permits and similar
authorizations required under the securities or Blue Sky laws
of certain states, no consent, approval, authorization or
other order of any regulatory body, administrative agency or
other governmental body is legally required for the valid
issuance and sale of the Notes to the Underwriters as
contemplated by this Agreement or

23
<PAGE> 24
the public offering of the Notes contemplated by the
Prospectus;

(xviii) the Registration Statement and the Prospectus
and any supplement or amendment thereto (except for financial
statements and other financial and statistical information
therein as to which no opinion need be expressed) comply as to
form in all material respects with the Act; and

(xix) each document filed pursuant to the Exchange
Act and incorporated by reference in the Registration
Statement and the Prospectus (except for financial statements
and financial and statistical information therein as to which
no opinion need be expressed) complied when so filed as to
form in all material respects with the Exchange Act and the
rules and regulations of the Commission thereunder.

In addition, Chadbourne & Parke LLP will deliver a separate
letter to the effect that such counsel has participated in conferences
with directors, officers and other representatives of the Company and
representatives of the independent public accountants for the Company,
at which conferences the contents of the Registration Statement and
related matters were discussed, and, although such counsel has not
independently verified and is not passing upon and assume no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement, except as
specified, no facts have come to such counsel's attention which lead
such counsel to believe that the Registration Statement (other than
any financial statements or other financial or statistical information
therein and that part of the Registration Statement that constitutes
the Form T-1 as to which no opinion is expressed) at its effective
date contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading, or that the
Prospectus as of its date or the Closing Date (other than any
financial statements or other financial or statistical information
therein as to which no opinion is expressed), contained any untrue
statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading.

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<PAGE> 25
In rendering their opinions above, Chadbourne & Parke LLP may
rely as to factual matters on such certificates of the Company's
officers or of governmental officials as they may deem relevant or
necessary for such opinions and as to matters governed by other than
federal or New York law or by the General Corporation Law of Delaware
on opinions of local counsel.

In rendering their opinions pursuant to clause (ix) of this
Section 8(e) with respect to statements constituting summaries of documents
applicable to Light, Chadbourne & Parke LLP may state that is has examined
only English translations of such documents and has assumed that such
translations are accurate.

(f) You shall have received on the Closing Date an opinion,
dated the Closing Date, of William R. Luraschi, General Counsel of the
Company, to the effect that each of the Company and the Subsidiaries
is in compliance with all applicable foreign, federal, state and local
environmental (including, without limitation, the Comprehensive
Environmental Response, Compensation & Liability Act of 1980, as
amended), safety and similar law, rule and regulation, except for any
such noncompliances which would not, singly or in the aggregate,
result in any material adverse change in the business, financial
condition or results of operations of the Company and the
Subsidiaries, taken as a whole.

In addition, Mr. Luraschi will deliver a separate letter to
the effect that such counsel has participated in conferences with
directors, officers and other representatives of the Company and
representatives of the independent public accountants for the Company,
at which conferences the contents of the Registration Statement and
related matters were discussed, and, although such counsel has not
independently verified and is not passing upon and assume no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement, except as
specified, no facts have come to such counsel's attention which lead
such counsel to believe that the Registration Statement (other than
any financial statements or other financial or statistical information
therein and that part of the Registration Statement that constitutes
the Form T-1 as to which no opinion is expressed) at its effective
date contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements contained therein

25
<PAGE> 26
not misleading, or that the Prospectus as of its date or the Closing
Date (other than any financial statements or other financial or
statistical information therein as to which no opinion is expressed),
contained any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements contained therein,
in the light of the circumstances under which they were made, not
misleading.

In rendering the opinions above, Mr. Luraschi may rely as to
factual matters on such certificates of the Company's officers or of
governmental officials as he may deem relevant or necessary for such
opinions and as to matters governed by other than federal or New York
law or by the General Corporation Law of Delaware on opinions of local
counsel.

(g) You shall have received on the Closing Date an opinion,
dated the Closing Date, of Davis Polk & Wardwell, counsel for the
Underwriters, as to the matters referred to in clauses (iv), (v),
(vi), (ix) (but only with respect to the statements under the captions
"Description of Notes" and "Underwriting") and (xviii) of the
foregoing paragraph (e).

With respect to subparagraph (xviii) of paragraph (e) above
and the final subparagraph of this paragraph (g), Davis Polk &
Wardwell may state that their opinion and belief is based upon their
participation in the preparation of the Registration Statement and the
Prospectus and any amendments or supplements thereto (but not
including documents incorporated therein by reference) and review and
discussion of the contents thereof (including documents incorporated
therein by reference), but is without independent check or
verification except as specified.

In addition, Davis Polk & Wardwell will opine to the effect
that such counsel has participated in conferences with officers and
other representatives of the Company and representatives of the
independent public accountants for the Company, at which conferences
the contents of the Registration Statement and related matters were
discussed, and, although such counsel has not independently verified
and is not passing upon and assume no responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement, except as specified, no facts have come to
such counsel's attention which lead such counsel to believe that the

26
<PAGE> 27
Registration Statement (other than any financial statements or other
financial or statistical information therein and that part of the
Registration Statement that constitutes the Form T-1 as to which no
opinion is expressed) at its effective date contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
contained therein not misleading, or that the Prospectus as of its
date or the Closing Date (other than any financial statements or other
financial or statistical information therein as to which no opinion is
expressed), contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements
contained therein, in the light of the circumstances under which they
were made, not misleading.

(i) You shall have received a letter on and as of the Closing
Date, in form and substance satisfactory to you, from Deloitte &
Touche, independent public accountants, with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus and substantially in the
form and substance of the letter delivered to you by Deloitte & Touche
on the date of this Agreement.

(j) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company
at or prior to the Closing Date.

9. Effective Date of Agreement and Termination. This
Agreement shall become effective upon the later of (i) execution of this
Agreement and (ii) when notification of the effectiveness of the Registration
Statement has been released by the Commission.

This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any adverse change or
development involving a prospective adverse change in the condition, financial
or otherwise, of the Company, any Principal Subsidiary or the earnings,
affairs, or business prospects of the Company or any Principal Subsidiary,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it

27
<PAGE> 28
impracticable to market the Notes on the terms and in the manner contemplated
in the Prospectus, (ii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or material change in economic
conditions, if the effect of such outbreak, escalation, calamity, crisis or
change on the financial markets of the United States or elsewhere would, in
your judgment, make it impracticable to market the Notes on the terms and in
the manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ National Market System or limitation on
prices for securities on any such exchange or National Market System, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.

If on the Closing Date any one or more of the Underwriters
shall fail or refuse to purchase the Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Notes
which such defaulting Underwriter or Underwriters, as the case may be, agreed
but failed or refused to purchase is not more than one-tenth of the total
principal amount of Notes to be purchased by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the principal amount of Notes set forth opposite its name in Schedule I
bears to the aggregate principal amount of Notes which all the non-defaulting
Underwriters, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Notes which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused
to purchase on such date; provided that in no event shall the principal amount
of Notes which any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such principal amount of Notes without the written consent of such
Underwriter. If on the Closing Date any Underwriter or Underwriters shall fail
or refuse to purchase Notes and the aggregate principal amount of Notes with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of Notes to be purchased on such date by all Underwriters in

28
<PAGE> 29
the event of a default by a Underwriter and arrangements satisfactory to you
and the Company for purchase of such Notes are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of
any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.

10. Miscellaneous. Notices given pursuant to any provision
of this Agreement shall be addressed as follows: (a) if to the Company, to The
AES Corporation, 1001 N. 19th Street, Arlington, Virginia 22209 and (b) if to
any Underwriter or to you, to you c/o J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York 10260, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.

The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, its officers
and directors and of the several Underwriters set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter or the QIU or by or on behalf of the Company, the officers or
directors of the Company or any controlling person of the Company, (ii)
acceptance of the Notes and payment for them hereunder and (iii) termination of
this Agreement.

If this Agreement shall be terminated by the Underwriters
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, the Company agrees
to reimburse the several Underwriters for all out-of-pocket expenses (including
the fees and disbursements of counsel) reasonably incurred by them.

Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this

29
<PAGE> 30
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
a purchaser of any of the Notes from any of the several Underwriters merely
because of such purchase.

This Agreement shall be governed and construed in accordance
with the laws of the State of New York.

This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.

30
<PAGE> 31
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the Underwriters.

Very truly yours,

THE AES CORPORATION

By
--------------------------------------

J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.

Acting severally on behalf of
itself and the several Underwriters
named above

By J.P. MORGAN SECURITIES INC.

By
---------------------------
<PAGE> 32
SCHEDULE I

<TABLE>
<CAPTION>
Principal Amount of Notes
Underwriters to be Purchased
------------ -------------------------
<S> <C>
J.P. Morgan Securities Inc. $

Goldman, Sachs & Co.

Total $ 225,000,000
=============
</TABLE>

<PAGE> 1

EXHIBIT 4.1

================================================================================

THE AES CORPORATION

AS THE COMPANY

AND

THE FIRST NATIONAL BANK OF CHICAGO

AS TRUSTEE

-----------------------------------

INDENTURE

DATED AS OF , 1996

-----------------------------------

================================================================================
<PAGE> 2
TABLE OF CONTENTS*

<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS OF THE COMPANY

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . 7
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 2

THE SECURITIES

SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.3 Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.4 Denomination and Date of Securities; Payments of Interest . . . . . . . . . . . . 14
SECTION 2.5 Registrar and Paying Agent; Agents Generally . . . . . . . . . . . . . . . . . . 14
SECTION 2.6 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.8 Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.9 Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12 CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.13 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.14 Series May Include Tranches . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

- ----------------------------------

*Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.

i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 3

REDEMPTION

SECTION 3.1 Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.2 Notice of Redemption; Partial Redemptions . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.3 Payment of Securities Called for Redemption . . . . . . . . . . . . . . . . . . . 25
SECTION 3.4 Exclusion of Certain Securities from Eligibility for Selection
for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.5 Mandatory and Optional Sinking Funds . . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE 4

COVENANTS

SECTION 4.1 Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3 Securityholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.4 Certificate to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.5 Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE 5

SUCCESSOR CORPORATION

SECTION 5.1 When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE 6

DEFAULT AND REMEDIES

SECTION 6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.5 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.7 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>

ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.10 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.11 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.12 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.13 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.14 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 42

ARTICLE 7

TRUSTEE

SECTION 7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.9 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.10 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.11 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

ARTICLE 8

SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.

SECTION 8.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.2 Application by Trustee of Funds Deposited for Payment of
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.3 Repayment of Moneys Held by Paying Agent . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for
Two Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.6 Defeasance of Certain Obligations. . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 8.7 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>

iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.1 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.2 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.3 Revocation and Effect of Consent . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.4 Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.5 Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.6 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . 59

ARTICLE 10

MISCELLANEOUS

SECTION 10.1 Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 10.3 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . 61
SECTION 10.4 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . 61
SECTION 10.5 Evidence of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 10.6 Rules by Trustee, Paying Agent or Registrar . . . . . . . . . . . . . . . . . . . 62
SECTION 10.7 Payment Date Other Than a Business Day . . . . . . . . . . . . . . . . . . . . . 62
SECTION 10.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.9 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . 63
SECTION 10.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.11 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.12 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.13 Table of Contents, Headings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.14 Incorporators, Stockholders, Officers and Directors of Company
Exempt from Individual Liability . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10.15 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>

iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 11

SUBORDINATION OF SECURITIES

SECTION 11.1 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11.2 Payments to Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.3 Subrogation of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 11.4 Authorization by Securityholders . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.5 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.6 Trustee's Relation to Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.7 No Impairment of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . 70

SIGNATURES
</TABLE>

v
<PAGE> 7
INDENTURE, dated as of ______, 1996, between The AES Corporation,
a Delaware corporation, as the Company, and First National Bank of Chicago, a
national association, as Trustee.

RECITALS OF THE COMPANY

WHEREAS, the Company has duly authorized the issue from time to
time of its debentures, notes or other evidences of indebtedness to be issued
in one or more series (the "Securities") up to such principal amount or amounts
as may from time to time be authorized in accordance with the terms of this
Indenture and to provide, among other things, for the authentication, delivery
and administration thereof, the Company has duly authorized the execution and
delivery of this Indenture; and

WHEREAS, all things necessary to make this Indenture a valid
indenture and agreement according to its terms have been done;

NOW, THEREFORE:

In consideration of the premises and the purchases of the
Securities by the holders thereof, the Company and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
holders from time to time of the Securities or of any and all series thereof
and of the coupons, if any, appertaining thereto as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1 Definitions.

"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

"Agent" means any Registrar, Paying Agent, transfer agent or
Authenticating Agent.
<PAGE> 8
"Authorized Newspaper" means a newspaper (which, in the case of
The City of New York, will, if practicable, be The Wall Street Journal (Eastern
Edition) and in the case of London, will, if practicable, be the Financial
Times (London Edition) and published in an official language of the country of
publication customarily published at least once a day for at least five days in
each calendar week and of general circulation in The City of New York or
London, as applicable. If it shall be impractical in the opinion of the
Trustee to make any publication of any notice required hereby in an Authorized
Newspaper, any publication or other notice in lieu thereof which is made or
given with the approval of the Trustee shall constitute a sufficient
publication of such notice.

"Bank Credit Agreement" means the Credit Agreement dated as of May
20, 1996 among the Company, the Banks named on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as such Agreement has been and may
be amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, or restructuring (including,
but not limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Company and whose obligations are guaranteed by the Company
thereunder) all or any portion of, the Debt under such Agreement or any
successor agreements and includes any agreement with one or more banks or other
lending institutions refinancing all or any portion of the Debt under such
Agreement or any successor agreements.

"Board Resolution" means one or more resolutions of the board of
directors of the Company or any authorized committee thereof, certified by the
secretary or an assistant secretary to have been duly adopted and to be in full
force and effect on the date of certification, and delivered to the Trustee.

"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New York,
with respect to any Security the interest on which is based on the offered
quotations in the interbank Eurodollar market for dollar deposits in London, or
with respect to Securities denominated in a specified currency other than
United States dollars in the principal financial center of the country of the
specified currency.

"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of

2
<PAGE> 9
this instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.

"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces it pursuant to Article 5 of this
Indenture and thereafter means the successor.

"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 120 Wall Street, New York, New York 10043 Attention: Corporate
Trust Administration.

"Default" means any Event of Default as defined in Section 6.1 and
any event that is, or after notice or passage of time or both would be, an
Event of Default.

"Depositary" means, with respect to the Securities of any series
issuable or issued in the form of one or more Registered Global Securities, the
Person designated as Depositary by the Company pursuant to Section 2.3 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or include
each Person who is then a Depositary hereunder, and if at any time there is
more than one such Person, "Depositary" as used with respect to the Securities
of any such series shall mean the Depositary with respect to the Registered
Global Securities of that series.

"Designated Senior Debt" means (i) Debt under the Bank Credit
Agreement and (ii) Debt constituting Senior Debt which, at the time of its
determination, (A) has an aggregate principal amount of at least $30 million
and (B) is specifically designated in the instrument evidencing such Senior
Debt as "Designated Senior Debt" by the Company.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended.

"GAAP" means generally accepted accounting principles in the
United States of America at the date of any computation required or permitted
hereunder.

"Holder" or "Securityholder" means the registered holder of any
Security with respect to Registered Securities and the bearer of any
Unregistered Security or any coupon appertaining thereto, as the case may be.

3
<PAGE> 10
"Indenture" means this Indenture as originally executed and
delivered or as it may be amended or supplemented from time to time by one or
more indentures supplemental to this Indenture entered into pursuant to the
applicable provisions of this Indenture and shall include the forms and terms
of the Securities of each series established as contemplated pursuant to
Sections 2.1 and 2.3.

"Officer" means, with respect to the Company, the chairman of the
board of directors, the president or chief executive officer, any vice
president, the chief financial officer, the treasurer or any assistant
treasurer, or the secretary or any assistant secretary.

"Officers' Certificate" means a certificate signed in the name of
the Company (i) by the chairman of the board of directors, the president or
chief executive officer or a vice president and (ii) by the chief financial
officer, the treasurer or any assistant treasurer, or the secretary or any
assistant secretary, complying with Section 10.4 and delivered to the Trustee.
Each such certificate shall comply with Section 314 of the Trust Indenture Act
and include (except as otherwise expressly provided in this Indenture) the
statements provided in Section 10.4.

