As filed with the Securities and Exchange Commission on August 8, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE AES CORPORATION
(Exact name of Registrant as
specified in its charter)
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DELAWARE 4911 54-1163725
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number) identification number)
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1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
BARRY J. SHARP
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
RICHARD D. TRUESDELL, JR.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: []
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE
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8 3/8% Senior Subordinated Exchange
Notes due 2007 ........................... $325,000,000 99.530% $323,472,500 $98,022
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(f).
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 OF 1933, AS AMENDED 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>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 7, 1997
PROSPECTUS
, 1997
AES(R)
THE AES CORPORATION
OFFER TO EXCHANGE 8 3/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007 FOR ANY AND
ALL OUTSTANDING 8 3/8% SENIOR SUBORDINATED NOTES DUE 2007.
The Exchange Offer will expire at 5:00 p.m., New York City time, on September
__, 1997, unless extended.
The AES Corporation ("AES" or the "Company"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange $1,000 principal amount of 8 3/8% Senior Subordinated Exchange Notes
due 2007 (the "New Notes" of the Company for each $1,000 principal amount of the
issued and outstanding 8 3/8% Senior Subordinated Notes due 2007 (the "Old
Notes" and together with the New Notes, the "Notes") of the Company. As of the
date of this Prospectus, there were outstanding $325,000,000 principal amount of
Old Notes. The terms of the New Notes are identical in all material respects to
the Old Notes, except that the offer of the New Notes will have been registered
under the Securities Act and therefore, the New Notes will not be subject to
certain transfer restrictions, registration rights and related liquidated damage
provisions applicable to the Old Notes.
The Old Notes were issued at 99.530% of their principal amount. The New Notes
will bear interest from July 17, 1997. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from July 17, 1997 to
the date of issuance of the New Notes. Interest on the New Notes is payable
semi-annually on February 15 and August 15, commencing February 15, 1998,
accruing from July 17, 1997 at a rate 8 3/8% per annum.
The Notes are redeemable for cash at any time on or after August 15, 2002 at the
option of The AES Corporation ("AES" or the "Company"), in whole or in part, at
the redemption prices set forth herein, plus accrued interest. In addition,
prior to August 15, 2000, in the event that the Company consummates one or more
offerings of its Qualified Capital Stock (as defined herein), the Company may at
its option use all or a portion of the net cash proceeds from such offerings to
redeem up to 33% of the original aggregate principal amount of the Notes at a
cash redemption price equal to 108.375% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the redemption date; provided
that at least $100 million of the original aggregate principal amount of the
Notes remains outstanding thereafter. The Notes are redeemable at the option of
the holder upon a Change of Control (as defined herein) at 101% of the principal
amount thereof, plus accrued and unpaid interest thereon. The Notes are
unsecured obligations of the Company and subordinated to all existing and future
Senior Debt (as defined herein) of the Company. As of March 31, 1997, on a pro
forma basis after giving effect to certain recent acquisitions described in
"Summary Unaudited Pro Forma Consolidated Financial Information" and to the
application of the net proceeds from the offering and sale of the Old Notes (the
"Offering"), the Company had approximately $350 million in aggregate principal
amount of Senior Debt and the subsidiaries of the Company had approximately $3.2
billion in aggregate amount of liabilities to which the Notes are effectively
subordinated.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Rights Agreement, dated July
17, 1997, among the Company and the other signatories thereto (the "Registration
Rights Agreement"). Based upon interpretations contained in letters issued to
third parties by the staff of the Securities and Exchange Commission (the
"Commission" or "SEC"), the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by each Holder thereof (other than a
broker-dealer, as set forth below, and any such Holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act of 1933,
as amended, (the "Securities Act")) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. Eligible Holders wishing to accept the Exchange
Offer must represent to the Company in the Letter of Transmittal that such
conditions have been met and must represent, if such Holder is not a
broker-dealer, or is a broker-dealer but will not receive New Notes in for its
own account in exchange for Old Notes, that neither such Holder nor the person
receiving such New Notes, if other than a Holder, is engaged in or intends to
participate in the distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
represent that the Old Notes tendered in exchange therefor were acquired as a
result of market-making activities or other trading activities and must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Note received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event the Company terminates the Exchange Offer and does
not accept for exchange any Old Notes, the Company will promptly return tendered
Old Notes to the Holders thereof.
Prior to this Exchange Offer, there has been no public market for the Notes. The
Company does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active public market for the New Notes
will develop.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN AN EXCHANGE OFFER.
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.
Information contained herein is subject to completion and amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
AES GENERATION PLANTS IN OPERATION AND UNDER CONSTRUCTION
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YEAR OF
ACQUISITION OR
COMMENCEMENT
OF COMMERCIAL CAPACITY AES EQUITY
PLANT FUEL OPERATIONS (MW) LOCATION INTEREST (%)
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IN OPERATION
North America
Deepwater Pet Coke 1986(a) 143 Texas 100
Beaver Valley Coal 1987 125 Pennsylvania 80
Placerita Gas 1989 120 California 100
Thames Coal 1990 181 Connecticut 100
Shady Point Coal 1991 320 Oklahoma 100
Barbers Point Coal 1992 180 Hawaii 100
Kingston Gas 1997 110 Canada 50
Europe
Kilroot (NIGEN) Coal/Oil 1992 520 United Kingdom 47
Belfast West (NIGEN) Coal 1992 240 United Kingdom 47
Medway Gas 1995 660 United Kingdom 25
Borsod (Tiszai) Coal 1996 171 Hungary 63
Tisza II (Tiszai) Oil/Gas 1996 860 Hungary 93
Tiszapalkonya (Tiszai) Coal 1996 250 Hungary 93
Indian Queens Gas 1997 140 United Kingdom 100
Asia and Pacific
Cili Misty Mountain Hydro 1994 26 China 51
Yangchun Sun Spring Oil 1995 15 China 25
Wuxi Tin Hill Oil 1996 63 China 55
Wuhu Grassy Lake Coal 1996 250 China 25
Ekibastuz Coal 1996 4,000(b) Kazakstan 70
Hazelwood Coal 1997 1,600 Australia 20
Chengdu Lotus City Gas 1997 48 China 35
Latin America
San Nicolas Multiple 1993 650 Argentina 69
Rio Juramento (2 plants) Hydro 1995 112 Argentina 98
San Juan (2 plants) Hydro/Gas 1996 78 Argentina 98
Light (4 plants) Hydro 1996 788 Brazil 14
CEMIG (35 plants) Hydro (c) 1997 5,068 Brazil 13
Los Mina Oil 1997 235 Dominican Republic 99
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Total in Operation 16,953
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UNDER CONSTRUCTION
Lal Pir Oil 1997(d) 337 Pakistan 90
PakGen Oil 1997(d) 337 Pakistan 90
Jiaozou Aluminum Power Coal 1997(d) 250 China 70
Elsta Gas 1997(d) 405 Netherlands 50
Aixi Heart River Coal 1998(d) 50 China 70
Hefei Prosperity Lake Oil 1998(d) 115 China 70
Barry Gas 1998(d) 230 United Kingdom 100
Warrior Run Coal 1999(d) 180 Maryland 100
Yangcheng Sun City Coal 2000(e) 2,100 China 25
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Total Under Construction 4,004
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Total 20,957
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(a) Plant operations commenced in 1986, but control was acquired in 1995.
(b) Due to poor historical maintenance over the ten years prior to the
Company's purchase, the facility's capacity factor is approximately 20%.
(c) Total capacity of CEMIG includes 125 MW of thermal generation. Six hydro
plants represent approximately 90% of CEMIG's total generation capacity.
(d) Estimated date of commencement of commercial operation.
(e) Yangcheng Sun City is being constructed over a sixty month period beginning
in 1997. The first of six 350 megawatt units is estimated to be completed
in 2000.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE INITIAL PURCHASERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus (this "Prospectus") in connection with the offer made hereby and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any other person. 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 jurisdiction 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.
TABLE OF CONTENTS
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Page Page
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Special Note Regarding Forward Looking Statements ...... 3 Business ............................................. 42
Prospectus Summary .................................... 4 Description of Notes ................................. 45
Risk Factors .......................................... 13 United States Federal Income Tax Consequences of the
Use of Proceeds ....................................... 19 Exchange Offer ........................................
Capitalization ....................................... 20 Plan of Distribution ................................. 67
Summary Unaudited Pro Forma Consolidated Legal Matters ....................................... 68
Financial Information .............................. 21 Experts ................................................ 68
Calculations of Fixed Charge Ratio .................. 24 Available Information ................................. 68
Selected Consolidated Financial Data .................. 25 Incorporation of Certain Documents by Reference ...... 68
Discussion and Analysis of Financial Condition and Index to Consolidated Financial Statements ............ F-1
Results of Operations .............................. 27
The Exchange Offer .................................... 36
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and under
the caption "Risk Factors" in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 ("Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of AES, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following factors, as well as those factors discussed in
the section entitled "Risk Factors" and those discussed elsewhere in AES's
filings with the Commission, including its Current Report on Form 8-K dated
February 26, 1996: changes in company-wide operation and availability compared
to AES's historical performance; changes in AES's historical operating cost
structure, including changes in various costs and expenses; political and
economic considerations in certain non-U.S. countries where AES is conducting or
is seeking to conduct business; restrictions on foreign currency convertibility
and remittance abroad, exchange rate fluctuations and developing legal systems;
regulation and restrictions; legislation intended to promote competition in U.S.
and non-U.S. electricity markets; tariffs; governmental approval processes;
environmental matters; construction, operating and fuel risks; load growth,
dispatch and transmission constraints; conflict of interest of contracting
parties; and adherence to the AES principles; and other factors referenced in
this Prospectus. See "Risk Factors."
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
connection with, the more detailed information and consolidated financial
statements and the notes thereto included and incorporated by reference in this
Prospectus. References herein to "AES" or the "Company" include The AES
Corporation and its subsidiaries and affiliates unless the context requires
otherwise and references herein to "MW" are to megawatts.
THE COMPANY
AES is a global power company committed to supplying electricity to customers
world-wide in a socially responsible way. The Company 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. AES markets power
principally from electricity generating facilities that it develops, acquires,
owns and operates.
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
generating plants and distribution companies, through competitively bid
privatization initiatives outside of the United States or negotiated
acquisitions. Since 1992, the Company's total generating capacity in megawatts
has grown from 1,829 MW to 16,953 MW (an increase of 827%), with the total
number of plants in operation increasing from eight to 66. Additionally, the
Company's total revenues have increased at a compound annual growth rate of 20%
from $401 million in 1992 to $835 million in 1996, while net income has
increased at a compound annual growth rate of 22% from $56 million to $125
million and Consolidated EBITDA (as defined herein) has increased from $45
million to $189 million over the same period.
AES operates and owns (entirely or in part), through subsidiaries and
affiliates, power plants in ten countries with a capacity of approximately
16,953 MW (including 4,000 MW attributable to Ekibastuz which currently has a
capacity factor of approximately 20%). AES is also constructing nine additional
power plants in five countries with a capacity of approximately 4,004 MW. The
Company's total ownership in plants in operation and under construction
aggregates approximately 20,957 MW and its net equity ownership in such plants
is approximately 9,831 MW. In addition, AES has numerous projects in advanced
stages of development, including seven projects with design capacity of
approximately 3,206 MW that have executed or been awarded power sales
agreements.
The Company is also engaged (entirely or in part) in electric power distribution
businesses in Latin America through its subsidiaries and affiliates. These
subsidiaries and affiliates serve approximately 7 million commercial, industrial
and residential customers using approximately 62,000 gigawatt hours per year.
As a result of the Company's significant growth in recent years, the Company's
operations have become more diverse with regard to both geography and fuel
source and it has reduced its dependence upon any single project or customer.
During 1996, four of the Company's projects individually contributed more than
10% of the Company's total revenues, Shady Point which represented approximately
20%, San Nicolas which represented approximately 16%, Thames which represented
approximately 16% and Barbers Point which represented approximately 15%.
OUTLOOK
The global trend of electricity market restructuring has created significant new
business opportunities for companies like AES. Both domestic and international
electricity markets are being restructured and there is a trend away from
government-owned electricity systems toward deregulated, competitive market
structures. Many countries have rewritten their laws and regulations to allow
foreign investment and private ownership of electricity generation, transmission
or distribution systems. Some countries have or are in the process of
"privatizing" their electricity systems by selling all or part of such systems
to private investors. With 60 of its operating plants and distribution
4
<PAGE>
companies having been acquired or commenced commercial operations since 1992,
AES has been an active participant in both the international privatization
process and the development process. The Company is currently pursuing over 90
projects including acquisitions, the expansion of existing plants and new
projects.
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 many countries. Several of these
acquisitions, if consummated, would require the Company to obtain substantial
additional financing, in the form of both debt and equity financing, in the
short term.
STRATEGY
The Company's strategy in helping meet the world's need for electricity is to
participate in competitive power markets as they develop either by greenfield
development or by acquiring and operating existing facilities or distribution
systems in these markets. The Company generally operates electric generating
facilities that utilize natural gas, coal, oil, hydro power, or combinations
thereof. In addition, the Company participates in the electric power
distribution and retail supply businesses in certain limited instances, and will
continue to review opportunities in such markets in the future.
Other elements of the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance;
o Constructing or acquiring projects of a relatively large size
(generally larger than 100 MW);
o When available, entering into power sales contracts with electric
utilities or other customers with significant credit strength; and
o Participating in electric power distribution and retail supply markets
that grant concessions with long-term pricing arrangements.
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.
Where possible, AES attempts to sell electricity under long-term power sales
contracts. The Company attempts, whenever possible, to structure the revenue
provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. The Company also
attempts to provide fuel for its operating plants generally under long-term
supply agreements, either through contractual arrangements with third parties
or, in some instances, through acquisition of a dependable source of fuel.
As electricity markets become more competitive, it may be more difficult for AES
(and other power generation companies) to obtain long-term power sales
contracts. In markets where long-term contracts are not available, AES will
pursue methods to hedge costs and revenues to provide as much assurance as
possible of a project's profitability. In these situations, AES might choose to
purchase a project with a partial hedge or with no hedge, with the strategy that
its diverse portfolio of projects provides some hedge to the increased
volatility of the project's earnings and cash flow. Additionally, AES may choose
not to participate in these markets.
The Company attempts to finance each domestic and foreign plant primarily under
loan agreements and related documents which, except as noted below, require the
loans to be repaid solely from the project's revenues and provide that the
repayment of the loans (and interest thereon) is secured solely by the capital
stock, physical assets, contracts
5
<PAGE>
and cash flow of that plant subsidiary or affiliate. This type of financing is
generally referred to as "project financing." The lenders under these project
financing structures cannot look to AES or its other projects for repayment,
unless such entity explicitly agrees to undertake liability. AES has explicitly
agreed to undertake certain limited obligations and contingent liabilities, most
of which by their terms will only be effective or will be terminated upon the
occurrence of future events. In certain circumstances, the Company may incur
indebtedness which is recourse to the Company or to more than one project.
RECENT DEVELOPMENTS
Recent Acquisitions.
In June 1997, AES together with The Southern Company and The Opportunity Fund, a
Brazilian investment fund, (collectively, the "AES Consortium"), acquired 14.41%
of Companhia Energ-tica de Minas Gerais ("CEMIG"), an integrated electric
utility serving the State of Minas Gerais in Brazil, for a total purchase price
of approximately $1.056 billion, $654 million of the financing for which was in
the form of non-recourse financing provided by Banco Nacional de Desenvolvimento
Economico e Social ("BNDES"). AES's portion of the purchase price was
approximately $364 million after consideration of the BNDES facility. The shares
of CEMIG, which represent approximately 33% of the voting interest, have been
purchased from the State of Minas Gerais in a partial privatization of CEMIG.
Initially, AES and The Opportunity Fund will have a 90.6% and a 9.4% economic
interest in the AES Consortium, respectively. The Southern Company has an option
until January 9, 1998 to purchase up to a 25% interest in the AES Consortium
from AES. Pursuant to a shareholders agreement between the AES Consortium and
the State of Minas Gerais, AES will have significant operating influence,
including the right to appoint the chief operating officer of CEMIG, and will
otherwise share control of CEMIG with the State of Minas Gerais. CEMIG owns
approximately 5,000 MW of generating plants and serves approximately 4 million
customers. The foregoing transaction and the financing therefor described below
are referred to herein as the "CEMIG Acquisition".
In June 1997, AES acquired the international assets of Destec Energy, Inc.
("Destec"), a large independent energy producer with headquarters in Houston,
Texas, at a total price to AES of approximately $436 million, which price is
subject to adjustment to reflect net cash flow adjustments. NGC Corporation
("NGC"), working in conjunction with AES, was selected as the winning bidder in
an auction for all of Destec at a total acquisition price of $1.27 billion. AES
acquired the international assets of Destec immediately following NGC's
acquisition of Destec. Destec's international assets acquired by AES include
ownership interests in the following five electric generating plants (with
ownership percentages in parentheses): (i) a 110 MW gas-fired combined cycle
plant in Kingston, Canada (50 percent); (ii) a 405 MW gas-fired combined cycle
plant in Terneuzen, Netherlands (50 percent); (iii) a 140 MW gas-fired simple
cycle plant in Cornwall, England (100 percent); (iv) a 235 MW oil-fired simple
cycle plant in Santo Domingo, Dominican Republic (99 percent); and (v) a 1,600
MW coal-fired plant ("Hazelwood") in Victoria, Australia (20 percent). Each of
such plants is currently in operation, except for the plant in Terneuzen which
is under construction. The acquisition by AES of Destec's international assets
also includes Destec's non-U.S. developmental stage power projects, including
projects in Taiwan, England, Germany, the Philippines, Australia and Colombia.
The foregoing transaction and the financing therefor described below are
referred to herein as the "Destec Acquisition".
In May 1997, a subsidiary of AES, and its partner, Community Energy Alternatives
("CEA"), acquired an aggregate of 90% (AES acquired 60% and CEA acquired 30%) of
two distribution companies of Empresa Social de Energia de Buenos Aires S.A.
("ESEBA") serving certain portions of the Province of Buenos Aires, Argentina
for an aggregate purchase price of $565 million. AES's portion of the purchase
price after consideration of non-recourse debt was $244 million. The remaining
10% will be owned by the employees of each of the two acquired companies. The
foregoing transaction is referred to herein as the "ESEBA Acquisition".
AES funded its acquisition of Destec through cash on hand and borrowings under
its $425 million revolving credit facility (the "Revolver"). The net proceeds of
approximately $387 million from the Company's issuance and sale of its common
stock, par value $.01 per share (the "AES Common Stock"), and $2.6875 Term
Convertible Securities, Series A ("TECONS") in March 1997 was temporarily
applied to repay amounts outstanding under the Revolver. AES
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<PAGE>
financed its acquisitions of CEMIG and ESEBA through: (i) $450 million in
non-recourse bridge financing, comprised of a $250 million bridge loan (the
"CEMIG Bridge") to AES CEMIG Funding Corporation, a wholly-owned subsidiary of
AES, and a $200 million bridge loan (the "ESEBA Bridge") to AESEBA Funding
Corporation, a wholly-owned subsidiary of AES; (ii) a $200 million subordinated
bridge loan to AES (the "AES Bridge Loan"); (iii) non-recourse project debt;
(iv) borrowings under AES's $425 million Revolver and (v) cash on hand.
AES intends to repay the ESEBA Bridge and the CEMIG Bridge through a combination
of proceeds from: (i) the sale of AES's interest in Hazelwood; (ii) additional
borrowings at one or more AES projects; (iii) the replacement of cash reserves
with letters of credit at certain AES projects; (iv) if exercised, the proceeds
from the exercise of The Southern Company's option to purchase up to a 25%
interest in the AES Consortium from AES; and (v) the sale of the Notes offered
hereby. None of the foregoing sources of funds (other than the sale of the
Notes) is committed. Accordingly, there can be no assurances that such sources
or any other sources will be available to repay the ESEBA Bridge and CEMIG
Bridge. AES repaid the AES Bridge Loan with the net proceeds of the Offering.
See "Use of Proceeds".
The CEMIG Bridge and ESEBA Bridge mature in May 1998 or, in the case of the
ESEBA Bridge, earlier if AES sells its interest in Hazelwood. The interest rates
on both the CEMIG Bridge and the ESEBA Bridge will initially be LIBOR plus 2.5%
and will increase by 1.0% each month beginning January 1, 1998. These loans are
secured by a pledge of shares of AES Common Stock issued to a subsidiary of AES.
The pro forma information contained in this Prospectus has been adjusted for the
CEMIG Acquisition, the Destec Acquisition, the financing for the ESEBA
Acquisition (without the inclusion of the results of operations of ESEBA) and
the Offering and the application of the net proceeds therefrom (collectively,
the "Adjustments"). The pro forma information also gives effect to the financing
for the ESEBA Acquisition but does not give effect to the ESEBA Acquisition
itself because separate historical financial results of the two distribution
companies acquired by the Company pursuant to the ESEBA Acquisition are not
separately available. See "Summary Unaudited Pro Forma Consolidated Financial
Information".
Other Events.
In June 1997, AES initially funded its portion of the Yangcheng International
Power Company ("Yangcheng"), a $1.6 billion joint venture formed to build, own
and operate a 2,100 MW mine-mouth, coal-fired power plant in Shanxi Province in
the People's Republic of China. AES, through a subsidiary, will be responsible
for overseeing the management of the construction and operations of the plant.
The project will be funded with $1.21 billion of debt and $393 million of
equity. AES, which will own 25% of Yangcheng, has committed to provide up to $98
million of equity. Substantial risks to the successful completion of this
project exist, including provincial and central governmental approvals,
financing, construction, permitting, expropriation and currency
inconvertibility. There can be no assurance that this project will be completed.
In May 1997, AES consummated its amalgamation (the "Chigen Amalgamation") with
AES China Generating Company, Ltd. ("AES Chigen"). As a result of the Chigen
Amalgamation, AES Chigen is a wholly-owned subsidiary of AES.
In February 1997, AES's subsidiary, AES Electric Ltd., raised L112.5 million of
non-recourse project financing, underwritten solely by The Industrial Bank of
Japan, Limited, for its 230 MW gas-fired, combined cycle facility in Barry,
South Wales, United Kingdom. The Barry facility will sell electricity into the
national electricity market in the United Kingdom, and is expected to be
operational by the second quarter of 1998. AES began construction of the Barry
facility in October 1996. Substantial risks to the successful completion of this
project exist, including those relating to governmental approvals, the demand
for and price of electricity in the United Kingdom national electricity market,
financing, construction and permitting. There can be no assurance that this
project will be completed.
In February 1997, AES's subsidiaries executed three power purchase agreements
("PPAs"), for an aggregate generating capacity of at least 457 MW, with GPU
Energy, the energy services and delivery business of GPU, Inc., a public utility
holding company. AES plans to build a 720 MW natural gas-fired, combined cycle
facility in
7
<PAGE>
Pennsylvania to sell power under the PPAs beginning in 2000 and to sell power to
other potential purchasers. Between March and July 1996, subsidiaries of AES
acquired the right to negotiate the PPAs from other independent power producers
for a net aggregate cost of approximately $28 million. GPU Energy is required to
reimburse AES for substantially all its initial net investment if the project
does not receive the requisite regulatory approvals and permits. In January
1997, a joint venture company led by a subsidiary of AES was selected as the
winning bidder to build, own and operate a 484 MW gas-fired, combined cycle
power plant in the City of Merida, Yucatan, Mexico. These projects are subject
to a number of risks including those related to financing, construction and
contract compliance, and there can be no assurance that the project will be
completed successfully.
In January 1997, AES acquired an additional 2.4% of the voting interest in Light
Servicos de Electricidade, S.A. ("Light"), a vertically integrated electric
utility in the State of Rio de Janeiro, Brazil, bringing its total equity
interest in Light to 13.75%. In December 1996, a subsidiary of AES completed a
$167.5 million syndicated bank financing related to its equity ownership of
Light (which at the time was 11.35%). Under the terms of the financing, a
wholly-owned subsidiary of AES pledged the shares of Light owned by it as
collateral for the loan. The proceeds of the financing were used to repay a
portion of the debt incurred in the original acquisition of Light.
Second Quarter Results.
On July 15, 1997, AES announced that net income was $42 million for the quarter
ended June 30, 1997. Net income increased 50% compared to net income of $28
million for the second quarter of 1996. Revenues for the quarter ended June 30,
1997 were $261 million, up 50% compared to $174 million in the same period last
year.
8
<PAGE>
THE EXCHANGE OFFER
SECURITIES OFFERED ...... Up to $325,000,000 principal amount of 8 3/8%
Senior Subordinated Exchange Notes due 2007. The
terms of the New Notes and the Old Notes are
identical in all material respects, except that
the offer of the New Notes will have been
registered under the Securities Act and therefore,
the New Notes will not be subject to certain
transfer restrictions, registration rights and
related liquidated damage provisions applicable to
the Old Notes.
THE EXCHANGE OFFER ...... The Company is offering, upon the terms and
subject to the conditions of the Exchange Offer,
to exchange $1,000 principal amount of New Notes
for each $1,000 principal amount of Old Notes. See
"The Exchange Offer" for a description of the
procedures for tendering Old Notes. The Exchange
Offer is intended to satisfy obligations of the
Company under the Registration Rights Agreement,
dated July 17, 1997, between the Company and J.P.
Morgan & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, and Salomon Brothers Inc
(collectively, the "Initial Purchasers").
TENDERS, EXPIRATION DATE;
WITHDRAWAL ............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on September ____, 1997, or such
later date and time to which it is extended. The
tender of Old Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the
Expiration Date. Any Old Notes not accepted for
exchange for any reasons will be returned without
expense to the tendering Holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
FEDERAL INCOME TAX
CONSEQUENCES ............ The exchange pursuant to the Exchange Offer will
not result in any income, gain or loss to the
Holders or the Company for federal income tax
purposes. See "United States Federal Income Tax
Consequences of the Exchange Offer."
USE OF PROCEEDS ...... There will be no proceeds to the Company from the
issuance of the New Notes pursuant to the Exchange
Offer.
EXCHANGE AGENT............ The Bank of New York is serving as Exchange Agent
in connection with the Exchange Offer.
9
<PAGE>
CONSEQUENCE OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the SEC, the Company believes that, generally, any Holder of Old
Notes (other than a broker-dealer, as set forth below, and any Holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who exchange its Old Notes for New Notes pursuant to the Exchange Offer may
offer such New Notes for resale, resell such New Notes, or otherwise transfer
such New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the Holder's business and such Holder has no arrangement or
understanding with any person to participate in a distribution of such New
Notes. Eligible Holders wishing to accept the Exchange Offer must represent to
the Company in the Letter of Transmittal that such conditions have been met and
must represent, if such Holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes, that
neither such Holder nor the person receiving such New Notes, if other than the
Holder, is engaged in or intends to participate in the distribution of such New
Notes. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must represent that the Old Notes tendered in exchange
therefor were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution". To comply with
the securities laws of certain jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to the offering or selling such New Notes.
The Company does not currently intend to take any action to register or qualify
the New Notes for resale in any such jurisdictions. If a Holder of Old Notes
does not exchange such Old Notes for New Notes pursuant to the Exchange Offer,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered or
sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Any holder who tenders in the Exchange Offer
with the intention to participate, or for the purpose of participating, in a
distribution of New Notes could not rely on the position of the staff of the SEC
enunciated in Exxon Capital Holdings Corporation (available May 13, 1986) or
similar-no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements in such
instance may result in such holder incurring liability under the Securities Act
for which the holder is not indemnified by the Company. See "The Exchange
Offer-Consequences of Failure to Exchange" and "Description of
Notes-Registration Rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the offer of the New Notes will have been registered under
the Securities Act and, therefore, the New Notes will not be subject to certain
transfer restrictions, registration rights and related provisions applicable to
the Old Notes.
NOTES OFFERED ............ Up to $325,000,000 aggregate principal amount of
8 3/8% Senior Subordinated Exchange Notes due
2007.
INTEREST .................. Payable semi-annually on each February 15 and
August 15, commencing on February 15, 1998. The
New Notes will bear interest from July 17, 1997.
Holders of Old Notes whose Old Notes are accepted
for exchange will be deemed to have waived the
right to receive any payment in respect of
interest on such Old Notes accrued from July 17,
1997 to date of the issuance of the New Notes.
Consequently, holders who exchange their Old Notes
for New Notes will receive the same interest
payment on February 15, 1998 (the first interest
payment date with respect to the Old Notes and the
New Notes) that they would have received had they
not accepted the Exchange Offer.
MATURITY DATE ............ August 15, 2007.
10
<PAGE>
OPTIONAL REDEMPTION BY THE
COMPANY .................. The Notes may not be redeemed prior to August 15,
2002. On and after that date, the Notes may be
redeemed at any time, in whole or in part, on not
less than 30 nor more than 60 days' notice at the
prices set forth herein.
In addition, prior to August 15, 2000, in the
event that the Company consummates one or more
offerings of its Qualified Capital Stock, the
Company may at its option use all or a portion of
the net cash proceeds from such offerings to
redeem up to 33% of the original aggregate
principal amount of the Notes at a cash redemption
price equal to 108.375% of the principal amount
thereof plus accrued and unpaid interest thereon,
if any, to the redemption date; provided that at
least $100 million of the original aggregate
principal amount of the Notes remains outstanding
thereafter.
RANKING .................. The Notes will be general unsecured obligations of
the Company and will be subordinated in right of
payment to all Senior Debt of the Company. As of
March 31, 1997, on a pro forma basis after giving
effect to the Adjustments, the Company had
approximately $350 million in aggregate principal
amount of Senior Debt. In addition, the Company's
subsidiaries had approximately $3.2 billion in
aggregate amount of liabilities to which the Notes
are effectively subordinated.
CHANGE OF CONTROL OFFER.... Upon a Change of Control, each Holder of the Notes
shall have, subject to certain conditions, the
right to require that the Company repurchase such
Holder's Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest to the
date of purchase in accordance with the procedures
set forth in the Indenture (as defined herein) for
the Notes. If a Change of Control occurs, the
subordination provisions of the Notes require
Senior Debt to be repaid prior to the purchase of
any tendered Notes. Due to the highly leveraged
nature of the Company, there can be no assurance
that, upon a Change of Control, the Company will
be able to fund the purchase of the Notes. See
"Description of Notes -- Covenants -- Repurchase
of Notes Upon a Change of Control."
PRINCIPAL COVENANTS ...... The Indenture for the Notes will restrict, among
other things, the ability of the Company and its
Restricted Subsidiaries (as defined herein) to (i)
incur additional indebtedness, (ii) pay dividends
and make other distributions, (iii) make certain
investments, (iv) engage in unrelated businesses,
(v) create encumbrances to secure Debt that is
pari passu with or subordinated to the Notes, (vi)
engage in certain transactions with affiliates,
(vii) dispose of certain assets or (viii) merge or
consolidate with or into, or sell or otherwise
transfer their properties and assets as an
entirety to, another entity. See "Description of
Notes -- Covenants."
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA (1)
<TABLE>
<CAPTION>
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
ACTUAL
-----------------------------------------------------------
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
In millions, except for ratios and per
share data
Statement of Operations Data:
Revenues .............................. $ 401 $ 519 $ 533 $ 679 $ 835
Operating costs and expenses ............ 246 323 297 426 557
Operating income ........................ 155 196 236 253 278
Interest expense ........................ 99 128 125 127 144
Income before income taxes and minority
interest .............................. 66 89 145 167 193
Net income .............................. 56 71 100 107 125
Net income per share .................. $ 0.80 $ 0.98 $ 1.32 $ 1.41 $ 1.62
Weighted average shares outstanding ... 69.4 73.0 75.8 75.9 77.3
Ratio of earnings to fixed charges (3) 1.37 x 1.62 x 2.08 x 2.18 x 1.83 x
Balance Sheet Data:
Total assets ........................... $ 1,552 $ 1,687 $ 1,915 $ 2,341 $ 3,622
Revolving bank loan (current) ......... -- -- -- 50 88
Project finance debt (current) ......... 71 79 61 84 110
Revolving bank loan (long-term) ......... -- -- -- -- 125
Project finance debt (long-term) ...... 1,146 1,075 1,019 1,098 1,558
Other notes payable (long-term) ......... 50 125 125 125 325
Stockholders' equity .................. 177 309 401 549 721
Debt to total capitalization and
short-term debt ratios:
Project financing debt .................. 83.2% 72.4% 67.0% 61.6% 57.0%
Parent debt (4) ........................ 3.4 7.9 7.8 9.1 18.4
--------- --------- --------- --------- ---------
Total ................................. 86.6% 80.3% 74.8% 70.7% 75.4%
========= ========= ========= ========= =========
<PAGE>
<CAPTION>
QUARTER
ENDED MARCH 31,
-------------------------------------
ACTUAL
PRO FORMA(2) ----------------------- PRO FORMA(2)
1996 1996 1997 1997
-------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
In millions, except for ratios and per
share data
Statement of Operations Data:
Revenues .............................. $ 1,276 $ 172 $ 261 $ 300
Operating costs and expenses ............ 978 107 183 219
Operating income ........................ 298 65 78 81
Interest expense ........................ 246 30 44 68
Income before income taxes and minority
interest .............................. 161 45 58 41
Net income .............................. 123 29 40 32
Net income per share .................. $ 1.54 $ 0.38 $ 0.50 $ 0.39
Weighted average shares outstanding ... 79.8 76.1 80.0 82.5
Ratio of earnings to fixed charges (3) 1.21x 2.12 x 1.52 x 1.10 x
Balance Sheet Data:
Total assets ........................... -- $ 2,353 $ 4,078 $ 5,805
Revolving bank loan (current) ......... -- 31 -- 98
Project finance debt (current) ......... -- 84 110 617
Revolving bank loan (long-term) ......... -- -- -- 125
Project finance debt (long-term) ...... -- 1,108 1,841 2,549
Other notes payable (long-term) ......... -- 125 325 575
Stockholders' equity .................. -- 582 891 891
Debt to total capitalization and
short-term debt ratios:
Project financing debt .................. -- 61.8% 57.1% 62.0%
Parent debt (4) ........................ -- 8.0 9.5 15.6
------- --------- ---------
Total ................................. -- 69.8% 66.6% 77.6%
======= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
ACTUAL
-------------------------------------------------------
1992 1993 1994 1995 1996
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Other Data:
Net cash provided by operating
activities .................. $ 76 $ 123 $ 164 $ 197 $ 182
Consolidated EBITDA (5)(6) ... 45 30 68 110 189
Consolidated Fixed Charges (5) 3 7 11 12 36
Fixed Charge Ratio (5) ...... 15.0 x 4.3 x 6.2 x 9.2 x 5.2 x
<CAPTION>
FOUR QUARTERS
ENDED MARCH 31,
-----------------------------------
ACTUAL
PRO FORMA(2) --------------------- PRO FORMA(2)
1996 1996 1997 1997
-------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Other Data:
Net cash provided by operating
activities .................. $ 182 $ 199 $ 147 $ 147
Consolidated EBITDA (5)(6) ... 204 115 207 218
Consolidated Fixed Charges (5) 73 13 45 73
Fixed Charge Ratio (5) ...... 2.8 x 8.8 x 4.6 x 3.0 x
</TABLE>
- ---------
(1) The information for the five years ended December 31, 1996 has been derived
from AES's audited consolidated financial statements. The information for
the three months ended March 31, 1996 and 1997 is derived from AES's
unaudited consolidated financial statements.