"Opinion of Counsel" means a written opinion signed by legal
counsel, who may be an employee of or counsel to the Company, satisfactory to
the Trustee and complying with Section 10.4. Each such opinion shall comply
with Section 314 of the Trust Indenture Act and include the statements provided
in Section 10.4, if and to the extent required thereby.

"original issue date" of any Security (or portion thereof) means
the earlier of (a) the date of authentication of such Security or (b) the date
of any Security (or portion thereof) for which such Security was issued
(directly or indirectly) on registration of transfer, exchange or substitution.

"Original Issue Discount Security" means any Security that
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof pursuant to
Section 6.2.

"Periodic Offering" means an offering of Securities of a series
from time to time, the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the stated maturity
or maturities thereof and the redemption provisions, if any,

4
<PAGE> 11
with respect thereto, are to be determined by the Company or its agents upon
the issuance of such Securities.

"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

"Principal" of a Security means the principal amount of, and,
unless the context indicates otherwise, includes any premium payable on, the
Security.

"Registered Global Security" means a Security evidencing all or a
part of a series of Registered Securities, issued to the Depositary for such
series in accordance with Section 2.2, and bearing the legend prescribed in
Section 2.2.

"Registered Security" means any Security registered on the
Security Register (as defined in Section 2.5).

"Responsible Officer" means, when used with respect to the
Trustee, any senior trust officer, any vice president, any trust officer, any
assistant trust officer, or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.

"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture and, unless the context indicates otherwise, shall include any
coupon appertaining thereto.

"Securities Act" means the Securities Act of 1933, as amended.

"Senior Debt" means the principal of (and premium, if any) and
interest on all Debt of the Company whether created, incurred or assumed
before, on or after the date of the issuance of the Securities; provided that
Senior Debt shall not include (i) the Company's 6 1/2% Convertible Subordinated
Debentures Due 2002 and 9% Convertible Subordinated Debentures Due 1993 which
rank junior to the Securities, (ii) Debt that, when incurred and without
respect to any election under Section 1111(b) of Title 11,

5
<PAGE> 12
United States Code, was without recourse to the Company, (iii) Debt of the
Company to any Affiliate, (iv) any other Debt of the Company which by the terms
of the instrument creating or evidencing the same are specifically designated
as not being senior in right of payment to the Securities and (v) redeemable
stock of the Company.

"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which a majority of the capital stock
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at
the time directly or indirectly owned by such Person.

"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of Article 7 and thereafter means such successor.

"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended (15 U.S. Code Section Section 77aaa-77bbbb), as it may be amended from
time to time.

"Unregistered Security" means any Security other than a Registered
Security.

"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.

"Yield to Maturity" means, as the context may require, the yield
to maturity (i) on a series of Securities or (ii) if the Securities of a series
are issuable from time to time, on a Security of such series, calculated at the
time of issuance of such series in the case of clause (i) or at the time of
issuance of such Security of such series in

6
<PAGE> 13
the case of clause (ii), or, if applicable, at the most recent redetermination
of interest on such series or on such Security, and calculated in accordance
with the constant interest method or such other accepted financial practice as
is specified in the terms of such Security.

SECTION 1.2 Other Definitions. Each of the following terms
is defined in the section set forth opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Authenticating Agent 2.2
cash transaction 7.3
Dollars 4.2
Event of Default 6.1
Judgment Currency 10.15
mandatory sinking fund payment 3.5
optional sinking fund payment 3.5
Paying Agent 2.5
Payment Blockage Period 11.2
record date 2.4
Registrar 2.5
Required Currency 10.15
Security Register 2.5
self-liquidating paper 7.3
sinking fund payment date 3.5
tranche 2.14
</TABLE>

SECTION 1.3 Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the Trust Indenture Act,
the provision is incorporated by reference in and made a part of this
Indenture. The following terms used in this Indenture that are defined by the
Trust Indenture Act have the following meanings:

"indenture securities" means the Securities;

"indenture security holder" means a Holder or a Securityholder;

"indenture to be qualified" means this Indenture;

"indenture trustee" or "institutional trustee" means the Trustee;
and

"obligor" on the indenture securities means the Company or any
other obligor on the Securities.

All other terms used in this Indenture that are defined by the
Trust Indenture Act, defined by reference in the Trust Indenture Act to another
statute or defined by a

7
<PAGE> 14
rule of the Commission and not otherwise defined herein have the meanings
assigned to them therein.

SECTION 1.4 Rules of Construction. Unless the context
otherwise requires:

(i) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

(ii) words in the singular include the plural, and words in the
plural include the singular;

(iii) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision;

(iv) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated; and

(v) use of masculine, feminine or neuter pronouns should not
be deemed a limitation, and the use of any such pronouns should be
construed to include, where appropriate, the other pronouns.

ARTICLE 2

THE SECURITIES

SECTION 2.1 Form and Dating. The Securities of each series
shall be substantially in such form or forms (not inconsistent with this
Indenture) as shall be established by or pursuant to one or more Board
Resolutions or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have imprinted or otherwise
reproduced thereon such legend or legends or endorsements, not inconsistent
with the provisions of this Indenture, as may be required to comply with any
law, or with any rules of any securities exchange or usage, all as may be
determined by the officers executing such Securities as evidenced by their
execution of the Securities. Unless otherwise so established, Unregistered
Securities shall have coupons attached.

SECTION 2.2 Execution and Authentication. Two Officers shall
execute the Securities (other than coupons) for the Company by facsimile or
manual signature in the name and on behalf of the Company. The seal of the
Company, if

8
<PAGE> 15
any, shall be reproduced on the Securities. If an Officer whose signature is
on a Security no longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid.

The Trustee, at the expense of the Company, may appoint an
authenticating agent (the "Authenticating Agent") to authenticate Securities
(other than coupons). The Authenticating Agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent.

A Security (other than coupons) shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of
authentication on the Security. The signature shall be conclusive evidence
that the Security has been authenticated under this Indenture.

At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series having
attached thereto appropriate coupons, if any, executed by the Company to the
Trustee for authentication together with the applicable documents referred to
below in this Section, and the Trustee shall thereupon authenticate and deliver
such Securities to or upon the written order of the Company. In authenticating
any Securities of a series, the Trustee shall be entitled to receive prior to
the first authentication of any Securities of such series, and (subject to
Article 7) shall be fully protected in relying upon, unless and until such
documents have been superseded or revoked:

(1) any Board Resolution and/or executed supplemental indenture
referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and
terms of the Securities of that series were established;

(2) an Officers' Certificate setting forth the form or forms and
terms of the Securities, stating that the form or forms and terms of the
Securities of such series have been, or will be when established in
accordance with such procedures as shall be referred to therein,
established in compliance with this Indenture; and

(3) an Opinion of Counsel substantially to the effect that the
form or forms and terms of the Securities of such series have been, or will
be when established in accordance with such

9
<PAGE> 16
procedures as shall be referred to therein, established in compliance with
this Indenture and that the supplemental indenture, to the extent
applicable, and Securities have been duly authorized and, if executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and duly paid for by the purchasers thereof on the date of
such opinion, would be entitled to the benefits of the Indenture and would
be valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
affecting creditors' rights generally, general principles of equity, and
such other matters as shall be specified therein.

If the Company shall establish pursuant to Section 2.3 that the
Securities of a series or a portion thereof are to be issued in the form of one
or more Registered Global Securities, then the Company shall execute and the
Trustee shall authenticate and deliver one or more Registered Global Securities
that (i) shall represent and shall be denominated in an amount equal to the
aggregate principal amount of all of the Securities of such series issued in
such form and not yet cancelled, (ii) shall be registered in the name of the
Depositary for such Registered Global Security or Securities or the nominee of
such Depositary, (iii) shall be delivered by the Trustee to such Depositary or
its custodian or pursuant to such Depositary's instructions and (iv) shall bear
a legend substantially to the following effect: "Unless and until it is
exchanged in whole or in part for Securities in definitive registered form,
this Security may not be transferred except as a whole by the Depositary to the
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary."

SECTION 2.3 Amount Unlimited; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

The Securities may be issued in one or more series and shall be
subordinated to the Senior Debt pursuant to the provisions of Article 11
hereof. There shall be established in or pursuant to Board Resolution or one
or more indentures supplemental hereto, prior to the initial

10
<PAGE> 17
issuance of Securities of any series, subject to the last sentence of this
Section 2.3,

(1) the designation of the Securities of the series, which shall
distinguish the Securities of the series from the Securities of all other
series;

(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under this
Indenture and any limitation on the ability of the Company to increase such
aggregate principal amount after the initial issuance of the Securities of
that series (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, or upon
redemption of, other Securities of the series pursuant hereto);

(3) the date or dates on which the principal of the Securities of
the series is payable (which date or dates may be fixed or extendable);

(4) the rate or rates (which may be fixed or variable) per annum
at which the Securities of the series shall bear interest, if any, the date
or dates from which such interest shall accrue, on which such interest shall
be payable and (in the case of Registered Securities) on which a record
shall be taken for the determination of Holders to whom interest is payable
and/or the method by which such rate or rates or date or dates shall be
determined;

(5) if other than as provided in Section 4.2, the place or places
where the principal of and any interest on Securities of the series shall
be payable, any Registered Securities of the series may be surrendered for
exchange, notices, demands to or upon the Company in respect of the
Securities of the series and this Indenture may be served and notice to
Holders may be published;

(6) the right, if any, of the Company to redeem Securities of the
series, in whole or in part, at its option and the period or periods within
which, the price or prices at which and any terms and conditions upon which
Securities of the series may be so redeemed, pursuant to any sinking fund
or otherwise;

(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any mandatory redemption,
sinking fund or

11
<PAGE> 18
analogous provisions or at the option of a Holder thereof and the price or
prices at which and the period or periods within which and any of the terms
and conditions upon which Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligation;

(8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series shall
be issuable;

(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the maturity thereof;

(10) if other than the coin or currency in which the Securities
of the series are denominated, the coin or currency in which payment of the
Principal of or interest on the Securities of the series shall be payable
or if the amount of payments of Principal of and/or interest on the
Securities of the series may be determined with reference to an index based
on a coin or currency other than that in which the Securities of the series
are denominated, the manner in which such amounts shall be determined;

(11) if other than the currency of the United States of America,
the currency or currencies, including composite currencies, in which
payment of the Principal of and interest on the Securities of the series
shall be payable, and the manner in which any such currencies shall be
valued against other currencies in which any other Securities shall be
payable;

(12) whether the Securities of the series or any portion thereof
will be issuable as Registered Securities (and if so, whether such
Securities will be issuable as Registered Global Securities) or Unregistered
Securities (with or without coupons), or any combination of the foregoing,
any restrictions applicable to the offer, sale or delivery of Unregistered
Securities or the payment of interest thereon and, if other than as
provided herein, the terms upon which Unregistered Securities of any series
may be exchanged for Registered Securities of such series and vice versa;

(13) whether and under what circumstances the Company will pay
additional amounts on the Securities

12
<PAGE> 19
of the series held by a person who is not a U.S. person in respect of any
tax, assessment or governmental charge withheld or deducted and, if so,
whether the Company will have the option to redeem such Securities rather
than pay such additional amounts;

(14) if the Securities of the series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, the
form and terms of such certificates, documents or conditions;

(15) any trustees, depositaries, authenticating or paying agents,
transfer agents or the registrar or any other agents with respect to the
Securities of the series;

(16) provisions, if any, for the defeasance of the Securities of
the series (including provisions permitting defeasance of less than all
Securities of the series), which provisions may be in addition to, in
substitution for, or in modification of (or any combination of the
foregoing) the provisions of Article 8;

(17) if the Securities of the series are issuable in whole or in
part as one or more Registered Global Securities, the identity of the
Depositary for such Registered Global Security or Securities;

(18) any other events of default or covenants with respect to the
Securities of the series; and

(19) any other terms of the Securities of the series (which terms
shall not be inconsistent with the provisions of this Indenture).

All Securities of any one series and coupons, if any, appertaining
thereto shall be substantially identical, except in the case of Registered
Securities as to date and denomination, except in the case of any Periodic
Offering and except as may otherwise be provided by or pursuant to the Board
Resolution referred to above or as set forth in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and may be issued from time to time, consistent with the terms of this
Indenture, if so provided by or pursuant to such Board Resolution or in any
such indenture supplemental hereto and any forms and terms of Securities to be
issued from time to

13
<PAGE> 20
time may be completed and established from time to time prior to the issuance
thereof by procedures described in such Board Resolution or supplemental
indenture.

SECTION 2.4 Denomination and Date of Securities; Payments of
Interest. The Securities of each series shall be issuable as Registered
Securities or Unregistered Securities in denominations established as
contemplated by Section 2.3 or, if not so established with respect to
Securities of any series, in denominations of $1,000 and any integral multiple
thereof. The Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
Officers of the Company executing the same may determine, as evidenced by their
execution thereof.

Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and such
interest and shall be payable on the dates, established as contemplated by
Section 2.3.

The person in whose name any Registered Security of any series is
registered at the close of business on any record date applicable to a
particular series with respect to any interest payment date for such series
shall be entitled to receive the interest, if any, payable on such interest
payment date notwithstanding any transfer or exchange of such Registered
Security subsequent to the record date and prior to such interest payment date,
except if and to the extent the Company shall default in the payment of the
interest due on such interest payment date for such series, in which case the
provisions of Section 2.13 shall apply. The term "record date" as used with
respect to any interest payment date (except a date for payment of defaulted
interest) for the Securities of any series shall mean the date specified as
such in the terms of the Registered Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, the
fifteenth day next preceding such interest payment date, whether or not such
record date is a Business Day.

SECTION 2.5 Registrar and Paying Agent; Agents Generally.
The Company shall maintain an office or agency where Securities may be
presented for registration, registration of transfer or for exchange (the
"Registrar") and an office or agency where Securities may be presented for
payment (the "Paying Agent"), which shall be in the Borough of Manhattan, The
City of New York. The Company shall cause the Registrar to keep a register of
the Registered Securi-

14
<PAGE> 21
ties and of their registration, transfer and exchange (the "Security Register").
The Company may have one or more additional Paying Agents or transfer agents
with respect to any series.

The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture and the Trust Indenture Act that relate to such
Agent. The Company shall give prompt written notice to the Trustee of the name
and address of any Agent and any change in the name or address of an Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such. The Company may remove any Agent upon written notice to such
Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent
as evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company or
any affiliate of the Company may act as Paying Agent or Registrar; provided
that neither the Company nor an affiliate of the Company shall act as Paying
Agent in connection with the defeasance of the Securities or the discharge of
this Indenture under Article 8.

The Company initially appoints the Trustee as Registrar, Paying
Agent and Authenticating Agent. If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee ten days prior to
each interest payment date and at such other times as the Trustee may
reasonably request the names and addresses of the Holders as they appear in the
Security Register.

SECTION 2.6 Paying Agent to Hold Money in Trust. Not later
than 10:00 a.m. New York City time on each due date of any Principal or
interest on any Securities, the Company shall deposit with the Paying Agent
money in immediately available funds sufficient to pay such Principal or
interest. The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders of such Securities or the Trustee all money held by the Paying
Agent for the payment of Principal of and interest on such Securities and shall
promptly notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds disbursed, and the Trustee
may at any time during the

15
<PAGE> 22
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any affiliate of the Company acts as Paying Agent, it will, on or before each
due date of any Principal of or interest on any Securities, segregate and hold
in a separate trust fund for the benefit of the Holders thereof a sum of money
sufficient to pay such Principal or interest so becoming due until such sum of
money shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee in writing of any failure
to act as required by this Section.

SECTION 2.7 Transfer and Exchange. Unregistered Securities
(except for any temporary global Unregistered Securities) and coupons (except
for coupons attached to any temporary global Unregistered Securities) shall be
transferable by delivery.

At the option of the Holder thereof, Registered Securities of any
series (other than a Registered Global Security, except as set forth below) may
be exchanged for a Registered Security or Registered Securities of such series
and tenor having authorized denominations and an equal aggregate principal
amount, upon surrender of such Registered Securities to be exchanged at the
agency of the Company that shall be maintained for such purpose in accordance
with Section 2.5 and upon payment, if the Company shall so require, of the
charges hereinafter provided. If the Securities of any series are issued in
both registered and unregistered form, except as otherwise established pursuant
to Section 2.3, at the option of the Holder thereof, Unregistered Securities of
any series may be exchanged for Registered Securities of such series and tenor
having authorized denominations and an equal aggregate principal amount, upon
surrender of such Unregistered Securities to be exchanged at the agency of the
Company that shall be maintained for such purpose in accordance with Section
4.2, with, in the case of Unregistered Securities that have coupons attached,
all unmatured coupons and all matured coupons in default thereto appertaining,
and upon payment, if the Company shall so require, of the charges hereinafter
provided. At the option of the Holder thereof, if Unregistered Securities of
any series, maturity date, interest rate and original issue date are issued in
more than one authorized denomination, except as otherwise established pursuant
to Section 2.3, such Unregistered Securities may be exchanged for Unregistered
Securities of

16
<PAGE> 23
such series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Unregistered Securities to be
exchanged at the agency of the Company that shall be maintained for such
purpose in accordance with Section 4.2, with, in the case of Unregistered
Securities that have coupons attached, all unmatured coupons and all matured
coupons in default thereto appertaining, and upon payment, if the Company shall
so require, of the charges hereinafter provided. Registered Securities of any
series may not be exchanged for Unregistered Securities of such series.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.

All Registered Securities presented for registration of transfer,
exchange, redemption or payment shall be duly endorsed by, or be accompanied by
a written instrument or instruments of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder or his attorney duly
authorized in writing.

The Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of Securities. No service charge shall be
made for any such transaction.

Notwithstanding any other provision of this Section 2.7, unless
and until it is exchanged in whole or in part for Securities in definitive
registered form, a Registered Global Security representing all or a portion of
the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series
or a nominee of such successor Depositary.

If at any time the Depositary for any Registered Global Securities
of any series notifies the Company that it is unwilling or unable to continue
as Depositary for such Registered Global Securities or if at any time the
Depositary for such Registered Global Securities shall no longer be eligible
under applicable law, the Company shall appoint a successor Depositary eligible
under applicable law with respect to such Registered Global Securities. If a
successor Depositary eligible under applicable law for such Registered Global
Securities is not appointed by the Company within 90 days after the Company
receives such notice or

17
<PAGE> 24
becomes aware of such ineligibility, the Company will execute, and the Trustee,
upon receipt of the Company's order for the authentication and delivery of
definitive Registered Securities of such series and tenor, will authenticate
and deliver Registered Securities of such series and tenor, in any authorized
denominations, in an aggregate principal amount equal to the principal amount
of such Registered Global Securities, in exchange for such Registered Global
Securities.

The Company may at any time and in its sole discretion determine
that any Registered Global Securities of any series shall no longer be
maintained in global form. In such event the Company will execute, and the
Trustee, upon receipt of the Company's order for the authentication and
delivery of definitive Registered Securities of such series and tenor, will
authenticate and deliver, Registered Securities of such series and tenor in any
authorized denominations, in an aggregate principal amount equal to the
principal amount of such Registered Global Securities, in exchange for such
Registered Global Securities.

Any time the Registered Securities of any series are not in the
form of Registered Global Securities pursuant to the preceding two paragraphs,
the Company agrees to supply the Trustee with a reasonable supply of
certificated Registered Securities without the legend required by Section 2.2
and the Trustee agrees to hold such Registered Securities in safekeeping until
authenticated and delivered pursuant to the terms of this Indenture.

If established by the Company pursuant to Section 2.3 with respect
to any Registered Global Security, the Depositary for such Registered Global
Security may surrender such Registered Global Security in exchange in whole or
in part for Registered Securities of the same series and tenor in definitive
registered form on such terms as are acceptable to the Company and such
Depositary. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge,

(i) to the Person specified by such Depositary new Registered
Securities of the same series and tenor, of any authorized denominations as
requested by such Person, in an aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the Registered Global
Security; and

(ii) to such Depositary a new Registered Global Security in a
denomination equal to the

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<PAGE> 25
difference, if any, between the principal amount of the surrendered
Registered Global Security and the aggregate principal amount of Registered
Securities authenticated and delivered pursuant to clause (i) above.

Registered Securities issued in exchange for a Registered Global
Security pursuant to this Section 2.7 shall be registered in such names and in
such authorized denominations as the Depositary for such Registered Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee or an agent of the Company or the
Trustee. The Trustee or such agent shall deliver such Securities to or as
directed by the Persons in whose names such Securities are so registered.

All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.

Notwithstanding anything herein or in the forms or terms of any
Securities to the contrary, none of the Company, the Trustee or any agent of
the Company or the Trustee shall be required to exchange any Unregistered
Security for a Registered Security if such exchange would result in adverse
Federal income tax consequences to the Company (such as, for example, the
inability of the Company to deduct from its income, as computed for Federal
income tax purposes, the interest payable on the Unregistered Securities) under
then applicable United States Federal income tax laws. The Trustee and any
such agent shall be entitled to rely on an Officers' Certificate or an Opinion
of Counsel in determining such result.

The Registrar shall not be required (i) to issue, authenticate,
register the transfer of or exchange Securities of any series for a period of
15 days before a selection of such Securities to be redeemed or (ii) to
register the transfer of or exchange any Security selected for redemption in
whole or in part.

SECTION 2.8 Replacement Securities. If a defaced or
mutilated Security of any series is surrendered to the Trustee or if a Holder
claims that its Security of any series has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security of such series and tenor and principal amount bearing a number not
contemporaneously outstanding.

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<PAGE> 26
If required by the Trustee or the Company, an indemnity bond must be furnished
that is sufficient in the judgment of both the Trustee and the Company to
protect the Company, the Trustee and any Agent from any loss that any of them
may suffer if a Security is replaced. The Company may charge such Holder for
its expenses and the expenses of the Trustee (including without limitation
attorneys' fees and expenses) in replacing a Security. In case any such
mutilated, defaced, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Company in its discretion may pay such
Security instead of issuing a new Security in replacement thereof.

Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.

To the extent permitted by law, the foregoing provisions of this
Section are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities.

SECTION 2.9 Outstanding Securities. Securities outstanding
at any time are all Securities that have been authenticated by the Trustee
except for those cancelled by it, those delivered to it for cancellation and
those described in this Section as not outstanding.

If a Security is replaced pursuant to Section 2.8, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Security is held by a holder in due
course.

If the Paying Agent (other than the Company or an affiliate of the
Company) holds on the maturity date or any redemption date or date for
repurchase of the Securities money sufficient to pay Securities payable or to
be redeemed or repurchased on that date, then on and after that date such
Securities cease to be outstanding and interest on them shall cease to accrue.

A Security does not cease to be outstanding because the Company or
one of its affiliates holds such Security, provided, however, that, in
determining whether the Holders of the requisite principal amount of the
outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the
Company or any affiliate of the Company shall be disregarded and deemed not to
be outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand,

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<PAGE> 27
authorization, direction, notice, consent or waiver, only Securities as to
which a Responsible Officer of the Trustee has received written notice to be so
owned shall be so disregarded. Any Securities so owned which are pledged by
the Company, or by any affiliate of the Company, as security for loans or other
obligations, otherwise than to another such affiliate of the Company, shall be
deemed to be outstanding, if the pledgee is entitled pursuant to the terms of
its pledge agreement and is free to exercise in its or his discretion the right
to vote such securities, uncontrolled by the Company or by any such affiliate.

SECTION 2.10 Temporary Securities. Until definitive
Securities of any series are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Securities of such series. Temporary
Securities of any series shall be substantially in the form of definitive
Securities of such series but may have insertions, substitutions, omissions and
other variations determined to be appropriate by the Officers executing the
temporary Securities, as evidenced by their execution of such temporary
Securities. If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of any series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series and tenor upon surrender of such temporary Securities
at the office or agency of the Company designated for such purpose pursuant to
Section 4.2, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities of any series the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of such series and tenor and
authorized denominations. Until so exchanged, the temporary Securities of any
series shall be entitled to the same benefits under this Indenture as
definitive Securities of such series.

SECTION 2.11 Cancellation. The Company at any time may
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold.
The Registrar, any transfer agent and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee shall cancel and destroy all Securities surrendered for transfer,
exchange, payment

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<PAGE> 28
or cancellation and shall deliver a certificate of destruction to the Company.
The Company may not issue new Securities to replace Securities it has paid in
full or delivered to the Trustee for cancellation.

SECTION 2.12 CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" and "CINS" numbers (if then generally in use), and
the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders and no
representation shall be made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of redemption or
exchange.

SECTION 2.13 Defaulted Interest. If the Company defaults
in a payment of interest on the Securities, it shall pay, or shall deposit
with the Paying Agent money in immediately available funds sufficient to pay,
the defaulted interest plus (to the extent lawful) any interest payable on the
defaulted interest (as may be specified in the terms thereof, established
pursuant to Section 2.3) to the Persons who are Holders on a subsequent special
record date, which shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before such special record date, the Company
shall mail to each Holder and to the Trustee a notice that states the special
record date, the payment date and the amount of defaulted interest to be paid.

SECTION 2.14 Series May Include Tranches. A series of
Securities may include one or more tranches (each a "tranche") of Securities,
including Securities issued in a Periodic Offering. The Securities of
different tranches may have one or more different terms, including
authentication dates and public offering prices, but all the Securities within
each such tranche shall have identical terms, including authentication date and
public offering price. Notwithstanding any other provision of this Indenture,
with respect to Sections 2.2 (other than the fourth paragraph thereof) through
2.4, 2.7, 2.8, 2.10, 3.1 through 3.5, 4.2, 6.1 through 6.14, 8.1 through 8.7
and 9.2, if any series of Securities includes more than one tranche, all
provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of Securities in the
same manner as though originally designated a series unless otherwise provided
with respect to such series or tranche pursuant to Section 2.3. In particular,
and without limiting the scope of the next preceding sentence, any of the
provisions of such sections which provide for or permit action to be taken with
respect

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<PAGE> 29
to a series of Securities shall also be deemed to provide for and permit such
action to be taken instead only with respect to Securities of one or more
tranches within that series (and such provisions shall be deemed satisfied
thereby), even if no comparable action is taken with respect to Securities in
the remaining tranches of that series.

ARTICLE 3

REDEMPTION

SECTION 3.1 Applicability of Article. The provisions of this
Article shall be applicable to the Securities of any series which are
redeemable before their maturity or to any sinking fund for the retirement of
Securities of a series except as otherwise specified as contemplated by Section
2.3 for Securities of such series.

SECTION 3.2 Notice of Redemption; Partial Redemptions.
Notice of redemption to the Holders of Registered Securities of any series to
be redeemed as a whole or in part at the option of the Company shall be given
by mailing notice of such redemption by first class mail, postage prepaid, at
least 30 days and not more than 60 days prior to the date fixed for redemption
to such Holders of Registered Securities of such series at their last addresses
as they shall appear upon the registry books. Notice of redemption to the
Holders of Unregistered Securities of any series to be redeemed as a whole or
in part who have filed their names and addresses with the Trustee pursuant to
Section 313(c)(2) of the Trust Indenture Act, shall be given by mailing notice
of such redemption, by first class mail, postage prepaid, at least 30 days and
not more than 60 days prior to the date fixed for redemption, to such Holders
at such addresses as were so furnished to the Trustee (and, in the case of any
such notice given by the Company, the Trustee shall make such information
available to the Company for such purpose). Notice of redemption to all other
Holders of Unregistered Securities of any series to be redeemed as a whole or
in part shall be published in an Authorized Newspaper in The City of New York
or with respect to any Security the interest on which is based on the offered
quotations in the interbank Eurodollar market for dollar deposits in an
Authorized Newspaper in London, in each case, once in each of three successive
calendar weeks, the first publication to be not less than 30 days nor more than
60 days prior to the date fixed for redemption. Any notice which is mailed or
published in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the Holder receives the notice.

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<PAGE> 30
Failure to give notice by mail, or any defect in the notice to the Holder of
any Security of a series designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Security of such series.

The notice of redemption to each such Holder shall specify the
principal amount of each Security of such series held by such Holder to be
redeemed, the CUSIP numbers of the Securities to be redeemed, the date fixed
for redemption, the redemption price, the place or places of payment, that
payment will be made upon presentation and surrender of such Securities and, in
the case of Securities with coupons attached thereto, of all coupons
appertaining thereto maturing after the date fixed for redemption, that such
redemption is pursuant to the mandatory or optional sinking fund, or both, if
such be the case, that interest accrued to the date fixed for redemption will
be paid as specified in such notice and that on and after said date interest
thereon or on the portions thereof to be redeemed will cease to accrue. In
case any Security of a series is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of such series and
tenor in principal amount equal to the unredeemed portion thereof will be
issued.

The notice of redemption of Securities of any series to be
redeemed at the option of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the
Company.

On or before 10:00 a.m. New York City time on the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more Paying Agents (or, if
the Company is acting as its own Paying Agent, set aside, segregate and hold in
trust as provided in Section 2.6) an amount of money sufficient to redeem on
the redemption date all the Securities of such series so called for redemption
at the appropriate redemption price, together with accrued interest to the date
fixed for redemption. If all of the outstanding Securities of a series are to
be redeemed, the Company will deliver to the Trustee at least 10 days prior to
the last date on which notice of redemption may be given to Holders pursuant to
the first paragraph of this Section 3.2 (or such shorter period as shall be
acceptable to the Trustee) an Officers' Certificate stating that all such
Securities are to be redeemed. If less than all the outstanding Securities of
a series are to be redeemed, the

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<PAGE> 31
Company will deliver to the Trustee at least 15 days prior to the last date on
which notice of redemption may be given to Holders pursuant to the first
paragraph of this Section 3.2 (or such shorter period as shall be acceptable to
the Trustee) an Officers' Certificate stating the aggregate principal amount of
such Securities to be redeemed. In case of a redemption at the election of the
Company prior to the expiration of any restriction on such redemption, the
Company shall deliver to the Trustee, prior to the giving of any notice of
redemption to Holders pursuant to this Section, an Officers' Certificate
stating that such redemption is not prohibited by such restriction.

If less than all the Securities of a series are to be redeemed,
the Trustee shall select, pro rata, by lot or in such manner as it shall deem
appropriate and fair, Securities of such series to be redeemed in whole or in
part. Securities may be redeemed in part in multiples equal to the minimum
authorized denomination for Securities of such series or any multiple thereof.
The Trustee shall promptly notify the Company in writing of the Securities of
such series selected for redemption and, in the case of any Securities of such
series selected for partial redemption, the principal amount thereof to be
redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.

SECTION 3.3 Payment of Securities Called for Redemption. If
notice of redemption has been given as above provided, the Securities or
portions of Securities specified in such notice shall become due and payable on
the date and at the place stated in such notice at the applicable redemption
price, together with interest accrued to the date fixed for redemption, and on
and after such date (unless the Company shall default in the payment of such
Securities at the redemption price, together with interest accrued to such
date) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue, and the unmatured coupons, if any,
appertaining thereto shall be void and, except as provided in Sections 7.11 and
8.2, such Securities shall cease from and after the date fixed for redemption
to be entitled to any benefit under this Indenture, and the Holders thereof
shall have no right in respect of such Securities except the right to receive
the redemption price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Securities at a place of
payment specified in said notice,

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<PAGE> 32
together with all coupons, if any, appertaining thereto maturing after the date
fixed for redemption, said Securities or the specified portions thereof shall
be paid and redeemed by the Company at the applicable redemption price,
together with interest accrued thereon to the date fixed for redemption;
provided that payment of interest becoming due on or prior to the date fixed
for redemption shall be payable in the case of Securities with coupons attached
thereto, to the Holders of the coupons for such interest upon surrender
thereof, and in the case of Registered Securities, to the Holders of such
Registered Securities registered as such on the relevant record date subject to
the terms and provisions of Sections 2.4 and 2.13 hereof.

If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate of
interest or Yield to Maturity (in the case of an Original Issue Discount
Security) borne by such Security.