(2) Pro forma information gives effect to the Adjustments. There can be no
assurance that the inclusion of the historical financial information
related to the ESEBA Acquisition would not have had a material adverse
effect on such pro forma financial information. For further information see
"Summary Unaudited Pro Forma Consolidated Financial Information."
(3) For purposes of this ratio, earnings include income before taxes and fixed
charges excluding capitalized interest. Fixed charges include interest,
whether capitalized or expensed, and amortization of deferred financing
costs, whether capitalized or expensed.
(4) Parent debt represents obligations of the Company, as parent. It does not
include non-recourse obligations of the Company's subsidiaries.
(5) The other data presented for "Consolidated EBITDA," "Consolidated Fixed
Charges" and "Fixed Charge Ratio" is calculated in accordance with the
respective definitions of such terms in the Indenture and set forth herein
under "Description of Notes -- Certain Definitions."
(6) Consolidated EBITDA is a concept defined in the Indenture and is not a
substitute for cash flows from operating activity as defined by generally
accepted accounting principles.
12
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, Holders of Old
Notes should carefully consider the following risk factors before accepting the
Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon. In general, the
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company does not
intend to register the Old Notes under the Securities Act. The Company believes
that, based upon interpretations contained in letters issued to third parties by
the staff of the SEC, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each Holder thereof (other than a broker-dealer, as set forth
below, and any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such Holder's
business and such Holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes. Eligible Holders wishing to
accept the Exchange Offer must represent to the Company in the Letter of
Transmittal that such conditions have been met and must represent, if such
Holder is not a broker-dealer, or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, that neither such Holder
nor the person receiving such New Notes, if other than the Holder is engaged in
or intends to participate in the distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must represent that the Old Notes tendered in exchange therefor
were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 90 days after the Expiration Date (as defined
herein), they will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdiction or an exemption from registration or qualification
is available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any such
jurisdictions. In addition, the tender of Old Notes pursuant to the Exchange
Offer will reduce the principal amount of the Old Notes outstanding, which may
have an adverse effect upon, and increase the volatility of, the market price of
the Old Notes due to a reduction in liquidity.
EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and avoid the restrictions on Old Notes,
each Holder of Old Notes must transmit a properly completed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to The Bank of New York (the "Exchange Agent") at one of the
addresses set forth below under "Exchange Agent") on or prior to the Expiration
Date. In addition, (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Old Notes, if
such procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date or (iii) the Holder must comply with the guaranteed
delivery procedures described below. See "The Exchange Offer."
LEVERAGE AND SUBORDINATION
The Company and its subsidiaries had approximately $2.3 billion of outstanding
indebtedness at March 31, 1997. 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, 1997, the Company had a consolidated ratio of total
debt to total book capitalization (including current debt) of approximately 67%.
13
<PAGE>
The Notes will be subordinated to all existing and future Senior Debt,
including, but not limited to, the amounts outstanding under the Company's
current $425 million Revolver. As of March 31, 1997, on a pro forma basis after
giving effect to the Adjustments, the Company had approximately $350 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 Notes will be
entitled to receive any payment in respect of the principal of, premium, if any,
or interest on such Notes. No payments on account of principal, premium, if any,
or interest in respect of the Notes may be made if there shall have occurred and
be continuing a default in any payment under any Senior Debt or during certain
periods when an event of default under certain Senior Debt permits the lenders
thereunder to accelerate the maturity thereof. See "Description of Notes --
Subordination."
The Notes will be effectively subordinated to the indebtedness and other
obligations (including trade payables) of the Company's subsidiaries. At March
31, 1997, on a pro forma basis after giving effect to the Adjustments, the
indebtedness and obligations of the Company's subsidiaries would have aggregated
approximately $3.2 billion. The ability of the Company to pay principal of,
premium, if any, and interest on the Notes 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 Notes 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 Notes 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 Notes. 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 Notes 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
and preferred stock issued by such subsidiary). The Company currently conducts
substantially all of its operations through its subsidiaries.
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 for projects
and plants outside the United States. The Company, through subsidiaries,
affiliates and joint ventures, has ownership interests in 68 power plants
outside the United States in operation or under construction. Five of such power
plants are located in Argentina; 39 in Brazil; five in the United Kingdom; two
in Pakistan; nine in the People's Republic of China; three in Hungary; one in
each of Kazakstan; Australia; the Netherlands; Canada; and the Dominican
Republic.
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 inconvertibility, political instability,
civil unrest, and expropriation) and other credit quality, liquidity or
structural 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.
14
<PAGE>
COMPETITION
The global power production market is characterized by numerous strong and
capable competitors, many of whom may have extensive and diversified
developmental or operating experience (including both domestic and international
experience) and financial resources similar to or greater 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 the 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 supply
businesses 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 substantially 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, such financing may not be available or 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.
15
<PAGE>
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. These investments
have 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
borrowings under the short-term credit facilities and 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 each 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 1996,
five customers, including CL&P, a subsidiary of Northeast Utilities, accounted
for 73% of the Company's consolidated total 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 39% of AES's
consolidated total assets at December 31, 1996 and generated approximately 67%
of AES's consolidated total revenues for the year ended December 31, 1996.
Sales to Connecticut Light & Power Company ("CL&P") represented 16% of the
Company's total revenues in 1996. Moody's Investor Service Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") have recently downgraded CL&P's senior
secured long-term debt from Baa3/BBB- to Ba1/BB+ and have placed CL&P on
negative outlook. In March 1997, as a result of regulatory action by the Public
Service Commission of New Hampshire, Moody's and S&P downgraded the senior
unsecured debt of Northeast Utilities, the parent of CL&P, from Ba2/BB to
Ba3/BB- and have placed Northeast Utilities on watch for possible downgrade.
REGULATORY UNCERTAINTY
AES's cogeneration operations in the United States 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 of 1935, 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 broader
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 could 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.
16
<PAGE>
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. In the
event of a PUHCA repeal, 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 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.
Such restructuring would 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 from 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.
LITIGATION AND REGULATORY PROCEEDINGS
From time to time, the Company and its affiliates are parties to litigation and
regulatory proceedings. Investors should review the descriptions of such matters
contained in the Company's Annual, Quarterly and Current Reports filed with the
Commission and incorporated by reference herein. There can be no assurances that
the outcome of such matters will not have a material adverse effect on the
Company's consolidated financial position.
BUSINESS SUBJECT TO STRINGENT ENVIRONMENTAL REGULATIONS
AES's activities are subject to stringent environmental regulation by federal,
state, local and foreign governmental authorities. For example, 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. These 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.
17
<PAGE>
CONTROL BY EXISTING STOCKHOLDERS
As of March 31, 1997, AES's two founders, Roger W. Sant and Dennis W. Bakke, and
their immediate families together owned beneficially approximately 24.4% of the
outstanding AES 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 March
31, 1997, all of AES's officers and directors and their immediate families
together owned beneficially approximately 32.9% of the outstanding AES 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 or financial benefits.
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old Notes
were issued on July 17, 1997 to a limited number of institutional investors. The
New Notes are new securities for which there currently is no market. The Company
does not intend to apply for listing of the Notes on any securities exchange or
for quotation through the National Association of Securities Dealers Automated
Quotation System. There can be no assurance that an active trading market for
the New Notes will develop. If a trading market develops for the New Notes,
future trading prices of such securities will depend on many factors, including
prevailing interest rates, the Company's results of operations and financial
condition and the market for similar securities.
RISK OF FRAUDULENT TRANSFER
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be applied by a court on behalf of any unpaid creditor or a
representative of AES's creditors in a lawsuit to subordinate or avoid the Notes
in favor of other existing or future creditors of AES. Under applicable
provisions of the U.S. Bankruptcy code or comparable provisions of state
fraudulent transfer or conveyance laws, if AES at the time of issuance of the
Notes, (i) incurred such indebtedness with intent to hinder, delay or defraud
any present or future creditor of AES or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (ii) received less than reasonably equivalent value or fair consideration for
issuing the Notes and AES (a) was insolvent, (b) was rendered insolvent by
reason of the issuance of the Notes, (c) was engaged or about to engage in
business or a transaction for which the remaining assets of AES constitute
unreasonably small capital to carry on its business or (d) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
mature, then, in each case, a court of competent jurisdiction could void, in
whole or in part, the Notes. Among other things, a legal challenge of the Notes
on fraudulent conveyance grounds may focus on the benefits, if any, realized by
AES as a result of the issuance by AES of the Notes.
The measure of insolvency for purposes of the foregoing will vary depending upon
the law applied in such case. Generally, however, AES would be considered
insolvent if the sum of its debts, including contingent liabilities, were
greater than all of its assets at fair valuation or if the present fair market
value of its assets were less than the amount that would be required to pay the
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature. There can be no assurance that, after providing
for all prior claims, there will be sufficient assets to satisfy the claims of
the holders of the Notes.
Management believes that, for purposes of all such insolvency, bankruptcy and
fraudulent transfer or conveyance laws, the Notes are being incurred without the
intent to hinder, delay or defraud creditors and for proper purposes and in good
faith, and that AES after the issuance of the Notes will be solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. There can be no assurance, however, that a court passing
on such questions would agree with management's view.
18
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. The net proceeds from the offering of the Old Notes of
approximately $314,753,750 are being used by the Company to repay amounts
outstanding under the AES Bridge Loan, to redeem the Company's $75,000,000 9
3/4% Senior Subordinated Notes due 2000 and to use the remainder to repay pro
rata amounts outstanding under the ESEBA Bridge and the CEMIG Bridge.
The AES Bridge Loan matures on June 26, 2003 and bears interest at the rate of
one-month adjusted LIBOR plus a spread which is initially 2.00% and increases to
3.00% if the AES Bridge Loan is not repaid in full by the end of the third month
following the closing of the AES Bridge Loan and will continue to increase
subject to a cap. The ESEBA Bridge and the CEMIG Bridge mature in May 1998 or in
the case of the ESEBA Bridge, earlier if AES sells its interest in Hazelwood.
The initerest rates on both the ESEBA Bridge and the CEMIG Bridge will initially
be LIBOR plus 2.5% and will increase by 1.0% each month beginning January 1,
1998. The AES Bridge Loan, the ESEBA Bridge and the CEMIG Bridge were incurred
to finance a portion of the Acquisitions. See" Prospectus Summary -- Recent
Developments."
CAPITALIZATION
The following table sets forth the consolidated capitalization of AES as of
March 31, 1997, as adjusted to give effect to certain recent acquisitions
described herein under "Summary Unaudited Pro Forma Consolidated Financial
Information", the issuance of the Notes in the Offering and the application of
the net proceeds therefrom.
<TABLE>
<CAPTION>
---------------------------------------------
MARCH 31, 1997
---------------------------------------------
PRO FORMA
FOR CERTAIN
PRO FORMA ACQUISITIONS
FOR CERTAIN AND THE
ACTUAL ACQUISITIONS(1) OFFERING(1)
--------- ----------------- -------------
<S> <C> <C> <C>
In millions, except per share data
Current Assets:
Cash and cash equivalents .................................... $ 423 $ 210 $ 210
======= ======= =======
Short-term debt:
Revolving bank loan (current portion) ........................ -- 98 98
Project financing debt (current portion) ..................... 110 653 617
------- ------- -------
Total short-term debt ........................................ $ 110 $ 751 $ 715
======= ======= =======
Long-term debt:
Revolving bank loan .......................................... $ -- $ 125 $ 125
Project financing debt ....................................... 1,841 2,549 2,549
AES Bridge Loan .............................................. -- 200 --
9 3/4% Senior Subordinated Notes due 2000 .................... 75 75 --
10 1/4% Senior Subordinated Notes due 2006 ................... 250 250 250
8 3/8% Senior Subordinated Notes due 2007 .................... -- -- 325
------- ------- -------
Total long-term debt ......................................... $ 2,166 $ 3,199 $ 3,249
------- ------- -------
Company-obligated mandatorily redeemable preferred securities
of AES Trust I .............................................. $ 250 $ 250 $ 250
Stockholders' equity:
Common Stock, $.01 par value: 100.0 million shares authorized;
80.2 million shares issued and outstanding (2) .............. 1 1 1
Additional paid-in capital ................................... 509 509 509
Retained earnings ............................................ 436 436 436
Treasury stock ............................................... (3) (3) (3)
Cumulative foreign currency translation adjustment ........... (52) (52) (52)
------- ------- -------
Total stockholders' equity ................................... 891 891 891
------- ------- -------
Total capitalization ......................................... $ 3,307 $ 4,340 $ 4,390
======= ======= =======
</TABLE>
- ----------
(1) Pro forma information gives effect to the Adjustments.
(2) Not adjusted to reflect the issuance of approximately 2.5 million shares of
AES Common Stock in connection with the Chigen Amalgamation in May 1997. In
addition to the shares of AES Common Stock outstanding as of March 31,
1997, there were outstanding warrants and options to purchase 5.0 million
shares of AES Common Stock and stock units to purchase 0.3 million shares
of AES Common Stock. In April 1997, the Company's shareholders approved an
increase in the authorized number of shares of AES Common Stock to 500.0
million.
19
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following tables and related notes present financial information at and for
the periods presented herein to give effect on a pro forma basis to the
Company's acquisitions of Destec's international assets, the interest in CEMIG,
and the sale of the Notes in the Offering and the application of the net
proceeds therefrom. The following pro forma information also gives effect to the
financing of the ESEBA Acquisition but does not give effect to the ESEBA
Acquisition itself because separate historical financial results of the two
distribution companies acquired by the Company pursuant to the ESEBA Acquisition
are not separately available. There can be no assurance that inclusion of such
historical financial information would not have had a material adverse effect on
the following pro forma financial information. The Company believes that the
historical operating results of ESEBA are not indicative of the future operating
results of the two distribution companies acquired in the ESEBA Acquisition
because, among other things (i) these distribution companies will be operated as
separate entities rather than as part of a unified company and (ii) in
connection with the ESEBA Acquisition AES negotiated new labor and concessionary
arrangements. The unaudited pro forma adjustments are based upon available
information and certain assumptions and estimates which the Company believes are
reasonable under the circumstances. The unaudited pro forma results do not
purport to be indicative of the results that would have been obtained had the
acquisitions and the Offering occurred at the beginning of the periods
presented, nor are they intended to be a projection of future results. The
unaudited pro forma financial information should be read in conjunction with the
notes herein.
The following unaudited pro forma consolidated statements of operations
information combine the results of AES's investment in CEMIG and Destec and the
ESEBA financing for the year ended December 31, 1996 and the quarter ended March
31, 1997 as if the Acquisitions and the Offering had occurred on January 1,
1996.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996(1)(2)
----------------------------------------------------------------------------------------------
PRO FORMA
FOR CERTAIN
ACQUISITIONS,
ADJUSTMENTS PRO FORMA ADJUSTMENTS FINANCING AND
ADJUSTMENTS FOR THE ESEBA ADJUSTMENTS FOR CERTAIN FOR THE THE ESEBA
ACTUAL FOR CEMIG FINANCING FOR DESTEC ACQUISITIONS OFFERING THE OFFERING
--------- ------------- -------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except per share data
Statements of Operations Data:
Total revenues ...................... $ 835 $ -- $ -- $ 441(4) $1,276 $ -- $1,276
Total operating cost and expenses . 557 -- -- 421(4) 978 -- 978
------- ------- ------- -------- ------ -------- ------
Operating income ................... 278 -- 20 298 -- 298
Other income and (expense):
Interest expense ................... (144) (56) (35) (10) (245) (1) (246)
Interest income ................... 24 -- -- -- 24 -- 24
Equity in earnings of affiliates .... 35 50 -- -- 85 -- 85
------- ------- ------- -------- ------ -------- ------
Income (loss) before income taxes and
minority interest ................ 193 (6) (35) 10 162 (1) 161
Income tax (benefit) ................ 60 (22) (14) 1 25 -- 25
Minority interest ................... 8 5 -- -- 13 -- 13
------- ------- ------- -------- ------ -------- ------
Net income (loss) ................... $ 125 $ 11 $ (21) $ 9 $ 124 $ (1) $ 123
======= ======= ======= ======== ====== ======== ======
Net income (loss) per share(3) .... $ 1.62 $ 0.14 $ (0.27) $ 0.11 $ 1.55 $ (0.01) $ 1.54
======= ======= ======= ======== ====== ======== ======
Ratio of earnings to fixed charges . 1.83x 1.21x
======= ======
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
QUARTER ENDED MARCH 31, 1997(1)(2)
-------------------------------------------------------------------------------------------
PRO FORMA
FOR CERTAIN
ACQUISITIONS,
ADJUSTMENTS THE ESEBA
FOR THE PRO FORMA ADJUSTMENTS FINANCING
ADJUSTMENTS ESEBA ADJUSTMENTS FOR CERTAIN FOR THE AND THE
ACTUAL FOR CEMIG FINANCING FOR DESTEC ACQUISITIONS OFFERING OFFERING
------- ------------- ------------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except per share data
Statements of Operations Data:
Total revenues ....................... $ 261 $ -- $ -- $ 39 $ 300 $ -- $ 300
Total operating cost and expenses ..... 183 -- -- 36 219 -- 219
------- --------- --------- ------ ----- ----- -------
Operating income ....................... 78 -- -- 3 81 -- 81
Other income and (expense):
Interest expense ....................... (44) (13) (8) (3) (68) -- (68)
Interest income ....................... 8 -- -- -- 8 -- 8
Equity (loss) in earnings of affiliates 16 3 -- 1 20 -- 20
------- --------- --------- ------ ----- ----- -------
Income (loss) before income taxes and
minority interest .................... 58 (10) (8) 1 41 -- 41
Income taxes (benefit) ................. 16 (5) (3) (1) 7 -- 7
Minority interest .................... 2 -- -- -- 2 -- 2
------- --------- --------- ------ ----- ----- -------
Net income (loss) .................... $ 40 $ (5) $ (5) $ 2 $ 32 $ -- $ 32
======= ========= ========= ====== ===== ===== =======
Net income (loss) per share(3) ........ $ 0.50 $ (0.06) $ (0.06) $0.02 $0.39 $ -- $ 0.39
======= ========= ========= ====== ===== ===== =======
Ratio of earnings to fixed charges ..... 1.52x 1.10x
======= =======
</TABLE>
The following unaudited pro forma consolidated balance sheet information
represents AES's financial position at March 31, 1997 as if the recent
acquisitions described above and the Offering had occurred on that date.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
AS OF MARCH 31, 1997(1)(2)
-------------------------------------------------------------------------------------------
PRO FORMA
FOR CERTAIN
ACQUISITIONS,
ADJUSTMENTS THE ESEBA
FOR THE PRO FORMA ADJUSTMENTS FINANCING
ADJUSTMENTS ESEBA ADJUSTMENTS FOR CERTAIN FOR THE AND THE
ACTUAL FOR CEMIG FINANCING FOR DESTEC ACQUISITIONS OFFERING OFFERING
------- ------------- ------------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions
Balance Sheet Data:
Current assets .................. $ 730 $ -- $ -- $ (103) $ 627 $ -- $ 627
Non-current assets ............... 3,348 1,038 390 388 5,164 14 5,178
------- ------- ----- ------ ------- ----- -------
Total assets ..................... $4,078 $1,038 $390 $ 285 $5,791 $ 14 $5,805
======= ======= ===== ====== ======= ===== =======
Current liabilities ............... $ 276 $ 343 $242 $ 56 $ 917 $ (36) $ 881
Long-term liabilities ............ 2,450 656 148 229 3,483 50 3,533
Minority interest ............... 211 39 -- -- 250 -- 250
Company-obligated mandatorily
redeemable preferred securities
of AES Trust I .................. 250 -- -- -- 250 -- 250
Shareholders' equity ............ 891 -- -- -- 891 -- 891
------- ------- ----- ------ ------- ----- -------
Total liabilities and shareholders'
equity ........................... $4,078 $1,038 $390 $ 285 $5,791 $ 14 $5,805
======= ======= ===== ====== ======= ===== =======
</TABLE>
21
<PAGE>
(1) Basis of presentation:
The Company's acquisition of the Destec international assets is being
accounted for as a purchase. The purchase price allocation has been prepared on
a preliminary basis pending completion of engineering, environmental, legal and
valuation analyses, all of which are ongoing. The excess of the purchase price
over the net assets acquired will be amortized over 40 years. The Company
intends to sell its interest in the Hazelwood project and as a result, the
financing costs and equity in earnings related to such interest are treated as
adjustments to the Destec purchase price allocation.
The Company's purchase of an economic interest of approximately 13% in
CEMIG, which also represents an approximate voting interest of 30%, has been
recorded as an investment in subsidiaries, and will be accounted for using the
equity method. The purchase price allocation has been prepared, on a preliminary
basis pending completion of engineering, environmental, legal and valuation
analyses, all of which are ongoing. The excess of the purchase price over the
net assets acquired will be amortized over 40 years.
The following pro forma information also gives effect to the financing for
the ESEBA Acquisition but does not give effect to the ESEBA Acquisition itself
because separate historical financial results of the two distribution companies
acquired by the Company pursuant to the ESEBA Acquisition are not separately
available.
The summary unaudited pro forma financial information has been prepared
based on the Company's estimate of CEMIG's and Destec's financial position and
results of operations in conformity with U.S. GAAP.
Equity in earnings of CEMIG has been translated at the average exchange
rate during the year of R$1.04 to U.S.$1.00. The statement of operations for the
quarter ended March 31, 1997 has been translated at the average exchange rate
during the quarter of R$1.07 to U.S.$1.00.
Income taxes have been recorded based on the historical rates in effect,
adjusted as necessary, to reflect any incremental U.S. federal income taxes.
(2) Financing -- For purposes of the unaudited pro forma financial information
presented herein, the acquisitions are assumed to be funded, and the adjustments
for the Offering are calculated, as follows:
(a) The acquisition of the Destec international assets is assumed to be
funded through the use of the proceeds from the $250 million TECONS offering,
the net proceeds of the $150 million offering of AES Common Stock, and funds
available under the Company's Revolver.
(b) The ESEBA financing is assumed to be funded through the use of the
ESEBA Bridge of $200 million, project financing debt of $148 million at an
interest rate of 7.4% related to the ESEBA Acquisition, and the drawdown of
funds available under the Company's Revolver.
(c) The acquisition of the Company's interest in CEMIG has been funded
assuming the use of the CEMIG Bridge of $250 million at an interest rate of
8.25%, the AES Bridge Loan of $200 million at an interest rate of 7.75%, and
project financing of $126 million at an interest rate of 9.75%, provided by
BNDES, the State Development Bank of Brazil. The remaining portion of the
purchase price amounting to approximately $527 million is deferred, by contract,
for a period of one year. Such obligation bears no interest and has been
guaranteed by BNDES for a fee of 1% per year which is included in interest
expense. No additional subsequent financing costs are assumed in these pro
formas.
(d) The adjustments for the Offering assume that the proceeds from the
Offering, at an interest rate of 8.375%, will be used to refinance the $200
million AES Bridge Loan, the $75 million 9 3/4% Senior Subordinated Notes and to
repay pro rata a portion of the ESEBA Bridge and the CEMIG Bridge. The
incremental effect of this refinancing is not significant to the pro forma
consolidated financial statements.
(3) Earnings per share for the Destec pro forma adjustment columns and those
columns that include Destec adjustments are calculated including 2.55 million
shares of AES Common Stock issued to finance that acquisition as though they
were issued January 1, 1996, but are not adjusted to reflect the issuance of
approximately 2.50 million shares of AES Common Stock in connection with the
Chigen Amalgamation in May 1997.
(4) Includes $384 million and $370 million of revenues and costs, respectively,
in the fiscal year ended 1996 and $9 million and $8 million, respectively, for
the quarter ended March 31, 1997, related to services performed under
construction contracts for the Elsta, Kingston, and Hazelwood projects. These
projects will be substantially complete in the near future and, as a result,
such revenue and costs will not continue after contract completion. The
Company's share of profits (based on its ownership interest in each respective
project) resulting from services performed under these contracts is deferred and
amortized over the life of the respective project.
22
<PAGE>
CALCULATIONS OF FIXED CHARGE RATIO
Defined terms used in the following table have the respective definitions for
such terms in the Indenture and set forth herein under "Description of Notes --
Certain Definitions."
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
FOUR QUARTERS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- ---------- ------- -------- ---------- -------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except ratios
Actual:
Net Income .............................. $ 56 $ 71 $100 $ 107 $ 125 $ 111 $ 136
Adjustments to reflect distributions from
affiliates and Subsidiaries ............ (26) (49) (34) 16 3 10 (7)
Adjusted Consolidated Net Income ...... 30 22 66 123 128 121 129
Income taxes ........................... 10 2 3 6 32 7 42
Consolidated Fixed Charges ............ 3 7 11 12 36 13 45
Depreciation, amortization and other non
cash adjustments ..................... 2 (1) (12) (31) (7) (26) (9)
------ ------ ----- ----- ------ ----- ------
Consolidated EBITDA(1) .................. $ 45 $ 30 $ 68 $ 110 $ 189 $ 115 $ 207
====== ====== ===== ===== ====== ===== ======
Consolidated Fixed Charges ............ $ 3 $ 7 $ 11 $ 12 $ 36 $ 13 $ 45
====== ====== ===== ===== ====== ===== ======
Fixed Charge Ratio ..................... 15.0x 4.3x 6.2x 9.2x 5.2x 8.8x 4.6x
Pro Forma:
Net Income ........................... $ 101 $ 111
Adjustments to reflect distributions from
affiliates and Subsidiaries ............ 5 1
------ ------
Adjusted Consolidated Net Income ...... 106 112
Income taxes ........................... 32 42
Consolidated Fixed Charges ............ 73 73
Depreciation and amortization and other
non cash adjustments .................. (7) (9)
------ ------
Consolidated EBITDA ..................... $ 204 $ 218
====== ======
Consolidated Fixed Charges ............ $ 73 $ 73
====== ======
Fixed Charge Ratio ..................... 2.8x 3.0x
</TABLE>
- ----------
(1) Consolidated EBITDA is not a substitute for cash flows from operating
activity as defined by generally accepted accounting principles.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with the Company's consolidated financial
statements and related notes included herein. The selected consolidated
financial data as of and for each of the five years in the period ended December
31, 1996 have been derived from the audited consolidated financial statements of
the Company. The consolidated financial statements as of December 31, 1995 and
1996, and for each of the three years in the period ended December 31, 1996, and
the independent auditors' report thereon, are included herein. The selected
financial data presented below as of March 31, 1996 and 1997 and for the three
months ended March 31, 1996 and 1997 are derived from the unaudited consolidated
financial statements of the Company. The results of operations for the three
months ended March 31, 1997 are not necessarily indicative of the results to be
expected for the full year. The Company believes that the unaudited information
for the three months ended March 31, 1996 and 1997 contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the operating results for such periods.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
QUARTER ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except ratio and per share data
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales ....................................... $ 394 $ 508 $ 514 $ 672 $ 824 $ 170 $ 258
Services .................................... 7 11 19 7 11 2 3
------ ------ ------ ------ ------ ------ -------
Total revenues .............................. 401 519 533 679 835 172 261
------ ------ ------ ------ ------ ------ -------
Operating cost and expenses:
Cost of sales ................................. 222 257 252 388 495 97 165
Cost of services .............................. 6 9 13 6 7 1 2
Selling, general and administrative expenses. 18 35 32 32 35 9 9
Provision to reduce carrying value of assets. -- 22 -- -- 20 -- 7
------ ------ ------ ------ ------ ------ -------
Total operating costs and expenses ......... 246 323 297 426 557 107 183
------ ------ ------ ------ ------ ------ -------
Operating income .............................. 155 196 236 253 278 65 78
Other income and (expense):
Interest expense .............................. (99) (128) (125) (127) (144) (30) (44)
Interest income .............................. 8 11 22 27 24 5 8
Equity in earnings of affiliates (net of income
taxes) ....................................... 2 10 12 14 35 5 16
------ ------ ------ ------ ------ ------ -------
Income before income taxes, minority
interest and extraordinary item ............ 66 89 145 167 193 45 58
Income taxes ................................. 9 18 44 57 60 15 16
Minority interest ........................... 1 -- 3 3 8 1 2
------ ------ ------ ------ ------ ------ -------
Net income before extraordinary item ......... 56 71 98 107 125 29 40
Extraordinary item ........................... -- -- 2 -- -- -- --
------ ------ ------ ------ ------ ------ -------
Net income .................................... $ 56 $ 71 $ 100 $ 107 $ 125 $ 29 $ 40
====== ====== ====== ====== ====== ====== =======
Net income per share ........................ $ 0.80 $ 0.98 $ 1.32 $ 1.41 $ 1.62 $ 0.38 $ 0.50
====== ====== ====== ====== ====== ====== =======
Weighted average number of common and
common equivalent shares ..................... 69.4 73.0 75.8 75.9 77.3 76.1 80.0
Ratio of earnings to fixed charges(1) ......... 1.37x 1.62x 2.08x 2.18x 1.83x 2.12x 1.52x
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, QUARTER ENDED MARCH 31,
--------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except ratios
BALANCE SHEET DATA:
Total assets .................................... $ 1,552 $ 1,687 $ 1,915 $ 2,341 $ 3,622 $ 2,353 $ 4,078
Revolving bank loan (current) .................. -- -- -- 50 88 31 --
Project financing debt (current) ............... 71 79 61 84 110 84 110
Revolving bank loan (long term) ............... -- -- -- -- 125 -- --
Project financing debt (long term) ............ 1,146 1,075 1,019 1,098 1,558 1,108 1,841
Other notes payable (long term) ............... 50 125 125 125 325 125 325
Stockholders' equity ........................... 177 309 401 549 721 582 891
Debt to total capitalization plus short term debt
ratio:
Project financing debt ........................ 83.2% 72.4% 67.0% 61.6% 57.0% 61.8% 57.1%
Parent debt(2) ................................. 3.4 7.9 7.8 9.1 18.4 8.0 9.5
------- ------- ------- ------- ------- ------- -------
Total ....................................... 86.6% 80.3% 74.8% 70.7% 75.4% 69.8% 66.6%
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
FOUR QUARTERS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
In millions, except ratios
Other Data:
Net cash provided by operating activities ...... $ 76 $ 123 $ 164 $ 197 $ 182 $ 199 $ 147
Consolidated EBITDA(3)(4) ..................... 45 30 68 110 189 115 207
Consolidated Fixed Charges(3) .................. 3 7 11 12 36 13 45
Fixed Charge Ratio(3) ........................... 15.0x 4.3x 6.2x 9.2x 5.2x 8.8x 4.6x
</TABLE>
- ----------
(1) For purposes of this ratio, earnings include income before taxes and fixed
charges excluding capitalized interest. Fixed charges include interest,
whether capitalized or expensed, and amortization of deferred financing
costs, whether capitalized or expensed.
(2) Parent debt represents obligations of the Company, as parent. It does not
include non-recourse obligations of the Company's subsidiaries.
(3) The other data presented for "Consolidated EBITDA," "Consolidated Fixed
Charges" and "Fixed Charge Ratio" is calculated in accordance with the
respective definitions of such terms in the Indenture and set forth herein
under "Description of Notes -- Certain Definitions."
(4) Consolidated EBITDA is a concept defined in the Indenture and is not a
substitute for cash flows from operating activity as defined by generally
accepted accounting principles.
25
<PAGE>
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, China, Brazil, Hungary and Kazakstan. Electricity sales
accounted for 97% of total revenues during 1996 and 1995. 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 to affiliates.
The electricity sold is generated by power plants owned or leased by the
Company's subsidiaries and affiliates. AES operates and owns (entirely or in
part) a diverse portfolio of electric power plants with a total capacity of
approximately 20,957 MW. Of that total, approximately 16,953 MW are in operation
and approximately 4,000 MW are in construction. 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 projects now under construction will reach
commercial operation and begin to sell electricity at various dates through
1999. The completion of each plant in a timely manner 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. In addition, AES has recently entered
into agreements to acquire interests in certain new power plants. See "Offering
Memorandum Summary -- Recent Developments."
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 many countries. Several of these
acquisitions, if consummated, would require the Company to obtain substantial
additional financing, in the form of both debt and equity financing, in the
short term.
Certain subsidiaries and affiliates (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, 1996, capitalized costs for projects under development were
approximately $53 million. The Company believes that these costs are
recoverable; however, no assurance can be given that changes in circumstances
related to individual development projects will not occur or that any of these
projects will be completed and reach commercial operation.
AES has been successful in acquiring a portion of its portfolio 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. In such privatizations, 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 markets and its integrated
divisional structure, with geographically dispersed locations, enable it to
react quickly and creatively in such situations.
Because of this relatively quick process or other considerations, it may not
always 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 expanding the Revolver to $425
million. AES also filed a $750 million "universal shelf" registration statement
that provides for the issuance of various additional debt and preferred or
common equity securities either individually or in combination, $350 million of
which remains available. AES also may consider an exchange of project ownership
interests to fund future acquisition opportunities.
26
<PAGE>
RESULTS OF OPERATIONS
First Quarter 1997 and First Quarter 1996.