If any Security with coupons attached thereto is surrendered for
redemption and is not accompanied by all appurtenant coupons maturing after the
date fixed for redemption, the surrender of such missing coupon or coupons may
be waived by the Company and the Trustee, if there be furnished to each of them
such security or indemnity as they may require to save and hold each of them
harmless.

Upon presentation of any Security of any series redeemed in part
only, the Company shall execute and the Trustee shall authenticate and deliver
to or on the order of the Holder thereof, at the expense of the Company, a new
Security or Securities of such series and tenor (with any unmatured coupons
attached), of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.

SECTION 3.4 Exclusion of Certain Securities from Eligibility
for Selection for Redemption. Securities shall be excluded from eligibility
for selection for redemption if they are identified by registration and
certificate number in a written statement signed by an authorized Officer of
the Company and delivered to the Trustee at least 40 days prior to the last
date on which notice of redemption may be given as being owned of record and
beneficially by, and not pledged or hypothecated by, either (a) the Company or
(b) an entity specifically identified in such written statement as directly or

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<PAGE> 33
indirectly controlling or controlled by or under direct or indirect common
control with the Company.

SECTION 3.5 Mandatory and Optional Sinking Funds. The
minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of the Securities of any series is herein referred to as an "optional
sinking fund payment". The date on which a sinking fund payment is to be made
is herein referred to as the "sinking fund payment date".

In lieu of making all or any part of any mandatory sinking fund
payment with respect to any series of Securities in cash, the Company may at
its option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except through a mandatory sinking fund
payment) by the Company or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Company and delivered to the Trustee for cancellation
pursuant to Section 2.11, (b) receive credit for optional sinking fund payments
(not previously so credited) made pursuant to this Section, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Company through any optional sinking fund payment. Securities so delivered
or credited shall be received or credited by the Trustee at the sinking fund
redemption price specified in such Securities.

On or before the sixtieth day next preceding each sinking fund
payment date for any series, or such shorter period as shall be acceptable to
the Trustee, the Company will deliver to the Trustee an Officers' Certificate
(a) specifying the portion of the mandatory sinking fund payment to be
satisfied by payment of cash and the portion to be satisfied by credit of
specified Securities of such series and the basis for such credit, (b) stating
that none of the specified Securities of such series has theretofore been so
credited, (c) stating that no defaults in the payment of interest or Events of
Default with respect to such series have occurred (which have not been waived
or cured) and are continuing and (d) stating whether or not the Company intends
to exercise its right to make an optional sinking fund payment with respect to
such series and, if so, specifying the amount of such optional sinking fund
payment which the Company intends to pay on or before the next succeeding
sinking fund payment date. Any Securities of such series to be credited and
required to be delivered to the Trustee in order for the Company to be entitled
to

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<PAGE> 34
credit therefor as aforesaid which have not theretofore been delivered to the
Trustee shall be delivered for cancellation pursuant to Section 2.11 to the
Trustee with such Officers' Certificate (or reasonably promptly thereafter if
acceptable to the Trustee). Such Officers' Certificate shall be irrevocable
and upon its receipt by the Trustee the Company shall become unconditionally
obligated to make all the cash payments or delivery of securities therein
referred to, if any, on or before the next succeeding sinking fund payment
date. Failure of the Company, on or before any such sixtieth day, to deliver
such Officer's Certificate and Securities specified in this paragraph, if any,
shall not constitute a default but shall constitute, on and as of such date,
the irrevocable election of the Company (i) that the mandatory sinking fund
payment for such series due on the next succeeding sinking fund payment date
shall be paid entirely in cash without the option to deliver or credit
Securities of such series in respect thereof and (ii) that the Company will
make no optional sinking fund payment with respect to such series as provided
in this Section.

If the sinking fund payment or payments (mandatory or optional or
both) to be made in cash on the next succeeding sinking fund payment date plus
any unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 (or a lesser sum if the Company shall so request with respect to
the Securities of any series), such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price thereof together with accrued
interest thereon to the date fixed for redemption. If such amount shall be
$50,000 (or such lesser sum) or less and the Company makes no such request then
it shall be carried over until a sum in excess of $50,000 (or such lesser sum)
is available. The Trustee shall select, in the manner provided in Section 3.2,
for redemption on such sinking fund payment date a sufficient principal amount
of Securities of such series to absorb said cash, as nearly as may be, and
shall (if requested in writing by the Company) inform the Company of the serial
numbers of the Securities of such series (or portions thereof) so selected.
Securities shall be excluded from eligibility for redemption under this Section
if they are identified by registration and certificate number in an Officers'
Certificate delivered to the Trustee at least 60 days prior to the sinking fund
payment date as being owned of record and beneficially by, and not pledged or
hypothecated by, either (a) the Company or (b) an entity specifically identified
in such Officers' Certificate as directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. The
Trustee, in the name and at the

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<PAGE> 35
expense of the Company (or the Company, if it shall so request the Trustee in
writing) shall cause notice of redemption of the Securities of such series to
be given in substantially the manner provided in Section 3.2 (and with the
effect provided in Section 3.3) for the redemption of Securities of such series
in part at the option of the Company. The amount of any sinking fund payments
not so applied or allocated to the redemption of Securities of such series
shall be added to the next cash sinking fund payment for such series and,
together with such payment, shall be applied in accordance with the provisions
of this Section. Any and all sinking fund moneys held on the stated maturity
date of the Securities of any particular series (or earlier, if such maturity
is accelerated), which are not held for the payment or redemption of particular
Securities of such series shall be applied, together with other moneys, if
necessary, sufficient for the purpose, to the payment of the Principal of, and
interest on, the Securities of such series at maturity.

On or before 10:00 a.m. New York City time on each sinking fund
payment date, the Company shall pay to the Trustee in cash or shall otherwise
provide for the payment of all interest accrued to the date fixed for
redemption on Securities to be redeemed on the next following sinking fund
payment date.

The Trustee shall not redeem or cause to be redeemed any
Securities of a series with sinking fund moneys or mail any notice of
redemption of Securities of such series by operation of the sinking fund during
the continuance of a Default in payment of interest on such Securities or of
any Event of Default except that, where the mailing of notice of redemption of
any Securities shall theretofore have been made, the Trustee shall redeem or
cause to be redeemed such Securities, provided that it shall have received from
the Company a sum sufficient for such redemption. Except as aforesaid, any
moneys in the sinking fund for such series at the time when any such Default or
Event of Default shall occur, and any moneys thereafter paid into the sinking
fund, shall, during the continuance of such default or Event of Default, be
deemed to have been collected under Article 6 and held for the payment of all
such Securities. In case such Event of Default shall have been waived as
provided in Section 6.4 or the Default cured on or before the sixtieth day
preceding the sinking fund payment date in any year, such moneys shall
thereafter be applied on the next succeeding sinking fund payment date in
accordance with this Section to the redemption of such Securities.

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ARTICLE 4

COVENANTS

SECTION 4.1 Payment of Securities. The Company shall pay the
Principal of and interest on the Securities on the dates and in the manner
provided in the Securities and this Indenture. The interest on Securities with
coupons attached (together with any additional amounts payable pursuant to the
terms of such Securities) shall be payable only upon presentation and surrender
of the several coupons for such interest installments as are evidenced thereby
as they severally mature. The interest on any temporary Unregistered
Securities (together with any additional amounts payable pursuant to the terms
of such Securities) shall be paid, as to the installments of interest evidenced
by coupons attached thereto, if any, only upon presentation and surrender
thereof, and, as to the other installments of interest, if any, only upon
presentation of such Unregistered Securities for notation thereon of the
payment of such interest. The interest on Registered Securities (together with
any additional amounts payable pursuant to the terms of such Securities) shall
be payable only to the Holders thereof and at the option of the Company may be
paid by mailing checks for such interest payable to or upon the written order
of such Holders at their last addresses as they appear on the Security Register
of the Company.

Notwithstanding any provisions of this Indenture and the
Securities of any series to the contrary, if the Company and a Holder of any
Registered Security so agree, payments of interest on, and any portion of the
Principal of, such Holder's Registered Security (other than interest payable at
maturity or on any redemption or repayment date or the final payment of
Principal on such Security) shall be made by the Paying Agent, upon receipt
from the Company of immediately available funds by 11:00 A.M., New York City
time (or such other time as may be agreed to between the Company and the Paying
Agent), directly to the Holder of such Security (by Federal funds wire transfer
or otherwise) if the Holder has delivered written instructions to the Trustee
15 days prior to such payment date requesting that such payment be so made
and designating the bank account to which such payments shall be so made and in
the case of payments of Principal, surrenders the same to the Trustee in
exchange for a Security or Securities aggregating the same principal amount as
the unredeemed principal amount of the Securities surrendered. The Trustee
shall be entitled to rely on the last instruction delivered by the Holder
pursuant to this Section 4.1 unless a new instruction is delivered 15 days
prior to a payment date. The Company

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will indemnify and hold each of the Trustee and any Paying Agent harmless
against any loss, liability or expense (including attorneys' fees) resulting
from any act or omission to act on the part of the Company or any such Holder
in connection with any such agreement or from making any payment in accordance
with any such agreement.

The Company shall pay interest on overdue Principal, and interest
on overdue installments of interest, to the extent lawful, at the rate per
annum specified in the Securities.

SECTION 4.2 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of Chicago, Illinois, an office
or agency where Securities may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Company hereby initially designates the Corporate Trust Services Division
of the Trustee, located in the Borough of Manhattan, The City of Chicago,
Illinois, as such office or agency of the Company. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in
Section 10.2.

The Company will maintain one or more agencies in a city or cities
located outside the United States (including any city in which such an agency
is required to be maintained under the rules of any stock exchange on which the
Securities of any series are listed) where the Unregistered Securities, if any,
of each series and coupons, if any, appertaining thereto may be presented for
payment. No payment on any Unregistered Security or coupon will be made upon
presentation of such Unregistered Security or coupon at an agency of the
Company within the United States nor will any payment be made by transfer to an
account in, or by mail to an address in, the United States unless, pursuant to
applicable United States laws and regulations then in effect, such payment can
be made without adverse tax consequences to the Company. Notwithstanding the
foregoing, if full payment in United States Dollars ("Dollars") at each agency
maintained by the Company outside the United States for payment on such
Unregistered Securities or coupons appertaining thereto is illegal or
effectively precluded by exchange controls or other similar restrictions,
payments in Dollars of Unregistered Securities of any series and coupons

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appertaining thereto which are payable in Dollars may be made at an agency of
the Company maintained in the City of Chicago, Illinois.

The Company may also from time to time designate one or more other
offices or agencies where the Securities of any series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or agency in
the City of Chicago, Illinois for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.

SECTION 4.3 Securityholders' Lists. The Company will furnish
or cause to be furnished to the Trustee a list in such form as the Trustee may
reasonably require of the names and addresses of the holders of the Securities
pursuant to Section 312 of the Trust Indenture Act of 1939 (a) semi-annually
not more than 15 days after each record date for the payment of semi-annual
interest on the Securities, as hereinabove specified, as of such record date,
and (b) at such other times as the Trustee may request in writing, within
thirty days after receipt by the Company of any such request as of a date not
more than 15 days prior to the time such information is furnished.

SECTION 4.4 Certificate to Trustee. The Company will furnish
to the Trustee annually, on or before a date not more than four months after
the end of its fiscal year (which, on the date hereof, is a calendar year), a
brief certificate (which need not contain the statements required by Section
10.4) from its principal executive, financial or accounting officer as to his
or her knowledge of the compliance of the Company with all conditions and
covenants under this Indenture (such compliance to be determined without regard
to any period of grace or requirement of notice provided under this Indenture)
which certificate shall comply with the requirements of the Trust Indenture
Act.

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SECTION 4.5 Reports by the Company. The Company covenants to
file with the Trustee, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the information,
documents, and other reports which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act.

ARTICLE 5

SUCCESSOR CORPORATION

SECTION 5.1 When Company May Merge, Etc. The Company shall
not consolidate with, merge with or into, or transfer, all or substantially
all of its property and assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions) to, any Person (other
than a consolidation with or merger with or into a Subsidiary or a transfer to
a Subsidiary) or permit any Person to merge with or into the Company unless:

(i) either (x) the Company shall be the continuing Person or (y)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which properties and assets of the Issuer
are transferred shall be a corporation organized and validly existing
under the laws of the United States of America or any jurisdiction thereof
and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company on all of
the Securities and under this Indenture and the Company shall have
delivered to the Trustee (A) an Opinion of Counsel stating that such
consolidation, merger or transfer and such supplemental indenture complies
with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with and that such
supplemental indenture constitutes the legal, valid and binding obligation
of the Company or such successor enforceable against such entity in
accordance with its terms, subject to customary exceptions (B) and an
Officers' Certificate to the effect that immediately after giving effect
to such transaction, no Default shall have occurred and be continuing.

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SECTION 5.2 Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.1 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.

ARTICLE 6

DEFAULT AND REMEDIES

SECTION 6.1 Events of Default. An "Event of Default" shall
occur with respect to the Securities of any series if:

(a) the Company defaults in the payment of the Principal of any
Security of such series when the same becomes due and payable at maturity,
upon acceleration, redemption or mandatory repurchase, including as a
sinking fund installment, or otherwise;

(b) the Company defaults in the payment of interest on any
Security of such series when the same becomes due and payable, and such
default continues for a period of 30 days;

(c) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture with respect
to any Security of such series or in the Securities of such series and such
default or breach continues for a period of 30 consecutive days after
written notice to the Company by the Trustee or to the Company and the
Trustee by the Holders of 25% or more in aggregate principal amount of the
outstanding Securities of all series affected thereby;

(d) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
for any substantial part of its property or ordering the winding up or
liquidation of its affairs, and such

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<PAGE> 41
decree or order shall remain unstayed and in effect for a period of 60
consecutive days;

(e) the Company (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or for all or substantially
all of the property and assets of the Company or (C) effects any general
assignment for the benefit of creditors; or

(f) any other Event of Default established pursuant to Section
2.3 with respect to the Securities of such series occurs.

SECTION 6.2 Acceleration. (a) If an Event of Default
described in clauses (a) or (b) of Section 6.1 with respect to the Securities
of any series then outstanding occurs and is continuing, then, and in each and
every such case, except for any series of Securities the principal of which
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Securities of any such
affected series then outstanding hereunder (each such series treated as a
separate class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal (or, if the
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such series
established pursuant to Section 2.3) of all Securities of such affected series,
and the interest accrued thereon, if any, to be due and payable immediately,
and upon any such declaration the same shall become immediately due and
payable.

(b) If an Event of Default described in clauses (c) or (f) of
Section 6.1 with respect to the Securities of one or more but not all series
then outstanding, or with respect to the Securities of all series then
outstanding, occurs and is continuing, then, and in each and every such case,
except for any series of Securities the principal of which shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount (or, if the Securities of any such series are
Original Issue Discount Securities, the amount thereof accelerable under this
Section) of the Securities of all such affected series then outstanding
hereunder (treated as

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<PAGE> 42
a single class) by notice in writing to the Company (and to the Trustee if
given by Securityholders), may declare the entire principal (or, if the
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such series
established pursuant to Section 2.3) of all Securities of all such affected
series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable.

(c) If an Event of Default described in clause (d) or (e) of
Section 6.1 occurs and is continuing, then the principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof established pursuant to
Section 2.3) of all the Securities then outstanding and interest accrued
thereon, if any, shall be and become immediately due and payable, subject to
the prior payment in full of all Senior Debt, without any notice or other
action by any Holder or the Trustee, to the full extent permitted by applicable
law.

The foregoing provisions, however, are subject to the condition
that if, at any time after the principal (or, if the Securities are Original
Issue Discount Securities, such portion of the principal as may be specified in
the terms thereof established pursuant to Section 2.3) of the Securities of any
series (or of all the Securities, as the case may be) shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Securities of each such series
(or of all the Securities, as the case may be) and the principal of any and all
Securities of each such series (or of all the Securities, as the case may be)
which shall have become due otherwise than by acceleration (with interest upon
such principal and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, at the same rate as
the rate of interest or Yield to Maturity (in the case of Original Issue
Discount Securities) specified in the Securities of each such series to the
date of such payment or deposit) and such amount as shall be sufficient to
cover all amounts owing the Trustee under Section 7.7, and if any and all
Events of Default under the Indenture, other than the non-payment of the
principal of Securities which shall have become due by acceleration, shall have
been cured, waived or otherwise remedied as provided herein, then and in

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every such case the Holders of a majority in aggregate principal amount of all
the then outstanding Securities of all such series that have been accelerated
(voting as a single class), by written notice to the Company and to the
Trustee, may waive all defaults with respect to all such series (or with
respect to all the Securities, as the case may be) and rescind and annul such
declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.