Revenues increased 52% or approximately $89 million, to $261 million from the
first quarter of 1996 to the first quarter of 1997. The increase in revenues was
primarily due to the acquisition of AES Tiszai; and AES Ekibastuz in August 1996
and higher revenues at AES Placerita and AES Deepwater due to higher natural gas
prices, offset slightly by decreased revenues at AES Barbers Point due to a
planned outage. Cost of sales and services increased 70% or approximately $69
million, to $167 million from the first quarter of 1996 to the first quarter of
1997. The increase in cost of sales and services was also primarily due to the
acquisition of AES Tiszai; and AES Ekibastuz in August 1996 and higher natural
gas prices at AES Placerita, offset in part by lower costs at AES San Nicolas
due to cost reduction efforts at the plant. Gross margin, which represents total
revenues reduced by cost of sales and services (prior to consideration of the
provision to reduce contract receivable), increased 27%, or approximately $20
million, to $94 million during the same period. The increase in gross margin was
primarily due to the acquisition of controlling interests in AES Tiszai and AES
Ekibastuz, improved financial performance at AES Deepwater due to higher natural
gas prices and AES San Nicolas due to cost reduction efforts at the plant,
offset in part by decreased production at Barbers Point due to a planned outage
in 1997. Gross margin as a percentage of total revenues decreased to 36% for the
first quarter of 1997 from 43% for the same period of 1996 primarily due to
lower gross margin percentages at AES Tiszai and AES Ekibastuz, offset in part
by improved gross margin percentages at AES Deepwater and AES San Nicolas.
Selling, general and administrative expenses were approximately $9 million for
both the first quarter of 1996 and 1997, and as a percentage of total revenue,
were 5% of revenues of 1996 and 3% of revenues in 1997. The Company's selling,
general and administrative costs do not necessarily vary with changes in
revenues.
Operating income increased 20%, or approximately $13 million, to $78 million
from the first quarter of 1996 to the first quarter of 1997. This increase was
the result of the factors discussed above.
Interest expense increased 47%, or approximately $14 million, to $44 million
from the first quarter of 1996 to the first quarter of 1997. The increase in
interest expense during the quarter reflects additional interest associated with
increased borrowings under the Company's Revolver, the $250 million 10 1/4%
Senior Subordinated Notes due 2006 (the "10 1/4% Notes"), and project financing
debt associated with the Company's equity investment in Light and additional
project financing debt associated with the acquisition of AES Tiszai, offset in
part by declining balances related to other project financing debt.
Interest income increased 60%, or approximately $3 million from the first
quarter of 1996 to the first quarter of 1997. The increase was primarily due to
the investment of proceeds from the 10 1/8% Notes due 2006, issued by AES Chigen
in December 1996.
Equity in earnings of affiliates (after income taxes) increased 220%, or
approximately $11 million to approximately $16 million from the first quarter of
1996 to the same period of 1997. The increase was almost entirely due to the
Company's equity in earnings from its initial acquisition of 11.35% of Light in
June 1996 and the additional 2.4% in January 1997.
Income taxes increased 7% or approximately $1 million, to $16 million from the
first quarter of 1996 to the first quarter of 1997. The increase resulted
primarily from an increase in the Company's estimated effective income tax rate
from approximately 39% in 1996 to 40% in 1997 and higher income before taxes.
Year Ended December 31, 1996, 1995 and 1994
Revenues
Total revenues increased $156 million (23%) to $835 million from 1995 to 1996
after increasing $146 million (27%) to $679 million from 1994 to 1995. The
increase in 1996 primarily reflects the acquisition of controlling interests in
AES Tiszai and AES Ekibastuz. The increase from 1994 to 1995 primarily reflects
the additional revenues arising from the acquisition of a controlling interest
in AES San Nicolas, the consolidation of AES Deepwater (resulting from the
acquisition of its outstanding debt), and improved capacity factors at AES
Thames and AES Barbers Point. These increases were offset, in part, by decreased
energy revenues at AES Placerita.
27
<PAGE>
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 1996, the Company's five
largest customers accounted for 73% of total 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 results of operations. 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.
However, AES does not limit its business solely to the most developed countries
or economies, or only to those countries with investment grade sovereign credit
ratings. In certain locations, particularly developing countries or countries
that are in a transition from centrally planned to market oriented economies,
the electricity purchasers may experience difficulty in meeting contractual
payment obligations.
In August 1996, AES, together with its partner, acquired a 4,000 megawatt
mine-mouth, coal-fired power supply business in Kazakstan. The facility sells
electricity to the government-owned distribution company under a 35 year power
sales contract. Due to economic difficulties over the ten years prior to the
Company's purchase, the facility has experienced a reduction in performance and
has operated at a capacity factor of approximately 20%. AES has agreed to
increase the availability to 63% over a five year period (contingent on the
purchaser's performance of its obligations under the power sales contract).
Through December 31, 1996, approximately $35 million (excluding VAT) was billed
under the power sales contract for electricity, of which the purchaser paid
approximately $5 million. The Company has recorded a provision of $20 million to
reduce the carrying value of the contract receivable as of December 31, 1996 to
$10 million. As of December 31, 1996, the net assets of this project were $24
million, a portion of which was represented by the contract receivable referred
to above. There can be no assurance as to the ultimate collectibility of amounts
owed to AES as of December 31, 1996 or additional amounts related to future
deliveries of electricity under the power sales contract or the recoverability
of the Company's investment or additional amounts the Company may invest in the
project. Other substantial risks associated with this plant exist, including
those relating to operations and maintenance, construction, refurbishment,
political risk, repatriation of earnings and currency convertibility.
A portion of the electricity sales from certain plants is not subject to a
contract and is available for sale, when economically advantageous, in the
relevant spot electricity market. The prices paid for electricity in the spot
markets may be volatile and are dependent on the behavior of the relevant
economies, including the demand for and retail price of electricity and the
competitive price and availability of power from other suppliers.
Costs of Sales and Services
Total costs of sales and services increased $108 million (27%) to $502 million
in 1996 after increasing $129 million (49%) to $394 million from 1994 to 1995.
The increase in 1996 was caused primarily by the costs of electricity sales
associated with the acquisition of controlling interests in AES Tiszai and AES
Ekibastuz. The increase from 1994 to 1995 was caused primarily by the additional
operating costs arising from the acquisitions of a controlling interest in AES
San Nicolas, the consolidation of AES Deepwater and increased fuel costs arising
from a higher capacity factor at AES Barbers Point, offset in part by decreased
fuel and operating costs at AES Placerita.
Gross Margin
Gross margin (revenues less costs of sales and services) increased (prior to
consideration of the $20 million provision to reduce contract receivable) $48
million (17%) to $333 million from 1995 to 1996 after increasing $17 million
(6%) to $285 million from 1994 to 1995. The improvement in 1996 primarily
reflects the additional gross margins contributed by the operations of AES
Tiszai and AES Ekibastuz, improved operations of AES San Nicolas and AES Thames
and higher electricity prices under the AES Deepwater sales contract due to
higher natural gas prices. The improvement in 1995 reflects the acquisitions of
a controlling interest in AES San Nicolas, the consolidation of AES Deepwater
and improved operations at AES Placerita and AES Thames, offset in part by lower
service revenues from affiliates. Gross margin as a percentage of total revenues
(net of the provision to reduce contract receivable) decreased from 42% in 1995
to 37% in 1996, primarily due to lower gross margin percentages at AES Tiszai
and AES Ekibastuz, offset in part by an improved gross margin percentage at AES
Deepwater. Gross margin as a percentage of total revenues decreased from 50% in
1994 to 42% in 1995, primarily due to a lower gross margin percentage at AES San
Nicolas.
28
<PAGE>
Because the Company's operations are located in different geographical areas,
seasonal variations have not historically had a significant effect on quarterly
financial results. However, unusual weather conditions and the specific needs of
each plant to perform routine or unanticipated facility maintenance, which would
require an outage, could 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 $3 million (9%)
to $35 million from 1995 to 1996 after increasing less than $1 million (3%) to
$32 million from 1994 to 1995. The 1996 increase is attributable to increases in
administrative costs and expenses associated with the development of new
business opportunities. The 1995 increase is attributable to an increase in
administrative costs. As a percentage of total revenues, selling, general and
administrative expenses decreased to 4% in 1996, down from 5% in 1995 and 6% in
1994. The Company's general and administrative costs do not necessarily vary
with changes in revenues.
Operating Income
Operating income improved $25 million (10%) to $278 million from 1995 to 1996
after increasing $17 million (7%) to $253 million from 1994 to 1995. The
increases result from the factors discussed in the preceding paragraphs, offset
in part for 1996 by the provision of $20 million to reduce the contract
receivable at AES Ekibastuz.
Other Income and Expense
Other income and expense, on a net basis, decreased $1 million (1%) to $85
million from 1995 to 1996 after decreasing $5 million (5%) to $86 million from
1994 to 1995. Interest expense increased 13% in 1996 and increased 2% in 1995.
The increase in 1996 reflects additional interest associated with increased
borrowings under the Revolver, the issuance in June 1996 of $250 million of the
10 1/4% Notes and project financing debt associated with the acquisition of the
Company's equity investment in Light and additional project financing debt
associated with the acquisition of AES Tiszai, offset, in part, by declining
balances related to other project financing debt. The increase in 1995 reflects
the additional interest expense associated with the acquisition of a controlling
interest in AES San Nicolas offset almost entirely by declining balances of
other project financing debt. AES capitalizes interest incurred during the
development and construction of its facilities. Interest capitalized totaled
approximately $27 million in 1996, $8 million in 1995 and $2 million in 1994.
Interest income decreased 11% in 1996 and increased 23% in 1995. The 1996
decrease results primarily from lower invested funds at AES Chigen, offset in
part by interest income earned on notes receivable at AES Tiszai. 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.
Equity in earnings of affiliates (after income taxes) increased 150% in 1996 and
17% in 1995. The increase in 1996 results almost entirely from the Company's
acquisition of an 11.35% interest in Light in June 1996, offset slightly by a
decrease in equity in earnings from NIGEN due to a planned outage. The increase
in 1995 results most significantly from the start of operations at Medway in
late 1995.
Income Taxes
The Company's effective tax rate increased to 40% in 1996 and to 38% in 1995
from 34% in 1994. The increase in 1996 is due primarily to foreign withholding
and income taxes. 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.
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, refinanced its outstanding project financing loan through a
public debenture offering. The extinguishment of such debt resulted in an
extraordinary loss of $7 million, of which the Company's share was $2 million,
net of taxes.
29
<PAGE>
OUTLOOK
All over the world, electricity markets are being restructured and there is a
trend away from government-owned and government-regulated electricity systems
toward deregulated, competitive market structures. Many countries have rewritten
their laws and regulations to allow foreign investment and private ownership of
electricity generation, transmission or distribution systems. Some countries
(for example, the UK, Brazil and some of those of the former Soviet Union, among
others) have or are in the process of "privatizing" their electricity systems by
selling all or part of such to private investors. This global trend of
electricity market restructuring has created significant new business
opportunities for companies like AES.
Although recent activity in the U.S. electricity market has provided some
opportunities for independent and competitive power companies, 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. In the U.S., some states (for example, California,
Illinois, Massachusetts, Michigan and Pennsylvania) have passed or are
considering new legislation that would permit utility customers to choose their
electricity supplier in a competitive electricity market (so-called "retail
access" or "customer choice" laws). While each state's plan differs in details,
there are certain consistent elements, including allowing customers to choose
their electricity suppliers by a certain date (the dates in the existing or
proposed legislation vary between 1998 and 2003), allowing utilities to recover
"stranded assets" (the remaining costs of uneconomic generating or regulatory
assets) and a reaffirmation of the validity of contracts like the Company's U.S.
contracts.
In addition to the potential for state restructuring legislation, the U.S.
Congress has proposed new federal legislation to encourage customer choice and
recovery of stranded assets. Federal legislation might be needed to avoid the
"patchwork quilt" effect of each state acting separately to pass restructuring
legislation. While it is uncertain whether or when federal legislation dealing
with electricity restructuring might be passed, it is the opinion of the Company
that such legislation would likely have a neutral or positive effect on the
Company's U.S. business.
There is also legislation currently before the U.S. Congress to repeal part or
all of the current provisions of PURPA and PUHCA. The Company believes that if
such legislation is adopted, competition in the U.S. for new capacity from
vertically integrated utilities would presumably increase. However, independents
like AES would also be free to acquire retail utilities.
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 the continued 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
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
toward competition, 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 low-cost plants in those markets. Such an
investment, which would not necessarily be supported by a long-term electricity
sales contract for all or any of the plant's expected output, may 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.
AES's involvement in the development of new projects and the acquisition of
existing plants in locations outside the U.S. is increasing and most of AES's
current development and acquisition activities are for projects and plants
outside the U.S. The financing, development and operation of such projects and
plants may entail significant political and financial uncertainties and other
structuring issues (including, without limitation, uncertainties associated with
the legal environments, with first-time privatization efforts in the countries
involved, currency exchange rate fluctuations, currency repatriation
restrictions, currency convertibility, political instability, civil unrest and
expropriation). These issues have the potential to cause substantial delays in
respect of or material impairment of the value of the project being developed or
plant being operated, which AES may not be capable of or choose to fully insure
or hedge against.
30
<PAGE>
FINANCIAL POSITION
At December 31, 1996, AES had working capital of $120 million as compared to
$218 million at the end of 1995. The decrease is primarily attributable to
decreased balances of cash and short-term investments, increases in accounts
payable and accrued liabilities and increases in the current portion of
borrowings under the Revolver and project financing debt, offset in part by
increases in inventory, accounts receivable and deferred income taxes.
Property, plant and equipment, net of accumulated depreciation, was $2.22
billion at December 31, 1996, up from $1.55 billion at the end of 1995. The net
increase of $670 million (43%) is primarily attributable to the acquisition
during 1996 of AES San Juan, AES Tiszai and AES Ekibastuz, the continuation of
construction activities at AES Lal Pir, AES Pak Gen and AES Warrior Run and the
commencement of construction activities at Jiaozou and AES Barry.
Other assets increased $555 million (161%) to $900 million primarily due to the
Company's purchase of and undistributed earnings from an 11.35% interest in
Light, payments to debt service reserves, payments for deferred financing costs
associated with a higher level of debt financing, reimbursable payments for
contracts related to a project in development and intangible assets acquired
through the purchase of AES San Juan.
Project financing debt, net of repayments, increased as a result of additional
borrowings associated with the Company's purchase of an 11.35% interest in Light
and additional construction borrowings associated with AES Lal Pir, AES Pak Gen
and AES Warrior Run. A significant portion of the AES Lal Pir and AES Pak Gen
loans, associated with equipment purchases, will be borrowed and repaid (as
scheduled in the future) in Japanese yen. The anticipated electricity prices
under the related power sales contracts (to be received beginning with
commercial operation of those plants) also include a yen component designed to
correlate with the yen-based financing.
Other notes payable (non-current) increased $325 million (260%) to $450 million
as a result of the issuance of the $250 million of the 10 1/4% Notes and
increased borrowings under the Revolver of $125 million that are due in excess
of one year, offset in part by the conversion of $50 million of the Company's
6 1/2% convertible subordinated debentures.
CASH FLOWS, FINANCIAL RESOURCES AND LIQUIDITY
First Quarter 1997
At March 31, 1997, cash and cash equivalents totaled approximately $423 million,
as compared to $185 million at the beginning of the year. The $238 million
increase in cash resulted from a use of $238 million for investing activities
which were funded by $466 million from financing activities and $10 million
provided by operating activities. Significant investing activities included
project construction progress at AES Barry, AES Lal Pir, AES Pak Gen and AES
Warrior Run; an additional purchase of Light shares; and the funding of reserves
relating to AES Chigen. Furthermore, the net source of cash from financing
activities was primarily the result of issuing TECONS and AES Common Stock with
net proceeds of $387 million, borrowing $296 million in project financing debt,
offset by repayments of $12 million of other project financing debt related to
scheduled amortization and $213 million of net repayments under the Revolver.
Unrestricted net cash flow of the parent company amounted to approximately $176
million for the four quarters ended March 31, 1997.
Year Ended December 31, 1996, 1995 and 1994
Cash from Operations
Cash flows provided by operating activities totaled $182 million during 1996 as
compared to $197 million during 1995 and $164 million in 1994. The decrease in
1996 was primarily due to a larger proportion of net income being derived from
undistributed earnings from affiliates, larger cash payments for income taxes
and increased deferred financing costs associated with a higher level of debt
financing activity in 1996. These factors offset a significant increase in net
income before depreciation as compared with 1995. The increase in 1995 was
primarily due to increased pre-tax income. Unrestricted net cash flow (as
defined in the Indenture for the 10 1/4% Notes, which is after cash paid for
general and administrative costs, taxes and project development expenses but
before investments and debt service) amounted to approximately $133 million for
the year ended December 31, 1996 as compared to $110 million for the year ended
December 31, 1995.
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Cash from Investing Activities
Net cash used in investing activities totaled $1.135 billion during 1996 as
compared to $343 million during 1995 and $120 million in 1994. The 1996 amount
primarily reflects the acquisitions of AES San Juan, AES Tiszai and AES
Ekibastuz; the Light investment; construction progress at AES Lal Pir, AES Pak
Gen, AES Warrior Run and AES Barry; AES Chigen's investments in various
projects; reimbursable payments for contracts related to a project in
development; and the funding of debt service reserves for the project financing
of the Light investment. 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; 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, capital additions and investments
in projects in development.
Cash from Financing Activities
Net cash provided by financing activities aggregated $899 million during 1996 as
compared to $130 million during 1995 and $80 million in 1994. The significant
cash financing inflows in 1996 were caused by construction loan draws for AES
Lal Pir, AES Pak Gen and AES Warrior Run; project acquisition financing of the
Light investment; issuance of $250 million of the 10 1/4% Notes; initial project
financing at AES San Nicolas; and net borrowings under the Company's Revolver.
Significant cash financing outflows were due to scheduled debt amortization of
the project financings. During 1995 the Company drew on its project financing
loan commitments associated with the construction of AES Lal Pir and AES Warrior
Run and borrowed under the Revolver. Repayments of project financing loans
during the year were made in accordance with contracted debt service
requirements. During 1994, AES Chigen completed an initial public offering of
10.2 million shares of Class A common stock. The Company also made scheduled
principal payments on project financing debt in 1994.
Financial Resources and Liquidity
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 The AES Corporation 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, and may cease
development of such project.
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. These investments
have 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. In August 1996, substantially all $50 million of the Company's 6
1/2% convertible subordinated debentures due in 2002 were converted into
approximately 1.9 million shares of AES Common Stock. In April 1997, the Company
also issued approximately 2.5 million shares of AES Common Stock to purchase all
of the remaining outstanding Class A shares of AES Chigen at an exchange rate of
0.29 share of AES Common Stock for each share of AES Chigen Class A common
stock.
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Interim needs for shorter-term and working capital financing at the parent
company have been met with borrowings under the Revolver. Over the past several
years, the Company has continued to increase the amount of available financing
under the Revolver. In the second quarter of 1996, AES increased the size of the
Revolver to $425 million. Under the terms of the Revolver, AES will be required
to reduce its direct borrowings to $125 million for 30 consecutive days during
each twelve month period. The terms of the Revolver 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. At December 31, 1996, cash borrowings and letters
of credit outstanding under the Revolver amounted to $213 million and $123
million, compared with $50 million and $56 million in 1995. The Company may also
attempt to meet its short-term and interim funding needs with commitments from
banks and other financial institutions at the parent or subsidiary level on an
as needed basis.
The ability of AES's subsidiaries and affiliates 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 for additional
information. In connection with its project financings and project-related
contracts, 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 those collateralized using letter of credit
obligations under the Revolver, were limited by their terms as of December 31,
1996 to an aggregate of approximately $176 million. 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 $33 million as of December 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 or financial position, 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.
At December 31, 1996, the Company had future commitments to fund investments in
its projects under construction and in development of $106 million. Of this
amount, letters of credit in the amount of $76 million have been issued to
support these obligations. In June 1997, the Company acquired the international
assets of Destec at a total price to AES of $436 million, which price is subject
to adjustment to reflect net cash flow adjustments. In addition, the Company
expects to assume certain obligations which require the funding of equity
investments in some of these projects in the amount of approximately $82 million
over the ensuing two years. These future capital commitments are expected to be
funded by internally-generated cash flows and by external financings as may be
necessary.
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,
exchange rates and energy prices. AES has generally structured the energy
payments in its power sales contracts to adjust with similar price indices as
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 and interest rate cap agreements to effectively fix or limit the interest
rate on the underlying variable rate financing. Such swaps effectively increased
the total weighted average borrowing rate on the portion of the Company's hedged
debt by 4.1 percentage points, 3.5 percentage points and 4.5 percentage points
for the years ended December 31, 1994, 1995 and 1996, respectively. Swap
payments in excess of variable interest paid for those same periods were $44
million, $24 million and $29 million, respectively. The following table presents
(in millions) the aggregate notional principal amount of interest rate swaps
categorized by annual maturity at December 31, 1996 and the weighted average
interest rates paid and received (based on market conditions at December 31,
1996):
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PAY FIXED RATE SWAPS
-------------------------------------------
WEIGHTED AVERAGE
INTEREST RATE
IN MILLIONS, EXCEPT PERCENTAGES AGGREGATE NOTIONAL --------------------
ANNUAL MATURITY PRINCIPAL AMOUNT PAID RECEIVED
- --------------------------------- ------------------- -------- ---------
1997 .................. $137 12.48% 5.46%
1998 .................. $ 15 9.90% 5.43%
1999 .................. $167 10.40% 5.45%
2000 .................. $ 17 9.90% 5.43%
2001 through 2007 ...... $214 9.90% 5.43%
In addition, certain subsidiaries of the Company have interest rate cap
agreements with terms ranging from three to six years in an aggregate notional
amount of $280 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, 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 and subsidiaries, AES
operates in jurisdictions dealing in currencies other than the Company's
consolidated functional currency, the U.S. dollar. Such investments and advances
were made to fund equity requirements and to provide collateral for contingent
obligations. Due primarily to the long-term nature of the investments and
advances, the Company accounts for any adjustments resulting from translation as
a charge or credit directly to a separate component of stockholders' equity
until such time as the Company realizes such charge or credit. At that time any
differences would be recognized in the statement of operations as gains or
losses.
In addition, certain of the Company's foreign subsidiaries have entered into
obligations in currencies other than their own functional currencies or the U.S.
dollar. These subsidiaries have attempted to limit potential foreign exchange
exposure by entering into revenue contracts which adjust to changes in the
foreign exchange rates. Certain foreign affiliates and subsidiaries operate in
countries where the local inflation rates are greater than U.S. inflation rates.
In such cases the foreign currency tends to devalue relative to the U.S. dollar
over time. The Company's subsidiaries and affiliates have entered into revenue
contracts which attempt to adjust for these differences; however, there can be
no assurance that such adjustments will compensate for the full effect of
currency devaluation, if any.
The Company had approximately $33 million in cumulative translation adjustment
losses at December 31, 1996. Because of the nature of AES's operations and
previous operations by others at certain of its current and future facilities,
its activities are subject to stringent environmental regulation by relevant
authorities at each plant location and the risk of claims under environmental
laws. 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 would not be
materially and adversely affected. In addition, the Company will be required to
make significant capital or other expenditures in connection with environmental
matters. Although the Company is not aware of non-compliance with environmental
laws which would have a material adverse effect on the Company's business or
financial condition, at times the Company has been in non-compliance, although
no such instance has resulted in revocation of any permit or license.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal (which together constitute the Exchange
Offer), the Company will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on September __, 1997; provided, however, that if the Company, in its sole
discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $325,000,000 aggregate principal amount of
the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date set forth on the cover
page to all Holders of Old Notes at the addresses set forth in the security
register with respect to Old Notes maintained by the Trustee. The Company's
obligations to accept Old Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth under "Certain Conditions to the
Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance of any Old Notes, by giving oral or written notice of such
extension to the Exchange Agent and notice of such extension to the Holders as
described below. During any such extension, all Old Notes previously tendered
will remain subject to the Exchange Offer and may be accepted for exchange by
the Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering Holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under the
General Corporation Law of the State of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the SEC thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth below
and the acceptance thereof by the Company will constitute a binding agreement
between the tendering Holder and the Company upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a Holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to The Bank of New York (the "Exchange Agent") at
one of the addresses set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (The "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the Holder
must comply with the guaranteed delivery procedures described below. THE METHOD
OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY, NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO
THE COMPANY.
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Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, must be guaranteed unless the Old Notes surrendered for exchange pursuant
thereto are tendered (i) by a registered Holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than
the person signing the Letter of Transmittal, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered Holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of receipt)
and acceptance of Old Notes tendered for exchange will be determined by the
Company in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Notes which acceptance might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right in its sole discretion to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old Notes
in the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with the tenders of Old
Notes for exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
or corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by the Company, proper
evidence satisfactory to the Company of its authority to so act must be
submitted.
By tendering, each Holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, (ii) neither the Holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the Holder is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the Holder not any such other person
is engaged in or intends to participate in the distribution of such New Notes
and (iv) neither the Holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company. If the tendering
Holder is a broker-dealer that will receive New Notes for its owns account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it will be required to acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the
Company will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent.
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<PAGE>
In all cases, issuance of New Notes for Old Notes that are accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted for
any reason set forth in the terms and conditions of the Exchange Offer or if
certificates representing Old Notes are submitted for a greater principal amount
than the Holder desires to exchange, such unaccepted or non-exchanged Old Notes
will be returned without expense to the tendering Holder thereof (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such non-exchanged Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from July 17, 1997, payable semiannually on
February 15 and August 15 of each year, commencing on February 15, 1998, at the
rate of 8 3/8% per annum. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from July 17, 1997 until the date
of the issuance of the New Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest payment on February 15, 1998
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer promptly after the date of this Prospectus. Any financial institution that
is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Notes by causing the Book-Entry Transfer Facility to
transfer such Notes into the Exchange Agent's account in accordance with the
Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP")
procedures for transfer. However, the exchange for the Notes so tendered will
only be made after timely confirmation of such book-entry transfer of Notes into
the Exchange Agent's account, and timely receipt by the Exchange Agent of an
Agent's Message (as such term is defined in the next sentence) and any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility and received by
the Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from a participant tendering Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and the
Old Notes are not immediately available, or time will not permit such Holder's
Old Notes or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates of all physically tendered Old Notes,
in proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the certificates
for all physically tendered Old Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal, are received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
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WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing Holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any note of withdrawal must specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the Holder thereof without cost to such Holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, such acceptance or issuance would violate applicable
law or any interpretation of the staff of the SEC.
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise the foregoing rights shall not be deemed a waiver of any such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA").
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EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at one of the addresses set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver To:
The Bank of New York, Exchange Agent
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section,
Attention: Reorganization Section, or for Information Call: Odell Romeo
Odell Romeo
(212) 815-6337
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Company and its affiliates. No additional compensation
will be paid to any such officers and employees who engage in soliciting
tenders. The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company and are estimated in the aggregate to be $200,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay any
transfer taxes in connection therewith, except that Holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering Holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend thereon. In general, the
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company does not
intend to register the Old Notes under the Securities Act. The Company believes
that, based upon interpretations contained in letters issued to third parties by
the staff of the SEC, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each Holder thereof (other than a broker-dealer, as set forth
below, and any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are
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acquired in the ordinary course of such Holder's business and such Holder has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. If any Holder has any arrangement or understanding with
respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such Holder (i) could not rely on the applicable interpretations
of the staff of the SEC and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
The Company does not currently intend to take any action to register or qualify
the New Notes for resale in any such jurisdictions.
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BUSINESS
AES is a global power company committed to supplying electricity to customers
world-wide in a socially responsible way. The Company 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. AES markets power
principally from electricity generating facilities that it develops, acquires,
owns and operates.
Over the last five years, the Company has experienced significant growth. This
growth has resulted primarily from greenfield development and also from the
acquisition of existing generating plants and distribution companies, through
competitively bid privatization initiatives outside of the United States or
negotiated acquisitions. Since 1992, the Company's total generating capacity in
megawatts has grown from 1,829 MW to 16,953 MW (an increase of 827%), with the
total number of plants in operation increasing from eight to 66. Additionally,
the Company's total revenues have increased at a compound annual growth rate of
20% from $401 million in 1992 to $835 million in 1996, while net income has
increased at a compound annual growth rate of 22% from $56 million to $125
million and Consolidated EBITDA has increased from $45 million to $189 million
over the same period.
AES operates and owns (entirely or in part), through subsidiaries and
affiliates, power plants in ten countries with a capacity of approximately
16,953 MW (including 4,000 MW attributable to Ekibastuz which currently has a
capacity factor of approximately 20%). AES is also constructing nine additional
power plants in five countries with a capacity of approximately 4,004 MW. The
Company's total ownership in plants in operation and under construction
aggregates approximately 20,957 MW and its net equity ownership in such plants
is approximately 9,831 MW. In addition, AES has numerous projects in advanced
stages of development, including seven projects with design capacity of
approximately 3,206 MW that have executed or been awarded power sales
agreements.
The Company is also engaged (entirely or in part) in electric power distribution
businesses in Latin America through its subsidiaries and affiliates. These
subsidiaries and affiliates serve approximately 7 million commercial, industrial
and residential customers using approximately 62,000 gigawatt hours per year.
As a result of the Company's significant growth in recent years, the Company's
operations have become more diverse with regard to both geography and fuel
service and it has reduced its dependence upon any single project or customer.
During 1996, four of the Company's projects individually contributed more than
10% of the Company's total revenues, Shady Point which represented approximately
20%, San Nicolas which represented approximately 16%, Thames which represented
approximately 16% and Barbers Point which represented approximately 15%.
OUTLOOK
The global trend of electricity market restructuring has created significant new
business opportunities for companies like AES. Both domestic and international,
electricity markets are being restructured and there is a trend away from
government-owned electricity systems toward deregulated, competitive market
structures. Many countries have rewritten their laws and regulations to allow
foreign investment and private ownership of electricity generation, transmission
or distribution systems. Some countries have or are in the process of
"privatizing" their electricity systems by selling all or part of such systems
to private investors. With 60 of its operating plants and distribution companies
having been acquired or commenced commercial operations since 1992, AES has been
an active participant in both the international privatization process and the
development process. The Company is currently pursuing over 90 projects
including acquisitions, the expansion of existing plants and new projects. 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 many countries. Several of these
acquisitions, if consummated, would require the Company to obtain substantial
additional financing, in the form of both debt and equity financing, in the
short term.
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STRATEGY
The Company's strategy in helping meet the world's need for electricity is to
participate in competitive power markets as they develop either by greenfield
development or by acquiring and operating existing facilities or distribution
systems in these markets. The Company generally operates electric generating
facilities that utilize natural gas, coal, oil, hydro power, or combinations
thereof. In addition, the Company participates in the distribution of electric
power distribution and retail supply businesses in certain limited instances,
and will continue to review opportunities in such markets in the future.
Other elements of the Company's strategy include:
o Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance;
o Constructing or acquiring projects of a relatively large size
(generally larger than 100 MW);
o Whenavailable, entering into power sales contracts with electric
utilities or other customers with significant credit strength; and
o Participating in electric power distribution and retail supply markets
that grant concessions with long-term pricing arrangements.
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.
Where possible, AES attempts to sell electricity under long-term power sales
contracts. The Company attempts, whenever possible, to structure the revenue
provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. A plant's
revenue from a power sales contract usually consists of two components, energy
payments and capacity payments. Energy payments are usually based on a plant's
net electrical output, with payment rates usually indexed to the fuel costs of
the customer or to general inflation indices. Capacity payments are based on
either a plant's net electrical output or its available capacity. Capacity
payment rates vary over the term of a power sales contract according to various
schedules. Some power sales contracts permit the utility customer to dispatch
the plant (i.e., direct the plant to deliver a reduced amount of electric
output) within certain specified parameters. AES attempts to structure the power
sales contract payments so that, even when dispatching occurs, the plant
continues to receive capacity payments (which provide substantially all of the
plant's profits, if any), while it receives reduced energy payments (which
primarily cover the variable operating, maintenance and fuel costs associated
with operating at higher or lower levels).
The Company attempts to provide fuel for its operating plants generally under
long-term supply agreements, either through contractual arrangements with third
parties or, in some instances, through acquisition of a dependable source of
fuel. The Company will generally contract with outside parties, often the
project's fuel supplier, to provide for the removal and disposal of waste.
As electricity markets become more competitive, it may be more difficult for AES
(and other power generation companies) to obtain long-term power sales
contracts. In markets where long-term contracts are not available, AES will
pursue methods to hedge costs and revenues to provide as much assurance as
possible of a project's profitability. In these situations, AES might choose to
purchase a project with a partial hedge or with no hedge, with the strategy that
its diverse portfolio of projects provides some hedge to the increased
volatility of the project's earnings and cash flow. Additionally, AES may choose
not to participate in these markets.
The Company attempts to finance each domestic and foreign plant primarily under
loan agreements and related documents which, except as noted below, require the
loans to be repaid solely from the project's revenues and provide that the
repayment of the loans (and interest thereon) is secured solely by the capital
stock, physical assets, contracts and cash flow of that plant subsidiary or
affiliate. This type of financing is generally referred to as "project
financing." The lenders under these project financing structures cannot look to
AES or its other projects for repayment, unless such entity explicitly agrees to
undertake liability. AES has explicitly agreed to undertake certain limited
obligations and contingent liabilities, most of which by their terms will only
be effective or will be terminated upon the occurrence of future events.
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These obligations and liabilities take the form of guaranties, letter of credit
reimbursement agreements, and agreements to pay, in certain circumstances, to
project lenders or other parties amounts up to the amounts of distributions
previously made by the applicable subsidiary or affiliate to AES. To the extent
AES becomes liable under guaranties and letter of credit reimbursement
agreements, distributions received by AES from other projects are subject to the
possibility of being utilized by AES to satisfy these obligations. To the extent
of these obligations, the lenders to a project effectively have recourse to AES
and to the distributions to AES from other projects. The aggregate contractual
liability of AES is, in each case, usually a small portion of the aggregate
project debt, and thus the project financing structures are generally described
herein as being "substantially non-recourse" to AES and its other projects. In
certain circumstances, the Company may incur indebtedness which is recourse to
the Company or to more than one project.
The Company, a corporation organized under the laws of Delaware, was formed in
1981. The principal office of the Company is located at 1001 North 19th Street,
Suite 2000, Arlington, Virginia 22209, and its telephone number is (703)
522-1315.
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DESCRIPTION OF NOTES
The New Notes will be issued under an Indenture (hereinafter referred to as the
"Indenture") dated as of July 17, 1997 between the Company and The Bank of New
York (hereinafter referred to as the "Trustee"),which has been filed as an
exhibit to the Registration Statement of which this Prospectus constitutes a
part. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. Wherever particular defined terms of the Indenture are
referred to, such defined terms shall be incorporated herein by reference. A
summary of certain defined terms used in the Indenture and referred to in the
following summary description of the Notes is set forth below under "Certain
Definitions". The following summary of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Registration Rights Agreement.
The terms of the New Notes are identical in all material respects to the terms
of the Old Notes, except for certain transfer restrictions and registration
rights relating to the Old Notes and except that, if the Exchange Offer is not
consummated by September , 1997. Holders that have complied with their
obligations under the Registration Rights Agreement will be entitled, subject to
certain exceptions, to liquidated damaged in an amount equal to 0.5% per annum
held by such Holder until December , 1997 and up to 1.0% per annum thereafter
until the consummation of the Exchange Offer.
GENERAL
The Notes will be general unsecured obligations of the Company subordinated in
right of payment to all Senior Debt of the Company, will be limited to $325
million aggregate principal amount, and will mature on August 15, 2007.
Principal of, and premium, if any, on, the Notes will be payable, and the Notes
may be exchanged or transferred, at the office or agency of the Trustee.
Interest at the annual rate set forth on the cover page hereof will accrue from
July 17, 1997, will be payable semi-annually on February 15 and August 15
commencing February 15, 1998, to the Holders thereof at the close of business on
the preceding February 1 and August 1, respectively, and, unless other
arrangements are made, will be paid by checks mailed to such Holders.
The Notes will be issued only in fully registered form in denominations of
$1,000 and any multiple of $1,000. No service charge shall be payable for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part, at
any time on or after August 15, 2002, and prior to maturity, upon not less than
30 nor more than 60 days' prior notice, at the following redemption prices
(expressed in percentages of principal amount) ("Redemption Prices"), plus
accrued interest to the date of redemption, if redeemed during the 12-month
period commencing on or after August 15 of the years set forth below:
YEAR REDEMPTION PRICE
---- ----------------
2002 ............. 104.188%
2003 ............. 102.094%
and, after August 15, 2004, at 100% of the principal amount.
In addition, prior to August 15, 2000 in the event that the Company consummates
one or more offerings of its Qualified Capital Stock, the Company may at its
option, use all or a portion of the proceeds therefrom to redeem up to 33% of
the original aggregate principal amount at maturity of the Notes at a cash
redemption price equal to 108.375% of the principal amount thereof, plus accrued
and unpaid interest thereon through the date of repurchase; provided that at
least $100 million of the original aggregate principal amount of the Notes
remains outstanding thereafter.
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SUBORDINATION
The payment of principal of, Change of Control purchase price, premium, if any,
and interest on the Notes will, to the extent and in the manner set forth in the
Indenture, be subordinated in right of payment to the prior payment in full, in
cash equivalents, of all 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 all Senior Debt
will first be entitled to receive payment in full of all amounts due or to
become due thereon before the Holders of the Notes will be entitled to receive
any payment in respect of the principal of, Change of Control purchase price,
premium, if any, or interest on the Notes.
No payments on account of principal, Change of Control purchase price, premium,
if any, or interest in respect of the Notes may be made by the Company if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt. 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, Change of Control purchase price, premium, if any, or interest in
respect of the Notes 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 Notes 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.
By reason of such subordination, in the event of insolvency, funds that would
otherwise be payable to Holders 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 Notes.
As of March 31, 1997, on a pro forma basis after giving effect to the
Adjustments, the Company had approximately $350 million in aggregate principal
amount of Debt which would have constituted Senior Debt. The Company expects
from time to time to incur additional Debt constituting Senior Debt. Although
the Indenture contains limitations on the amount of Debt which the Company may
incur, the amount of such Debt could be substantial and, in any case, such Debt
may be Senior Debt. See "-- Covenants -- Limitation on Debt" below.
In addition, the Company currently conducts substantially all of its operations
through its Subsidiaries. The rights of the Company and its creditors, including
the Holders of the Notes, to participate in the distribution of the assets of
any Subsidiary upon any liquidation or reorganization of such Subsidiary or
otherwise will be effectively subordinated to, and subject to, the prior claims
of creditors of such Subsidiary, except to the extent that the Company may
itself be a creditor with recognized claims against the Subsidiary. The ability
of the Company to pay principal of, Change of Control purchase price, premium,
if any, and interest on the Notes 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 a Power Supply Business
currently have in place, and the Indenture will 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 and
otherwise. As of March 31, 1997, on a pro forma basis after giving effect to the
Adjustments, the Company's Subsidiaries had approximately $3.2 billion of
indebtedness to which the Notes would have been effectively subordinated. The
Company expects its Subsidiaries from time to time to incur additional Debt and
the amount of such Debt could be substantial.
REGISTRATION RIGHTS
Holders of New Notes are not entitled in any registration rights with respect to
the New Notes. Holders of Old Notes are entitled to certain registration rights
pursuant to the Registration Rights Agreement. AES has agreed with the Initial
Purchasers pursuant to the terms of the Registration Rights Agreement, for the
benefit of the Holders of the Old Notes, that AES will use its reasonable best
efforts, to file and cause to become effective a registration statement (the
"Exchange Offer Registration Statement") with respect to a registered offer to
exchange the Notes for an issue of notes of AES with terms
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identical to the Old Notes (except that the New Notes will not contain terms
with respect to transfer restrictions or the additional interest provisions
described below on or prior to December 14, 1997). Upon such registration
statement being declared effective, AES shall offer the New Notes in return for
surrender of the Notes. The Exchange Offer shall remain open for not less than
20 business days after the date notice of the Exchange Offer is mailed out to
Holders of the Old Notes. For each Old Note surrendered to AES under the
Exchange Offer, the Holder will receive a New Note of equal principal amount.
The Registration Statement of which this Prospectus is a part constitutes the
Exchange Offer Registration Statement.
In the event that applicable interpretations of the staff of the Commission do
not permit AES to effect the Exchange Offer, AES shall use its best efforts to
cause to become effective a shelf registration statement with respect to resales
of the Old Notes (a "Shelf Registration Statement") and to keep such Shelf
Registration Statement effective until the earliest of (i) two years after the
Closing Date, (ii) the time when the Old Notes registered thereunder can be sold
by non-affiliates of AES pursuant to Rule 144(k), or (iii) such time as all the
Old Notes have been sold thereunder, AES shall, in the event of such a shelf
registration, provide to each Holder copies of the prospectus, notify each
Holder when a registration statement for the Old Notes has become effective and
take certain other actions as are required to permit resales of the Old Notes.
In the event that (i) the Exchange Offer Registration Statement (or in the event
the Exchange Offer is not permitted under applicable law or Commission policy, a
Shelf Registration Statement) is not filed with the Commission on or prior to
the 90th day following the Closing Date, (ii) such Exchange Offer Registration
Statement is not declared effective by the Commission or a Shelf Registration
Statement is not filed with the Commission on or prior to the 150th day
following the Closing Date of the Old Notes or (iii) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective on or
prior to the 180th day following the Closing Date (each such event referred to
in clauses (i) through (iii), a "Registration Default"), then AES will pay
additional interest (in addition to the interest otherwise due on the Old Notes)
to each holder of the Old Notes during the first 90-day period immediately
following the occurrence of each such Registration Default in an amount equal to
0.5% per annum increasing to an amount equal to 1.0% per annum thereafter. Such
additional interest will cease accruing on such Old Notes when the Registration
Default has been cured.
COVENANTS
Limitation on Debt
The Company will not Incur any Debt, including Acquisition Debt, unless after
giving effect to the Incurrence of such Debt and the receipt and application of
the proceeds therefrom, the Fixed Charge Ratio of the Company would be greater
than 2 to 1. The Company's obligation to comply with this covenant will
terminate if and when the Notes become Investment Grade.
Notwithstanding the foregoing, the Company may Incur each and all of the
following: (i) Debt under or in respect of the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed $600
million; (ii) Debt issued in exchange for, or the proceeds of which are used to
refinance, outstanding Notes or other Debt of the Company in an amount (or, if
such new Debt provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, with an original
issue price) not to exceed the amount so exchanged or refinanced (plus accrued
interest, premium, if any, and fees and expenses related to such exchange or
refinancing); provided that (A) the date of any scheduled payment of principal
by way of sinking fund, mandatory redemption or otherwise (including defeasance)
on any Debt so refinanced or exchanged otherwise due after the final scheduled
maturity date of the Notes shall not occur prior to such maturity date as a
result of such exchange or refinancing and (B) new Debt the proceeds of which
are used to exchange or refinance the Notes or other Debt of the Company that is
subordinated in right of payment to the Notes shall only be permitted under this
clause (ii) if (x) in case the Notes are exchanged or refinanced in part, such
new Debt, by its terms or by the terms of any agreement or instrument pursuant
to which such Debt is issued, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Notes, (y) in case the Debt to be
exchanged or refinanced is subordinated in right of payment to the Notes, such
new Debt, by its terms or by the terms of any agreement or instrument pursuant
to which such Debt is issued, is expressly made subordinate in right of payment
to the Notes, at least to the extent that the Debt to be exchanged or refinanced
is subordinated in right of payment to the Notes and (z) in case the Notes are
exchanged or refinanced in part or the Debt to be exchanged or refinanced is
subordinated in right of payment to the Notes, as of the date the new Debt is
Incurred, the Average Life of the new Debt shall be equal to or greater than the
Average Life of the Notes or Debt to be exchanged or refinanced; (iii) Debt of
the Company to any of its Consolidated Subsidiaries, except that any transfer of
such Debt by a Consolidated Subsidiary (other than to another
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Consolidated Subsidiary) will be deemed to be an Incurrence of Debt; provided
that such Debt is expressly subordinated in right of payment to the Notes; and
(iv) Debt in an aggregate principal amount not to exceed $50 million at any one
time outstanding.
For purposes of determining any particular amount of Debt under this "Limitation
on Debt" covenant, Guarantees of, or obligations with respect to letters of
credit supporting, Debt otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with this "Limitation on Debt" covenant, (A) in the event that an item of Debt
meets the criteria of more than one of the types of Debt described in the above
clauses, the Company, in its sole discretion, shall classify such item of Debt
and only be required to include the amount and type of such Debt in one of such
clauses and (B) the amount of Debt issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with GAAP.
Limitation on Restricted Subsidiary Debt
The Company will not permit any Restricted Subsidiary to Incur, directly or
indirectly, any Debt, including Acquisition Debt. The Company's obligation to
comply with this covenant will terminate if and when the Notes become Investment
Grade.
Notwithstanding the foregoing, each and all of the following Debt may be
Incurred by a Restricted Subsidiary: (i) Debt outstanding as of the Closing
Date; (ii) Debt Incurred for any purpose (including without limitation the
purposes set forth in clause (iii) below) to the extent of the amount thereof
that is also Debt of the Company and is permitted under the "Limitation on Debt"
covenant described above; (iii) Debt Incurred to finance the development,
acquisition, construction, maintenance, working capital requirements in the
ordinary course of business consistent with past practice or operation of a
Power Supply Business or Unrelated Business in which the Company or any
Restricted Subsidiary has a direct or indirect interest; provided that (a) such
Debt shall be permitted under this clause (iii) only to the extent of the amount
thereof which (x) is Non-Recourse to the Company and (y) is Non-Recourse to any
other Restricted Subsidiary of the Company other than Restricted Subsidiaries
which represented less than 33% of the Consolidated EBITDA of the Company for
the Reference Period, and (b) upon the commencement of commercial operations of
such Power Supply Business or, in the case of an acquisition of such Power
Supply Business or Unrelated Business, upon the date of such acquisition, the
Company directly or through its Restricted Subsidiaries either (x) controls,
under an operating and management agreement or otherwise, the day to day
management and operation of the Power Supply Business or Unrelated Business so
financed or (y) has significant influence over the management and operation of
such Power Supply Business or Unrelated Business; (iv) Debt issued in exchange
for, or the proceeds of which are used to refinance, outstanding Debt of such
Restricted Subsidiary otherwise permitted under the Indenture in an amount (or,
if such new Debt provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, with an
original issue price) not to exceed the amount so exchanged or refinanced (plus
accrued interest, premium, if any, and fees and expenses related to such
exchange or refinancing plus any principal amounts previously repaid); provided
that (a) the new Debt shall be Non-Recourse to the Company to the same extent as
the Debt to be exchanged or refinanced, (b) if such Restricted Subsidiary has a
direct or indirect interest in any Power Supply Business or Unrelated Business,
the new Debt shall be Non-Recourse to any other Restricted Subsidiary of the
Company other than Restricted Subsidiaries which represented less than 33% of
the Consolidated EBITDA of the Company for the Reference Period, (c) the date of
any scheduled payment of principal by way of sinking fund, mandatory redemption
or otherwise (including defeasance) on any Debt so refinanced or exchanged
otherwise due after the final scheduled maturity date of the Notes shall not
occur prior to such maturity date as a result of such exchange or refinancing
and (d) if the new Debt refinances principal amounts previously repaid, (x) such
new Debt shall be permitted only if on the date such new Debt is Incurred, the
Company could incur at least $1 of Debt under the first paragraph of the
"Limitation on Debt" covenant described above and (y) the proceeds from such new
Debt are not to be used to make any Restricted Payments; (v) Guarantees of Debt
of the Company under the Bank Credit Agreement; (vi) Debt Incurred to support
the performance obligations of a Restricted Subsidiary engaged in providing
construction management or operating services to a Power Supply Business;
provided that (a) such Debt shall be permitted under this clause (vi) only to
the extent of the amount thereof which is Non-Recourse to the Company and is
Non-Recourse to any other Restricted Subsidiary of the Company other than
Restricted Subsidiaries which represented less than 33% of the Consolidated
EBITDA of the Company for the Reference Period, and (b) upon the commencement of
commercial operation of such Power Supply Business or in the case of an
acquisition of such Power Supply Business, upon the date of such acquisition,
the Company directly or through its Restricted Subsidiaries either (x) controls,
under an operating and management agreement or otherwise, the day to day
management and operation of such Power Supply Business or (y) has significant
influence over the management and operation of such Power Supply Business; (vii)
Debt in an aggregate amount
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for all Restricted Subsidiaries at any one time outstanding of not more than $50
million Incurred to finance the on-going operation, but not any expansion or
improvement, of a Power Supply Business or Unrelated Business in which such
Restricted Subsidiary has a direct or indirect interest; provided that such Debt
shall be permitted under this clause (vii) only to the extent it is Non-Recourse
to the Company and to any other Restricted Subsidiary of the Company other than
Restricted Subsidiaries which represented less than 33% of the Consolidated
EBITDA of the Company for the Reference Period; (viii) Debt of any Restricted
Subsidiary of the Company owed to (A) the Company or (B) any Restricted
Subsidiary of the Company; (ix) Debt in respect of Currency Agreements or
Interest Rate Agreements; (x) Debt that is Non-Recourse to the Company and
Non-Recourse to any other Restricted Subsidiary of the Company other than
Restricted Subsidiaries which represented less than 33% of the Consolidated
EBITDA of the Company for the Reference Period, only to the extent that the
proceeds of such Debt are received by the Company or an Intermediate Holding
Company as a result of such proceeds being used to pay dividends or make
distributions on the Capital Stock of such Restricted Subsidiary and any other
Restricted Subsidiary in the chain of ownership between the Company or such
Intermediate Holding Company and such Restricted Subsidiary; (xi) Acquisition
Debt and Debt incurred to finance the acquisition of a Power Supply Business;
provided that such Acquisition Debt and other Debt is Non-Recourse to the
Company or any Person that was a Restricted Subsidiary of the Company
immediately prior to such Incurrence; and provided further that where any Debt
is incurred to finance the acquisition of more than one Power Supply Business,
all such acquisitions shall have occurred within 180 days of each other; and
(xii) Debt of the type described in clause (iii) of the definition thereof the
Incurrence of which causes a corresponding reduction in any debt service or
other similar cash reserve required to be maintained in connection with any Debt
of such Restricted Subsidiary permitted by clause (iii) above and (to the extent
that the same constitutes a refinancing of Debt permitted under such clause
(iii)), clause (iv) above, in each case, only to the extent that the proceeds
from such reserve reduction are received by the Company or an Intermediate
Holding Company as a result of such proceeds being used to pay dividends or make
distributions on the Capital Stock of such Restricted Subsidiary and any other
Restricted Subsidiary in the chain of ownership between the Company or such
Intermediate Holding Company and such Restricted Subsidiary.
For purposes of determining compliance with this "Limitation on Restricted
Subsidiary Debt" covenant, (A) in the event that an item of Debt meets the
criteria of more than one of the types of Debt described in the above clauses,
the Company, in its sole discretion, shall classify such item of Debt and only
be required to include the amount and type of such Debt in one of such clauses
and (B) the amount of Debt issued at a price that is less than the principal
amount thereof shall be equal to the amount of the liability in respect thereof
determined in conformity with GAAP.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, make any Restricted Payment if after giving effect to such
Restricted Payment: (a) an 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, (b) the Company could not Incur at least $1 of Debt
under the first paragraph of the "Limitation on Debt" covenant described above
or (c) the aggregate amount expended by the Company and its Restricted
Subsidiaries for all Restricted Payments (the amount of any single or related
series of Restricted Payments so expended or distributed, if in excess of $15
million and other than in cash, to be determined in good faith by the Board of
Directors, as evidenced by a Board resolution) after April 1, 1997 shall exceed
the sum of: (1) 50% of the Net Income of the Company and its Consolidated
Subsidiaries for the period (taken as one accounting period) beginning on April
1, 1997 and ending on the last day of the fiscal quarter for which financial
information is available immediately prior to the date of such calculation;
provided that if Net Income for such period is less than zero, then minus 100%
of such net loss; plus (2) the aggregate net proceeds (including the fair market
value of proceeds other than cash, as determined in good faith by the Board of
Directors, as evidenced by a Board resolution if the fair market value of such
non-cash proceeds is in excess of $15 million) received by (A) the Company from
and after April 1, 1997 from the issuance and sale (other than to a Restricted
Subsidiary) of its Capital Stock (excluding Redeemable Stock, but including
Capital Stock other than Redeemable Stock issued upon conversion of, or in
exchange for, Redeemable Stock or securities other than its Capital Stock), and
warrants, options and rights to purchase its Capital Stock (other than
Redeemable Stock), but excluding the net proceeds from the issuance, sale,
exchange, conversion or other disposition of its Capital Stock convertible
(unless solely at the option of the Company) into (x) any security other than
its Capital Stock or (y) its Redeemable Stock or (B) a Finance Subsidiary of the
Company from and after April 1, 1997 from the issuance and sale (other than to
the Company or a Restricted Subsidiary) of its Qualified Capital Stock; plus (3)
to the extent not included in clause (1) above, the net reduction in Investments
of the type specified in clauses (iv) through (vi) of the definition of
Restricted Payment resulting from payments of interest on Debt, dividends,
repayments of loans or advances, or other transfers of assets to the Company or
other Person that made the original Investment from the Person in which such
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Investment was made or resulting from the sale or disposition of the Investment
or other return of the amount of the Investment or from the redesignation of any
Unrestricted Subsidiary as a Restricted Subsidiary; provided that such payment,
for purposes of the calculation to be made pursuant to this clause (3), shall
not exceed the amount of the original Investment; plus (4) any amount previously
included as a Restricted Payment on account of an obligation by the Company or
any Restricted Subsidiary to make a Restricted Payment which has not actually
been made by the Company or any Restricted Subsidiary and which is no longer
required to be paid by the Company or any Restricted Subsidiary; plus (5) $502
million; provided that the foregoing clause (c) shall not prevent the payment of
any dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of its declaration without violation of the
provisions of this covenant. For purposes of clause (c)(2) above, the aggregate
net proceeds received by the Company (x) from the issuance of its Capital Stock
upon the conversion of, or exchange for, securities evidencing Debt of the
Company, shall be calculated on the assumption that the gross proceeds from such
issuance are equal to the aggregate principal amount (or, if discount Debt, the
accreted principal amount) of the Debt evidenced by such securities converted or
exchanged and (y) upon the conversion or exchange of other securities of the
Company shall be equal to the aggregate net proceeds of the original sale of the
securities so converted or exchanged if such proceeds of such original sale were
not previously included in any calculation for the purposes of clause (c)(2)
above plus any additional sums payable upon conversion or exchange. The
Company's obligation to comply with this covenant shall terminate if and when
the Notes become Investment Grade. The amount available to make Restricted
Payments calculated in accordance with clause (c) of the first sentence of this
covenant is the same amount available under the equivalent provision applicable
to the Company's outstanding 10 1/4% Senior Subordinated Notes due 2006.
If an Investment which the Company or any Restricted Subsidiary is obligated to
make either in part from time to time or in whole in the future is fixed in
amount by the agreement setting forth such obligation, for purposes of
determining whether such Investment is a Restricted Payment permitted under the
foregoing covenant or is a Permitted Payment, the Investment shall be deemed to
have been made only once, in the amount so fixed, at the time the obligation
first arises (and not when payments in respect thereof are later made). If an
Investment which the Company or any Restricted Subsidiary is obligated to make
either in part from time to time or in whole in the future is not fixed in
amount by the agreement setting forth such obligation, for purposes of
determining whether such Investment is a Restricted Payment permitted under the
foregoing covenant or is a Permitted Payment, the Investment shall be deemed to
have been made at the time the obligation first arises in an amount to be
determined in good faith by the Board of Directors, as evidenced by a Board
resolution, and any actual payments in respect of such Investment shall be
deemed to be Investments made on the date of payment thereof. Subject to the
terms of clause (v) of the definition of Permitted Payments, such later
Investments may be Permitted Payments.
Restricted Payments are defined in the Indenture to exclude Permitted Payments
which include Permitted Investments. See "Certain Definitions" below.
Limitation on Restricted Subsidiary Investments and Mergers
The Company will not permit any Restricted Subsidiary with any direct or
indirect interest in a Power Supply Business to make any Investment in, or to
consolidate or merge with, any other Person with a direct or indirect interest
in any other Power Supply Business or any Unrelated Business. In addition, the
Company will not permit any Restricted Subsidiary with any direct or indirect
interest in any Unrelated Business to make any Investment in, or to consolidate
or merge with, any other Person with a direct or indirect interest in any Power
Supply Business or any other Unrelated Business. The Company's obligation to
comply with this covenant shall terminate if and when the Notes become
Investment Grade.
The foregoing restrictions shall not apply to any Intermediate Holding Company;
provided that (i) each such Intermediate Holding Company's direct and indirect
interest in any Power Supply Business or Unrelated Business shall be limited to
the ownership of Capital Stock or Debt obligations of a Person with a direct or
indirect interest in such Power Supply Business or Unrelated Business; (ii) no
Intermediate Holding Company shall incur, assume, create or suffer to exist any
Debt (including any Guarantee of Debt) other than Debt to the Company or Debt
permitted under clauses (iii), (viii) and (xi) of the "Limitation on Restricted
Subsidiary Debt" covenant described above; and (iii) no Lien shall exist upon
any assets of such Intermediate Holding Company whether now or hereafter
acquired, except for Liens upon the Capital Stock of a Restricted Subsidiary of
an Intermediate Holding Company securing Debt of such Restricted Subsidiary and
Liens securing Debt permitted under clauses (iii) and (xi) of the "Limitation on
Restricted Subsidiary Debt" covenant described above.
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Limitation on Business
The Company (a) will continue, and will cause each Material AES Entity to
continue, to engage in business of the same general type as now conducted by the
Company and its Restricted Subsidiaries and (b) will continue, and will cause
each Material AES Entity to continue, to operate its and their respective
businesses on a basis substantially consistent with the policies and standards
of the Company or such Material AES Entity as in effect on the Closing Date.
Limitations on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) make payments in respect of any
Debt owed to the Company or any other Restricted Subsidiary, (iii) make loans or
advances to the Company or any other Restricted Subsidiary or (iv) transfer any
of its Property to the Company or any other Restricted Subsidiary. The Company's
obligation to comply with this covenant will terminate if and when the Notes
become Investment Grade.
This covenant shall not restrict or prohibit any encumbrances or restrictions
existing: (i) in connection with the Incurrence of any Debt permitted under
clause (iii), (vi), (vii), (x) or (xi) of the "Limitation on Restricted
Subsidiary Debt" covenant described above or with respect to any portion thereof
that is also Debt of the Company and permitted under the "Limitation on Debt"
covenant described above; provided that such encumbrances or restrictions are
required in order to effect such financing and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary to make the payments, distributions, loans, advances or transfers
referred to in clauses (i) through (iv) of the preceding paragraph than
encumbrances and restrictions, taken as a whole, customarily accepted (or, in
the absence of any industry custom, reasonably acceptable) in substantially
non-recourse project financing, (ii) in connection with the execution and
delivery of an electric power or thermal energy purchase contract to which such
Restricted Subsidiary is the supplying party or other contracts with customers,
suppliers and contractors to which such Restricted Subsidiary is a party and
where such Restricted Subsidiary is engaged in the development, construction,
acquisition or operation of a Power Supply Business; provided that such
encumbrances or restrictions are required in order to effect such contracts and
are not materially more restrictive, taken as a whole, on the ability of the
applicable Restricted Subsidiary to make the payments, distributions, loans,
advances or transfers referred to in clauses (i) through (iv) in the preceding
paragraph than encumbrances and restrictions, taken as a whole, customarily
accepted (or, in the absence of any industry custom, reasonably acceptable) in
substantially non-recourse project financing, (iii) in connection with the
Incurrence of any Debt permitted under clause (iv) of the "Limitation on
Restricted Subsidiary Debt" covenant described above, provided that such
encumbrances or restrictions taken as a whole are not materially more
restrictive on the ability of the applicable Restricted Subsidiary to make the
payments, distributions, loans, advances or transfers referred to in clauses (i)
through (iv) in the preceding paragraph than those that are then in effect,
taken as a whole, in connection with the Debt so exchanged or refinanced, (iv)
in connection with the Bank Credit Agreement and the project financing, electric
power and thermal energy purchase arrangements and other contracts with
customers, suppliers and contractors in effect on the Closing Date, including
extensions, refinancings, renewals or replacements thereof, (v) pursuant to
customary non-assignment provisions in leases, (vi) pursuant to restrictions
imposed pursuant to any stock purchase or asset purchase agreement pending the
consummation of the transactions contemplated thereby, (vii) in connection with
any Acquisition Debt, provided that such encumbrance or restriction was not
incurred in contemplation of the obligor becoming a Restricted Subsidiary of the
Company, which encumbrance or restriction is not applicable to any Person, or
the Property or assets of any Person, other than the Person, or the Property or
assets, acquired, (viii) customary restrictions on transfers of Property subject
to a Lien which could not materially adversely affect the Company's ability to
satisfy its obligations under the Indenture and the Notes or (ix) provisions
contained in agreements or instruments relating to Debt which prohibit the
transfer of all or substantially all of the assets of the obligor thereunder
unless the transferee shall assume the obligations of the obligor under such
agreement or instrument, in each case; provided that, in the case of clause (iv)
above, such encumbrances and restrictions, taken as a whole, in any such
extensions, refinancings, renewals or replacements are not materially more
restrictive on the ability of the applicable Restricted Subsidiary to make the
payments, distributions, loans, advances or transfers referred to in clauses (i)
through (iv) in the preceding paragraph than those encumbrances or restrictions
taken as a whole in effect immediately before such extension, refinancing,
renewal or replacement. The covenant shall not prevent the Company from granting
any Liens not expressly prohibited by this covenant.
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Limitation on Additional Tiers of Senior Subordinated Debt
The Company will not Incur or suffer to exist any Debt, other than Debt
evidenced by the Notes, that is subordinate in right of payment to any Senior
Debt unless such Debt, by its terms or the terms of the instrument creating or
evidencing it, is pari passu with, or subordinate in right of payment to, the
Notes; provided that any Debt of the Company or any of its Restricted
Subsidiaries which is outstanding on the Closing Date shall be excluded from the
operation of this covenant.
Limitation on Asset Dispositions
The Company will not make, and will not permit any of its Restricted
Subsidiaries to make, any Asset Disposition unless the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
each such Asset Disposition at least equal to the fair market value of the
shares or assets sold or otherwise disposed of (such amounts in excess of $50
million determined in good faith by the Board of Directors, as evidenced by a
Board resolution) and either (i) not less than 75% of the consideration received
by the Company (or such Restricted Subsidiary, as the case may be) is in the
form of cash or property or assets used or useful in a Power Supply Business or
Capital Stock of a Person primarily engaged in a Power Supply Business, provided
that any note or other obligation received by the Company (or such Restricted
Subsidiary, as the case may be) that is converted into cash within 180 days of
such Asset Disposition and any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary that are assumed by the transferee of any such assets
shall be deemed to be cash for purposes of this clause (i), and (ii) first, the
Net Cash Proceeds of such Asset Disposition are applied within 90 days from the
later of the date of such Asset Disposition or the receipt of Net Cash Proceeds
related thereto, to the payment of the principal of, premium and interest on any
Senior Debt of the Company (including to cash collateralize letters of credit)
and, in connection with any such payment, any related loan commitment, standby
facility or the like shall be permanently reduced in an amount equal to the
principal amount so repaid and second, to the extent such Net Cash Proceeds are
not required by the lenders, or the terms, of the Senior Debt to be applied in
accordance with the foregoing or, if after being so applied there remain Net
Cash Proceeds, then at the Company's election, such Net Cash Proceeds are either
(x) invested in the business or businesses of the Company or any of its
Restricted Subsidiaries consistent with the "Limitation on Business" covenant
described above; provided that such investment is made within 365 days from the
later of the date of such Asset Disposition or the receipt of the Net Cash
Proceeds related thereto or (y) applied to the payment of any Senior Debt of the
Company or Debt of any Restricted Subsidiary or any Consolidated Subsidiary
(other than Debt owed to the Company or another Restricted Subsidiary), and, in
connection with any such payment, any related loan commitment, standby facility
or the like shall be permanently reduced in an amount equal to the principal
amount so repaid; provided that such Net Cash Proceeds are so applied within
three months after the expiration of the 365-day period referred to in clause
(x) above or (z) applied to make a tender offer (the "Offer") to purchase Notes
and other Debt of the Company from time to time outstanding with similar
provisions requiring the Company to make an offer to purchase or to redeem such
Debt with the proceeds from assets sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of Debt issued with
an original issue discount) of the Notes and such other Debt then outstanding at
a purchase price of 100% of their principal amount (or accreted value in the
case of Debt issued with an original issue discount), plus accrued interest
(subject to proration in the event of oversubscription in the manner set forth
below). Notwithstanding the foregoing, to the extent that any or all of the Net
Cash Proceeds of any Foreign Asset Disposition are prohibited or delayed by
applicable local law from being repatriated to the U.S., the Company (or such
Restricted Subsidiary, as the case may be) shall not be required to apply the
portion of such Net Cash Proceeds so affected in accordance with clause (ii)
above (other than to repay Debt of the Restricted Subsidiary making such Asset
Disposition or Debt of a Consolidated Subsidiary of the Company, in each case as
contemplated by clause (ii) above and to the extent the prohibition or delay on
repatriation is not applicable to such repayment and such repayment is not in
violation of the terms of any Senior Debt) (the Company hereby agreeing to cause
the applicable Restricted Subsidiary to promptly take all actions required by
the applicable local law to permit such repatriation); provided that once such
repatriation of any such affected Net Cash Proceeds is permitted under the
applicable local law, such repatriation will be immediately effected and such
repatriated Net Cash Proceeds will be applied in the manner set forth in this
covenant. To the extent that dividends or distributions of any or all of the Net
Cash Proceeds of any Foreign Asset Disposition would result in a tax liability
greater than that which would be incurred if such Net Cash Proceeds were not so
dividended or distributed, the Net Cash Proceeds so affected may be retained by
the applicable Restricted Subsidiary for so long as such adverse tax liability
would continue to be incurred.
Notwithstanding anything in this covenant to the contrary, the Company and any
Restricted Subsidiary may make the following Asset Dispositions: (i) a
disposition resulting from the bona fide exercise by governmental authority of
its claimed or actual power of eminent domain; (ii) a realization upon a
security interest; (iii) any Permitted Payment or Restricted
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Payment that is permitted hereunder; or (iv) any sale, transfer, conveyance,
lease or other disposition of the Capital Stock or Property of a Restricted
Subsidiary pursuant to the terms of any power sales agreement or steam sales
agreement or other agreement or contract related to the output or product of, or
services rendered by, a Power Supply Business as to which such Restricted
Subsidiary is the supplying party; provided that to the extent the Company or
any Restricted Subsidiary receives any cash consideration in connection with
such Asset Disposition, the Net Cash Proceeds from such Asset Disposition shall
be applied in accordance with clause (ii) of this covenant.
If the aggregate purchase price of Notes and other Debt tendered pursuant to an
Offer made pursuant to clause (ii)(z) in the preceding paragraph is less than
the Net Cash Proceeds allotted to the purchase of the Notes and other Debt, the
Company may use the remaining Net Cash Proceeds for general corporate purposes.
The Company will not be required to comply with the provisions of clause (ii) in
the first paragraph of this covenant if the Net Cash Proceeds from one or more
Asset Dispositions occurring on or after the date of the Indenture are less than
$40 million in any one fiscal year. Any lesser amounts so carried forward and
cumulated need not be segregated or reserved and may be used for general
corporate purposes.
The Company will make such Offer by mailing to each Holder of the Notes, within
30 days from the receipt of Net Cash Proceeds, a written notice specifying the
purchase date, which shall be not less than 30 days nor more than 60 days after
the date of such notice (the "Purchase Date") and shall contain certain
information concerning the business of the Company which the Company believes in
good faith will enable the Holders of the Notes to make an informed decision.
Holders electing to have their Notes purchased will be required to surrender
such Notes at least one Business Day prior to the Purchase Date. If at the
expiration of the offer period the aggregate principal amount of Notes
surrendered by Holders exceeds the amount available to purchase Notes, the
Company will select the Notes to be purchased on a pro rata basis.
In the event the Company is unable to purchase Notes from Holders in an Offer
because of provisions of applicable law, the Company need not make an Offer. The
Company shall then be obligated to use the Net Cash Proceeds in accordance with
clauses (ii)(x) or (y) in the first paragraph of this covenant description.
The Company will comply with all applicable tender offer rules, including
without limitation Rule 14e-1 under the Exchange Act, in connection with an
Offer under the provisions of this covenant.