For all purposes under this Indenture, if a portion of the
principal of any Original Issue Discount Securities shall have been accelerated
and declared due and payable pursuant to the provisions hereof, then, from and
after such declaration, unless such declaration has been rescinded and
annulled, the principal amount of such Original Issue Discount Securities shall
be deemed, for all purposes hereunder, to be such portion of the principal
thereof as shall be due and payable as a result of such acceleration, and
payment of such portion of the principal thereof as shall be due and payable as
a result of such acceleration, together with interest, if any, thereon and all
other amounts owing thereunder, shall constitute payment in full of such
Original Issue Discount Securities.

SECTION 6.3 Other Remedies. If a payment default or an Event
of Default with respect to the Securities of any series occurs and is
continuing, the Trustee may pursue, in its own name or as trustee of an express
trust, any available remedy by proceeding at law or in equity to collect the
payment of principal of and interest on the Securities of such series or to
enforce the performance of any provision of the Securities of such series or
this Indenture.

The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.

SECTION 6.4 Waiver of Past Defaults. Subject to Sections
6.2, 6.7 and 9.2, the Holders of at least a majority in principal amount (or,
if the Securities are Original Issue Discount Securities, such portion of the
principal as is then accelerable under Section 6.2) of the outstanding
Securities of all series affected (voting as a single class), by notice to the
Trustee, may waive an existing Default or Event of Default with respect to the
Securities of such series and its consequences, except a Default in the payment
of Principal of or interest on any Security as specified in clauses (a) or (b)
of Section 6.1

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or in respect of a covenant or provision of this Indenture which cannot be
modified or amended without the consent of the Holder of each outstanding
Security affected. Upon any such waiver, such Default shall cease to exist,
and any Event of Default with respect to the Securities of such series arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto.

SECTION 6.5 Control by Majority. Subject to Sections 7.1 and
7.2(v), the Holders of at least a majority in aggregate principal amount (or,
if any Securities are Original Issue Discount Securities, such portion of the
principal as is then accelerable under Section 6.2) of the outstanding
Securities of all series affected (voting as a single class) may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee with
respect to the Securities of such series by this Indenture; provided, that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction; and provided further, that
the Trustee may take any other action it deems proper that is not inconsistent
with any directions received from Holders of Securities pursuant to this
Section 6.5.

SECTION 6.6 Limitation on Suits. No Holder of any Security
of any series may institute any proceeding, judicial or otherwise, with respect
to this Indenture or the Securities of such series, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:

(i) such Holder has previously given to the Trustee written
notice of a continuing Event of Default with respect to the Securities of
such series;

(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Securities of all such series affected shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;

(iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liabilities or
expenses to be incurred in compliance with such request;

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(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and

(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities of all such
affected series have not given the Trustee a direction that is inconsistent
with such written request.

A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.

SECTION 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of Principal of or interest, if any, on such
Holder's Security on or after the respective due dates expressed on such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.

SECTION 6.8 Collection Suit by Trustee. If an Event of
Default with respect to the Securities of any series in payment of Principal or
interest specified in clause (a) or (b) of Section 6.1 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount (or such portion
thereof as specified in the terms established pursuant to Section 2.3 of
Original Issue Discount Securities) of Principal of, and accrued interest
remaining unpaid on, together with interest on overdue Principal of, and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest on, the Securities of such series, in each case at the
rate or Yield to Maturity (in the case of Original Issue Discount Securities)
specified in such Securities, and such further amount as shall be sufficient to
cover all amounts owing the Trustee under Section 7.7.

SECTION 6.9 Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for amounts due the Trustee under Section 7.7) and the Holders allowed in any
judicial proceedings relative to the Company (or any other obligor on the
Securities), its creditors or its property and shall be entitled and empowered
to collect and receive any moneys, securities or other property payable

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<PAGE> 46
or deliverable upon conversion or exchange of the Securities or upon any such
claims and to distribute the same, and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
to it under Section 7.7. Nothing herein contained shall be deemed to empower
the Trustee to authorize or consent to, or accept or adopt on behalf of any
Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.

SECTION 6.10 Application of Proceeds. Any moneys collected by
the Trustee pursuant to this Article in respect of the Securities of any series
shall be applied in the following order at the date or dates fixed by the
Trustee and, in case of the distribution of such moneys on account of Principal
or interest, upon presentation of the several Securities and coupons
appertaining to such Securities in respect of which moneys have been collected
and noting thereon the payment, or issuing Securities of such series and tenor
in reduced principal amounts in exchange for the presented Securities of such
series and tenor if only partially paid, or upon surrender thereof if fully
paid:

FIRST: To the payment of all amounts due the Trustee under
Section 7.7 applicable to the Securities of such series in respect of which
moneys have been collected;

SECOND: In case the principal of the Securities of such series in
respect of which moneys have been collected shall not have become and be
then due and payable, to the payment of interest on the Securities of such
series in default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at the
same rate as the rate of interest or Yield to Maturity (in the case of
Original Issue Discount Securities) specified in such Securities, such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference;

THIRD: In case the principal of the Securities of such series in
respect of which moneys have been col-

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lected shall have become and shall be then due and payable, to the
payment of the whole amount then owing and unpaid upon all the Securities of
such series for Principal and interest, with interest upon the overdue
Principal, and (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the same rate as the rate
of interest or Yield to Maturity (in the case of Original Issue Discount
Securities) specified in the Securities of such series; and in case such
moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Securities of such series, then to the payment of such
Principal and interest or Yield to Maturity, without preference or priority
of Principal over interest or Yield to Maturity, or of interest or Yield to
Maturity over Principal, or of any installment of interest over any other
installment of interest, or of any Security of such series over any other
Security of such series, ratably to the aggregate of such Principal and
accrued and unpaid interest or Yield to Maturity; and

FOURTH: To the payment of the remainder, if any, to the Company
or any other person lawfully entitled thereto.

SECTION 6.11 Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored to their
former positions hereunder and thereafter all rights and remedies of the
Company, Trustee and the Holders shall continue as though no such proceeding
had been instituted.

SECTION 6.12 Undertaking for Costs. In any suit
for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, in either
case in respect to the Securities of any series, a court may require any party
litigant in such suit (other than the Trustee) to file an undertaking to pay
the costs of the suit, and the court may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant (other than the Trustee)
in the suit having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.12 does not apply to a
suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10%
in

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principal amount of the outstanding Securities of such series.

SECTION 6.13 Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.8, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

SECTION 6.14 Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article 6 or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.

ARTICLE 7

TRUSTEE

SECTION 7.1 General. The duties and responsibilities of the
Trustee shall be as provided by the Trust Indenture Act and as set forth
herein. Notwithstanding the foregoing, no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, unless it receives indemnity
satisfactory to it against any loss, liability or expense. Whether or not
therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article 7.

SECTION 7.2 Certain Rights of Trustee. Subject to Trust
Indenture Act Sections 315(a) through (d):

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(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, Officers'
Certificate, Opinion of Counsel (or both), statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed or presented by the proper person or
persons. The Trustee need not investigate any fact or matter stated in the
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;

(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which shall
conform to Section 10.4. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion. Subject to Sections 7.1 and 7.2, whenever in the administration
of the trusts of this Indenture the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or
suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to
be conclusively proved and established by an Officers' Certificate
delivered to the Trustee, and such certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full warrant
to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof;

(iii) the Trustee may act through its attorneys and agents not
regularly in its employ and shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care;

(iv) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any Board Resolution may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an Assistant
Secretary of the Company;

(v) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of

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<PAGE> 50
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;

(vi) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the direction of the Holders in accordance with Section 6.5 relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture;

(vii) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon; and

(viii) prior to the occurrence of an Event of Default hereunder
and after the curing or waiving of all Events of Default, the Trustee shall
not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, Officers' Certificate, Opinion of Counsel,
Board Resolution, statement, instrument, opinion, report, notice, request,
consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing so to do
by the Holders of not less than a majority in aggregate principal amount of
the Securities of all series affected then outstanding; provided that, if
the payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding.

SECTION 7.3 Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the

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same with like rights. However, the Trustee is subject to Trust Indenture Act
Sections 310(b) and 311. For purposes of Trust Indenture Act Section 311(b)(4)
and (6), the following terms shall mean:

(a) "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after delivery
of the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand; and

(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured
by documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale of
the goods, wares or merchandise previously constituting the security, provided
the security is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.

SECTION 7.4 Trustee's Disclaimer. The recitals contained
herein and in the Securities (except the Trustee's certificate of
authentication) shall be taken as statements of the Company and not of the
Trustee and the Trustee assumes no responsibility for the correctness of the
same. Neither the Trustee nor any of its agents (i) makes any representation
as to the validity or adequacy of this Indenture or the Securities and (ii)
shall be accountable for the Company's use or application of the proceeds from
the Securities.

SECTION 7.5 Notice of Default. If any Default with respect
to the Securities of any series occurs and is continuing and if such Default is
known to the actual knowledge of a Responsible Officer with the Corporate Trust
Department of the Trustee, the Trustee shall give to each Holder of Securities
of such series notice of such Default within 90 days after it occurs (i) if any
Unregistered Securities of such series are then outstanding, to the Holders
thereof, by publication at least once in an Authorized Newspaper in the Borough
of Manhattan, The City of New York and at least once in an Authorized Newspaper
in London and (ii) to all Holders of Securities of such series in the manner
and to the extent provided in Section 313(c) of the Trust Indenture Act, unless
such Default shall have

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been cured or waived before the mailing or publication of such notice;
provided, however, that, except in the case of a Default in the payment of the
Principal of or interest on any Security, the Trustee shall be protected in
withholding such notice if the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.

SECTION 7.6 Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1996, the Trustee shall mail to each
Holder as and to the extent provided in Trust Indenture Act Section 313(c) a
brief report dated as of such May 15, if required by Trust Indenture Act
Section 313(a).

SECTION 7.7 Compensation and Indemnity. The Company shall
pay to the Trustee such compensation as shall be agreed upon in writing from
time to time for its services. The compensation of the Trustee shall not be
limited by any law on compensation of a Trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses, disbursements and advances incurred or made by the
Trustee. Such expenses shall include the reasonable compensation and expenses
of the Trustee's agents, counsel and other persons not regularly in its employ.

The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part arising out of or in connection with the acceptance or
administration of this Indenture and the Securities or the issuance of the
Securities or of any series thereof or the trusts hereunder and the performance
of duties under this Indenture and the Securities, including the costs and
expenses of defending itself against or investigating any claim or liability
and of complying with any process served upon it or any of its officers in
connection with the exercise or performance of any of its powers or duties
under this Indenture and the Securities.

To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay the Principal of, and interest on particular
Securities.

The obligations of the Company under this Section to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each

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predecessor Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture or the rejection or termination of this Indenture
under bankruptcy law. Such additional indebtedness shall be a senior claim to
that of the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the Holders of
particular Securities or coupons, and the Securities are hereby subordinated to
such senior claim. If the Trustee renders services and incurs expenses
following an Event of Default under Section 6.1(d) or Section 6.1(e) hereof,
the parties hereto and the holders by their acceptance of the Securities hereby
agree that such expenses are intended to constitute expenses of administration
under any bankruptcy law.

SECTION 7.8 Replacement of Trustee. A resignation or removal
of the Trustee as Trustee with respect to the Securities of any series and
appointment of a successor Trustee as Trustee with respect to the Securities of
any series shall become effective only upon the successor Trustee's acceptance
of appointment as provided in this Section 7.8.

The Trustee may resign as Trustee with respect to the Securities
of any series at any time by so notifying the Company in writing. The Holders
of a majority in principal amount of the outstanding Securities of any series
may remove the Trustee as Trustee with respect to the Securities of such series
by so notifying the Trustee in writing and may appoint a successor Trustee with
respect thereto with the consent of the Company. The Company may remove the
Trustee as Trustee with respect to the Securities of any series if: (i) the
Trustee is no longer eligible under Section 7.10 of this Indenture; (ii) the
Trustee is adjudged a bankrupt or insolvent; (iii) a receiver or other public
officer takes charge of the Trustee or its property; or (iv) the Trustee
becomes incapable of acting.

If the Trustee resigns or is removed as Trustee with respect to
the Securities of any series, or if a vacancy exists in the office of Trustee
with respect to the Securities of any series for any reason, the Company shall
promptly appoint a successor Trustee with respect thereto. Within one year
after the successor Trustee takes office, the Holders of a majority in
principal amount of the outstanding Securities of such series may appoint a
successor Trustee in respect of such Securities to replace the successor
Trustee appointed by the Company. If the successor Trustee with respect to the
Securities of any series does not deliver its written acceptance required by

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<PAGE> 54
the next succeeding paragraph of this Section 7.8 within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in principal amount of the outstanding Securities of
such series may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect thereto.

A successor Trustee with respect to the Securities of any series
shall deliver a written acceptance of its appointment to the retiring Trustee
and to the Company. Immediately after the delivery of such written acceptance,
subject to the lien provided for in Section 7.7, (i) the retiring Trustee shall
transfer all property held by it as Trustee in respect of the Securities of
such series to the successor Trustee, (ii) the resignation or removal of the
retiring Trustee in respect of the Securities of such series shall become
effective and (iii) the successor Trustee shall have all the rights, powers and
duties of the Trustee in respect of the Securities of such series under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder of Securities of such series.

Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in the preceding paragraph.

The Company shall give notice of any resignation and any removal
of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee in respect of the Securities of such series
to all Holders of Securities of such series. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.

Notwithstanding replacement of the Trustee with respect to the
Securities of any series pursuant to this Section 7.8, the Company's
obligations under Section 7.7 shall continue for the benefit of the retiring
Trustee.

SECTION 7.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.

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SECTION 7.10 Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of Trust Indenture Act Section 310(a).
The Trustee shall have a combined capital and surplus of at least $25,000,000
as set forth in its most recent published annual report of condition.

SECTION 7.11 Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
in writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except for
money held in trust under Article 8 of this Indenture.

ARTICLE 8

SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.

SECTION 8.1 Satisfaction and Discharge of Indenture. If at
any time (a) the Company shall have paid or caused to be paid the principal of
and interest on all the Securities of any series outstanding hereunder (other
than Securities of such series which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.8) as and when the
same shall have become due and payable, or (b) the Company shall have delivered
to the Trustee for cancellation all securities of any series theretofore
authenticated (other than any Securities of such series which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.8) or (c) (i) all the securities of such series not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and (ii) the Company shall
have irrevocably deposited or caused to be deposited with the Trustee as trust
funds the entire amount in cash (other than moneys repaid by the Trustee or any
paying agent to the Company in accordance with Section 8.4) or U.S. Government
Obligations, maturing as to principal and interest in such amounts and at such
times as will insure the availability of cash sufficient to pay at maturity or
upon redemption all Securities of such series (other than any Securities of
such series which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.8) not theretofore
delivered to the Trustee for

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cancellation, including principal and interest due or to become due on or prior
to such date of maturity as the case may be, and if, in any such case, the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company with respect to Securities of such series, then this Indenture
shall cease to be of further effect with respect to Securities of such series
(except as to (i) rights of registration of transfer and exchange of securities
of such series, and the Company's right of optional redemption, if any, (ii)
substitution of mutilated, defaced, destroyed, lost or stolen Securities, (iii)
rights of holders to receive payments of principal thereof and interest
thereon, upon the original stated due dates therefor (but not upon
acceleration) and remaining rights of the holders to receive mandatory sinking
fund payments, if any, (iv) the rights, obligations and immunities of the
Trustee hereunder and (v) the rights of the Securityholders of such series as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them), and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company, shall execute proper instruments acknowledging
such satisfaction of and discharging this Indenture with respect to such
series; provided, that the rights of Holders of the Securities to receive
amounts in respect of principal of and interest on the Securities held by them
shall not be delayed longer than required by then-applicable mandatory rules or
policies of any securities exchange upon which the Securities are listed. The
Company agrees to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Securities of such series.