Repurchase of Notes Upon a Change of Control
Upon a Change of Control, each Holder of the Notes shall have, subject to the
provisions of "Subordination" above, the right to require that the Company
repurchase such Holder's Notes at a repurchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase. Certain of the events constituting a Change of Control under
the Notes will also constitute an event of default under the Company's Bank
Credit Agreement and, in any event, the right of Holders to receive the Change
of Control purchase price is subordinated in right of payment to the payment of
all Senior Debt, including Debt outstanding under the Bank Credit Agreement. As
of March 31, 1997, on a pro forma basis after giving effect to the Adjustments,
the Company had approximately $350 million in aggregate principal amount of Debt
which would have constituted Senior Debt. Furthermore, other Senior Debt is
permitted to be Incurred, provided certain Fixed Charge Ratios are met. Due to
the highly leveraged nature of the Company, there can be no assurance that the
Company will have sufficient funds to purchase tendered Notes upon a Change of
Control.
The Change of Control provisions may not be waived by the Trustee or by the
Board of Directors, and any modification thereof must be approved by each
Holder. Nevertheless, the Change of Control provisions will not necessarily
afford protection to Holders, including protection against an adverse effect on
the value of the Notes, in the event that the Company or its Restricted
Subsidiaries Incur additional Debt, whether through recapitalizations or
otherwise. Furthermore, the Change of Control provisions will not be applicable
in the event of certain transactions with Affiliates of the Company that are
approved by the Board of Directors. The Change of Control provisions will not
prevent a change in the Board of Directors which is approved by the then-present
members of the Board of Directors. See "Certain Definitions -- Change of
Control" below. With respect to a sale of assets, the phrase "all or
substantially all", which appears in the definition of Change of Control, has
not gained an established meaning. In interpreting this phrase, courts have made
subjective determinations, considering such factors as the value of the assets
conveyed and the proportion of an entity's income derived from such assets.
Accordingly, there may be uncertainty as to whether a Holder can determine
whether a Change of Control has occurred and can exercise any remedies such
Holder may have upon a Change of Control.
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Within 30 days following any Change of Control, the Company shall mail a notice
to each Holder of the Notes with a copy to the Trustee stating (1) that a Change
of Control has occurred and that such Holder has the right to require the
Company to repurchase such Holder's Notes at a repurchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase (the "Change of Control Offer"), (2) the circumstances
and relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control), (3) the repurchase date (which shall
be not earlier than 30 days or later than 60 days from the date such notice is
mailed) (the "Repurchase Date"), (4) that any Note not tendered will continue to
accrue interest, (5) that any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Repurchase Date, (6)
that Holders electing to have a Note purchased pursuant to a Change of Control
Offer will be required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the Repurchase Date, (7) that Holders will be entitled to withdraw their
election if the paying agent receives, not later than the close of business on
the third Business Day (or such shorter periods as may be required by applicable
law) preceding the Repurchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes the
Holder delivered for purchase, and a statement that such Holder is withdrawing
his election to have such Notes purchased, and (8) that Holders which elect to
have their Notes purchased only in part will be issued new Notes in a principal
amount equal to the unpurchased portion of the Notes surrendered.
On the Repurchase Date, the Company shall (i) accept for payment Notes or
portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit
with the Trustee money sufficient to pay the purchase price of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee Notes so accepted together with an officers' certificate identifying the
Notes or portions thereof tendered to the Company. The Trustee shall promptly
mail to the Holders of the Notes so accepted payment in an amount equal to the
purchase price, and promptly authenticate and mail to such Holders a new Note in
a principal amount equal to any unpurchased portion of the Note surrendered. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Repurchase Date.
The Company will comply with all applicable tender offer rules, including
without limitation Rule 14e-1 under the Exchange Act, in connection with a
Change of Control Offer.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly enter into any transaction (including, without
limitation, the sale, purchase or lease of any assets or properties or the
rendering of any services) involving aggregate consideration in excess of $5
million with any Affiliate (other than a Person that constitutes an Affiliate
solely because of the Company's or a Subsidiary of the Company's control of such
Person except for any Unrestricted Subsidiary) or holder of 5% or more of any
class of Capital Stock of the Company except for transactions (including,
subject to the "Limitation on Restricted Payments" covenant described above, any
loans or advances by or to, or Guarantee on behalf of, any Affiliate or any such
holder) made in good faith the terms of which are fair and reasonable to the
Company or such Restricted Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Company or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis with Persons who are not such a holder or Affiliate; provided
that any such transaction shall be conclusively deemed to be on terms which are
fair and reasonable to the Company or any of its Restricted Subsidiaries and on
terms which are at least as favorable as the terms which could be obtained on an
arm's-length basis with Persons who are not such a holder or Affiliate if such
transaction is approved by a majority of the Company's directors (including a
majority of the Company's independent directors); and provided further, that
with respect to the purchase or disposition of assets of the Company or any of
its Restricted Subsidiaries having a net book value in excess of $15 million, in
addition to approval of its Board of Directors, the Company shall obtain a
written opinion of an Independent Financial Advisor stating that the terms of
such transaction are fair to the Company or its Restricted Subsidiary, as the
case may be, from a financial point of view; and provided further that the
fairness, reasonableness and arm's-length nature of the terms of any transaction
which is part of a series of related transactions may be determined on the basis
of the terms of the series of related transactions taken as a whole. This
covenant shall not apply to (a) transactions between the Company or any of its
Restricted Subsidiaries and any employee of the Company or any of its Restricted
Subsidiaries that are approved by the Board of Directors or any committee of the
Board of Directors consisting of the Company's independent directors, (b) the
payment of reasonable and customary regular fees to directors of the Company or
a Restricted Subsidiary, (c) any transaction between the Company and any of its
Consolidated Subsidiaries or between any of its Consolidated Subsidiaries, (d)
any Permitted Payment and any Restricted Payment not otherwise prohibited by the
"Limitation on Restricted
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Payments" covenant described above or (e) the provision of general corporate
administrative, operating and management services, including, without
limitation, procurement, construction engineering, construction administration,
legal, accounting, financial, money management, risk management, personnel,
administration and business planning services, in each case, in the ordinary
course.
EVENTS OF DEFAULT
An Event of Default, as defined in the Indenture and applicable to the Notes,
will occur with respect to the Notes if: (i) the Company defaults in the payment
of all or any part of principal, the Change of Control purchase price or
premium, if any, on any Note 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 Note when the same becomes
due and payable, and such default continues for a period of 30 days; (iii) an
event of default, as defined in any indenture or instrument evidencing or under
which the Company or any Significant Subsidiary has at the date of this
Indenture or shall hereafter have outstanding any Debt, shall happen and be
continuing and either (a) such default results from the failure to pay the
principal of such Debt in excess of $50 million at final maturity of such Debt
or (b) as a result of such default, the maturity of such Debt shall have been
accelerated so that the same shall be or become due and payable prior to the
date on which the same would otherwise have become due and payable, and such
acceleration shall not be rescinded or annulled within 60 days and the principal
amount of such Debt, together with the principal amount of any other Debt of the
Company or any Significant Subsidiary in default, or the maturity of which has
been accelerated, aggregates $50 million or more; provided that such default
shall not be an Event of Default if such Debt is Debt of a Significant
Subsidiary, is Non-Recourse to the Company in respect of the amounts not paid or
due upon acceleration and the Company could, at the time of default, incur at
least $1 of Debt under the "Limitation on Debt" covenant described above; and
provided, further however, that, subject to certain provisions, the Trustee
shall not be charged with knowledge of any such default unless written notice
thereof shall have been given to the Trustee by the Company, by the holder or an
agent of the holder of any such Debt, by the trustee then acting under any
indenture or other instrument under which such default shall have occurred, or
by the Holders of not less than 25% in the aggregate principal amount of the
Notes at the time outstanding; (iv) the Company defaults in the performance of
or breaches any other covenant or agreement of the Company in the Indenture with
respect to the Notes or under the Notes and such default or breach continues for
a period of 60 consecutive days after written notice by the Trustee or by the
Holders of 25% or more in aggregate principal amount of the Notes; (v) one or
more judgments or orders shall be entered by a court against the Company or any
Significant Subsidiary for the payment of money in an amount which, individually
or in the aggregate exceeds $50 million (excluding the amount thereof covered by
insurance or by a bond written by third parties but treating any deductibles,
self insurance or retentions as not so covered by insurance) and which judgments
or orders shall not be discharged or waived, and shall remain outstanding and
there shall be any period of 60 consecutive days following entry of such
judgment or order in excess of $50 million or the judgment or order which causes
the aggregate amount to exceed $50 million during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; provided, that such a judgment or order shall not be an Event of
Default if such judgment or order is against a Significant Subsidiary and does
not require any payment by the Company and the Company could, at the expiration
of the applicable 60 day period, incur at least $1 of Debt under the "Limitation
on Debt" covenant described above; (vi) a court having jurisdiction in the
premises enters a decree or order for (A) relief in respect of the Company or
any of its Material 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 Material
Subsidiaries or for all or substantially all of the property and assets of the
Company or any of its Material Subsidiaries or (C) the winding up or liquidation
of the affairs of the Company or any of its Material Subsidiaries and, in each
case, such decree or order shall remain unstayed and in effect for a period of
60 consecutive days; or (vii) the Company or any of its Material 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 Material Subsidiaries or for all or substantially all of the property and
assets of the Company or any of its Material Subsidiaries or (C) effects any
general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clauses (vi)
or (vii) above that occurs with respect to the Company) occurs with respect to
the Notes and is continuing under the Indenture, then, and in each and every
such case either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding by written notice to the Company
(and to the Trustee if such notice is given by the Holders (the "Acceleration
Notice")), may,
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and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, and accrued
interest shall be immediately due and payable. If an Event of Default specified
in clauses (vi) or (vii) above occurs with respect to the Company, the principal
of, and accrued interest on the Notes then outstanding shall ipso facto become
and be immediately due and payable, subject to the prior payment in full of all
Senior Debt, 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 Notes may, by written notice to the Company and to the Trustee,
waive all past defaults with respect to the Notes and rescind and annul a
declaration of acceleration with respect to the Notes and its consequences if
(i) all existing Events of Default applicable to the Notes, other than the
nonpayment of the principal of, Change in Control purchase price or 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.
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes 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 the Notes 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 the Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
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 the
outstanding Notes make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide 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 at least a majority in aggregate principal amount of the
outstanding Notes do not give the Trustee a direction that is inconsistent with
the request. However, such limitations do not apply to the right of any Notes to
receive payment of the principal of, premium, if any, or interest on, such Notes
or to bring suit for the enforcement of any such payment, on or after the due
date expressed in the Notes, which right shall not be impaired or affected
without the consent of the Holder.
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 Notes 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 the terms in "Restriction
on Mergers, Consolidations and Sales of Assets" described below; (iii) to comply
with any requirements of the Commission in connection with the qualification of
the Indenture under the Trust Indenture Act of 1939, as amended; (iv) to
evidence and provide for the acceptance of appointment with respect to the Notes
of a successor Trustee; (v) to provide for uncertificated Notes and to make all
appropriate changes for such purpose; and (vi) 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 Notes;
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 installment of interest on, any Note, (ii) reduce the
principal amount of, or premium, if any, or interest on, any Note, (iii) reduce
the above-stated percentage of outstanding Notes the consent of whose Holders is
necessary to modify or amend the Indenture with respect to the Notes, or (iv)
reduce the percentage or aggregate principal amount of outstanding Notes the
consent of whose Holders is necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults. It shall not be
necessary for the consent of the Holders 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 becomes effective, the Company shall give to the Holders affected thereby
a notice briefly describing the amendment, supplement, or waiver. The Company
will mail
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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 of 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 and the Indenture; (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)
immediately after giving effect to such transaction on a pro forma basis, the
Company or the surviving entity would be able to incur at least $1 of Debt under
the first paragraph of the "Limitation on Debt" covenant described above.
Notwithstanding the foregoing, clause (iii) of the preceding sentence shall not
prohibit a transaction, the principal purpose of which is (as determined in good
faith by the Board of Directors as evidenced by a Board resolution) to change
the state of incorporation of the Company, and such transaction does not have as
one of its purposes the evasion of the limitations imposed by this covenant.
DEFEASANCE
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 Notes of any
series, on the 123rd day after the deposit referred to below has been made, and
the provisions of the Indenture shall no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost, or mutilated Notes,
to maintain paying agencies, and to hold monies for payment in trust) if, among
other things, (A) the Company has irrevocably 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 Stated Maturity 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 Notes, (B) the Company has delivered to the Trustee (i) either (x) an
Opinion of Counsel to the effect that holders of the Notes 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 (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law 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 United States 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 (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) 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 Notes are listed on a national
securities exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result of such
deposit, defeasance, and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Indenture further provides that the provisions of the Indenture will no
longer be in effect with respect to the covenants described in this Offering
Memorandum under "Covenants" and clause (iv) under "Events of Default" with
respect to such
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covenants and clauses (iii) and (v) under "Events of Default" shall be deemed
not to be Events of Default with respect to the Notes, upon, among other things,
the deposit with the Trustee, in trust, of money and/or U.S. government
obligations 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
Stated Maturity thereof or earlier redemption (irrevocably provided for under
agreements satisfactory to the Trustee), as the case may be, in accordance with
the terms of the Indenture and the Notes, the satisfaction of the provisions
described in clauses (B)(ii), (C), (D), and (E) of the preceding paragraph and
the delivery by the Company to the Trustee of an Opinion of Counsel to the
effect that, among other things, the holders of the Notes will not recognize
income, gain, or loss for federal income tax purposes as a result of such
deposit and defeasance of the covenants and Events of Default 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.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
If the Company exercises its option to omit compliance with certain covenants
and provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the Notes are declared due and payable
because of the occurrence of an Event of Default that remains applicable, the
amount of money and/or U.S. Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Notes at the time of their Stated
Maturity, but may not be sufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. However, the Company
shall remain liable for such payments.
CERTAIN DEFINITIONS
"Acquisition Debt" is defined to mean Debt of any Person existing at the time
such Person became a Restricted Subsidiary of the Company (or such Person is
merged into the Company or one of its Restricted Subsidiaries) or assumed in
connection with the acquisition of assets from any such Person (other than
assets acquired in the ordinary course of business), including Debt Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary of the Company (but excluding Debt of such Person which is
extinguished, retired or repaid in connection with such Person becoming a
Restricted Subsidiary of the Company).
"Adjusted Consolidated Net Income" is defined to mean, for any period, for any
Person the aggregate Net Income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in conformity with GAAP plus the Net
Income of any Restricted Subsidiary of such Person for prior periods to the
extent such Net Income is actually paid in cash to such Person during such
period plus the Net Income of any Person (other than a Restricted Subsidiary) in
which such Person has a joint interest with a third party for prior periods to
the extent such Net Income is actually paid in cash to such Person during such
period; provided that the following items shall be excluded in computing
Adjusted Consolidated Net Income (without duplication): (i) the Net Income (or
loss) of any Person (other than a Restricted Subsidiary) in which such Person
has a joint interest with a third party, except to the extent such Net Income is
actually paid in cash to such Person during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clauses (c)(1) or (c)(2) of the "Limitation on Restricted Payments"
covenant described above (and in such case, except to the extent includible
pursuant to clause (i) above), the Net Income (if positive) of such Person
accrued prior to the date it becomes a Restricted Subsidiary of any other Person
or is merged into or consolidated with such other Person or any of its
Restricted Subsidiaries or all or substantially all of the property and assets
of such Person are acquired by such other Person or any of its Restricted
Subsidiaries; (iii) the Net Income (or loss) of any Restricted Subsidiary of
such Person, except to the extent such Net Income (if positive) is actually paid
in cash to such Person during such period; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) the cumulative effect of a
change in accounting principle; and (vi) any amounts paid or accrued as
dividends on Preferred Stock of such Person or Preferred Stock of any Restricted
Subsidiary of such Person.
"AES Hawaii" is defined to mean AES Hawaii Management Co., Inc., a Delaware
corporation and a Subsidiary of the Company, and its successors.
"AES Oklahoma" is defined to mean AES Oklahoma Management Co., Inc., a Delaware
corporation and a Subsidiary of the Company, and its successors.
"Affiliate" is defined to mean, as applied to any Person, 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
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correlative meanings, the terms "controlling", "controlled by" and "under common
control with") when used with respect to any Person is defined to mean 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.
"Asset Acquisition" is defined to mean (i) an investment by the Company or any
of its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any of its Restricted
Subsidiaries or shall be merged into or consolidated with the Company or any of
its Restricted Subsidiaries or (ii) an acquisition by the Company or any of its
Restricted Subsidiaries of the Property of any Person other than the Company or
any of its Restricted Subsidiaries that constitutes substantially all of an
operating unit or business of such Person.
"Asset Disposition" is defined to mean, with respect to any Person, any sale,
transfer, conveyance, lease or other disposition (including by way of merger,
consolidation or sale-leaseback) by such Person or any of its Restricted
Subsidiaries to any Person (other than to such Person or a Consolidated
Subsidiary of such Person and other than in the ordinary course of business) of
(i) any assets (excluding cash and cash equivalents) of such Person or any of
its Restricted Subsidiaries or (ii) any shares of Capital Stock of such Person's
Restricted Subsidiaries. For purposes of this definition, any disposition in
connection with directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall not constitute an Asset Disposition. In
addition, the term "Asset Disposition" shall not include any sale, transfer,
conveyance, lease or other disposition of assets governed by the "Restriction on
Mergers, Consolidations and Sales of Assets" covenant described above. The term
"Asset Disposition" also shall not include (i) any sale of shares of Preferred
Stock of a Restricted Subsidiary, (ii) the grant of a security interest by any
Person in any assets or shares of Capital Stock securing a borrowing by, or
contractual performance obligation of, such Person or any Restricted Subsidiary
of such Person, (iii) a sale-leaseback transaction involving substantially all
of the assets of a Power Supply Business where a Restricted Subsidiary of the
Company sells the Power Supply Business to a Person in exchange for the
assumption by that Person of the Debt financing the Power Supply Business and
the Restricted Subsidiary leases the Power Supply Business from such Person,
(iv) dispositions of contract rights, development rights and resource data made
in connection with the initial development of a Power Supply Business, made
prior to the commencement of commercial operation of such Power Supply Business
or (v) transactions made in order to enhance the repatriation of cash proceeds
in connection with a Foreign Asset Disposition or in order to increase the
after-tax proceeds thereof available for immediate distribution.
"Asset Sale" is defined to mean the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary of the Company) of (i) all or substantially all of the
Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the Property that constitutes an operating unit or business
of the Company or any of its Restricted Subsidiaries.
"Average Life" is defined to mean, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the product
of (A) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (B)
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bank Agent" is defined to mean Morgan Guaranty Trust Company of New York, as
agent for the Banks pursuant to the Bank Credit Agreement, and any successor or
successors thereto in such capacity.
"Bank Credit Agreement" is defined to mean the Credit Agreement dated as of
August 2, 1996 among the Company, the Banks named on the signature pages thereof
and the Bank Agent, 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 Restricted 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.
"Banks" is defined to mean the lenders who are from time to time parties to the
Bank Credit Agreement.
"Board of Directors" is defined to mean either the Board of Directors of the
Company or (except for the purposes of clause (iii) of the definition of "Change
of Control") any committee of such Board duly authorized to act under the
Indenture.
"Business Day" is defined to mean 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.
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"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of, or interests in (however designated), the
equity of such Person which is outstanding or issued on or after the Closing
Date, including, without limitation, all Common Stock and Preferred Stock and
partnership and joint venture interests of such Person.
"Capitalized Lease" is defined to mean, as applied to any Person, any lease of
any Property of which the discounted present value of the rental obligations of
such Person as lessee, in conformity with GAAP, is required to be capitalized on
the balance sheet of such Person; and "Capitalized Lease Obligation" is defined
to mean the rental obligations, as aforesaid, under such lease.
"Change of Control" is defined to mean the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company to any Person or group (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of Persons,
(ii) a Person or group (as so defined) of Persons (other than management of the
Company on the date of the Indenture or their Affiliates) shall have become the
beneficial owner of more than 35% of the outstanding Voting Stock of the
Company, or (iii) during any one-year period, individuals who at the beginning
of such period constitute the Board of Directors (together with any new director
whose election or nomination was approved by a majority of the directors then in
office who were either directors at the beginning of such period or who were
previously so approved) cease to constitute a majority of the Board of
Directors.
"Closing Date" is defined to mean the date on which the Notes are originally
issued under the Indenture.
"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of common stock of such Person which is
outstanding or issued on or after the date of the Indenture, including, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" of any Person for any period is defined to mean the
Adjusted Consolidated Net Income of such Person, plus (without duplication) (i)
income taxes (other than income taxes (x) (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or Asset Sales
and (y) actually payable with respect to such period) determined on a
consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with GAAP to the extent payable by such Person, (ii) Consolidated
Fixed Charges, (iii) depreciation and amortization expense for such period and
prior periods, all determined on a consolidated basis for such Person and its
Consolidated Subsidiaries in accordance with GAAP, but only to the extent that
the positive cash flow associated with such depreciation and amortization
expense is actually received in cash by such Person during such period and (iv)
all other non-cash items reducing Net Income for such period and prior periods,
all determined on a consolidated basis for such Person and its Consolidated
Subsidiaries in accordance with GAAP, but only to the extent that the positive
cash flow associated with such non-cash items is actually received in cash by
such Person during such period, and less (without duplication) (i) all non-cash
items increasing Net Income of such Person during such period and prior periods,
but only to the extent that positive cash flow associated with such non-cash
items in not actually received in cash by such Person during such period, and
(ii) the aggregate amount of any capitalized expenses (including capitalized
interest) paid by such Person during such period which have the effect of
increasing Net Income for such period.
"Consolidated Fixed Charges" of any Person is defined to mean, for any period,
the aggregate of (i) Consolidated Interest Expense, (ii) the interest component
of Capitalized Leases, determined on a consolidated basis for such Person and
its Consolidated Subsidiaries in accordance with GAAP, excluding any interest
component of Capitalized Leases in respect of that portion of a Capitalized
Lease Obligation of a Restricted Subsidiary that is Non-Recourse to such Person
and (iii) cash and non-cash dividends due (whether or not declared) on any
Redeemable Stock of such Person.
"Consolidated Interest Expense" of any Person is defined to mean, for any
period, the aggregate interest expense in respect of Debt (including
amortization of original issue discount and non-cash interest payments or
accruals) of such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, including all commissions,
discounts, other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs associated with Interest Rate
Agreements and any amounts paid during such period in respect of such interest
expense, commissions, discounts, other fees and charges that have been
capitalized; provided that Consolidated Interest Expense of the Company shall
not include any interest expense (including all commissions, discounts, other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs associated with Interest Rate Agreements) in respect of
that portion of Debt of a Restricted Subsidiary of the Company that is
Non-Recourse to the Company; and
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provided further that Consolidated Interest Expense of the Company in respect of
a Guarantee by the Company of Debt of a Restricted Subsidiary shall be equal to
the commissions, discounts, other fees and charges that would be due with
respect to a hypothetical letter of credit issued under the Bank Credit
Agreement that can be drawn by the beneficiary thereof in the amount of the Debt
so guaranteed if (i) the Company is not actually making directly or indirectly
interest payments on such Debt and (ii) GAAP does not require the Company on an
unconsolidated basis to record such Debt as a liability of the Company.
"Consolidated Subsidiary" is defined to mean at any date with respect to any
Person, any Subsidiary of such Person or other entity the accounts of which
would be consolidated with those of such Person in its consolidated financial
statements if such statements were prepared as of such date, other than an
Unrestricted Subsidiary.
"Consolidated Total Assets" is defined to mean, with respect to any Person at
any time, the total assets of such Person and its Consolidated Subsidiaries at
such time determined in conformity with GAAP.
"Currency Agreement" is defined to mean, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its Restricted
Subsidiaries against fluctuations in currency values to or under which such
Person or any of its Restricted Subsidiaries is a party or a beneficiary on the
Closing Date or becomes a party or a beneficiary thereafter.
"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' acceptance 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.
"Designated Senior Debt" is defined to mean (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.
"Excess Cash Flow" of any Person for any period is defined to mean Consolidated
EBITDA less Consolidated Fixed Charges less any income taxes actually paid by
such Person during such period.
"Finance Subsidiary" is defined to mean a Wholly-Owned Subsidiary of the Company
that does not engage in any activity other than (i) the holding of Debt of the
Company that both (x) is subordinated to the Notes and (y) provides for no
payments of principal by way of sinking fund, mandatory redemption or otherwise
prior to the maturity of the Notes, (ii) the issuance of Capital Stock and (iii)
any activity necessary, incidental or related to the foregoing.
"Fixed Charge Ratio" is defined to mean the ratio, on a pro forma basis, of (i)
the aggregate amount of Consolidated EBITDA of any Person for the Reference
Period immediately prior to the date of the transaction giving rise to the need
to calculate the Fixed Charge Ratio (the "Transaction Date") to (ii) the
aggregate Consolidated Fixed Charges of such Person during such Reference
Period; provided that for purposes of such computation, in calculating
Consolidated EBITDA and Consolidated Fixed Charges, (1) the Incurrence of the
Debt giving rise to the need to calculate the Fixed Charge Ratio and the
application of the proceeds therefrom shall be assumed to have occurred on the
first day of the Reference Period, (2) Asset Sales and Asset Acquisitions which
occur during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date (but including any Asset Acquisition to be made
with the Debt Incurred pursuant to clause (1) above) shall be assumed to have
occurred on the first day of the Reference Period, (3) the Incurrence of any
Debt during the Reference Period or subsequent to the Reference Period and prior
to the Transaction Date and the application of the proceeds therefrom shall be
assumed to have occurred on the first day of such Reference Period, (4)
Consolidated Interest Expense attributable to any Debt (whether existing or
being Incurred) computed on a pro forma basis and bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire
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period unless such Person or any of its Restricted Subsidiaries is a party to an
Interest Rate Agreement (which shall remain in effect for the twelve month
period after the Transaction Date) which has the effect of fixing the interest
rate on the date of computation, in which case such rate (whether higher or
lower) shall be used and (5) there shall be excluded from Consolidated Fixed
Charges any Consolidated Fixed Charges related to any amount of Debt which was
outstanding during and subsequent to the Reference Period but is not outstanding
on the Transaction Date, except for Consolidated Fixed Charges actually incurred
with respect to Debt borrowed (as adjusted pursuant to clause (4)) (x) under a
revolving credit or similar arrangement to the extent the commitment thereunder
remains in effect on the Transaction Date or (y) pursuant to clause (iv) in the
"Limitation on Debt" covenant described above. For the purpose of making this
computation, Asset Sales and Asset Acquisitions which have been made by any
Person which has become a Restricted Subsidiary of the Company or been merged
with or into the Company or any Restricted Subsidiary of the Company during the
Reference Period or subsequent to the Reference Period and prior to the
Transaction Date shall be calculated on a pro forma basis (including all of the
calculations referred to in clauses (1) through (5) above assuming such Asset
Sales or Asset Acquisitions occurred on the first day of the Reference Period).
"Foreign Asset Disposition" is defined to mean any Asset Disposition in respect
of the Capital Stock and/or Property of any Restricted Subsidiary of any Person
where such Restricted Subsidiary is organized under the laws of any jurisdiction
other than the U.S. or any state thereof or any Restricted Subsidiary of the
type described in Section 936 of the Internal Revenue Code of 1986, as amended,
to the extent that the proceeds of such Asset Disposition are received by a
Person subject in respect of such proceeds to the tax laws of a jurisdiction
other than the U.S. or any state thereof.
"GAAP" is defined to mean generally accepted accounting principles in the U.S.
as in effect as of the date of the Indenture applied on a basis consistent with
the principles, methods, procedures and practices employed in the preparation of
the Company's audited financial statements, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keepwell, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder", "holder of Securities", "Securityholder" and other similar terms mean
the registered holder of any Security.
"Incur" is defined to mean, with respect to any Debt, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Debt; provided
that neither the accrual of interest (whether such interest is payable in cash
or kind) nor the accretion of original issue discount shall be considered an
Incurrence of Debt.
"Independent Financial Advisor" is defined to mean a nationally recognized
investment banking firm (i) which does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company and (ii) which, in the sole judgment of the Board of
Directors, is otherwise independent and qualified to perform the task for which
such firm is being engaged.
"Interest Rate Agreement" is defined to mean, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect such Person or any of
its Restricted Subsidiaries against fluctuations in interest rates to or under
which such Person or any of its Restricted Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
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"Intermediate Holding Company" is defined to mean any Restricted Subsidiary of
the Company that serves as a holding company for the Company's direct or
indirect interests in Power Supply Businesses and Unrelated Businesses.
"Investment" in a Person is defined to mean any investment in, loan or advance
to, Guarantee on behalf of, directly or indirectly, or other transfer of assets
to such Person. For purposes of the definition of "Unrestricted Subsidiary" and
the "Limitation on Restricted Payments" covenant described above, "Investment"
shall include (i) the fair market value of the assets (net of liabilities) of
any Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary and shall exclude the fair market value of
the assets (net of liabilities) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any
property transferred to or from any Person shall be valued at its fair market
value at the time of such transfer, in each case as determined by the Board of
Directors in good faith.
"Investment Grade" is defined to mean, with respect to any security, a rating of
Baa3 or higher of such security by Moody's Investors Service Inc. together with
a rating of BBB- or higher of such security by Standard & Poor's Corporation.
"Joint Venture" is defined to mean a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that, as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Lien" is defined to mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of the Indenture, the Company shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Material AES Entity" is defined to mean (i) any Subsidiary Guarantor, (ii) any
of AES Connecticut Management Co., Inc., AES Thames, Inc., AES Barbers Point,
Inc. and AES Shady Point, Inc. and (iii) any other Person in which the Company
has a direct or indirect equity Investment if such Person's contribution to
Consolidated EBITDA of the Company for the four most recently completed fiscal
quarters of the Company constitutes 15% or more of the Consolidated EBITDA of
the Company for such period, in each case, other than an Unrestricted
Subsidiary.
"Material Subsidiary" of a Person is defined to mean, as of any date, any
Restricted Subsidiary that would constitute a "significant subsidiary" within
the meaning of Article 1 of Regulation S-X.
"Net Cash Proceeds" from an Asset Disposition is defined to mean cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received (including any cash received upon sale or disposition of such
note or receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
Property disposed of in such Asset Disposition or received in any other noncash
form) therefrom, in each case, net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred (including, without
limitation, consent and waiver fees and any applicable premiums, earn-out or
working interest payments or payments in lieu or in termination thereof), and
all federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP (i) as a consequence of such Asset Disposition, (ii)
as a result of the repayment of any Debt in any jurisdiction other than the
jurisdiction where the Property disposed of was located or (iii) as a result of
any repatriation to the U.S. of any proceeds of such Asset Disposition, and in
each case net of a reasonable reserve for the after tax-cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its Restricted
Subsidiaries in connection with such Asset Disposition (but excluding any
payments, which by the terms of the indemnities will not, under any
circumstances, be made during the term of the Notes), and net of all payments
made on any Debt which is secured by such Property, in accordance with the terms
of any Lien upon or with respect to such Property or which must by its terms or
by applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all distributions and other payments made to minority interest holders in
Restricted Subsidiaries or Joint Ventures as a result of such Asset Disposition.
"Net Income" of any Person for any period is defined to mean the net income
(loss) of such Person for such period, determined in accordance with GAAP,
except that extraordinary and non-recurring gains and losses as determined in
accordance with GAAP shall be excluded.
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"Net Worth" of any Person is defined to mean, as of any date, the aggregate of
capital, surplus and retained earnings (including any cumulative translation
adjustment) of such Person and its Consolidated Subsidiaries as would be shown
on a consolidated balance sheet of such Person and its Consolidated Subsidiaries
prepared as of such date in accordance with GAAP.
"Non-Recourse" to a Person as applied to any Debt (or portion thereof) is
defined to mean that such Person is not directly or indirectly liable to make
any payments with respect to such Debt (or portion thereof), that no Guarantee
of such Debt (or portion thereof) has been made by such Person and that such
Debt (or portion thereof) is not secured by a Lien on any asset of such Person.
"Opinion of Counsel" is defined to mean an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Company or who may be other
counsel satisfactory to the Trustee. Each such opinion shall comply with Section
314 of the Trust Indenture Act of 1939, as amended, and include the statements
provided for in the Indenture, if and to the extent required thereby.
"Permitted Investment" is defined to mean any Investment of the type specified
in clauses (iv) or (vi) of the definition of Restricted Payment which is made
directly or indirectly by the Company and its Restricted Subsidiaries; provided
that (i) at the time such Investment is made, the Company could Incur at least
$1 of Debt under the first paragraph of the "Limitation on Debt" covenant
described above; (ii) at the time such Investment is made, 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; (iii) after giving
effect to the Investment, the aggregate Investments made by the Company and its
Restricted Subsidiaries in the applicable Person and in any other Persons that
have a direct or indirect interest in the same Power Supply Business or
Unrelated Business does not exceed 40% of the Net Worth of the Company as of the
end of its most recently ended fiscal quarter; (iv) the Person in which the
Investment is made is engaged only in the businesses described in the
"Limitation on Business" covenant described above; and (v) the Company directly
or through its Restricted Subsidiaries either (x) controls, under an operating
and management agreement or otherwise, the day to day management and operation
of any Power Supply Business or Unrelated Business of the Person in which the
Investment is made or (y) has significant influence over the management and
operation of any such Power Supply Business or Unrelated Business in connection
with such management or operation. To the extent that an Investment is not a
Permitted Investment only because the aggregate investment limitation in clause
(iii) above is not satisfied, such Investment shall be treated as a Permitted
Investment to the extent of the limitation and any excess Investment shall be
subject to the other restrictions of the "Limitation on Restricted Payments"
covenant described above.
"Permitted Payments" is defined to mean with respect to the Company or any of
its Restricted Subsidiaries (i) any dividend on shares of Capital Stock payable
(or to the extent paid) solely in shares of Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase Capital Stock (other
than Redeemable Stock) and any distribution of Capital Stock (other than
Redeemable Capital Stock) in respect of the exercise of any right to convert or
exchange any instrument (whether Debt or equity and including Redeemable Stock);
(ii) any dividend or other distribution payable to the Company by any of its
Restricted Subsidiaries or by a Restricted Subsidiary to another Restricted
Subsidiary; (iii) the repurchase or other acquisition or retirement for value of
any shares of the Company's Capital Stock, or any option, warrant or other right
to purchase shares of the Company's Capital Stock with additional shares of, or
out of the proceeds of a substantially contemporaneous issuance of, Capital
Stock other than Redeemable Stock (unless the redemption provisions of such
Redeemable Stock prohibit the redemption thereof prior to the date on which the
Capital Stock to be acquired or retired was by its terms required to be
redeemed); (iv) any defeasance, redemption, repurchase or other acquisition for
value of any Debt which by its terms ranks pari passu with, or subordinate in
right of payment to the Notes with the proceeds from the issuance of (x) Debt
which is also pari passu with the Notes or subordinate to the Notes at least to
the extent and in the manner as the Debt to be defeased, redeemed, repurchased
or otherwise acquired is subordinate in right of payment to, the Notes; provided
that such new pari passu or subordinated Debt provides for no payments of
principal by way of sinking fund, mandatory redemption or otherwise (including
defeasance) by the Company (including, without limitation, at the option of the
holder thereof other than an option given to a holder pursuant to a "change of
control" or "limitation on asset sale" covenant which is no more favorable to
the holders of such Debt than the provisions contained in the Debt being
replaced or, if none, the "Repurchase of Notes Upon a Change in Control" and
"Limitation on Asset Dispositions" covenants described above) prior to the
maturity of Debt being replaced and the proceeds of such new pari passu or
subordinated Debt are utilized for such purpose within 45 days of issuance or
(y) Capital Stock (other than Redeemable Stock); (v) in respect of any actual
payment on account of an Investment which is not fixed in amount at the time
when made, the amount determined by the Board of Directors to be a Restricted
Payment on the date such Investment was originally deemed to have been made (the
"Original Restricted Payment Charge") plus an amount equal to the interest on a
hypothetical
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investment in a principal amount equal to the Original Restricted Payment Charge
assuming interest at the rate of 7% per annum compounded annually for a period
beginning on the date the Investment was originally deemed to have been made and
ending with respect to any portion of the Original Restricted Payment Charge
actually paid on the date of actual payment, less any actual payments previously
made on account of such Investment; provided that the Permitted Payment under
this clause (v) shall in no event exceed the payment actually made; (vi) the
declaration and payment of dividends to holders, or any payment on account of
the purchase, redemption, retirement or acquisition for value, of any class or
series of Redeemable Stock; or (vii) a Permitted Investment.
"Person" is defined to mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Power Supply Business" is defined to mean an electric power or thermal energy
generation or cogeneration facility or related facilities, or electric power
transmission, distribution, fuel supply or fuel transportation facilities, or
any combination thereof, all subject to related security interests under related
project financing arrangements, together with its or their related power supply,
thermal energy and fuel contracts as well as other contractual arrangements with
customers, suppliers and contractors.
"Preferred Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of preferred or preference stock of such Person
which is outstanding or issued on or after the date of the Indenture.
"Property" of any Person is defined to mean all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
GAAP.
"Qualified Capital Stock" is defined to mean any Capital Stock of a Person that
is not Redeemable Stock.
"Redeemable Stock" is defined to mean any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Notes, (ii) redeemable at the option of the holder
of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for (unless
solely at the option of the Company) Capital Stock referred to in clause (i) or
(ii) above or Debt having a scheduled maturity prior to the Stated Maturity of
the Notes; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof giving holders thereof the right to require the
Company to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or a "change of control" occurring prior to the Stated Maturity of
the Securities shall not constitute Redeemable Stock if the "asset sale" or
"change of control" provision applicable to such Capital Stock is no more
favorable to the holders of such Capital Stock than the provisions contained in
the "Limitation on Asset Dispositions" and "Repurchase of Notes upon a Change of
Control" covenants described above, and such Capital Stock specifically provides
that the Company will not repurchase or redeem any such Capital Stock pursuant
to such provisions prior to the Company's repurchase of Notes required to be
repurchased by the Company under the "Limitation on Asset Dispositions" and
"Repurchase of Notes upon a Change of Control" covenants described above.
"Reference Period" is defined to mean the four fiscal quarters for which
financial information is available preceding the date of a transaction giving
rise to the need to make a financial calculation.
"Responsible Officer" when used with respect to the Trustee is defined to mean
any officer of the Trustee assigned by the Trustee to administer its corporate
trust matters.
"Restricted Payment" is defined to mean, with respect to any Person, (i) any
dividend or other distribution on any shares of such Person's Capital Stock;
(ii) any payment on account of the purchase, redemption, retirement or
acquisition for value of such Person's Capital Stock; (iii) any defeasance,
redemption, repurchase or other acquisition or retirement for value prior to
scheduled maturity of any Debt subordinated in right of payment to the Notes and
having a maturity date after the maturity of the Notes; (iv) any Investment in a
Restricted Subsidiary after the occurrence of an event of default, as defined in
any indenture or instrument evidencing or under which such Restricted Subsidiary
has at the date of the Indenture or shall thereafter have outstanding any Debt,
shall happen and be continuing; (v) any Investment in an Unrestricted
Subsidiary; (vi) any Investment made in an Affiliate (other than a Person that
constitutes an Affiliate solely because of the Company's, or a Restricted
Subsidiary of the Company's, control of such Person) and (vii) the conversion of
such Person's Capital Stock into Debt of such Person or its Restricted
Subsidiaries. Notwithstanding the foregoing, "Restricted Payment" shall not
include any Permitted Payment.
"Restricted Subsidiary" is defined to mean any Subsidiary other than an
Unrestricted Subsidiary.
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"Security" or "Securities" is defined to mean any Notes or Notes, as the case
may be, authenticated and delivered under the Indenture.
"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 issuance of the Securities; provided that Senior
Debt shall not include (i) the Company's 9 3/4 % Senior Subordinated Notes due
2000 and 10 1/4 % Senior Subordinated Notes due 2006 which rank pari passu to
the Notes, (ii) Debt of the Company to any Affiliate, (iii) Debt that, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, was without recourse to the Company, (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 Notes
and (v) Redeemable Stock of the Company.
"Significant Subsidiary" of a Person is defined to mean, as of any date, any
Restricted Subsidiary which has two or more of the following attributes: (i) it
contributes 20% or more of such Person's Excess Cash Flow for its most recently
completed fiscal quarter or (ii) it contributes 15% or more of Net Income before
tax of such Person and its Consolidated Subsidiaries for such Person's most
recently completed fiscal quarter or (iii) it constitutes 20% or more of
Consolidated Total Assets of such Person at the end of such Person's most
recently completed fiscal quarter.
"Stated Maturity" is defined to mean, with respect to any debt security or any
installment of interest thereon, the date specified in such debt security as the
fixed date on which any principal of such debt security or any such installment
of interest is due and payable.
"Subsidiary" is defined to mean, with respect to any Person, any corporation or
other 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.
"Subsidiary Guarantors" is defined to mean (i) prior to the first day, if any,
on which the Company's long-term debt is rated BBB- or higher by Standard &
Poor's Ratings Group and Baa3 or higher by Moody's Investors Service, Inc., AES
Oklahoma and AES Hawaii, and (ii) on and after such first day, if any, AES
Hawaii.
"Trade Payables" is defined to mean, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Restricted
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Unrelated Business" is defined to mean any business not of the same general
type now conducted by the Company and its Restricted Subsidiaries.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary (including any newly acquired or newly formed Subsidiary
of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary that is not a Subsidiary of the Subsidiary to be so
designated, provided that (A) any Guarantee by the Company or any Restricted
Subsidiary of any Debt of the Subsidiary being so designated shall be deemed an
"Incurrence" of such Debt and an "Investment" by the Company or such Restricted
Subsidiary (or both, if applicable) at the time of such designation; (B) either
(I) the Subsidiary to be so designated has total assets of $1,000 or less or
(II) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under the "Limitation on Restricted Payments" covenant described
below and (C) if applicable, the Incurrence of Debt and the Investment referred
to in clause (A) of this proviso would be permitted under the "Limitation on
Restricted Subsidiary Debt" and "Limitation on Restricted Payments" covenants
described above. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that immediately after giving
effect to such designation (x) all Liens and Debt of such Unrestricted
Subsidiary outstanding immediately after such designation would, if Incurred at
such time, have been permitted to be incurred for all purposes of the Indenture
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
65
<PAGE>
"U.S. Government Obligations" is defined to mean securities which are (i) direct
obligations of the U.S. for the payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the U.S. the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the U.S.,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligations
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.
"Voting Stock" is defined to mean, with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors of such Person.
"Wholly-Owned Subsidiary" is defined to mean, with respect to any Person, any
Restricted Subsidiary of such Person if all the Capital Stock or other ownership
interests in such Restricted Subsidiary having ordinary voting power to elect
the entire board of directors or entire group of other persons performing
similar functions (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned directly or indirectly by
such Person.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will not
result in any federal income tax consequences to Holders. When a Holder
exchanges an Old Note for a New Note pursuant to the Exchange Offer, the Holder
will have the same adjusted basis and holding period in the New Note as in the
Old Note immediately before the exchange.
66
<PAGE>
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the Company
by Davis Polk & Wardwell, New York, New York.
EXPERTS
The financial statements as of December 31,1996 and 1995 and for each of the
three years in the period ended December 31, 1996 included in this Prospectus
and the related financial statement schedules incorporated by reference in the
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and incorporated by
reference in the Registration Statement, and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditng.
The financial statements of Companhia Energetica de Mina Gerais- CEMIG for the
years ended December 31, 1996 and 1995, prepared in accordance with accounting
princlpes generally accepted in Brazil, incorporated by reference in this
Prospectus from Item 7 of the Current Report on Form 8-K of The AES Corporation
filed July 16, 1997, have been audited by Price Waterhouse Auditores
Independentes, Belo Horizonte, Brazil, independent auditors, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
67
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes a part of the Registration Statement on Form S-4
under the Securities Act filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the Notes offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
AES is subject to the informational requirements of the Exchange Act, and in
accordance therewith files reports, proxy and information statements and other
information with 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 agreed that, whether or not it is required to do so by the rules
and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and file with the
Commission (i) all quarterly and annual financial information that would be
required to file such forms, including contained in a filing with the Commission
on Forms 10-Q and 10-K if the Company were required to file such forms,
including a "Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent auditors and (ii) all reports that would
be required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, for so long as any of the Notes
remain outstanding, the Company has agreed to make available to any prospective
purchaser of the Notes or any beneficial owner of the Notes in connection with
any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
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, 1996; (ii) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997; (iii) the Company's Current
Reports on Form 8-K filed on July 16, 1997, July 15, 1997, July 14, 1997, July
3, 1997, March 24, 1997, March 13, 1997, February 18, 1997 and January 30, 1997
and the Company's Current Report on Form 8-K/A filed on August 5, 1997.
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 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.
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.
68
<PAGE>
THE AES CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report ............................................................ F-2
Consolidated Balance Sheets at December 31, 1996 and 1995 and March 31, 1997 (unaudited) F-3
Consolidated Statements of Operations--For the Years Ended December 31, 1996, 1995 and
1994 and For
the Three Months Ended March 31, 1997 and 1996 (quarterly unaudited) .................. F-4
Consolidated Statements of Cash Flow--For the Years Ended December 31, 1996, 1995 and
1994 and For
the Three Months Ended March 31, 1997 and 1996 (quarterly unaudited) .................. F-5
Notes to Consolidated Financial Statements--For the Years Ended December 31, 1996, 1995 F-6
and 1994 .
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Of The AES Corporation:
We have audited the accompanying consolidated balance sheets of The AES
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations and cash flows for each of the three years
in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Washington, DC
January 30, 1997, except for the penultimate paragraph of Note 6 as to which the
date is March 13, 1997, and Note 13, as to which the date is June 30, 1997
F-2
<PAGE>
THE AES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
--------------------------------------
DECEMBER 31, MARCH 31,
----------------------- ------------
1996 1995 1997
In millions, except par values ---------- ---------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................................. $ 185 $ 239 $ 423
Short-term investments ................................................ 20 58 26
Accounts receivable, net ................................................ 95 54 86
Inventory ............................................................... 81 36 71
Receivable from affiliates ............................................. 9 11 12
Deferred income taxes ................................................... 65 21 49
Prepaid expenses and other current assets .............................. 47 27 63
------- ------- -------
Total current assets ................................................... 502 446 730
Property, Plant and Equipment:
Land .................................................................. 30 9 30
Electric and steam generating facilities .............................. 1,884 1,594 1,889
Furniture and office equipment .......................................... 14 11 14
Accumulated depreciation and amortization .............................. (282) (222) (295)
Construction in progress ................................................ 574 158 666
------- ------- -------
Property, plant and equipment, net ....................................... 2,220 1,550 2,304
Other Assets:
Deferred costs, net ................................................... 47 32 59
Project development costs ............................................. 53 41 59
Investments in and advances to affiliates .............................. 491 48 590
Debt service reserves and other deposits .............................. 175 168 207
Goodwill & other intangible assets, net ................................. 52 37 52
------- ------- -------
Other assets ............................................................ 82 19 77
------- ------- -------
Total other assets ...................................................... 900 345 1,044
------- ------- -------
Total .................................................................. $3,622 $2,341 $4,078
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ...................................................... $ 64 $ 33 $ 61
Income taxes payable ................................................... 4
Accrued interest ...................................................... 25 12 31
Accrued and other liabilities .......................................... 95 49 70
Other notes payable -- current portion ................................. 88 50 --
Project financing debt -- current portion .............................. 110 84 110
------- ------- -------
Total current liabilities ................................................ 382 228 276
Long-Term Liabilities:
Project financing debt ................................................ 1,558 1,098 1,841
Other notes payable ................................................... 450 125 325
Deferred income taxes ................................................... 243 170 228
Other long-term liabilities ............................................. 55 13 56
------- ------- -------
Total long-term liabilities ............................................. 2,306 1,406 2,450
Minority Interest ...................................................... 213 158 211
Commitments and Contingencies .......................................... -- -- --
Company-obligated Mandatorily Redeemable Preferred Securities of
AES ..................................................................... -- -- 250
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: 1996 -- 77.4 million; 1995 -- 74.8 million)...... 1 1 1
Additional paid-in capital ............................................. 360 293 509
Retained earnings ...................................................... 396 271 436
Cumulative foreign currency translation adjustment ..................... (33) (10) (52)
Less treasury stock at cost (1996 -- .1 million shares; 1995 -- .3 million
shares) ............................................................... (3) (6) (3)
------- ------- -------
Total stockholders' equity ............................................. 721 549 891
------- ------- -------
Total .................................................................. $3,622 $2,341 $4,078
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE AES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-----------------------------------------------------
THREE MONTHS
ENDED
DECEMBER 31, MARCH 31,
--------------------------------- -----------------
1996 1995 1994 1997 1996
In millions, except per share amounts --------- --------- --------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales ................................................... $ 824 $ 672 $ 514 $258 $171
Services ................................................ 11 7 19 3 1
------ ------ ------ ----- ------
Total revenues ............................................. 835 679 533 261 172
OPERATING COSTS AND EXPENSES:
Cost of sales ............................................. 495 388 252 165 97
Cost of services .......................................... 7 6 13 2 1
Selling, general and administrative expenses ............ 35 32 32 9 9
Provision to reduce contract receivable .................. 20 -- -- 7 --
------ ------ ------ ----- -------
Total operating costs and expenses ........................ 557 426 297 183 107
------ ------ ------ ------ -------
Operating Income .......................................... 278 253 236 78 65
OTHER INCOME AND (EXPENSE):
Interest expense .......................................... (144) (127) (125) (44) (30)
Interest income .......................................... 24 27 22 8 5
Equity in earnings of affiliates (net of income tax) 35 14 12 16 5
------ ------ ------ ------ ------
INCOME BEFORE INCOME TAXES,
MINORITY INTEREST,
AND EXTRAORDINARY ITEM .................................... 193 167 145 58 45
INCOME TAXES ............................................. 60 57 44 16 15
MINORITY INTEREST .......................................... 8 3 3 2 1
------ ------ ------ ----- ------
INCOME BEFORE EXTRAORDINARY ITEM ........................... 125 107 98 40 29
Extraordinary item -- net gain on extinguishment of
debt (less applicable income taxes of $1).................. -- -- 2 -- --
------ ------ ------ ------ -------
NET INCOME ................................................ $ 125 $ 107 $ 100 $40 $29
====== ====== ====== ====== =======
NET INCOME PER SHARE:
Before extraordinary gain ................................. $ 1.62 $ 1.41 $ 1.30 $0.50 $0.38
Extraordinary gain ....................................... -- -- 0.02 -- --
------ ------ ------ ------ -------
NET INCOME PER SHARE ....................................... $ 1.62 $ 1.41 $ 1.32 $0.50 $0.38
====== ====== ====== ====== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE AES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------------
THREE MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
---------------------------------------- -----------------
1996 1995 1994 1997 1996
In millions, except per share amounts ------------- ----------- ---------- -------- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................... $ 125 $ 107 $ 100 $40 $29
Adjustments to net income: ...........................
Depreciation and amortization ..................... 65 55 43 15 14
Provision for deferred taxes ........................ 26 48 39 5 14
Undistributed earnings of affiliates ............... (20) 3 (3) (16) (4)
Payments for deferred financing costs ............... (13) (3) (6) -- --
Other ............................................. 6 4 -- (12) 1
Changes in working capital ........................ (7) (17) (9) (22) (9)
--------- ------- ------- ------- ------
Net cash provided by operating activities ............ 182 197 164 10 45
INVESTING ACTIVITIES:
Property additions ................................. (506) (171) (10) (97) (45)
Acquisitions, net of cash acquired .................. (148) (121) -- -- (20)
Sale of short-term investments ..................... 103 254 132 -- 8
Purchase of short-term investments .................. (66) (218) (204) (6) --
Affiliate advances and investments .................. (430) (10) -- (90) (1)
Project development costs ........................... (16) (22) (17) (6) (2)
Debt service reserves and other assets ............... (72) (55) (21) (39) (6)
--------- ------- ------- ------- ------
Net cash used in investing activities ............... (1,135) (343) (120) (238) (66)
FINANCING ACTIVITIES:
Net borrowings (repayments) under the revolver ...... 163 50 -- (213) (19)
Issuance of company-obligated mandatorily
redeemable preferred securities ("TECONS") ......... -- -- -- 244 --
Issuance of project financing debt and other notes
payable ............................................. 802 133 -- 296 20
Repayments of project financing debt ............... (75) (63) (72) (12) (12)
Other liabilities .................................... (3) 8 -- -- --
Contributions by minority interests .................. 10 7 152 2 (1)
Sale (repurchase) of common stock .................. 2 (5) -- 149 1
--------- ------- ------- ------- ------
Net cash provided by financing activities ............ 899 130 80 466 (11)
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS ....................................... (54) (16) 124 238 (32)
CASH AND CASH EQUIVALENTS, BEGINNING ............... 239 255 131 185 239
--------- ------- ------- ------ ------
CASH AND CASH EQUIVALENTS, ENDING .................. $ 185 $ 239 $ 255 $423 $207
========= ======= ======= ======= ======
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest ........................... $ 134 $ 120 $ 127 $38 $23
Cash payments for income taxes ..................... 32 6 3 11 1
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE AES CORPORATION AND SUBSIDIARIES
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 consolidated based on its 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 -- 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):
--------------
December 31,
--------------
1996 1995
------ -----
Coal and other raw materials ............ $57 $ 24
Spare parts, materials and supplies ...... 24 12
---- -----
Total .................................... $81 $36
==== =====
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.
INTANGIBLE ASSETS -- Goodwill and other intangible assets are amortized on a
straight-line basis over their estimated periods of benefit or their estimated
lives, which range from 30 to 40 years. Intangible assets at December 31, 1996
and 1995 are shown net of accumulated amortization of $3 million and $1 million,
respectively. 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. Interest capitalized during development and construction totaled
$27 million, $8 million and $2 million in 1996, 1995 and 1994, respectively.
DEFERRED COSTS -- Financing costs are deferred and amortized using the
straight-line method over the related financing period, which does not differ
materially from the effective interest method of amortization. Deferred costs
are shown net of accumulated amortization of $36 million and $31 million for
1996 and 1995, respectively.
F-6
<PAGE>
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 direct costs.
These costs are included in investments 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. Certain reimbursable costs related to one of the projects have been
classified as other assets at December 31, 1996.
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, and gains and losses on intercompany transactions which are
long-term in nature, and which the Company does not intend to repatriate are
shown in the cumulative foreign currency translation adjustment balance in the
stockholders' equity section of the balance sheet. 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. Five customers accounted for 20%, 16%, 16%, 11% and 10% of
revenues in 1996, four customers accounted for 24%, 18%, 18% and 13% of revenues
in 1995, and four customers accounted for 31%, 23%, 22% and 11% of revenues in
1994. The prolonged failure of any of these customers to fulfill its contractual
obligations could have a substantial negative impact on AES's revenues and
profits. 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.
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 77.3 million, 75.9 million, and 75.8 million for 1996, 1995 and 1994,
respectively. Primary and fully diluted earnings per share are approximately the
same.
NEW ACCOUNTING PRONOUNCEMENTS -- Statement of Financial Accounting Standards
(SFAS) No. 128 "Earnings Per Share," was issued in early 1997. SFAS No. 128 is
effective for periods ending after December 15, 1997 and early adoption is not
permitted. SFAS No. 128 requires the Company to compute and present basic and
diluted earnings per share. Had the Company computed earnings per share in
accordance with SFAS No. 128 the basic and diluted amounts would have been as
follows:
<TABLE>
<CAPTION>
----------------------------------------------
QUARTERS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- ----------------
1996 1995 1994 1997 1996
------- ------- ------- ------- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Basic earnings per share ......... $1.65 $1.43 $1.34 $0.52 $0.38
Diluted earnings per share ...... $1.59 $1.40 $1.31 $0.50 $0.37
</TABLE>
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 1996 presentation.
F-7
<PAGE>
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.
2. ACQUISITIONS
In March 1996, the Company, through a subsidiary acquired a 98% interest in
Hidrot-rmica San Juan, S.A., ("AES San Juan"), which is the owner and operator
of a 78 megawatt Power Supply Business in the province of San Juan, Argentina.
The facility, which sells electricity into the Argentine spot market, includes a
45 megawatt hydroelectric power plant and a 33 megawatt gas combustion plant. As
a result of this acquisition, the Company acquired intangible assets of $17
million which are being amortized over the life of the hydroelectric concession
of 30 years.
In May 1996, AES, through certain subsidiaries, acquired for approximately $393
million, common shares representing an 11.35% interest in Light Servi-os de
Electricidade S. A. ("Light"), a publicly-held Brazilian corporation that
operates as the concessionaire of an approximately 3,800 megawatt integrated
electric power generation, transmission and distribution system which serves Rio
de Janeiro, Brazil. The AES subsidiary which owns an interest in Light is
participating in a consortium established through a shareholders' agreement that
owns a 50.44% controlling interest. As a result, the Company has the ability to
exert significant influence over the operation of Light, and is recording its
investment using the equity method.
In August 1996, the Company, through a subsidiary, acquired a controlling
interest in three power plants totaling 1,281 MW and a coal mine through the
purchase of an 81% share of Tiszai Eromu Rt. ("AES Tiszai") an electricity
generation company in Hungary for $110 million, and in December 1996 acquired an
additional 13% for $17 million.
Also, in August 1996, the Company acquired, through a subsidiary, a majority
controlling interest in a 4,000 megawatt coal-fired facility in Kazakstan, ("AES
Ekibastuz"), for approximately $3 million. The facility sells power to a
government-owned utility under a 35 year power purchase agreement. Through
December 31, 1996, approximately $35 million (excluding VAT) has been billed
under the power sales contract for electricity delivered of which the purchaser
has paid approximately $5 million. The Company has recorded a provision of $20
million to reduce the carrying value of the contract receivable at December 31,
1996 to $10 million. As of December 31, 1996, the net assets of the project were
$24 million, a portion of which was represented by the contract receivable
referred to above. There can be no assurance as to the ultimate collectibility
of amounts owed to AES as of December 31, 1996 or additional amounts related to
future deliveries of electricity under the power sales contract.
In January 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 or significant influence 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 T-rmica San Nicol-s, S. A. ("AES San Nicol-s"), a 650
megawatt power plant located in San Nicol-s, 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 AES San Nicol-s
in 1995 is reflected as minority interest.
In addition, in December 1995, another subsidiary of the Company purchased
Hidroel-ctrica 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 purchase price
allocations for Light, AES Tiszai and AES Ekibastuz have been completed on a
preliminary basis, subject to adjustments resulting from new or additional facts
that may come to light when the engineering, environmental, and legal analyses
are completed during the allocation period. The accompanying financial
statements include the operating results of AES Tiszai from August 1, 1996, the
operating results of AES Ekibastuz from August 10, 1996, equity earnings from
Light from June 10, 1996, and the operating results of AES Deepwater from
January 20, 1995, the operating results of AES San Nicol-s from 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
all of the acquisitions had occurred at the beginning of 1995 (in millions,
except per share amounts):
F-8
<PAGE>
FOR THE YEARS
ENDED
DECEMBER 31,
-----------------
1996 1995
-------- ------
Revenues ................................................ $1,013 $892
Net income ................................................ 100 91
Earnings per share ....................................... $1.29 $1.20
The pro forma results are based upon assumptions and estimates which the Company
believes are reasonable. The pro forma results do not purport to be indicative
of the results that actually would have been obtained had the acquisitions
occurred on January 1, 1995, nor are they intended to be a projection of future
results.
3. INVESTMENTS
At December 31, 1996 and 1995, 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, 1996 and 1995 classified as
held-to-maturity and available-for-sale were approximately the same.
The short-term investments and debt service reserves and other deposits were
invested as follows (in millions):
<TABLE>
<CAPTION>
----------------
DECEMBER 31,
----------------
1996 1995
------- ------
<S> <C> <C>
Restricted cash and cash equivalents .............................. $104 $144
Held-to-maturity US treasury and government agency securities ...... 1 33
Foreign certificates of deposit .................................... -- 3
Commercial paper ................................................... 39 3
Floating rate notes ................................................ -- 6
----- -----
Subtotal ............................................................ 40 45
Available-for-sale:
US treasury and government agency securities ........................ 43 30
Certificates of deposit ............................................. 3 4
Commercial paper ................................................... 5 --
Foreign certificates of deposit .................................... -- 3
----- -----
Subtotal ............................................................ 51 37
----- -----
Total ............................................................... $195 $226
===== =====
</TABLE>
Short-term investments classified as held-to-maturity and available-for-sale
were $9 and $11 million, respectively, at December 31, 1996 and $44 million and
$14 million, respectively, at December 31, 1995.
F-9
<PAGE>
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), Medway Power Ltd. (25% owned
UK affiliate), Light (11.35% owned Brazilian affiliate) and AES Chigen's
affiliates at December 31, 1996, and for the year then ended, the accounts of
NIGEN, Ltd. and Medway Power Ltd. at December 31, 1995 and 1994 and for the
years then ended, and the accounts of San Nicol-s (34% owned Argentine
affiliate) at December 31, 1994 and for the year then ended.
1996 1995 1994
-------- ------- -------
Sales ........................................ $1,960 $276 335
Operating income ............................ 498 86 75
Net income .................................. 383 49 33
Current assets ............................... 891 171 156
Noncurrent assets ............................ 4,928 949 1,030
Current liabilities ......................... 868 70 133
Noncurrent liabilities ...................... 2,111 973 945
Stockholders' equity ......................... 2,840 77 108
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 $33 million and $13 million at December 31,
1996 and 1995, respectively. The Company charged and recognized management fees
and interest on advances to its affiliates which aggregated $9 million, $8
million and $18 million for each of the years ended December 31, 1996, 1995 and
1994, respectively.
5. DEBT
PROJECT FINANCING DEBT -- Project financing debt at December 31, 1996 and 1995
consisted of the following (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------
INTEREST
RATE
@ 12/31/96 FINAL MATURITY 1996 1995
------------ ---------------- -------- --------
<S> <C> <C> <C> <C>
Senior Debt--floating
AES Beaver Valley ..................... 7.4% 1998 $ 21 $ 33
AES Thames .............................. 6.8% 2004 163 181
AES Shady Point ........................ 7.4% 2004 306 320
AES Barbers Point ..................... 6.5% 2007 325 340
AES Lal Pir ........................... 5.0% 2008 135 28
AES Pak Gen ........................... 5.1% 2010 90 --
AES Coral Reef ........................ 10.1% 2003 168 --
AES Warrior Run ........................ 6.7% 2014 37 22
Other ................................. 10.4% 2001 8 --
Senior Debt--fixed
AES Placerita--capital lease ............ 8.1% 2009 105 111
AES Warrior Run--tax exempt bonds ...... 7.4% 2019 74 74
AES Pak Gen ........................... 4.3% 2007 85 --
AES San Nicol-s ........................ 10.4% 2000 80 --
Subordinated Debt ..................... 13.6% 2010 71 73
------ ------
Subtotal .............................. 1,668 1182
Less current maturities ............... (110) (84)
------ ------
Total ................................. $1,558 $1,098
====== ======
</TABLE>
F-10
<PAGE>
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 $550 million at December 31, 1996. 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, 1996, subsidiaries of the Company have interest
rate cap agreements at a ceiling of approximately 12.5% with remaining terms
ranging from three to six years in an aggregate notional amount of $280 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.
OTHER NOTES PAYABLE -- Other notes payable at December 31, 1996 and 1995
consisted of the following (in millions):
<TABLE>
<CAPTION>
------------------------------------------------------
INTEREST RATE
@ 12/31/96 FINAL MATURITY 1996 1995
-------------- ---------------- ------- -------
<S> <C> <C> <C> <C>
Corporate revolving bank loan(1) ......... 7.40% 1998 $213 $ 50
Senior subordinated notes ............... 9.75% 2000 75 75
Convertible subordinated debentures ...... 6.50% 2002 -- 50
Senior subordinated notes ............... 10.25% 2006 250 --
----- -----
Subtotal ................................. 538 175
Less current maturities .................. (88) (50)
----- -----
Total .................................... $450 $125
===== =====
</TABLE>
- ----------
(1) Floating rate loan.
Under the terms of the $425 million corporate revolving bank loan and letter of
credit facility ("Revolver"), the Company must reduce its direct borrowings to
$125 million for 30 consecutive days annually to obtain additional loans.
Commitment fees on the unused portion at December 31, 1996 are .375% per annum,
and as of that date $89 million was available. The Company's 9 3/4% senior
subordinated notes due 2000 ("9 3/4% Notes) and 10 1/4% senior subordinated
notes due 2006 ("10 1/4% Notes") are general unsecured obligations of the
Company. The 9 3/4% 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 10 1/4% Notes are redeemable at the
Company's option, in whole or in part, beginning July 2001 at redemption prices
in excess of par and are redeemable at par beginning July 2003. The Company's
convertible subordinated debentures ("Debentures") were converted into common
stock of the Company at the rate of $26.16 per common share on August 30, 1996.
F-11
<PAGE>
FUTURE MATURITIES OF DEBT -- Scheduled maturities of total long-term debt at
December 31, 1996 are (in millions):
1997 ............ ................................. $ 198
1998 ............ ................................. 132
1999 ............ ................................. 303
2000 ............ ................................. 269
2001 ............ ................................. 202
Thereafter ...... ................................. 1,102
-------
Total ............ ................................. $2,206
=======
COVENANTS -- The terms of the Company's Revolver, 9 3/4% Notes, 10 1/4% Notes,
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, 1996, approximately $63 million was available under
project loan documents for distribution by U.S. subsidiaries.
AES CHIGEN NOTES -- Subsequent to its fiscal year end, AES Chigen issued $180
million of 101/8% Notes due 2006.
6. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996, 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 $4 million, $3
million and $2 million in the years ended 1996, 1995 and 1994, respectively. The
future minimum lease commitments under these leases are $6 million each year for
1997 and 1998, $5 million for 1999, $2 million each year for 2000 and 2001, and
$56 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 3 to 11 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, 1996, by the terms of the agreements, to an aggregate
of approximately $176 million. 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 $33
million as of December 31, 1996.
LETTERS OF CREDIT -- At December 31, 1996 and 1995, the Company had $123 million
and $56 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 -- On February 25, 1993, an action was filed, jointly and severally,
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, four 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
F-12
<PAGE>
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 results of operations or financial
position.
On December 17, 1996, AES was named defendant in a complaint filed in the Court
of Chancery in Delaware. The suit was brought by the holder of 750 shares of AES
Chigen Class A Common Stock individually and on behalf of a purported class of
public shareholders of AES Chigen in response to an amalgamation to be entered
into between AES Chigen and AES. The complaint alleges, among other things, that
AES breached its alleged fiduciary duty as a controlling shareholder to treat
the class with fairness, and questions the sufficiency of the consideration to
be paid to AES Chigen shareholders. The complaint sought damages and injunctive
relief. AES Chigen was not named in the suit. On March 13, 1997 settlement was
reached subject to court approval.
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 financial position.
7. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
--------------------------------------
1996 1995 1994
----------- ----------- ----------
In millions
<S> <C> <C> <C>
Common stock
Balance at January 1 and December 31 ........................... $ 1 $ 1 $ 1
====== ====== ======
Additional paid-in capital
Balance at January 1 ............................................. $ 293 $ 240 $ 203
Issuance of common stock under benefit plans and exercise of stock
options and warrants .......................................... 3 2 2
Tax benefit associated with the exercise of options ............ 15 -- --
Issuance of common stock on conversion of 6.5% subordinated
debentures, net ($26.16 per share).............................. 49 -- --
Common stock dividends (1994-3% per share) ..................... -- -- 47
AES Chigen Class A redeemable common stock ..................... -- 51 (12)
------ ------ ------
Balance at December 31 .......................................... $ 360 $ 293 $ 240
====== ====== ======
Retained earnings
Balance at January 1 ............................................. $ 271 $ 164 $ 111
Net income for the year .......................................... 125 107 100
Common stock dividends (1994-3% per share) ..................... -- -- (47)
------ ------ ------
Balance at December 31 .......................................... $ 396 $ 271 $ 164
====== ====== ======
Cumulative foreign currency translation adjustment
Balance at December 31 .......................................... $ (33) $ (10) $ (3)
====== ====== ======
Treasury stock
Balance at December 31 .......................................... $ (3) $ (6) $ --
====== ====== ======
</TABLE>
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.
F-13
<PAGE>
On July 30, 1996, the Company exercised its right to redeem the Debentures at a
redemption price equal to approximately 104% of the principal amount of the
debentures, together with accrued interest through the date of redemption. As a
result, $49.7 million of the debentures were converted into 1.9 million shares
of common stock of the Company at a conversion price of $26.16 per share.