SECTION 8.2 Application by Trustee of Funds Deposited for
Payment of Securities. Subject to Section 8.4 and to the subordination
provisions of Article 11 hereof, all moneys deposited with the Trustee pursuant
to Section 8.1 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Company acting as its own
paying agent), to the Holders of the particular Securities of such series for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law.

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SECTION 8.3 Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect
to Securities of any series, all moneys then held by any paying agent under the
provisions of this Indenture with respect to such series of Securities shall,
upon demand of the Company, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

SECTION 8.4 Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or
any paying agent for the payment of the principal of or interest on any
Security of any series and not applied but remaining unclaimed for two years
after the date upon which such principal or interest shall have become due and
payable, shall, upon the written request of the Company and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Company by the Trustee for such series
or such paying agent, and the Holder of the Security of such series shall,
unless otherwise required by mandatory provisions of applicable escheat or
abandoned or unclaimed property laws, thereafter look only to the Company for
any payment which such Holder may be entitled to collect, and all liability of
the Trustee or any paying agent with respect to such moneys shall thereupon
cease.

SECTION 8.5 Defeasance and Discharge of Indenture. The
Company shall be deemed to have paid and shall be discharged from any and all
obligations in respect of the Securities of any series, on the 123rd day after
the deposit referred to in clause (A) hereof has been made, and the provisions
of this Indenture shall no longer be in effect with respect to the Securities
of such series (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except as to: (a) rights of
registration of transfer and exchange, and the Company's right of optional
redemption, (b) substitution of apparently mutilated, defaced, destroyed, lost
or stolen Securities, (c) rights of holders to receive payments of principal
thereof and interest thereon, upon the original stated due dates therefor (but
not upon acceleration), (d) the rights, obligations and immunities of the
Trustee hereunder and (e) the rights of the Securityholders of such series as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them; provided that the following conditions shall
have been satisfied:

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(A) with reference to this provision the Company has deposited or
caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Sections 7.8 and 7.10) as trust funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Securities of such series, (i) money in an
amount, or (ii) U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide not later than one day before the due date of any payment
referred to in subclause (x) or (y) of this clause (A) money in an amount,
or (iii) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee (x) the principal of,
premium, if any, and each installment of interest on the outstanding
Securities of such series on the due dates thereof or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee)
and (y) any mandatory sinking fund payments or analogous payments
applicable to the Securities of such series on the day on which such
payments are due and payable in accordance with the terms of Securities of
such series and the Indenture with respect to the Securities of such series;

(B) the Company has delivered to the Trustee (i) either (x) an
Opinion of Counsel to the effect that Holders of Securities of such series
will not recognize income, gain or loss for federal income tax purposes as
a result of the Company's exercise of its option under this Section 8.5 and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel must be
based upon a ruling of the Internal Revenue Service to the same effect
unless there has been a change in applicable federal income tax law or
related treasury regulations after the date of this Indenture such that a
ruling is no longer required or (y) a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect as the
aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to the
effect that the creation of the defeasance trust does not violate the
Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section
547 of the U.S.

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Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law;

(C) immediately after giving effect to such deposit on a pro
forma basis, no Event of Default, or event that after the giving of notice
or lapse of time or both would become an Event of Default, shall have
occurred and be continuing on the date of such deposit or during the period
ending on the 123rd day after the date of such deposit, and such deposit
shall not result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company is a party or
by which the Company is bound;

(D) the Company is not prohibited from making payments in respect
of the Securities by Article 11 hereof; and

(E) if at such time the Securities of such series are listed on a
national securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Securities of such series will
not be delisted as a result of such deposit, defeasance and discharge.

SECTION 8.6 Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in, and this
Indenture will no longer be in effect with respect to, any covenant in Article
4 or Section 5.1 established pursuant to Section 2.3 in any indenture
supplemental hereto and clause (c) (with respect to any covenants in Article 4
or Section 5.1 established pursuant to Section 2.3 in any indenture
supplemental hereto) and clause (f) of Section 6.1 shall be deemed not to be an
Event of Default, and the provisions of Article 11 shall not apply with respect
to the Securities of any series, if

(A) with reference to this Section 8.6, the Company has deposited
or caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.8) as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of the Securities of such series and the Indenture with
respect to the Securities of such series, (i) money in an amount or (ii)
U.S. Government Obligations which through the payment of interest and
principal in respect thereof in accordance with their terms will provide
not later than one day before the due dates thereof or earlier redemption
(irrevocably provided for

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under agreements satisfactory to the Trustee), as the case may be, of any
payment referred to in subclause (x) or (y) of this clause (A) money in an
amount, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee (x) the principal of,
premium, if any, and each installment of interest on the outstanding
Securities on the due date thereof or earlier redemption (irrevocably
provided for under arrangements satisfactory to the Trustee), as the case
may be, and (y) any mandatory sinking fund payments or analogous payments
applicable to the Securities of such series and the Indenture with respect
to the Securities of such series on the day on which such payments are due
and payable in accordance with the terms of the Indenture and of Securities
of such series and the Indenture with respect to the Securities of such
series;

(B) the Company has delivered to the Trustee (i) an Opinion of
Counsel to the effect that Holders of Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result
of the Company's exercise of its option under this Section 8.6 and will be
subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and
defeasance had not occurred and (ii) an Opinion of Counsel to the effect
that the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and after the passage of 123 days following the
deposit, the trust fund will not be subject to the effect of Section 547 of
the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law;

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(D) the Company is not prohibited from making payments in respect
of the Securities by Article 11 hereof; and

SECTION 8.7 Reinstatement. If the Trustee or paying agent is
unable to apply any monies or U.S. Government Obligations in accordance with
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article until such time as the Trustee or
paying agent is permitted to apply all such monies or U.S. Government
Obligations in accordance with Article 8; provided, however, that if the
Company has made any payment of principal of or interest on any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the monies or U.S. Government Obligations held by the Trustee or
paying agent.

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.1 Without Consent of Holders. The Company and the
Trustee may amend or supplement this Indenture or the Securities of any series
without notice to or the consent of any Holder:

(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not
materially and adversely affect the interests of the Holders;

(2) to comply with Article 5;

(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust
Indenture Act;

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(4) to evidence and provide for the acceptance of appointment
hereunder with respect to the Securities of any or all series by a
successor Trustee;

(5) to establish the form or forms or terms of Securities of any
series or of the coupons appertaining to such Securities as permitted by
Section 2.3;

(6) to provide for uncertificated or Unregistered Securities
and to make all appropriate changes for such purpose; and

(7) to make any change that does not materially and adversely
affect the rights of any Holder.

SECTION 9.2 With Consent of Holders. Subject to Sections 6.4
and 6.7, without prior notice to any Holders, the Company and the Trustee may
amend this Indenture and the Securities of any series with the written consent
of the Holders of a majority in principal amount of the outstanding Securities
of all series affected by such supplemental indenture (all such series voting
as a separate class), and the Holders of a majority in principal amount of the
outstanding Securities of all series affected thereby (all such series voting
as a separate class) and by written notice to the Trustee may waive future
compliance by the Company with any provision of this Indenture or the
Securities of any such series.

Notwithstanding the provisions of this Section 9.2, without the
consent of each Holder affected thereby, an amendment or waiver, including a
waiver pursuant to Section 6.4, may not:

(i) change the stated maturity of the Principal of, or any
sinking fund obligation or any installment of interest on, such Holder's
Security, or reduce the Principal amount thereof, the premium, if any or
the rate of interest thereon (including any amount in respect of original
issue discount) or adversely affect the rights of such Holder under any
mandatory redemption or repurchase provision or any right of redemption or
repurchase at the option of such Holder, or reduce the amount of the
Principal of an Original Issue Discount Security that would be due and
payable upon an acceleration of the maturity thereof pursuant to Section
6.2 or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Security or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the due date therefor;

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(ii) reduce the percentage in principal amount of outstanding
Securities of the relevant series the consent of whose Holders is necessary
for any such supplemental indenture, for any waiver of compliance with
certain provisions of this Indenture or certain Defaults and their
consequences provided for in this Indenture;

A supplemental indenture which changes or eliminates any covenant
or other provision of this Indenture which has expressly been included solely
for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series with respect to
such covenant or provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series or of the coupons
appertaining to such Securities.

It shall not be necessary for the consent of any Holder under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall give to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.

SECTION 9.3 Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be

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effective only if the Trustee receives the notice of revocation before the date
the amendment, supplement or waiver becomes effective. An amendment,
supplement or waiver shall become effective with respect to any Securities
affected thereby on receipt by the Trustee of written consents from the
requisite Holders of outstanding Securities affected thereby.

The Company may, but shall not be obligated to, fix a record date
(which may be not less than five nor more than 60 days prior to the
solicitation of consents) for the purpose of determining the Holders of the
Securities of any series affected entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the
immediately preceding paragraph, those Persons who were such Holders at such
record date (or their duly designated proxies) and only those Persons shall be
entitled to consent to such amendment, supplement or waiver or to revoke any
consent previously given, whether or not such Persons continue to be such
Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.

After an amendment, supplement or waiver becomes effective with
respect to the Securities of any series affected thereby, it shall bind every
Holder of such Securities unless it is of the type described in any of clauses
(i) through (iv) of Section 9.2. In case of an amendment or waiver of the type
described in clauses (i) through (iv) of Section 9.2, the amendment or waiver
shall bind each such Holder who has consented to it and every subsequent Holder
of a Security that evidences the same indebtedness as the Security of the
consenting Holder.

SECTION 9.4 Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of any Security, the Trustee
may require the Holder thereof to deliver it to the Trustee. The Trustee may
place an appropriate notation on the Security about the changed terms and
return it to the Holder and the Trustee may place an appropriate notation on
any Security of such series thereafter authenticated. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security of the same
series and tenor that reflects the changed terms.

SECTION 9.5 Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver

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authorized pursuant to this Article 9 is authorized or permitted by this
Indenture, stating that all requisite consents have been obtained or that no
consents are required and stating that such supplemental indenture constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to customary exceptions. Subject
to the preceding sentence, the Trustee shall sign such amendment, supplement or
waiver if the same does not adversely affect the rights of the Trustee. The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

SECTION 9.6 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article 9 shall conform to the
requirements of the Trust Indenture Act as then in effect.

ARTICLE 10

MISCELLANEOUS

SECTION 10.1 Trust Indenture Act of 1939. This Indenture
shall incorporate and be governed by the provisions of the Trust Indenture Act
that are required to be part of and to govern indentures qualified under the
Trust Indenture Act.

SECTION 10.2 Notices. Any notice or communication shall be
sufficiently given if written and (a) if delivered in person when received or
(b) if mailed by first class mail 5 days after mailing, or (c) as between the
Company and the Trustee if sent by facsimile transmission, when transmission is
confirmed, in each case addressed as follows:

if to the Company:

The AES Corporation
1001 North 19th Street
Arlington, VA 22209
Telecopy: (703) 528-4510
Attention: General Counsel

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if to the Trustee:

The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza
Chicago, IL 60670-0126

Telecopy: (312) 407-4656
Attention: Richard D. Manella

The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications.

Any notice or communication shall be sufficiently given to Holders
of any Unregistered Securities, by publication at least once in an Authorized
Newspaper in The City of New York, or with respect to any Security the interest
on which is based on the offered quotations in the interbank Eurodollar market
for dollar deposits at least once in an Authorized Newspaper in London, and by
mailing to the Holders thereof who have filed their names and addresses with
the Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act at such
addresses as were so furnished to the Trustee and to Holders of Registered
Securities by mailing to such Holders at their addresses as they shall appear
on the Security Register. Notice mailed shall be sufficiently given if so
mailed within the time prescribed. Copies of any such communication or notice
to a Holder shall also be mailed to the Trustee and each Agent at the same
time.

Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except as otherwise provided in this Indenture, if a notice or communication is
mailed in the manner provided in this Section 10.2, it is duly given, whether
or not the addressee receives it.

Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

In case it shall be impracticable to give notice as herein
contemplated, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.

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SECTION 10.3 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:

(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and

(ii) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

SECTION 10.4 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:

(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;

(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained
in such certificate or opinion is based;

(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and

(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.

SECTION 10.5 Evidence of Ownership. The Company, the Trustee
and any agent of the Company or the Trustee may deem and treat the Holder of
any Unregistered Security and the Holder of any coupon as the absolute owner of
such Unregistered Security or coupon (whether or not such Unregistered Security
or coupon shall be overdue) for the purpose of receiving payment thereof or on
account thereof and for all other purposes, and neither the Company, the
Trustee, nor any agent of the Company or the Trustee shall be affected by any
notice to the contrary. The fact of the

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holding by any Holder of an Unregistered Security, and the identifying number
of such Security and the date of his holding the same, may be proved by the
production of such Security or by a certificate executed by any trust company,
bank, banker or recognized securities dealer wherever situated satisfactory to
the Trustee, if such certificate shall be deemed by the Trustee to be
satisfactory. Each such certificate shall be dated and shall state that on the
date thereof a Security bearing a specified identifying number was deposited
with or exhibited to such trust company, bank, banker or recognized securities
dealer by the person named in such certificate. Any such certificate may be
issued in respect of one or more Unregistered Securities specified therein.
The holding by the person named in any such certificate of any Unregistered
Securities specified therein shall be presumed to continue for a period of one
year from the date of such certificate unless at the time of any determination
of such holding (1) another certificate bearing a later date issued in respect
of the same Securities shall be produced or (2) the Security specified in such
certificate shall be produced by some other Person, or (3) the Security
specified in such certificate shall have ceased to be outstanding. Subject to
Article 7, the fact and date of the execution of any such instrument and the
amount and numbers of Securities held by the Person so executing such
instrument may also be proven in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in any other manner which
the Trustee may deem sufficient.

The Company, the Trustee and any agent of the Company or the
Trustee may deem and treat the person in whose name any Registered Security
shall be registered upon the Security Register for such series as the absolute
owner of such Registered Security (whether or not such Registered Security
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the Principal
of and, subject to the provisions of this Indenture, interest on such
Registered Security and for all other purposes; and neither the Company nor the
Trustee nor any agent of the Company or the Trustee shall be affected by any
notice to the contrary.

SECTION 10.6 Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.

SECTION 10.7 Payment Date Other Than a Business Day. If any
date for payment of Principal or interest on

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any Security shall not be a Business Day at any place of payment, then payment
of Principal of or interest on such Security, as the case may be, need not be
made on such date, but may be made on the next succeeding Business Day at any
place of payment with the same force and effect as if made on such date and no
interest shall accrue in respect of such payment for the period from and after
such date.

SECTION 10.8 Governing Law. The laws of the State of New York
shall govern this Indenture and the Securities.

SECTION 10.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture or loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture
or agreement may not be used to interpret this Indenture.

SECTION 10.10 Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.

SECTION 10.11 Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.

SECTION 10.12 Separability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

SECTION 10.13 Table of Contents, Headings, Etc. The Table of
Contents and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.

SECTION 10.14 Incorporators, Stockholders, Officers and Directors
of Company Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture or any indenture
supplemental hereto, or in any Security or any coupons appertaining thereto, or
because of any indebtedness evidenced thereby, shall be had against any
incorporator, as such or against any past, present or future stockholder,
officer, director or employee, as such, of the Company or of any successor,
either directly or through the Company or any

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successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of the Securities and the coupons appertaining thereto by the
holders thereof and as part of the consideration for the issue of the
Securities and the coupons appertaining thereto.

SECTION 10.15 Judgment Currency. The Company agrees, to the
fullest extent that it may effectively do so under applicable law, that (a) if
for the purpose of obtaining judgment in any court it is necessary to convert
the sum due in respect of the Principal of or interest on the Securities of any
series (the "Required Currency") into a currency in which a judgment will be
rendered (the "Judgment Currency"), the rate of exchange used shall be the rate
at which in accordance with normal banking procedures the Trustee could
purchase in The City of New York the Required Currency with the Judgment
Currency on the day on which final unappealable judgment is entered, unless
such day is not a Business Day, then, to the extent permitted by applicable
law, the rate of exchange used shall be the rate at which in accordance with
normal banking procedures the Trustee could purchase in The City of New York
the Required Currency with the Judgment Currency on the Business Day preceding
the day on which final unappealable judgment is entered and (b) its obligations
under this Indenture to make payments in the Required Currency (i) shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment
(whether or not entered in accordance with subsection (a)), in any currency
other than the Required Currency, except to the extent that such tender or
recovery shall result in the actual receipt, by the payee, of the full amount
of the Required Currency expressed to be payable in respect of such payments,
(ii) shall be enforceable as an alternative or additional cause of action for
the purpose of recovering in the Required Currency the amount, if any, by which
such actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by judgment
being obtained for any other sum due under this Indenture.

ARTICLE 11

SUBORDINATION OF SECURITIES

SECTION 11.1 Agreement to Subordinate. The Company covenants
and agrees, and each Holder of Securities

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issued hereunder by his acceptance thereof likewise covenants and agrees, that
all Securities shall be issued subject to the provisions of this Article; and
each person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof accepts and agrees that the Principal of and
interest on all Securities issued hereunder shall, to the extent and in the
manner herein set forth, be subordinated and subject in right to the prior
payment in full of all Senior Debt.

SECTION 11.2 Payments to Securityholders. No payments on
account of Principal of or interest on the Securities shall be made if at the
time of such payment or immediately after giving effect thereto there shall
exist a default in any payment with respect to any Senior Debt, and such event
of default shall not have been cured or waived or shall not have ceased to
exist. In addition, during the continuance of any other event of default
(other than a payment default) with respect to Designated Senior Debt pursuant
to which the maturity thereof may be accelerated, from and after the date of
receipt by the Trustee of written notice from the holders of such Designated
Senior Debt or from an agent of such holders, no payments on account of
Principal or interest in respect of the Securities may be made by the Company
for a period ("Payment Blockage Period") commencing on the date of delivery of
such notice and ending 179 days thereafter (unless such Payment Blockage Period
shall be terminated by written notice to the Trustee from the holders of such
Designated Senior Debt or from an agent of such holders, or such event of
default has been cured or waived or has ceased to exist). Only one Payment
Blockage Period may be commenced with respect to the Securities during any
period of 360 consecutive days. No event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Debt initiating such Payment Blockage Period
shall be or be made the basis for the commencement of any subsequent Payment
Blockage Period by the holders of such Designated Senior Debt, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.

Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding up, receivership, reorganization,
assignment for the benefit of creditors, marshalling of assets and liabilities
or any bankruptcy, insolvency or similar proceedings of the Company, all
amounts due or to become due upon all Senior Debt shall first be paid in full,
in cash or cash equivalents, or payment thereof provided for

65
<PAGE> 72
in accordance with its terms, before any payment is made on account of the
Principal of or interest on the indebtedness evidenced by the Securities, and
upon any such liquidation, dissolution, winding up, receivership,
reorganization, assignment, marshalling or proceeding, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the Securities or the
Trustee under this Indenture would be entitled, except for the provisions
hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders of the Securities or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Debt (pro rata to
such holders on the basis of the respective amounts of Senior Debt held by such
holders) or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to pay all Senior Debt in full (including, without
limitation, except to the extent, if any, prohibited by mandatory provisions of
law, post-petition interest, in any such proceedings), after giving effect to
any concurrent payment or distribution to or for the holders of Senior Debt,
before any payment or distribution is made to the holders of the indebtedness
evidenced by the Securities or to the Trustee under this Indenture.

In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee under this Indenture or the holders of the Securities before all
Senior Debt is paid in full or provision is made for such payment in accordance
with its terms, such payment or distribution shall be held in trust for the
benefit of and shall be paid over or delivered to the holders of such Senior
Debt or their respective representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such Senior
Debt may have been issued, as their respective interests may appear, for
application to the payment of all Senior Debt remaining unpaid until all such
Senior Debt shall have been paid in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders
of such Senior Debt.

For purposes of this Article, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted,

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<PAGE> 73
or securities of the Company or any other corporation provided for by a plan of
arrangement, reorganization or readjustment, the payment of which is
subordinated (at least to the extent provided in this Article with respect to
the Securities) to the payment of all Senior Debt which may at the time be
outstanding; provided, that (i) the Senior Debt is assumed by the new
corporation, if any, resulting from any such arrangement, reorganization or
readjustment, and (ii) the rights of the holders of the Senior Debt are not,
without the consent of such holders, altered by such arrangement,
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon
the terms and conditions provided in Article 5 shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article 5.
Nothing in this Section shall apply to claims of, or payments to, the Trustee
under or pursuant to Article 7, except as provided therein. This Section shall
be subject to the further provisions of Section 11.5.

SECTION 11.3 Subrogation of Securities. Subject to the
payment in full of all Senior Debt, the holders of the Securities shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Debt until the principal of and interest on the Securities shall be paid
in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the holders of the Securities or the Trustee on their
behalf would be entitled except for the provisions of this Article, and no
payment over pursuant to the provisions of this Article to the holders of
Senior Debt by holders of the Securities or the Trustee on their behalf shall,
as between the Company, its creditors other than holders of Senior Debt and the
holders of the Securities, be deemed to be a payment by the Company to or on
account of the Senior Debt; and no payments or distributions of cash, property
or securities to or for the benefit of the Securityholders pursuant to the
subrogation provision of this Article, which would otherwise have been paid to
the holders of Senior Debt shall be deemed to be a payment by the Company to or
for the account of the Securities. It is understood that the provisions of
this Article are and are intended solely for the purpose of defining the
relative

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rights of the holders of the Securities, on the one hand, and the holders of
the Senior Debt, on the other hand.

Nothing contained in this Article or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company,
its creditors other than the holders of Senior Debt, and the holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Securities the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
holders of the Securities and creditors of the Company other than the holders
of the Senior Debt, nor shall anything herein or therein prevent the holder of
any Security or the Trustee on his behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article of the holders of Senior Debt
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Sections 7.1 and
7.2, and the holders of the Securities shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such
liquidation, dissolution, winding up, receivership, reorganization, assignment
or marshalling proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the holders of the
Securities, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Debt and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this
Article.

SECTION 11.4 Authorization by Securityholders. Each holder of
a Security by his acceptance thereof authorizes the Trustee in his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.

SECTION 11.5 Notice to Trustee. The Company shall give prompt
written notice to the Trustee and to any paying agent of any fact known to the
Company which would prohibit the making of any payment of moneys to or by the
Trustee or any paying agent in respect of the Securities

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pursuant to the provisions of this Article. Regardless of anything to the
contrary contained in this Article or elsewhere in this Indenture, the Trustee
shall not be charged with knowledge of the existence of any Senior Debt or of
any default or event of default with respect to any Senior Debt or of any other
facts which would prohibit the making of any payment of moneys to or by the
Trustee, unless and until the Trustee shall have received notice in writing at
its principal Corporate Trust Office to that effect signed by an officer of the
Company, or by a holder or agent of a holder of Senior Debt who shall have been
certified by the Company or otherwise established to the reasonable
satisfaction of the Trustee to be such holder or agent, or by the trustee under
any indenture pursuant to which Senior Debt shall be outstanding, and, prior to
the receipt of any such written notice, the Trustee shall, subject to Sections
7.1 and 7.2, be entitled to assume that no such facts exist; provided that if
on a date at least three Business Days prior to the date upon which by the
terms hereof any such moneys shall become payable for any purpose (including,
without limitation, the payment of the principal of, or interest on any
Security) the Trustee shall not have received with respect to such moneys the
notice provided for in this Section, then, regardless of anything herein to the
contrary, the Trustee shall have full power and authority to receive such
moneys and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such prior date.

Regardless of anything to the contrary herein, nothing shall
prevent (a) any payment by the Company or the Trustee to the Securityholders of
amounts in connection with a redemption of Securities if (i) notice of such
redemption has been given pursuant to Article 3 prior to the receipt by the
Trustee of written notice as aforesaid, and (ii) such notice of redemption is
given not earlier than 60 days before the redemption date, or (b) any payment
by the Trustee to the Securityholders of amounts deposited with it pursuant to
Section 8.1.

The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior Debt
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Debt or a trustee on behalf of any such holder. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article, the
Trustee may request such

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person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt held by such person, the extent to which such person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article, and if such evidence
is not furnished the Trustee may defer any payment to such person pending
judicial determination as to the right of such person to receive such payment.

SECTION 11.6 Trustee's Relation to Senior Debt. The Trustee
and any agent of the Company or the Trustee shall be entitled to all the rights
set forth in this Article with respect to any Senior Debt which may at any time
be held by it in its individual or any other capacity to the same extent as any
other holder of Senior Debt and nothing in this Indenture shall deprive the
Trustee or any such agent, of any of its rights as such holder. Nothing in
this Article shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 7.7.

With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Debt and, subject to the provisions of Sections 7.1
and 7.2, the Trustee shall not be liable to any holder of Senior Debt if it
shall pay over or deliver to holders of Securities, the Company or any other
person moneys or assets to which any holder of Senior Debt shall be entitled by
virtue of this Article or otherwise.

SECTION 11.7 No Impairment of Subordination. No right of any
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.

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SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.

(SEAL) THE AES CORPORATION
Attest: as the Company

- ----------------------
By:
---------------------------
Name:
Title:

THE FIRST NATIONAL BANK OF
(SEAL) CHICAGO
Attest: as Trustee

- ----------------------

By:
---------------------------
Name:
Title:

71
<PAGE> 78
STATE OF _________ )
)
COUNTY OF ________ )

BEFORE ME, the undersigned authority, on this __ day of
____________, 1996, personally appeared ____________, ____________ of The AES
Corporation, a Delaware corporation, known to me (or proved to me by
introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he/she executed the same as the act of such corporation for the
purposes and consideration herein expressed and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF JUNE, 1995.

(SEAL)

________________________________
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________

STATE OF NEW YORK )
)
COUNTY OF NEW YORK )

BEFORE ME, the undersigned authority, on this _______ day of
____________, 1996, personally appeared _________________, _______________ of
The First National Bank of Chicago, a national association, known to me (or
proved to me by introduction upon the oath of a person known to me) to be the
person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such trust for
the purposes and consideration herein expressed and in the capacity therein
stated.

GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF ____, 1996.

(SEAL)
________________________________
NOTARY PUBLIC, STATE OF_________
Print Name:_____________________
Commission Expires:_____________

<PAGE> 1
EXHIBIT 4.2

[FORM OF DEBT SECURITY]

CUSIP:
No. $

[To be included on Registered Global Securities only: Unless and until it is
exchanged in whole or in part for [Notes] [Debentures] in definitive registered
form, this [Note] [Debenture] may not be transferred except as a whole by the
Depositary to the nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary.]

THE AES CORPORATION

__% [Note]
[Sinking Fund Debenture]
Due ___

THE AES CORPORATION, a Delaware corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to , or
registered assigns, at the office or agency of the Company in New York, New
York, the principal sum of Dollars on _______________, in the
coin or currency of the United States, and to pay interest, semi-annually on
______ and ______ of each year, commencing __________, on said principal sum at
said office or agency, in like coin or currency, at the rate per annum
specified in the title of this [Note] [Debenture], from the _____ or the
______, as the case may be, next preceding the date of this [Note] [Debenture]
to which interest has been paid or duly provided for, unless the date hereof is
a date to which interest has been paid or duly provided for, in which case from
the date of this [Note] [Debenture], or unless no interest has been paid or
duly provided for on these [Notes] [Debentures], in which case from __________,
until payment of said principal sum has been made or duly provided for;
provided, that payment of interest may be made at the option of the Company by
check mailed to the address of the person entitled thereto as such address
shall appear on the Security
<PAGE> 2
register or by wire transfer as provided in the Indenture. Notwithstanding the
foregoing, if the date hereof is after the __th day of _____ or ______ , as the
case may be, and before the following _____ or ______, this [Note] [Debenture]
shall bear interest from such ______ or ______; provided, that if the Company
shall default in the payment of interest due on such _____ or _____, then this
[Note] [Debenture] shall bear interest from the next preceding _____ or _____,
to which interest has been paid or duly provided for or, if no interest has
been paid or duly provided for on these [Notes] [Debentures], from ________.
The interest so payable on any ____ or ____ will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid to the
person in whose name this [Note] [Debenture] is registered at the close of
business on the ____ or ______, as the case may be, next preceding such _____
or ______, whether or not such day is a Business Day.

Reference is made to the further provisions of this [Note]
[Debenture] set forth on the reverse hereof, including without limitation
provisions subordinating the payment of principal of, premium, if any,and
interest on this [Note] [Debenture] to the payment in full of all Senior Debt
of the Company as defined in the Indenture. Such further provisions shall for
all purposes have the same effect as though fully set forth at this place.

This [Note] [Debenture] shall not be valid or become
obligatory for any purpose until the certificate of authentication hereon shall
have been manually signed by the Trustee under the Indenture referred to on the
reverse hereof.

IN WITNESS WHEREOF, THE AES CORPORATION has caused this
instrument to be signed manually or by facsimile by its duly authorized
officers and has caused a facsimile of its corporate seal to be affixed
hereunto or imprinted hereon.

(SEAL) THE AES CORPORATION

Attest: By
--------------------------------

- ------------------------

2
<PAGE> 3
CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.

Dated: THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee

By
--------------------------------
Authorized Signatory

3
<PAGE> 4
REVERSE OF [NOTE] [DEBENTURE]

THE AES CORPORATION

__% [Note]
[Sinking Fund Debenture]
Due ____

This [Note] [Sinking Fund Debenture] is one of a duly
authorized issue of debentures, notes, bonds or other evidences of indebtedness
of the Company (hereinafter called the "Securities") of the series hereinafter
specified, all issued or to be issued under and pursuant to an indenture dated
as of June __, 1996 (herein called the "Indenture"), duly executed and
delivered by the Company to The First National Bank of Chicago, Chicago, as
Trustee (herein called the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Securities. The Securities may be
issued in one or more series, which different series may be issued in various
aggregate principal amounts, may mature at different times, may bear interest
(if any) at different rates, may be subject to different redemption provisions
(if any), may be subject to different sinking, purchase or analogous funds (if
any) and may otherwise vary as in the Indenture provided. This [Note]
[Debenture] is one of a series designated as the ___% [Notes] [Sinking Fund
Debentures] Due ___ of the Company, limited in aggregate principal amount to
$________.

Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue Principal and,
to the extent lawful, on overdue installments of interest at the rate per annum
borne by this [Note] [Debenture]. If a payment date is not a Business Day as
defined in the Indenture at a place of payment, payment may be made at that
place on the next succeeding day that is a Business Day, and no interest shall
accrue for the intervening period.

In case an Event of Default with respect to the ___%
[Notes] [Sinking Fund Debentures] Due ____, as defined in the Indenture, shall
have occurred and be continuing, the Principal hereof and the interest accrued
hereon, if any, may be declared, and upon such declaration shall become, due
and payable, in the manner, with the effect and subject to the conditions
set forth in the Indenture.

4
<PAGE> 5
The Indenture contains provisions which provide that, without
prior notice to any Holders, the Company and the Trustee may amend the
Indenture and the Securities of any series with the written consent of the
Holders of a majority in principal amount of the outstanding Securities of all
series affected by such amendment (all such series voting as one class), and
the Holders of a majority in principal amount of the outstanding Securities of
all series affected thereby (all such series voting as one class) by written
notice to the Trustee may waive future compliance by the Company with any
provision of the Indenture or the Securities of such series; provided that,
without the consent of each Holder of the Securities of each series affected
thereby, an amendment or waiver, including a waiver of past defaults, may not:
(i) change the stated maturity of the Principal of, or any sinking fund
obligation or any installment of interest on, such Holder's Security, or reduce
the principal amount thereof or the rate of interest thereon, or any premium
payable under or with respect thereto, or change any place of payment where, or
the currency in which, any Security of such series or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the due date therefor; (ii) reduce
the percentage in principal amount of outstanding Securities of the relevant
series the consent of whose Holders is required for any waiver of compliance
with certain provisions of the Indenture or certain Defaults and their
consequences provided for in the Indenture; (iii) waive a Default in the
payment of Principal of or interest on any Security of such Holder; (iv)
adversely affect the rights of such Holder under any mandatory redemption or
repurchase provision or any right of redemption or repurchase at the option of
such Holder, or the amount thereof provable in bankruptcy; or (v) modify any of
the provisions of the Indenture governing supplemental indentures requiring the
consent of Securityholders except to increase any such percentage or to provide
that certain other provisions of the Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security affected
thereby.