STOCK OPTIONS AND WARRANTS -- The Company has granted options for shares of
common stock under its stock option plans. 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,
1996, there were approximately 2 million shares reserved for future grants under
the plans. A summary of the option activity follows (in thousands of shares):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994
---------------------- ---------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- ----------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding--beginning of year ...... 4,063 $ 14.56 3,540 $12.07 2,999 $ 9.78
Exercised during the year .................. (480) 10.69 (355) 17.71 (187) 2.65
Forfeitures during the year .................. (216) 20.55 (57) 18.36 (12) 13.17
Granted during the year ..................... 643 38.78 935 20.04 740 18.91
----- -------- ----- ------- ----- -------
Outstanding--end of year ..................... 4,010 18.59 4,063 14.56 3,540 12.07
----- -------- ----- ------- ----- -------
Eligible for exercise--end of year ......... 2,132 $ 12.86 1,209 $ 9.03 1,059 $ 6.02
===== ======== ===== ======= ===== =======
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996 (in thousands of shares):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- -------------------------------------
REMAINING LIFE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES TOTAL OUTSTANDING (IN YEARS) EXERCISE PRICE TOTAL EXERCISABLE EXERCISE PRICE
- -------------------------- ------------------- ---------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
$1.55 to $6.47............ 1,013 3.3 $ 5.14 1,011 $ 5.14
$11.65 to $19.75 ......... 1,261 6.9 17.54 492 17.44
$20.00 to $28.88 ......... 1,248 8.3 20.97 593 20.79
$31.75 to $44.13 ......... 488 10.0 43.14 36 36.31
------ ------
Total .................. 4,010 2,132
====== ======
</TABLE>
The Company accounts for its stock-based compensation plans under APB No. 25,
and as a result, no compensation expense has been recognized in connection with
the options, as all options have been granted only to AES people, including
Directors, with an exercise price equal to the market price of the Company's
common stock on the date of grant. The Company adopted SFAS No. 123 for
disclosure purposes in 1996. For SFAS No. 123 purposes, the fair value of each
option grant has been estimated as of the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions: risk-free
interest rate of 6.5%, 5.5%, and 7.5% and expected volatility of 28%, 24%, and
22% for the years ended 1996, 1995 and 1994, respectively, a dividend payout
rate of zero for each year and an expected option life of 7 years. Using these
assumptions, the weighted average fair value of the stock options granted is
$17.61 and $8.17 for 1996 and 1995, respectively. There were no adjustments made
in calculating the fair value to account for vesting provisions or for
non-transferability or risk of forfeiture.
F-14
<PAGE>
Had compensation expense been determined consistent with SFAS No. 123, utilizing
the assumptions detailed above, the Company's net income and earnings per share
for the year ended December 31, 1996, 1995 and 1994 would have been reduced to
the following pro forma amounts (in millions):
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1996 1995 1994
------- ------- ------
Net Income:
As Reported ............... ............. $ 125 $ 107 $ 100
Pro forma ............... ............. 121 106 100
Net income per common share:
As Reported ............... ............. $1.62 $1.41 $1.32
Pro forma ............... ............. 1.57 1.40 1.32
The use of such amounts and assumptions are not intended to forecast any
possible future appreciation of the Company's stock price or change in dividend
policy.
In addition to the options described above, the Company has outstanding warrants
to purchase up to 0.7 million shares of its common stock at $29.43 per share
through July 2000, which were issued as partial settlement of a shareholder
class action suit and were expensed in 1995. Warrants exercised under this
settlement were not significant at December 31, 1996.
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. In November 1996, the Company and AES
Chigen signed a definitive agreement for the Company to acquire the
approximately 8.2 million outstanding Class A shares of AES Chigen. The
acquisition will be accomplished by amalgamating AES Chigen with a wholly owned
subsidiary of the Company. Subject to approval of the holders of the Class A
common stock, AES Chigen shareholders will receive shares of the Company common
stock at an exchange rate of 0.29 shares of the Company's common stock for each
share of AES Chigen common stock.
8. INCOME TAXES
INCOME TAX PROVISION -- The provision for income taxes attributable to
continuing operations consists of the following (in millions):
---------------------------
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1996 1995 1994
------- ------- ------
Federal
Current ................................ $ 19 $ 4 $ 2
Deferred ................................ 27 47 35
State
Current ................................ 12 5 4
Deferred ................................ (2) 1 3
Foreign
Current ................................ 3 -- --
Deferred ................................ 1 -- --
----- ---- ----
Total ................................... $ 60 $57 $44
===== ==== ====
F-15
<PAGE>
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 (excluding earnings and taxes from affiliates
accounted for on the equity method, and minority interests) is as follows:
------------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------
1996 1995 1994
--------- ------- --------
Statutory federal tax rate .................. 35% 35% 35%
Change in valuation allowance ............... (2) (6) (2)
State taxes, net of federal tax benefit ...... 6 6 5
Foreign taxes ................................. 2 -- --
Other--net .................................... (1) 3 (4)
---- ---- ----
Effective tax rate ........................... 40% 38% 34%
==== ==== ====
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>
---------------------------------
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Differences between book and tax basis of property and total
deferred tax liability .................................... $ 379 $ 379 $ 219
Operating loss carryforwards ................................. (124) (167) (231)
Tax credit carryforwards .................................... (97) (71) (68)
Other deductible temporary differences ..................... (13) (1) (15)
------ ------- ------
Total gross deferred tax asset .............................. (234) (239) (314)
Less: valuation allowance .................................... 33 9 168
------ ------- ------
Total net deferred tax asset ................................. (201) (230) (146)
------ ------- ------
Net deferred tax liability ................................. $ 178 $ 149 $ 73
====== ======= ======
</TABLE>
As of December 31, 1996, the Company had federal net operating loss
carryforwards for tax purposes of approximately $295 million expiring from 2001
through 2010, federal investment tax credit carryforwards for tax purposes of
approximately $54 million expiring in years 2001 through 2006, foreign tax
credit carryforwards of $3 million expiring in 2001 and federal alternative
minimum tax credits of approximately $30 million which carryforward without
expiration.
The valuation allowance increased during the current year by approximately $24
million to $33 million at December 31, 1996. This increase resulted primarily
from the acquisition of foreign entities with certain pre-existing deferred tax
assets, the ultimate realization of which cannot be determined on a more likely
than not basis. The valuation allowance for these pre-existing deferred tax
assets was recorded as acquisition adjustments and had no effect on the current
year income tax expense. The $33 million valuation allowance at December 31,
1996 relates primarily to state and foreign tax credits, state operating losses,
and deferred tax assets, 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.
F-16
<PAGE>
The valuation allowance decreased during 1995 by approximately $159 million to
$9 million. 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 related 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 $85 million on
December 31, 1996. 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 of any
additional taxes which may be payable on the undistributed earnings.
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 1996, 1995
and 1994.
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 therein).
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-17
<PAGE>
10. QUARTERLY DATA (Unaudited)
The following table summarizes the unaudited quarterly statements of operations
(in millions, except per share amounts):
----------------------------------------
QUARTERS ENDED 1996
----------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
-------- -------- -------- -------
Sales and services ......... $ 172 $ 174 $ 205 $ 284
Gross margin ............... 74 76 85 98
Net income ............... 29 28 32 36
Net income per share ...... $0.38 $0.37 $0.42 $0.46
----------------------------------------
QUARTERS ENDED 1995
----------------------------------------
MAR 31 JUN 30 SEP 30 DEC 31
-------- -------- -------- -------
Sales and services ......... $ 169 $ 166 $ 173 $ 171
Gross margin ............... 69 69 73 74
Net income ............... 25 27 27 28
Net income per share ...... $0.33 $0.35 $0.36 $0.37
11. GEOGRAPHIC SEGMENTS
Information about the Company's operations in different geographic areas is as
follows (in millions):
----------------------------------
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- --------
Revenues
North America ...... $554 $542 $523
South America ...... 146 131 2
Asia ............... 45 1 --
Europe ............ 90 5 8
----- ----- -----
Total ............... $835 $679 $533
===== ===== =====
----------------------------------
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- --------
Operating Income
North America ...... $258 $251 $ 245
South America ...... 21 14 --
Asia ............... (9) (8) (11)
Europe ............ 8 (4) 2
----- ----- -----
Total ............... $278 $253 $ 236
===== ===== =====
F-18
<PAGE>
-----------------------------
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------
1996 1995 1994
-------- -------- -------
Identifiable Assets
North America ...... $1,831 $1,693 $1,569
South America ...... 683 230 46
Asia ............... 744 328 221
Europe ............ 364 90 79
------- ------- -------
Total ............... $3,622 $2,341 $1,915
======= ======= =======
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, 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 at which similar borrowing arrangements would be made under
current conditions, or by the estimated discount rate a prospective seller would
pay to a credit-worthy third party to assume the obligations. The carrying value
and fair value of the AES Placerita capital lease have been excluded from this
disclosure. The fair value of swap agreements is the estimated net amount that
the Company would pay to terminate the agreements at the balance sheet date. The
estimated fair values of the Debentures, 9 3/4% Notes and 10 1/4% Notes are
based on the quoted market prices at December 31, 1996 and 1995.
The estimated fair values of the Company's financial instruments at December 31,
1996 and 1995 are as follows (in millions):
<TABLE>
<CAPTION>
---------------------------------------------------
1996 1995
------------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Project financing debt ...... $1,562 $1,562 $1,071 $1,078
Other notes payable ......... 538 560 175 180
Interest rate swaps ......... -- 68 -- 137
</TABLE>
The fair value estimates presented herein are based on pertinent information
available as of December 31, 1996 and 1995. The Company is not aware of any
factors that would significantly affect the estimated fair value amounts since
that date.
13. SUBSEQUENT EVENTS
On June 30, 1997, AES acquired the international assets of Destec Energy, Inc.
("Destec") for a total of $436 million. The purchase will include five electric
generating plants and a number of power projects in development. The plants to
be acquired by AES (with ownership percentages in parenthesis) include a 110 MW
gas-fired combined cycle plant in Kingston, Canada (50%); a 405 MW gas-fired
combined cycle plant in Terneuzen, Netherlands (50%); a 140 MW gas-fired simple
cycle plant in Cornwall, England (100%); a 235 MW oil-fired simple cycle plant
in Santo Domingo, Dominican Republic (99%); and a 1600 MW coal-fired plant in
Victoria, Australia (20%).
In May 1997, the Company and its partner, CEA acquired an aggregate of 90% (AES
acquired 60% and CEA acquired 30%) of two integrated electricity companies of
ESEBA serving certain portions of the province of Buenos Aires, Argentina for an
aggregate purchase price of $565 million. The remaining 10% will be owned by the
employees of each of the two acquired companies.
F-19
<PAGE>
On May 8, 1997, AES completed its amalgamation with AES China Generating Co.
Ltd. (see Note 7). As a result of the amalgation the Company issued
approximately 2.5 million shares of AES Common Stock in exchange for all of the
outstanding AES Chigen Class A Common Stock.
In May 1997, AES through a consortium agreed to acquire approximately 13% of
CEMIG, an integrated electric utility service in the State of Minas Gerais for
approximately $1 billion. These shares also represent a 33% voting interest in
CEMIG.
F-20
<PAGE>
AES(R)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, expect
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for the unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Section 145 of the DGCL empowers the Company to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought before or threatened by reason of the fact that the person
was a director, officer, employee or agent of such company, or is or was serving
as such with respect to another entity at the request of such company. The DGCL
also provides that the Company may purchase insurance on behalf of any such
director, officer, employee or agent.
The Company Amended and Restated Certificate of Incorporation provides in effect
for the indemnification by the Company of each director and officer of the
Company to the fullest extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits (see index to exhibits at E-1)
ITEM 22. UNDERTAKING.
(a) The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of this 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 the Registration Statement
(iii) to include any material informant with respect to the plan to
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) For the purpose of determining and liability under the Securities Act
of 1993, each 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 an 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing provisions,
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 their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-1
<PAGE>
(c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuants to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) 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>
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 Forms S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Arlington, State of Virginia on August 8, 1997.
THE AES CORPORATION
By: /s/ Dennis W. Bakke
-----------------------------------
Dennis W. Bakke
President and Chief Executive
Officer
The Registrant and each person whose signature appears below constitutes and
appoints Dennis W. Bakke and Barry J. Sharp and any agent for service named in
this Registration Statement and each of them, his, her or its true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, her or it and in his, her, or its name, place and
stead, in any and all capacities, to sign and file (i) any and all amendments
(including post-effective amendments) to this Registration Statement, with all
exhibits thereto, relating to the offering covered hereby filed pursuant to Rule
462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he, she, or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitutes or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on August 8, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ------------------------------------------------- ---------------
<S> <C> <C>
/s/ Roger W. Sant Chairman of the Board August 8, 1997
- ----------------------------
Roger W. Sant
/s/ Dennis W. Bakke President, Chief Executive Officer and Director August 8, 1997
- ---------------------------- (Principal Executive Officer)
Dennis W. Bakke
/s/ Vicki-Ann Assevero Director August 8, 1997
- ----------------------------
Vicki-Ann Assevero
/s/ Dr. Alice F. Emerson Director August 8, 1997
- ----------------------------
Dr. Alice F. Emerson
/s/ Robert F. Hemphill, Jr. Director August 8, 1997
- ----------------------------
Robert F. Hemphill, Jr.
/s/ Frank Jungers Director August 8, 1997
- ----------------------------
Frank Jungers
/s/ Dr. Henry R. Linden Director August 8, 1997
- ----------------------------
Dr. Henry R. Linden
II-3
<PAGE>
/s/ Russel E. Train
- ----------------------------
Russel E. Train Director August 8, 1997
/s/ Thomas I. Unterberg Director August 8, 1997
- ----------------------------
Thomas I. Unterberg
/s/ Robert H. Waterman, Jr. Director August 8, 1997
- ----------------------------
Robert H. Waterman, Jr.
/s/ Barry J. Sharp Vice President and Chief Financial Officer August 8, 1997
- ---------------------------- (Principal Financial and Accounting Officer)
Barry J. Sharp
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- --------- ------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
4.1 Indenture to 8 3/8% Senior Subordinated Notes due 2007 between The AES Corporation and
The Bank of New York, as Trustee (including form of Note)
5.1 Opinion of Davis Polk & Wardwell regarding the validity of the securities being
registered
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP relating to the financial statements of the Company
23.2 Consent of Price Waterhouse
23.3 Consent of Davis Polk & Wardwell (see exhibit 5.1)
25.1 Statement of Eligibility of The Bank of New York
99.1 Form of Letter of Transmittal to 8 3/8% Senior Subordinated Notes due 2007 of the
Company
99.2 Form of Notice of Guaranteed Delivery to 8 3/8% Senior Subordinated Notes due 2007 of
the Company
99.3 Form of Instruction to Registered Holder and/or Book-Entry Transfer of Participant from
Owner of The AES Corporation
99.4 Form of Letter to Clients
99.5 Form of Letter to Registered Holders and Depository Trust Company Participants
</TABLE>
THE AES CORPORATION, as Issuer
and THE BANK OF NEW YORK, as Trustee ____________________
INDENTURE
Dated as of July 17, 1997 ____________________ $325,000,000
8 3/8% Senior Subordinated Notes due 2007
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
Section 310(a)(1).............................................. 7.10
(a)(2).............................................. 7.10
(a)(3).............................................. N.A.
(a)(4).............................................. N.A.
(a)(5).............................................. 7.10
(b)................................................. 7.8; 7.10;
10.2
(c)................................................. N.A.
Section 311(a)................................................. 7.11
(b)................................................. 7.11
(c)................................................. N.A.
Section 312(a)................................................. 2.5
(b)................................................. 10.3
(c)................................................. 10.3
Section 313(a)................................................. 7.6
(b)(1).............................................. 7.6
(b)(2).............................................. 7.6
(c)................................................. 7.6; 10.2
(d)................................................. 7.6
Section 314(a) ................................................ 4.6; 4.7;
10.2
(b)................................................. N.A.
(c)(1).............................................. 10.4
(c)(2).............................................. 10.4
(c)(3).............................................. 10.4
(d)................................................. N.A.
(e)................................................. 10.5
(f)................................................. N.A.
Section 315(a)................................................. 7.1(b)
(b)................................................. 7.5; 10.2
(c)................................................. 7.1(a)
(d)................................................. 7.1(c)
(e)................................................. 6.11
Section 316(a) (last sentence)................................. 2.9
(a)(1)(A)........................................... 6.5
(a)(1)(B) .......................................... 6.4
(a)(2).............................................. N.A.
(b)................................................. 6.6, 6.7
(c)................................................. 9.4
Section 317(a)(1).............................................. 6.8
(a)(2).............................................. 6.9
(b)................................................. 2.4
---------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of this Indenture.
<PAGE>
Section 318(a)................................................. 10.1
(c)................................................. 10.1
---------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of this Indenture.
<PAGE>
TABLE OF CONTENTS
------------------
Page
----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.................................... 1
SECTION 1.2 Incorporation by Reference of Trust
Indenture Act................................ 24
SECTION 1.3 Rules of Construction.......................... 25
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating................................ 25
SECTION 2.2 Execution and Authentication................... 27
SECTION 2.3 Registrar and Paying Agent..................... 28
SECTION 2.4 Paying Agent To Hold Money in Trust............ 29
SECTION 2.5 Securityholder Lists........................... 29
SECTION 2.6 Transfer and Exchange.......................... 29
SECTION 2.7 Replacement Securities......................... 39
SECTION 2.8 Temporary Securities........................... 40
SECTION 2.9 Cancellation................................... 41
SECTION 2.10 Defaulted Interest............................. 41
SECTION 2.11 CUSIP or CINS Number........................... 42
SECTION 2.12 Payments of Interest........................... 42
SECTION 2.13 Outstanding Securities......................... 43
SECTION 2.14 Treasury Securities............................ 44
ARTICLE III
REDEMPTION OF SECURITIES
SECTION 3.1 Right of Redemption............................ 44
SECTION 3.2 Applicability of Article....................... 44
SECTION 3.3 Election To Redeem; Notice to Trustee.......... 44
-i-
<PAGE>
Page
----
SECTION 3.4 Selection by Trustee of Securities
To Be Redeemed............................... 45
SECTION 3.5 Notice of Redemption........................... 45
SECTION 3.6 Deposit of Redemption Price.................... 46
SECTION 3.7 Securities Payable on Redemption
Date......................................... 46
SECTION 3.8 Securities Redeemed in Part.................... 46
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities......................... 47
SECTION 4.2 Maintenance of Office or Agency............... 47
SECTION 4.3 Corporate Existence........................... 48
SECTION 4.4 Limitation on Business........................ 48
SECTION 4.5 Limitation on Restricted Subsidiary
Investments and Mergers..................... 48
SECTION 4.6 Compliance Certificates....................... 49
SECTION 4.7 Reports....................................... 49
SECTION 4.8 Limitation on Debt............................ 50
SECTION 4.9 Limitation on Restricted Subsidiary
Debt........................................ 52
SECTION 4.10 Limitation on Additional Tiers of
Senior Subordinated Debt.................... 55
SECTION 4.11 Change of Control............................. 55
SECTION 4.12 Limitation on Transactions with
Affiliates.................................. 57
SECTION 4.13 Limitation on Restricted Payments............. 58
SECTION 4.14 Limitation on Dividend and other
Payment Restrictions Affecting
Subsidiaries................................ 61
SECTION 4.15 Limitation on Asset Dispositions.............. 63
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Merger, Consolidation, Etc.................... 68
SECTION 5.2 Successor Entity Substituted.................. 69
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default............................. 69
-ii-
<PAGE>
Page
----
SECTION 6.2 Acceleration.................................. 72
SECTION 6.3 Other Remedies................................ 72
SECTION 6.4 Waiver of Past Default........................ 73
SECTION 6.5 Control by Majority........................... 73
SECTION 6.6 Limitation on Suits........................... 73
SECTION 6.7 Rights of Holders To Receive
Payment..................................... 74
SECTION 6.8 Collection Suit by Trustee.................... 74
SECTION 6.9 Trustee May File Proofs of Claim.............. 75
SECTION 6.10 Priorities.................................... 75
SECTION 6.11 Undertaking for Costs......................... 76
SECTION 6.12 Rights and Remedies Cumulative................ 76
SECTION 6.13 Delay or Omission Not Waiver.................. 76
SECTION 6.14 Restoration of Rights and Remedies............ 76
ARTICLE VII TRUSTEE
SECTION 7.1 Duties of Trustee............................. 77
SECTION 7.2 Rights of Trustee............................. 78
SECTION 7.3 Individual Rights of Trustee.................. 79
SECTION 7.4 Trustee's Disclaimer.......................... 80
SECTION 7.5 Notice of Defaults............................ 80
SECTION 7.6 Reports by Trustee to Holders................. 80
SECTION 7.7 Compensation and Indemnity.................... 80
SECTION 7.8 Replacement of Trustee........................ 82
SECTION 7.9 Successor Trustee by Merger, Etc.............. 83
SECTION 7.10 Eligibility; Disqualification................. 83
SECTION 7.11 Preferential Collection of Claims
Against Company............................. 83
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 8.1 Satisfaction and Discharge of
Indenture................................... 84
SECTION 8.2 Application by Trustee of Funds
Deposited for Payment of
Securities.................................. 85
SECTION 8.3 Repayment of Moneys Held by Paying
Agent....................................... 85
-iii-
<PAGE>
Page
----
SECTION 8.4 Return of Moneys Held by Trustee
and Paying Agent Unclaimed for
Two Years................................... 86
SECTION 8.5 Defeasance and Discharge o
Indenture................................... 86
SECTION 8.6 Defeasance of Certain Obligation.............. 88
SECTION 8.7 Reinstatement................................. 89
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.................... 90
SECTION 9.2 With Consent of Holders....................... 91
SECTION 9.3 Compliance with Trust Indenture
Act......................................... 92
SECTION 9.4 Revocation and Effect of Consents............. 92
SECTION 9.5 Notation on or Exchange of
Securities.................................. 93
SECTION 9.6 Trustee to Sign Amendments, Etc............... 93
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.................. 93
SECTION 10.2 Notices....................................... 94
SECTION 10.3 Communications by Holders with
Other Holders............................... 95
SECTION 10.4 Certificate and Opinion of Counsel
as to Conditions Precedent.................. 95
SECTION 10.5 Statements Required in Certificate
and Opinion of Counsel...................... 96
SECTION 10.6 Rules by Trustee, Paying Agent,
Registrar................................... 96
SECTION 10.7 Legal Holidays................................ 96
SECTION 10.8 GOVERNING LAW................................. 96
SECTION 10.9 No Recourse Against Others.................... 97
SECTION 10.10 Successors.................................... 97
SECTION 10.11 Counterparts.................................. 97
SECTION 10.12 Severability.................................. 97
SECTION 10.13 Table of Contents, Headings, Etc.............. 97
SECTION 10.14 No Adverse Interpretation of Other
Agreements.................................. 97
SECTION 10.15 Benefits of Indenture......................... 98
SECTION 10.16 Independence of Covenants..................... 98
-iv-
<PAGE>
ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.1 Agreement to Subordinate...................... 98
SECTION 11.2 Payments to Securityholders................... 98
SECTION 11.3 Subrogation of Securities..................... 101
SECTION 11.4 Authorization by Securityholders.............. 102
SECTION 11.5 Notice to Trustee............................. 102
SECTION 11.6 Trustee's Relation to Senior Debt............. 103
SECTION 11.7 No Impairment of Subordination................ 104
SIGNATURES S-1
EXHIBIT A - Form of Security
EXHIBIT B - Form of Certificate of Transfer
EXHIBIT C - Form of Certificate of Exchange
-v-
<PAGE>
-1-
INDENTURE dated as of July 17, 1997, between THE AES CORPORATION, a
Delaware corporation, as Issuer (the "Company"), and THE BANK OF NEW YORK, a New
York banking corporation, as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the 8 3/8% Senior Subordinated Notes
due 2007 of the Company (the "Securities") to be issued as provided for in this
Indenture. All things necessary to make the Securities, when duly issued and
executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid, binding
agreement of the Company, in accordance with their respective terms, have been
done.
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders:
ARTICLE I_______________________________________________________________________
________________________________________________________________________________
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acquisition Debt" means Debt of any Person existing at the time such
Person became a Restricted Subsidiary of the Company (or such Person is merged
into the Company or one of its Restricted Subsidiaries) or assumed in connection
with the acquisition of assets from any such Person (other than assets acquired
in the ordinary course of business), including Debt Incurred in connection with,
or in contemplation of, such Person becoming a Restricted Subsidiary of the
Company (but excluding Debt of such Person which is extinguished, retired or
repaid in connection with such Person becoming a Restricted Subsidiary of the
Company).
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Adjusted Consolidated Net Income" means, for any period, for any
Person the aggregate Net Income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in conformity with GAAP plus the Net
Income of any Restricted Subsidiary of such Person for prior periods to the
extent such Net Income is actually paid in cash to such Person during such
period plus the Net Income of any Person (other than a Restricted Subsidiary) in
which such Person has a joint interest with a third party for prior periods to
the extent such Net Income is actually paid in cash to such Person during
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such period; provided that the following items shall be excluded in computing
Adjusted Consolidated Net Income (without duplication): (i) the Net Income (or
loss) of any Person (other than a Restricted Subsidiary) in which such Person
has a joint interest with a third party, except to the extent such Net Income is
actually paid in cash to such Person during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clauses (c)(1) or (c)(2) of Section 4.13 (and in such case, except
to the extent includible pursuant to clause (i) above), the Net Income (if
positive) of such Person accrued prior to the date it becomes a Restricted
Subsidiary of any other Person or is merged into or consolidated with such other
Person or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by such other Person or any of
its Restricted Subsidiaries; (iii) the Net Income (or loss) of any Restricted
Subsidiary of such Person, except to the extent such Net Income (if positive) is
actually paid in cash to such Person during such period; (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales; (v) the cumulative
effect of a change in accounting principle; and (vi) any amounts paid or accrued
as dividends on Preferred Stock of such Person or Preferred Stock of any
Restricted Subsidiary of such Person.
"AES Hawaii" means AES Hawaii Management Co., Inc., a Delaware
corporation and a Subsidiary of the Company, and its successors.
"AES Oklahoma" means AES Oklahoma Management Co., Inc., a Delaware
corporation and a Subsidiary of the Company, and its successors. "Affiliate"
means, as applied to any Person, 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 is defined to mean 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.
"Applicable Procedures" means, with respect to any transfer or exchange
of interests in a Global Security, the rules and procedures of DTC, Euroclear or
Cedel that apply to such transfer or exchange.
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"Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any of its Restricted
Subsidiaries or shall be merged into or consolidated with the Company or any of
its Restricted Subsidiaries or (ii) an acquisition by the Company or any of its
Restricted Subsidiaries of the Property of any Person other than the Company or
any of its Restricted Subsidiaries that constitutes substantially all of an
operating unit or business of such Person.
"Asset Disposition" means, with respect to any Person, any sale,
transfer, conveyance, lease or other disposition (including by way of merger,
consolidation or sale-leaseback) by such Person or any of its Restricted
Subsidiaries to any Person (other than to such Person or a Consolidated
Subsidiary of such Person and other than in the ordinary course of business) of
(i) any assets (excluding cash and cash equivalents) of such Person or any of
its Restricted Subsidiaries or (ii) any shares of Capital Stock of such Person's
Restricted Subsidiaries. For purposes of this definition, any disposition in
connection with directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall not constitute an Asset Disposition. In
addition, the term "Asset Disposition" shall not include any sale, transfer,
conveyance, lease or other disposition of assets governed by Section 5.1. The
term "Asset Disposition" also shall not include (i) any sale of shares of
Preferred Stock of a Restricted Subsidiary, (ii) the grant of a security
interest by any Person in any assets or shares of Capital Stock securing a
borrowing by, or contractual performance obligation of, such Person or any
Restricted Subsidiary of such Person, (iii) a sale-leaseback transaction
involving substantially all of the assets of a Power Supply Business where a
Restricted Subsidiary of the Company sells the Power Supply Business to a Person
in exchange for the assumption by that Person of the Debt financing the Power
Supply Business and the Restricted Subsidiary leases the Power Supply Business
from such Person, (iv) dispositions of contract rights, development rights and
resource data made in connection with the initial development of a Power Supply
Business, made prior to the commencement of commercial operation of such Power
Supply Business or (v) transactions made in order to enhance the repatriation of
cash proceeds in connection with a Foreign Asset Disposition or in order to
increase the after-tax proceeds thereof available for immediate distribution.
"Asset Sale" means the sale or other disposition by the Company or any
of its Restricted Subsidiaries (other than to the Company or another Restricted
Subsidiary of the Company) of (i) all or substantially all of the Capital Stock
of any Restricted Subsidiary of the Company or (ii) all or
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substantially all of the Property that constitutes an operating unit or business
of the Company or any of its Restricted Subsidiaries.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the product of
(A) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (B)
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal
or state law for the relief, reorganization, adjustment or recomposition of
debtors.
"Bank Agent" means Morgan Guaranty Trust Company of New York, as agent
for the Banks pursuant to the Bank Credit Agreement, and any successor or
successors thereto in such capacity.
"Bank Credit Agreement" means the Credit Agreement dated as of August
2, 1996 among the Company, the Banks named on the signature pages thereof and
the Bank Agent, 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 Restricted 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.
"Banks" means the lenders who are from time to time parties to the Bank
Credit Agreement.
"Board of Directors" means either the Board of Directors of the Company
or (except for the purposes of clause (iii) of the definition of "Change of
Control") any committee of such Board duly authorized to act hereunder.
"Board Resolution" means one or more resolutions of the Board of
Directors, 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
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banking institutions are authorized or required by law or regulation to close in
The City of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of, or interests in (however designated), the equity of
such Person which is outstanding or issued on or after the Closing Date,
including, without limitation, all Common Stock and Preferred Stock and
partnership and joint venture interests of such Person.
"Capitalized Lease" means, as applied to any Person, any lease of any
Property of which the discounted present value of the rental obligations of such
Person as lessee, in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person; and "Capitalized Lease Obligation" is defined to
mean the rental obligations, as aforesaid, under such lease.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company to any Person or group (as that term is used in
Section 13(d)(3) of the Exchange Act) of Persons, (ii) a Person or group (as so
defined) of Persons (other than management of the Company on the date of this
Indenture or their Affiliates) shall have become the beneficial owner of more
than 35% of the outstanding Voting Stock of the Company, or (iii) during any
one-year period, individuals who at the beginning of such period constitute the
Board of Directors (together with any new director whose election or nomination
was approved by a majority of the directors then in office who were either
directors at the beginning of such period or who were previously so approved)
cease to constitute a majority of the Board of Directors.
"Change of Control Offer" has the meaning provided in Section 4.11.
"Closing Date" means the date on which the Securities are originally
issued under this Indenture.
"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 this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
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"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of common stock of such Person which is outstanding or
issued on or after the date of this Indenture, including, without limitation,
all series and classes of such common stock.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article V of this Indenture
and thereafter means the successor.
"Consolidated EBITDA" of any Person for any period means the Adjusted
Consolidated Net Income of such Person, plus (without duplication) (i) income
taxes (other than income taxes (x) (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or Asset Sales and (y) actually
payable with respect to such period) determined on a consolidated basis for such
Person and its Consolidated Subsidiaries in accordance with GAAP to the extent
payable by such Person, (ii) Consolidated Fixed Charges, (iii) depreciation and
amortization expense for such period and prior periods, all determined on a
consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with GAAP, but only to the extent that the positive cash flow
associated with such depreciation and amortization expense is actually received
in cash by such Person during such period and (iv) all other non-cash items
reducing Net Income for such period and prior periods, all determined on a
consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with GAAP, but only to the extent that the positive cash flow
associated with such non-cash items is actually received in cash by such Person
during such period, and less (without duplication) (i) all non-cash items
increasing Net Income of such Person during such period and prior periods, but
only to the extent that positive cash flow associated with such non-cash items
in not actually received in cash by such Person during such period, and (ii) the
aggregate amount of any capitalized expenses (including capitalized interest)
paid by such Person during such period which have the effect of increasing Net
Income for such period.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate of (i) Consolidated Interest Expense, (ii) the interest component of
Capitalized Leases, determined on a consolidated basis for such Person and its
Consolidated Subsidiaries in accordance with GAAP, excluding any interest
component of Capitalized Leases in respect of that portion of a Capitalized
Lease Obligation of a Restricted Subsidiary that is Non-Recourse to such Person
and (iii) cash and non-cash dividends due (whether or not declared) on any
Redeemable Stock of such Person.
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"Consolidated Interest Expense" of any Person means, for any period,
the aggregate interest expense in respect of Debt (including amortization of
original issue discount and non-cash interest payments or accruals) of such
Person and its Consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP, including all commissions, discounts, other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs associated with Interest Rate Agreements and any amounts paid
during such period in respect of such interest expense, commissions, discounts,
other fees and charges that have been capitalized; provided that Consolidated
Interest Expense of the Company shall not include any interest expense
(including all commissions, discounts, other fees and charges owed with respect
to letters of credit and bankers' acceptance financing and net costs associated
with Interest Rate Agreements) in respect of that portion of Debt of a
Restricted Subsidiary of the Company that is Non-Recourse to the Company; and
provided further that Consolidated Interest Expense of the Company in respect of
a Guarantee by the Company of Debt of a Restricted Subsidiary shall be equal to
the commissions, discounts, other fees and charges that would be due with
respect to a hypothetical letter of credit issued under the Bank Credit
Agreement that can be drawn by the beneficiary thereof in the amount of the Debt
so guaranteed if (i) the Company is not actually making directly or indirectly
interest payments on such Debt and (ii) GAAP does not require the Company on an
unconsolidated basis to record such Debt as a liability of the Company.
"Consolidated Subsidiary" means at any date with respect to any Person,
any Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date, other than an Unrestricted
Subsidiary.
"Consolidated Total Assets" means, with respect to any Person at any
time, the total assets of such Person and its Consolidated Subsidiaries at such
time determined in conformity with GAAP.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
administered, which office is, at the date of this Indenture, located at 101
Barclay Street, Floor 21 West, New York, New York 10286.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its Restricted
Subsidiaries against
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fluctuations in currency values to or under which such Person or any of
its Restricted Subsidiaries is a party or a beneficiary on the Closing Date or
becomes a party or a beneficiary thereafter.