It is also provided in the Indenture that, subject to certain
conditions, the Holders of at least a majority in principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the
principal as is then accelerable) of the outstanding Securities of all series
affected (voting as a single class), by notice to the Trustee, may waive an
existing Default or Event of Default with respect to the Securities of such
series and its consequences, except a Default in the payment of Principal

5
<PAGE> 6
of or interest on any Security or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the Holder
of each outstanding Security affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default with respect to the Securities
of any such series arising therefrom shall be deemed to have been cured, for
every purpose of the Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.

The Indenture provides that a series of Securities may include
one or more tranches (each a "tranche") of Securities, including Securities
issued in a Periodic Offering. The Securities of different tranches may have
one or more different terms, including authentication dates and public offering
prices, but all the Securities within each such tranche shall have identical
terms, including authentication date and public offering price.
Notwithstanding any other provision of the Indenture, subject to certain
exceptions, with respect to sections of the Indenture concerning the execution,
authentication and terms of the Securities, redemption of the Securities,
Events of Default of the Securities, defeasance of the Securities and amendment
of the Indenture, if any series of Securities includes more than one tranche,
all provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of Securities in the
same manner as though originally designated a series unless otherwise provided
with respect to such series or tranche pursuant to a board resolution or a
supplemental indenture establishing such series or tranche.

The indebtedness evidenced by the Securities is, to the extent
and in the manner provided in the Indenture, expressly subordinate and subject
in right of payment to the prior payment in full of all Senior Debt of the
Company as defined in the Indenture, whether outstanding at the date of the
Indenture or thereafter incurred, and this Security is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Security, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.

No reference herein to the Indenture and no provision of this
[Note] [Debenture] or of the Indenture shall alter or impair the obligation of
the Company, which

6
<PAGE> 7
is absolute and unconditional, to pay the Principal of and any premium and
interest on this [Note] [Debenture] in the manner, at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.

The [Notes] [Debentures] are issuable initially only in
registered form without coupons in denominations of [$1,000] or any integral
multiple thereof at the office or agency of the Company in the Borough of
Manhattan, The City of New York, and in the manner and subject to the
limitations provided in the Indenture.

[This [Note] [Debenture] will not be redeemable at the option
of the Company prior to maturity.] [This [Note] [Debenture] is redeemable
prior to maturity ...] [This Debenture is entitled to the benefits of a
mandatory sinking fund as follows ...]

Upon due presentment for registration of transfer of this
[Note] [Debenture] at the office or agency of the Trustee in the City of
Chicago, Illinois, a new [Note or Notes] [Debenture or Debentures] of
authorized denominations for an equal aggregate principal amount will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.

The Company, the Trustee and any agent of the Company or the
Trustee may deem and treat the registered Holder hereof as the absolute owner
of this [Note] [Debenture] (whether or not this [Note] [Debenture] shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment of, or on account of, the Principal hereof
and, subject to the provisions hereof, interest hereon, and for all other
purposes, and neither the Company nor the Trustee nor any agent of the Company
or the Trustee shall be affected by any notice to the contrary.

No recourse under or upon any obligation, covenant or
agreement contained in the Indenture or any indenture supplemental thereto or
in any [Note] [Debenture], or because of any indebtedness evidenced thereby,
shall be had against any incorporator as such, or against any past, present or
future stockholder, officer, director or employee, as such, of the Company or
of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being

7
<PAGE> 8
expressly waived and released by the acceptance hereof and as part of the
consideration for the issue hereof.

Terms used herein which are defined in the Indenture shall
have the respective meanings assigned thereto in the Indenture.

The laws of the State of New York (without regard to conflicts
of laws principles thereof) shall govern this [Note] [Debenture].

8
<PAGE> 9
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto

[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]

- --------------------------------------

- -------------------------------------------------------------------------

[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

- -------------------------------------------------------------------------
the within [Note] [Debenture] and all rights thereunder, hereby

- -------------------------------------------------------------------------
irrevocably constituting and appointing such person attorney

- -------------------------------------------------------------------------
to transfer such [Note] [Debenture] on the books of the Issuer, with full

- -------------------------------------------------------------------------
power of substitution in the premises.

Dated:
----------------------

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within [Note] [Debenture] in every
particular without alteration or enlargement or any change whatsoever.

Signature guarantee:
------------------------

<PAGE> 1
EXHIBIT 5.1

June 12, 1996

The AES Corporation
1001 N. 19th Street
Arlington, Virginia 22209

Dear Sirs:

We have acted as counsel for The AES Corporation, a Delaware
corporation (the "Company") , in connection with the preparation and filing
with the Securities and Exchange Commission of a Registration Statement on Form
S-3 (Registration No. 333-01286) under the Securities Act of 1933, as amended
(the "Act"), and Amendment No. 1 thereto (collectively, the "Registration
Statement"), relating to the proposed issuance and sale by the Company of up to
$225,000,000 in aggregate principal amount of debt securities (the "Debt
Securities"). The Debt Securities are to be issued pursuant to an Indenture
(the "Indenture") between the Company and The First National Bank of Chicago,
as trustee, and are to be sold pursuant to an Underwriting Agreement (the
"Underwriting Agreement") between
<PAGE> 2
The AES Corporation -2- June 12, 1996

the Company and J.P. Morgan Securities Inc. and Goldman, Sachs & Co., as
representatives of the several Underwriters named in Schedule I thereto (the
"Underwriters") forms of which are filed as Exhibit 4.1 and 1.1, respectively,
to the Registration Statement .

As such counsel, we have examined originals or copies certified or
otherwise identified to our satisfaction of the Restated Certificate of
Incorporation and By-Laws of the Company, as amended to the date hereof, as
well as resolutions adopted by the Company's Board of Directors in connection
with the authorization, registration, issuance and sale of the Debt Securities.
We have also examined originals, or copies certified to our satisfaction, of
such corporate records of the Company and other instruments, certificates of
appropriate public officials and certificates of officers and representatives
of the Company, and other documents as we have deemed necessary as a basis for
the opinions hereinafter expressed. In such examination, we have assumed the
authenticity of all documents submitted to us as originals, the conformity with
the originals of all documents submitted to us as copies, the genuineness of
all signatures and the legal capacity of natural persons.

On the basis of the foregoing, we are of the opinion that, when the
Registration Statement with respect to the Debt

<PAGE> 3
The AES Corporation -3- June 12, 1996

Securities filed pursuant to the Act has become effective under the Act, the
Indenture has been qualified under the Trust Indenture Act of 1939, as amended,
the Indenture has been executed by the parties thereto and delivered, and the
Debt Securities have been duly executed, authenticated and delivered against
payment therefor in accordance with the provisions of the Underwriting
Agreement, the Debt Securities will be legally and validly issued and will
constitute the valid and binding obligations of the Company.

We are members of the bar of the State of New York and with your
approval do not herein express any opinion as to any matters governed by any
law other than the laws of the State of New York, the General Corporation Law
of the State of Delaware and the federal laws of the United States.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to this firm under the caption
"Legal Matters" in the prospectus constituting part of the Registration
Statement.

Very truly yours,

Chadbourne & Parke LLP

<PAGE> 1
THE AES CORPORATION AND SUBSIDIARIES EXHIBIT 12.1

STATEMENT RE: CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
(In millions, unaudited)

<TABLE>
<CAPTION>
Three Months
Ended
Years Ended December 31 March 31
- ------------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Actual:
COMPUTATION OF EARNINGS:
Income from continuing operations
before income taxes $ 50.1 $ 65.2 $ 89.4 $141.8 $163.7 $ 44.0
Adjustment for undistributed equity
earnings, net of distributions - (2.5) (10.6) (5.9) 3.2 (5.0)
Interest expense 84.8 97.1 125.0 121.8 121.9 28.0
Depreciation of previously
capitalized interest 3.9 4.0 4.5 4.5 4.5 1.1
Net amortization of issuance cost 2.4 2.8 2.6 3.5 4.6 1.1
- ------------------------------------------------------------------------------------------------------------------------------
Earnings $141.2 $166.6 $210.9 $265.7 $297.9 $ 69.2
==============================================================================================================================

COMPUTATION OF FIXED CHARGES:
Interest expensed and capitalized
amounts (including construction
related fixed charges) $105.1 $118.2 $127.0 $123.9 $131.9 31.6
Net amortization of issuance costs
including capitalized amounts 3.0 3.1 2.5 3.5 4.6 1.1
- ------------------------------------------------------------------------------------------------------------------------------
Fixed charges $108.1 $121.3 $129.5 $127.4 $136.5 32.7
==============================================================================================================================
Ratio of earnings to fixed charges 1.31x 1.37x 1.63x 2.08x 2.18x 2.12x

Proforma:
COMPUTATION OF EARNINGS:
Income from continuing operations
before income taxes $141.0 $ 40.0
Adjustment for undistributed equity
earnings, net of distributions 1.0 (11.0)
Interest expense 156.0 38.0
Depreciation of previously
capitalized interest 4.5 1.1
Net amortization of issuance cost 4.6 1.1
- ------------------------------------------------------------------------------------------------------------------------------
Earnings $307.1 $ 69.2
==============================================================================================================================

COMPUTATION OF FIXED CHARGES:
Interest expensed and capitalized
amounts (including construction
related fixed charges) $165.9 $ 38.3
Net amortization of issuance costs
including capitalized amounts 4.6 1.1
- ------------------------------------------------------------------------------------------------------------------------------
Fixed charges $170.5 $ 39.4
==============================================================================================================================
1.80x 1.76x
</TABLE>

<PAGE> 1
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.2

We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-01286 of The AES Corporation on Form S-3 of our
report dated February 20, 1996, except for Note 14, as to which the date is
May 30, 1996, appearing in the Prospectus dated June 10, 1996, and our report
on the financial statement schedules dated February 20, 1996, appearing in and
incorporated by reference in the Annual Report on Form 10-K of The AES
Corporation for the year ended December 31, 1995. We also consent to the
reference to us under the heading "Experts" in the Prospectus, which is part
of such Registration Statement.

DELOITTE & TOUCHE LLP

Washington, D.C.

June 10, 1996

<PAGE> 1
EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-01286 of The AES Corporation on Form S-3 of our
report (based on our audit which was performed in accordance with auditing
standards generally accepted in Brazil) on the financial statements of LIGHT -
Servicos de Eletricidade S.A. as of December 31, 1995 and 1994 and for the
years then ended, prepared in conformity with accounting principles generally
accepted in Brazil, dated January 24, 1996, except for note 27 for which the
date is May 1996 (which expresses an unqualified opinion and includes a
reference to other auditors who audited the financial statements of Eletropaulo
Eletricidade de Sao Paulo S.A. as of and for the years ended December 31, 1995
and 1994, whose report thereon has been furnished to us, and our opinion on
LIGHT - Servicos de Eletricidade S.A., insofar as it relates to the amounts
included for such company, is based solely on the report of such other
auditors) appearing and incorporated by reference in the Current Report on Form
8-K of The AES Corporation dated June 10, 1996, and to the reference to us
under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.

DELOITTE TOUCHE TOHMATSU

Rio de Janiero, Brazil
June 10, 1996

<PAGE> 1

EXHIBIT 25.1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1
--------

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _____

---------------------------------

THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)

A National Banking Association 36-0899825
(I.R.S. employer
identification number)

One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)

The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)

-----------------------------------

THE AES CORPORATION
(Exact name of obligor as specified in its charter)

Delaware 54-1163725
State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)

1001 North 19th Street
Arlington, Virginia 22209
(Address of principal executive offices) (Zip Code)

Debt Securities
(Title of Indenture Securities)

<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:

(a) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.

Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.

(b) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.

The trustee is authorized to exercise corporate
trust powers.

ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.

No such affiliation exists with the trustee.

ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.

1. A copy of the articles of association of the
trustee now in effect.*

2. A copy of the certificates of authority of the
trustee to commence business.*

3. A copy of the authorization of the trustee to
exercise corporate trust powers.*

4. A copy of the existing by-laws of the trustee.*

5. Not Applicable.

6. The consent of the trustee required by
Section 321(b) of the Act.

2
<PAGE> 3

7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.

8. Not Applicable.

9. Not Applicable.

Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 4th day of June, 1996.

THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE

BY /S/ RICHARD D. MANELLA
---------------------------
RICHARD D. MANELLA
VICE PRESIDENT

* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).

3
<PAGE> 4

EXHIBIT 6

THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT

June 4, 1996

Securities and Exchange Commission
Washington, D.C. 20549

Gentlemen:

In connection with the qualification of an indenture between The AES
Corporation and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.

Very truly yours,

THE FIRST NATIONAL BANK OF CHICAGO

BY: /s/ RICHARD D. MANELLA
------------------------------
RICHARD D. MANELLA
VICE PRESIDENT

4
<PAGE> 5
EXHIBIT 7

<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 03/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
</TABLE>

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1996

All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.

SCHEDULE RC--BALANCE SHEET

<TABLE>
<CAPTION>
C400 <-
DOLLAR AMOUNTS IN ------------ -------
THOUSANDS RCFD BIL MIL THOU
------------------ ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule . .
RC-A): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 0081 3,047,140 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 8,488,390 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) . . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . . 1773 997,155 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs: . . . . . . . . . . . . . . . . . . . . . .
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . 0276 3,384,301 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . 0277 685,531 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 16,884,488 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . RCFD 3123 358,448 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . 2125 16,526,040 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . 3545 10,974,841 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . 2145 592,581 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . 2150 9,952 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2130 42,098 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . 2155 564,435 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . 2143 96,463 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 1,703,124 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . 2170 47,112,051 12.
</TABLE>

- ------------------

(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.

5
<PAGE> 6
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 03/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
</TABLE>

SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . RCON 2200 14,251,874 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 5,707,786 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 8,544,088 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . RCFN 2200 12,839,836 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . RCFN 6631 196,311 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . RCFN 6636 12,643,525 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . RCFD 0278 2,692,008 14.a.
b. Securities sold under agreements to repurchase . . . . . . RCFD 0279 1,165,032 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . RCON 2840 77,000 15.a.
b. Trading Liabilities . . . . . . . . . . . . . . . . . . . . RCFD 3548 7,103,300 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . RCFD 2332 2,223,560 16.a.
b. With original maturity of more than one year . . . . . . . RCFD 2333 144,665 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 283,041 17.
18. Bank's liability on acceptance executed and outstanding . . . RCFD 2920 564,435 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . RCFD 3200 1,275,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . RCFD 2930 1,411,087 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . RCFD 2948 44,030,838 21.
22. Limited-Life preferred stock and related surplus . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) . . . RCFD 3839 2,320,326 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . RCFD 3632 559,707 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 730 26.b.
27. Cumulative foreign currency translation adjustments . . . . . RCFD 3284 (408) 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . RCFD 3210 3,081,213 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . RCFD 3300 47,112,051 29.
</TABLE>

Memorandum
<TABLE>
<S> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
--------------
auditors as of any date during 1993 . . . . . . . . . . . . . . .. . . . .............. . . . . . .... RCFD 6724 2 M.1.
--------------
</TABLE>

<TABLE>
<S> <C> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>

- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.

<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1

FINANCIAL DATA SCHEDULE
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 239
<SECURITIES> 58
<RECEIVABLES> 54
<ALLOWANCES> 0
<INVENTORY> 36
<CURRENT-ASSETS> 425
<PP&E> 1772
<DEPRECIATION> (222)
<TOTAL-ASSETS> 2320
<CURRENT-LIABILITIES> 228
<BONDS> 1307
0
0
<COMMON> 1
<OTHER-SE> 548
<TOTAL-LIABILITY-AND-EQUITY> 2320
<SALES> 672
<TOTAL-REVENUES> 685
<CGS> 393
<TOTAL-COSTS> 437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122
<INCOME-PRETAX> 164
<INCOME-TAX> 57
<INCOME-CONTINUING> 107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 0

</TABLE>