"Debt" means, 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' acceptance 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.
"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.
"Defaulted Interest" has the meaning specified in Section 2.10.
"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.
"DTC" means The Depository Trust Company or its successors.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
Office) as operator of the Euroclear system.
"Event of Default" has the meaning provided in Section 6.1.
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"Excess Cash Flow" of any Person for any period means Consolidated
EBITDA less Consolidated Fixed Charges less any income taxes actually paid by
such Person during such period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Finance Subsidiary" means a Wholly-Owned Subsidiary of the Company
that does not engage in any activity other than (i) the holding of Debt of the
Company that both (x) is subordinated to the Securities and (y) provides for no
payments of principal by way of sinking fund, mandatory redemption or otherwise
prior to the maturity of the Securities, (ii) the issuance of Capital Stock and
(iii) any activity necessary, incidental or related to the foregoing.
"Fixed Charge Ratio" means the ratio, on a pro forma basis, of (i) the
aggregate amount of Consolidated EBITDA of any Person for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
calculate the Fixed Charge Ratio (the "Transaction Date") to (ii) the aggregate
Consolidated Fixed Charges of such Person during such Reference Period; provided
that for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (1) the Incurrence of the Debt giving rise to the
need to calculate the Fixed Charge Ratio and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of the Reference
Period, (2) Asset Sales and Asset Acquisitions which occur during the Reference
Period or subsequent to the Reference Period and prior to the Transaction Date
(but including any Asset Acquisition to be made with the Debt Incurred pursuant
to clause (1) above) shall be assumed to have occurred on the first day of the
Reference Period, (3) the Incurrence of any Debt during the Reference Period or
subsequent to the Reference Period and prior to the Transaction Date and the
application of the proceeds therefrom shall be assumed to have occurred on the
first day of such Reference Period, (4) Consolidated Interest Expense
attributable to any Debt (whether existing or being Incurred) computed on a pro
forma basis and bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period unless such Person or any of its Restricted Subsidiaries is a
party to an Interest Rate Agreement (which shall remain in effect for the twelve
month period after the Transaction Date) which has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used and (5) there shall be excluded from Consolidated
Fixed Charges any Consolidated Fixed Charges related to any
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amount of Debt which was outstanding during and subsequent to the Reference
Period but is not outstanding on the Transaction Date, except for Consolidated
Fixed Charges actually incurred with respect to Debt borrowed (as adjusted
pursuant to clause (4)) (x) under a revolving credit or similar arrangement to
the extent the commitment thereunder remains in effect on the Transaction Date
or (y) pursuant to clause (iv) of Section 4.8(b). For the purpose of making this
computation, Asset Sales and Asset Acquisitions which have been made by any
Person which has become a Restricted Subsidiary of the Company or been merged
with or into the Company or any Restricted Subsidiary of the Company during the
Reference Period or subsequent to the Reference Period and prior to the
Transaction Date shall be calculated on a pro forma basis (including all of the
calculations referred to in clauses (1) through (5) above assuming such Asset
Sales or Asset Acquisitions occurred on the first day of the Reference Period).
"Foreign Asset Disposition" means any Asset Disposition in respect of
the Capital Stock and/or Property of any Restricted Subsidiary of any Person
where such Restricted Subsidiary is organized under the laws of any jurisdiction
other than the U.S. or any state thereof or any Restricted Subsidiary of the
type described in Section 936 of the Internal Revenue Code of 1986, as amended,
to the extent that the proceeds of such Asset Disposition are received by a
Person subject in respect of such proceeds to the tax laws of a jurisdiction
other than the U.S. or any state thereof.
"GAAP" means generally accepted accounting principles in the U.S. as in
effect as of the date of this Indenture applied on a basis consistent with the
principles, methods, procedures and practices employed in the preparation of the
Company's audited financial statements, including, without limitation, those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession.
"Global Security" means the global security, without coupons,
representing all or a portion of the Securities deposited with DTC,
substantially in the form of Exhibit A attached hereto.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase
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or payment of) such Debt or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keepwell, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder", "holder of Securities", "Securityholder" and other similar
terms mean the registered holder of any Security.
"Incur" means, with respect to any Debt, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Debt; provided
that neither the accrual of interest (whether such interest is payable in cash
or kind) nor the accretion of original issue discount shall be considered an
Incurrence of Debt.
"Indenture" means this Indenture as originally executed and delivered
or as it may be amended or supplemented from time to time pursuant to the terms
hereof.
"Independent Financial Advisor" means a nationally recognized
investment banking firm (i) which does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company and (ii) which, in the sole judgment of the Board of
Directors, is otherwise independent and qualified to perform the task for which
such firm is being engaged.
"Initial Global Securities" means the Regulation S Global Securities
and the 144A Global Securities, each of which contains a Securities Act Legend.
"Initial Securities" means the Securities containing a Securities Act
Legend.
"Interest Payment Date," when used with respect to any Security, means
the stated maturity of an installment of interest specified in such Security.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate
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collar agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect such Person or any of its Restricted
Subsidiaries against fluctuations in interest rates to or under which such
Person or any of its Restricted Subsidiaries is a party or a beneficiary on the
date of the Indenture or becomes a party or a beneficiary thereafter.
"Intermediate Holding Company" means any Restricted Subsidiary of the
Company that serves as a holding company for the Company's direct or indirect
interests in Power Supply Businesses and Unrelated Businesses.
"Investment" in a Person means any investment in, loan or advance to,
Guarantee on behalf of, directly or indirectly, or other transfer of assets to
such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.13, "Investment" shall include (i) the fair market value of the assets
(net of liabilities) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude
the fair market value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) any property transferred to or from any Person
shall be valued at its fair market value at the time of such transfer, in each
case as determined by the Board of Directors in good faith.
"Investment Grade" means, with respect to any security, a rating of
Baa3 or higher of such security by Moody's Investors Service Inc. together with
a rating of BBB- or higher of such security by Standard & Poor's Corporation.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that, as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Legal Holiday" means any day other than a Business Day.
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Indenture, the Company shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
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"Material AES Entity" means (i) any Subsidiary Guarantor, (ii) any of
AES Connecticut Management Co., Inc., AES Thames, Inc., AES Barbers Point, Inc.
and AES Shady Point, Inc. and (iii) any other Person in which the Company has a
direct or indirect equity Investment if such Person's contribution to
Consolidated EBITDA of the Company for the four most recently completed fiscal
quarters of the Company constitutes 15% or more of the Consolidated EBITDA of
the Company for such period, in each case, other than an Unrestricted
Subsidiary.
"Material Subsidiary" of a Person means, as of any date, any Restricted
Subsidiary that would constitute a "significant subsidiary" within the meaning
of Article 1 of Regulation S-X.
"Maturity Date," when used with respect to any Security, means the date
specified in such Security as the fixed date on which the final installment of
principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to Section 6.2 or any Change of Control Offer
pursuant to Section 4.11).
"Net Cash Proceeds" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received (including any cash received upon sale or disposition of such
note or receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
Property disposed of in such Asset Disposition or received in any other noncash
form) therefrom, in each case, net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred (including, without
limitation, consent and waiver fees and any applicable premiums, earn-out or
working interest payments or payments in lieu or in termination thereof), and
all federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP (i) as a consequence of such Asset Disposition, (ii)
as a result of the repayment of any Debt in any jurisdiction other than the
jurisdiction where the Property disposed of was located or (iii) as a result of
any repatriation to the U.S. of any proceeds of such Asset Disposition, and in
each case net of a reasonable reserve for the after tax-cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its Restricted
Subsidiaries in connection with such Asset Disposition (but excluding any
payments, which by the terms of the indemnities will not, under any
circumstances, be made during the term of the Securities), and net of all
payments made on any Debt which is secured by such Property, in
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accordance with the terms of any Lien upon or with respect to such Property or
which must by its terms or by applicable law be repaid out of the proceeds from
such Asset Disposition, and net of all distributions and other payments made to
minority interest holders in Restricted Subsidiaries or Joint Ventures as a
result of such Asset Disposition.
"Net Income" of any Person for any period means the net income (loss)
of such Person for such period, determined in accordance with GAAP, except that
extraordinary and non-recurring gains and losses as determined in accordance
with GAAP shall be excluded.
"Net Worth" of any Person means, as of any date, the aggregate of
capital, surplus and retained earnings (including any cumulative translation
adjustment) of such Person and its Consolidated Subsidiaries as would be shown
on a consolidated balance sheet of such Person and its Consolidated Subsidiaries
prepared as of such date in accordance with GAAP.
"Non-Recourse" to a Person as applied to any Debt (or portion thereof)
means that such Person is not directly or indirectly liable to make any payments
with respect to such Debt (or portion thereof), that no Guarantee of such Debt
(or portion thereof) has been made by such Person and that such Debt (or portion
thereof) is not secured by a Lien on any asset of such Person.
"Offering Memorandum" means the offering memorandum dated July 14, 1997
relating to the Securities.
"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 10.5 and delivered to the Trustee. Each such
certificate shall comply with Section 314 of the TIA and include (except as
otherwise expressly provided in this Indenture) the statements provided in
Section 10.5.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Company or who may be other
counsel. Each such opinion shall comply with Section 314 of the TIA and include
the
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statements provided in Section 10.5, 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 6.1.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, it shall include Euroclear or Cedel).
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Payment Blockage Period" shall have the meaning set forth in Section
11.2.
"Permitted Investment" means any Investment of the type specified in
clauses (iv) or (vi) of the definition of Restricted Payment which is made
directly or indirectly by the Company and its Restricted Subsidiaries; provided
that (i) at the time such Investment is made, the Company could Incur at least
$1 of Debt under Section 4.8(a); (ii) at the time such Investment is made, 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;
(iii) after giving effect to the Investment, the aggregate Investments made by
the Company and its Restricted Subsidiaries in the applicable Person and in any
other Persons that have a direct or indirect interest in the same Power Supply
Business or Unrelated Business does not exceed 40% of the Net Worth of the
Company as of the end of its most recently ended fiscal quarter; (iv) the Person
in which the Investment is made is engaged only in the businesses described in
Section 4.4; and (v) the Company directly or through its Restricted Subsidiaries
either (x) controls, under an operating and management agreement or otherwise,
the day to day management and operation of any Power Supply Business or
Unrelated Business of the Person in which the Investment is made or (y) has
significant influence over the management and operation of any such Power Supply
Business or Unrelated Business in connection with such management or operation.
To the extent that an Investment is
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not a Permitted Investment only because the aggregate investment limitation in
clause (iii) above is not satisfied, such Investment shall be treated as a
Permitted Investment to the extent of the limitation and any excess Investment
shall be subject to the other restrictions of Section 4.13.
"Permitted Payments" means with respect to the Company or any of its
Restricted Subsidiaries (i) any dividend on shares of Capital Stock payable (or
to the extent paid) solely in shares of Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase Capital Stock (other
than Redeemable Stock) and any distribution of Capital Stock (other than
Redeemable Capital Stock) in respect of the exercise of any right to convert or
exchange any instrument (whether Debt or equity and including Redeemable Stock);
(ii) any dividend or other distribution payable to the Company by any of its
Restricted Subsidiaries or by a Restricted Subsidiary to another Restricted
Subsidiary; (iii) the repurchase or other acquisition or retirement for value of
any shares of the Company's Capital Stock, or any option, warrant or other right
to purchase shares of the Company's Capital Stock with additional shares of, or
out of the proceeds of a substantially contemporaneous issuance of, Capital
Stock other than Redeemable Stock (unless the redemption provisions of such
Redeemable Stock prohibit the redemption thereof prior to the date on which the
Capital Stock to be acquired or retired was by its terms required to be
redeemed); (iv) any defeasance, redemption, repurchase or other acquisition for
value of any Debt which by its terms ranks pari passu with, or subordinate in
right of payment to the Securities with the proceeds from the issuance of (x)
Debt which is also pari passu with the Securities or subordinate to the
Securities at least to the extent and in the manner as the Debt to be defeased,
redeemed, repurchased or otherwise acquired is subordinate in right of payment
to, the Securities; provided that such new pari passu or subordinated Debt
provides for no payments of principal by way of sinking fund, mandatory
redemption or otherwise (including defeasance) by the Company (including,
without limitation, at the option of the holder thereof other than an option
given to a holder pursuant to a "change of control" or "limitation on asset
sale" covenant which is no more favorable to the holders of such Debt than the
provisions contained in the Debt being replaced or, if none, Sections 4.11 and
4.15) prior to the maturity of Debt being replaced and the proceeds of such new
pari passu or subordinated Debt are utilized for such purpose within 45 days of
issuance or (y) Capital Stock (other than Redeemable Stock); (v) in respect of
any actual payment on account of an Investment which is not fixed in amount at
the time when made, the amount determined by the Board of Directors to be a
Restricted Payment on the date such Investment was originally deemed to have
been made (the "Original Restricted Payment Charge") plus an amount equal to
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the interest on a hypothetical investment in a principal amount equal to the
Original Restricted Payment Charge assuming interest at the rate of 7% per annum
compounded annually for a period beginning on the date the Investment was
originally deemed to have been made and ending with respect to any portion of
the Original Restricted Payment Charge actually paid on the date of actual
payment, less any actual payments previously made on account of such Investment;
provided that the Permitted Payment under this clause (v) shall in no event
exceed the payment actually made; (vi) the declaration and payment of dividends
to holders, or any payment on account of the purchase, redemption, retirement or
acquisition for value, of any class or series of Redeemable Stock; or (vii) a
Permitted Investment.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Physical Securities" means those Securities issued pursuant to Section
2.6(a).
"Power Supply Business" means an electric power or thermal energy
generation or cogeneration facility or related facilities, or electric power
transmission, distribution, fuel supply or fuel transportation facilities, or
any combination thereof, all subject to related security interests under related
project financing arrangements, together with its or their related power supply,
thermal energy and fuel contracts as well as other contractual arrangements with
customers, suppliers and contractors.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of preferred or preference stock of such Person
which is outstanding or issued on or after the date of this Indenture.
"Principal" of a Security means the principal amount of, and, unless
the context indicates otherwise, includes any premium payable on, the Security.
"Private Exchange Securities" shall have the meaning set forth in the
Registration Rights Agreement.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under GAAP.
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"Qualified Capital Stock" means any Capital Stock of a Person that is
not Redeemable Stock.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Securities, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Securities or (iii) convertible into or exchangeable for (unless
solely at the option of the Company) Capital Stock referred to in clause (i) or
(ii) above or Debt having a scheduled maturity prior to the Stated Maturity of
the Securities; provided that any Capital Stock that would not constitute
Redeemable Stock but for provisions thereof giving holders thereof the right to
require the Company to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or a "change of control" occurring prior to the
Stated Maturity of the Securities shall not constitute Redeemable Stock if the
"asset sale" or "change of control" provision applicable to such Capital Stock
is no more favorable to the holders of such Capital Stock than the provisions
contained in Sections 4.11 and 4.15, and such Capital Stock specifically
provides that the Company will not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's repurchase of Securities
required to be repurchased by the Company under Sections 4.11 and 4.15.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture and such Security.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture and such Security.
"Reference Period" means the four fiscal quarters for which financial
information is available preceding the date of a transaction giving rise to the
need to make a financial calculation.
"Registrar" has the meaning provided in Section 2.3.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the date hereof among the Company, the J.P. Morgan Securities Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers Inc.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the or
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(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Regulation S" means Regulation S promulgated under the Securities Act
(including any successor registration thereto) as it may be amended from time to
time.
"Repurchase Date" shall have the meaning provided in Section 4.11.
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of such Person's Capital Stock;
(ii) any payment on account of the purchase, redemption, retirement or
acquisition for value of such Person's Capital Stock; (iii) any defeasance,
redemption, repurchase or other acquisition or retirement for value prior to
scheduled maturity of any Debt subordinated in right of payment to the
Securities and having a maturity date after the maturity of the Securities; (iv)
any Investment in a Restricted Subsidiary after the occurrence of an event of
default, as defined in any indenture or instrument evidencing or under which
such Restricted Subsidiary has at the date of this Indenture or shall thereafter
have outstanding any Debt, shall happen and be continuing; (v) any Investment in
an Unrestricted Subsidiary; (vi) any Investment made in an Affiliate (other than
a Person that constitutes an Affiliate solely because of the Company's, or a
Restricted Subsidiary of the Company's, control of such Person) and (vii) the
conversion of such Person's Capital Stock into Debt of such Person or its
Restricted Subsidiaries. Notwithstanding the foregoing, "Restricted Payment"
shall not include any Permitted Payment.
"Restricted Physical Security" means a Physical Security containing a
Securities Act Legend.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Rule 144" shall have the meaning set forth in the Registration Rights
Agreement.
"Rule 144A" shall have the meaning set forth in the Registration Rights
Agreement.
"SEC" means the Securities and Exchange Commission.
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"Security" or "Securities" means any Security or Securities, as the
case may be, authenticated and delivered under this Indenture.
"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 9 3/4% Senior Subordinated Notes due 2000
and 10 1/4% Senior Subordinated Notes due 2006 which rank pari passu to the
Securities, (ii) Debt of the Company to any Affiliate, (iii) Debt that, when
incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, was without recourse to the Company, (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.
"Shelf Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Significant Subsidiary" of a Person means, as of any date, any
Restricted Subsidiary which has two or more of the following attributes: (i) it
contributes 20% or more of such Person's Excess Cash Flow for its most recently
completed fiscal quarter or (ii) it contributes 15% or more of Net Income before
tax of such Person and its Consolidated Subsidiaries for such Person's most
recently completed fiscal quarter or (iii) it constitutes 20% or more of
Consolidated Total Assets of such Person at the end of such Person's most
recently completed fiscal quarter.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.10.
"Stated Maturity" means, with respect to any debt security or any
installment of interest thereon, the date specified in such debt security as the
fixed date on which any principal of such debt security or any such installment
of interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation or
other 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.
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"Subsidiary Guarantors" means (i) prior to the first day, if any, on
which the Company's long-term debt is rated BBB- or higher by Standard & Poor's
Corporation and Baa3 or higher by Moody's Investors Services, Inc., AES Oklahoma
and AES Hawaii, and (ii) on and after such first day, if any, AES Hawaii.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (0)(0)
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Restricted
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
"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 VII and thereafter means such successor.
"Unrelated Business" means any business not of the same general type
now conducted by the Company and its Restricted Subsidiaries.
"Unrestricted Global Securities" means one or more Global Securities
that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Securities" means the Securities that do not and are not
required to bear the Securities Act Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary that is not a Subsidiary of the Subsidiary to be so
designated, provided that (A) any Guarantee by the Company or any Restricted
Subsidiary of any Debt of the Subsidiary being so designated shall be deemed an
"Incurrence" of such Debt and an "Investment" by the Company or such
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Restricted Subsidiary (or both, if applicable) at the time of such designation;
(B) either (I) the Subsidiary to be so designated has total assets of $1,000 or
less or (II) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under Section 4.13 and (C) if applicable, the Incurrence of
Debt and the Investment referred to in clause (A) of this proviso would be
permitted under Sections 4.9 and 4.13. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately
after giving effect to such designation (x) all Liens and Debt of such
Unrestricted Subsidiary outstanding immediately after such designation would, if
Incurred at such time, have been permitted to be incurred for all purposes of
this Indenture and (y) no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the U.S. for the payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the U.S. the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the U.S.,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligations
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.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
of such Person.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Restricted Subsidiary of such Person if all the Capital Stock or other ownership
interests in such Restricted Subsidiary having ordinary voting power to elect
the entire board of directors or entire group of other persons performing
similar functions (other than any director's qualifying shares
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or Investments by foreign nationals mandated by applicable law) is owned
directly or indirectly by such Person.
SECTION 1.2 Incorporation by Reference
of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
terms used in this Indenture that are defined in the TIA have the following
meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
(c) "indenture security holder" means a Securityholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee" means the Trustee;
and
(f) "obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by reference in the TIA to another statute or defined by the Securities
Act or the Exchange Act and not otherwise defined herein have the meanings so
assigned to them therein.
SECTION 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the plural
include the singular;
(d) provisions apply to successive events and transactions;
(e) "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; and
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(f) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
(a) Global Securities. Securities offered and sold to QIBs in reliance
on Rule 144A shall be issued initially substantially in the form of Exhibit A
hereto in the name of Cede & Co. as nominee of DTC, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. Any such Security
shall be referred to herein as the "144A Global Security." Securities offered
and sold in reliance on Regulation S shall be issued initially substantially in
the form of Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Any such Security shall be referred to herein as the "Regulation S
Global Security." Unrestricted Global Securities shall be issued initially in
accordance with Sections 2.6(b)(iv), 2.6(c)(ii) and 2.6(e) in the name of Cede &
Co. as nominee of DTC, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of each Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee as hereinafter provided.
Each Global Security shall represent such of the outstanding Securities
as shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Securities from time to time endorsed
thereon and that the aggregate principal amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, redemptions and transfers of interests
therein in accordance with the terms of this Indenture. Any change in the
aggregate principal amount of a Global Security to reflect the amount of any
increase or decrease in the principal amount of outstanding Securities
represented thereby shall be made by the Trustee in accordance with reasonable
instructions given by the Holder thereof as required by Section 2.6 hereof and
shall be conclusively reflected on the books and records of the Trustee.
Upon the issuance of the Global Security to DTC, DTC shall credit, on
its internal book-entry registration and transfer system, its Participant's
accounts with the respective interests owned by such Participants. Interests in
the Global
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Securities shall be limited to Participants, including Euroclear and Cedel, and
indirect Participants.
The Participants shall not have any rights either under this Indenture
or under any Global Security with respect to such Global Security held on their
behalf by DTC, and DTC may be treated by the Company, the Trustee and any agent
of the Company or the Trustee as the absolute owner of such Global Security for
the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest and Additional Interest,
if any, on the Global Securities and for all other purposes. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Participants, the operation of customary practices of DTC governing the exercise
of the rights of an owner of a beneficial interest in any Global Security.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel, as in effect from
time to time, shall be applicable to interests in the Regulation S Global
Security that are held by the Participants through Euroclear or Cedel.
(b) Physical Securities. All Securities will initially be issued in the
form of Global Securities pursuant to Section 2.1(a). If Physical Securities are
issued in accordance with Section 2.6(a), the Physical Securities shall be
issued initially substantially in the form of Exhibit A hereto, in certificated
form and issued in the names of the then beneficial holders thereof (or their
nominees), duly executed by the Company and authenticated by the Trustee as
hereinafter provided.
(c) Securities. The provisions of the form of Securities contained in
Exhibit A hereto are incorporated herein by reference. The Securities and the
Trustee's Certificates of Authentication shall be substantially in the form of
Exhibit A hereto. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage and provided to the Trustee in
writing by the Company. The Company shall approve the form of the Securities and
any notation, legend or endorsement on them. If required, the Securities may
bear the appropriate legend regarding original issue discount for federal income
tax purposes. Each Security shall be dated the date of its authentication. The
terms and provisions contained in the Securities shall constitute, and are
hereby expressly made, a part of this Indenture.
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SECTION 2.2 Execution and Authentication.
Two Officers of the Company shall sign the Securities for the Company
by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for issue on the
Issue Date in the aggregate principal amount of $325,000,000, (ii) Private
Exchange Securities from time to time only in exchange for a like principal
amount of Initial Securities and (iii) Unrestricted Securities from time to time
only in exchange for a like principal amount of Initial Securities, in each case
upon a written order signed by an Officer of the Company. The order shall be
based upon a Board Resolution of the Company and shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The order shall also provide instructions
concerning registration, legends, if any, pursuant to Section 2.6(f), amounts
for each Holder and delivery. The aggregate principal amount of Securities
outstanding at any time may not exceed $325,000,000 except as provided in
Section 2.7. The Securities shall be issued only in registered form, without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Company may have one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
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 that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.7.
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The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company shall give written notice to the Trustee in the event that
the Company decides to act as Registrar.
SECTION 2.4 Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in writing to hold
in trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities
(whether such money has been paid to it by the Company or any other obligor on
the Securities), and the Company and the Paying Agent shall each notify the
Trustee of any default by the Company (or any other obligor on the Securities)
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 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
making such payment the Paying Agent shall have no further liability for the
money delivered to the Trustee.
SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
SECTION 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. Transfer of the Global
Securities shall be by delivery. Global Securities may not be transferred as or
exchanged for Physical Securities except (i) if DTC notifies the Company that it
is unwilling or unable to continue to act as depositary with respect to the
Global Securities or ceases to be a clearing agency registered under the
Exchange Act and, in either case, a successor depositary registered as a
clearing agency under the Exchange Act is not appointed by the Company within
120 days, (ii) at any time if the Company in its sole discretion determines that
the Global Securities (in whole but not in part) should be exchanged for
Physical Securities or (iii) if the owner of an interest in the Global
Securities requests such
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Physical Securities, following an Event of Default under this Indenture, in a
writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the previous
paragraph, Physical Securities shall be issued in such names as DTC shall
instruct the Trustee and the Trustee shall cause the aggregate principal amount
of the applicable Global Security to be reduced accordingly and direct DTC to
make a corresponding reduction in its book-entry system. The Company shall
execute and the Trustee shall authenticate and cause to be delivered to the
Person designated in such instructions a Physical Security in the appropriate
principal amount. The Trustee shall deliver such Physical Securities to the
Persons in whose names such Securities are so registered. Physical Securities
issued in exchange for an Initial Global Security pursuant to this Section
2.6(a) shall bear the Securities Act Legend and shall be subject to all
restrictions on transfer contained therein. Global Securities may also be
exchanged or replaced, in whole or in part, as provided in Sections 2.7 and 2.8.
Every Security authenticated and delivered in exchange for, or in lieu of, a
Global Security or any portion thereof, pursuant to Section 2.7 or 2.8, shall be
authenticated and delivered in the form of, and shall be, a Global Security. A
Global Security may not be exchanged for another Security other than as provided
in this Section 2.6(a).
(b) Transfer and Exchange of Interests in Global Securities. The
transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no obligation to
ascertain DTC's compliance with any such restrictions on transfer. Transfers of
interests in Global Securities shall also require compliance with subparagraph
(i) below, as well as one or more of the other following subparagraphs as
applicable:
(i) All Transfers and Exchanges of Interests in Global Securities. In
connection with all transfers and exchanges of interests in Global
Securities (other than transfers of interests in a Global Security to
Persons who take delivery thereof in the form of an interest in the same
Global Security), the transferor of such interest must deliver to the
Registrar (1) instructions given in accordance with the Applicable
Procedures from a Participant or an indirect Participant directing DTC to
credit or cause to be credited an interest in the specified Global Security
in an amount equal to the interest to be transferred or exchanged, (2) a
written order given in accordance with the Applicable Procedures
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containing information regarding the Participant account to be credited with
such increase and (3) instructions given by the Holder of the Global Security to
effect the transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global Security.
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in the same Initial Global
Security in accordance with the transfer restrictions set forth in Section
2.6(f) hereof.
(iii) Transfer of Interests to Another Initial Global Security.
Interests in any Initial Global Security may be transferred to Persons who
take delivery thereof in the form of an interest in another Initial Global
Security if the Registrar receives the following:
(A) if the transferee will take delivery in the form of an
interest in the 144A Global Security, then the transferor must deliver
a certificate in the form of Exhibit B hereto, including the
certifications in item 1 thereof; or
(B) if the transferee will take delivery in the form of an
interest in the Regulation S Global Security, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item 2 thereof.
(iv) Transfer and Exchange of Interests in Initial Global Security for
Interests in an Unrestricted Global Security. Interests in any Initial
Global Security may be exchanged by the holder thereof for an interest in
the Unrestricted Global Security or transferred to a Person who takes
delivery thereof in the form of an interest in the Unrestricted Global
Security if:
(A) such exchange or transfer is effected pursuant to the Exchange
Registration Statement in accordance with the Registration Rights
Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such an interest in an Initial Global
Security proposes to exchange it for an interest in the
Unrestricted Global Security, a certificate from such Holder
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in the form of Exhibit C hereto, including the certifications in
item 1(a) thereof;
(2) if the holder of such an interest in an Initial Global
Security proposes to transfer it to a Person who shall take
delivery thereof in the form of an interest in an Unrestricted
Global Security, a certificate in the form of Exhibit B hereto,
including the certification in item 4 thereof; and
(3) in each such case set forth in this paragraph (C), an
Opinion of Counsel in form reasonably acceptable to the Company
and the Trustee, to the effect that such exchange or transfer is
in compliance with the Securities Act and, that the restrictions
on transfer contained herein and in Section 2.6(f) hereof are not
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time when
an Unrestricted Global Security has not yet been issued, the Company shall issue
and, upon receipt of an authentication order in accordance with Section 2.2, the
Trustee shall authenticate one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of interests in the
Initial Global Security transferred pursuant to paragraph (B) above, provided
the Company has made appropriate arrangements with DTC prior to delivery of such
an authentication order to the Trustee.
(v) Notation by the Trustee of Transfer of Interests Among Global
Securities. Upon satisfaction of the requirements for transfer of interests
in Global Securities pursuant to clauses (iii) or (iv) above, the Trustee
shall reduce or cause to be reduced the aggregate principal amount of the
relevant Global Security from which the interests are being transferred, and
increase or cause to be increased the aggregate principal amount of the
Global Security to which the interests are being transferred, in each case,
by the principal amount so transferred and shall direct DTC to make
corresponding adjustments in its book-entry system. No transfer of interests
of a Global Security shall be effected until, and any transferee pursuant
thereto shall succeed to the rights of a holder of such interests only when,
the Registrar has made appropriate adjustments to the applicable Global
Security in accordance with this paragraph.
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(c) Transfer or Exchange of Physical Securities for Interests in a
Global Security.
(i) If any Holder of Physical Securities required to contain the
Securities Act Legend proposes to exchange such Securities for an interest
in a Global Security, then, upon receipt by the Registrar of a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item 2 thereof which may be submitted by facsimile;
the Trustee shall cancel the Physical Securities, increase or cause to be
increased the aggregate principal amount of, the 144A Global Security or
the Regulation S Global Security, as the case may be, and direct DTC to
make a corresponding increase in its book-entry system.
(ii) A Holder of Physical Securities required to contain the Securities
Act Legend may exchange such Securities for an interest in the Unrestricted
Global Security only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) upon receipt by the Registrar of the following documentation
(all of which may be submitted by facsimile):
(1) if the Holder of such Physical Securities proposes to
exchange such Securities for an interest in the Unrestricted
Global Security, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item 1(b)
thereof;
(2) an Opinion of Counsel in form reasonably acceptable to
the Company, to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in Section 2.6(f) hereof are not
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time when
an Unrestricted Global Security has not yet been issued, the Company shall issue
and, upon
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receipt of an authentication order in accordance with Section 2.2, the Trustee
shall authenticate (i) one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of Physical Securities
transferred pursuant to paragraph (B) above.
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(d) Transfer and Exchange of Physical Securities.
(i) Transfer of a Physical Security to Another Physical Security.
Following the occurrence of one or more of the events specified in Section
2.6(a), a Physical Security may be transferred to Persons who take delivery
thereof in the form of another Physical Security if the Registrar receives
the following:
(A) if the transfer is being effected pursuant to and in
accordance with Rule 144A, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to and in
accordance with Regulation S, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical Security for Physical
Security Which Does Not Bear the Securities Act Legend. Following the
occurrence of one or more of the events specified in Section 2.6(a) and the
receipt by the Trustee of an OfficersAE Certificate stating that such events
have occurred, a Restricted Physical Security may be exchanged by the Holder
thereof for a Physical Security or transferred to a Person who takes
delivery thereof in the form of a Physical Security which does not bear the
Securities Act Legend if:
(A) such exchange or transfer is effected pursuant to the Exchange
Registration Statement in accordance with the Registration Rights
Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item 1(c)
thereof and an Opinion of Counsel in form reasonably acceptable to the
Company, to the effect that such exchange or transfer is in compliance
with the Securities Act and, that the restrictions on transfer
contained herein and in Section 2.6(f) hereof are not required in order
to maintain compliance with the Securities Act.
(iii) Exchange of Physical Securities. Whey Physical
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Securities are presented by a Holder to the Registrar with a request to
register the exchange of such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations, the
Registrar shall make the exchange as requested only if the Physical
Securities are endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Registrar duly executed by such Holder or by
his attorney duly authorized in writing and shall be issued only in the
name of such Holder or its nominee. The Physical Securities issued in
exchange for Physical Securities shall bear the Securities Act Legend and
shall be subject to all restrictions on transfer contained herein in each
case to the same extent as the Physical Securities so exchanged.
(iv) Return of Physical Securities. In the event of a transfer pursuant
to clauses (i) or (ii) above and the Holder thereof has delivered
certificates representing an aggregate principal amount of Securities in
excess of that to be transferred, the Company shall execute and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Physical Security or Securities of
any authorized denomination requested by the Holder, in an aggregate
principal amount equal to the portion of the Security not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer (as
defined in the Registration Rights Agreement) in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Officers' Certificate stating that the Exchange Registration Statement has
become effective and that the Exchange Offer has occurred and an authentication
order in accordance with Section 2.2, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of the interests in the Initial Global Securities. Concurrently
with the issuance of such Securities, the Trustee shall cause the aggregate
principal amount of the applicable Initial Global Securities to be reduced
accordingly and direct DTC to make a corresponding reduction in its book-entry
system.
In the case that one or more of the events specified in Section 2.6(a)
have occurred, upon the occurrence of such Exchange Offer, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.2, the Trustee shall authenticate Unrestricted Physical Securities in an
aggregate principal amount equal to the principal amount of the Restricted
Physical Securities tendered for acceptance by persons participating therein.
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(f) Legends.
Each Initial Global Security and, if applicable, each Restricted
Physical Security shall bear the legend (the "Securities Act Legend") in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO AES OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE
SECURITY, THE HOLDER MUST SUBMIT A CERTIFICATE WITH RESPECT TO SUCH
TRANSFER TO THE TRUSTEE (A FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE);
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
(g) Global Security Legend. Each Global Security shall bear a legend in
substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO A NOMINEE OF
DTC, OR BY ANY SUCH NOMINEE
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OF DTC, OR BY DTC TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC).
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2..6 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At such time
as all interests in the Global Securities have been exchanged for Physical
Securities, all Global Securities shall be returned to or retained and
canceledcancelled by the Trustee in accordance with Section 2.9 hereof. At any
time prior to such cancellation, if any interest in a Global Security is
exchanged for an interest in another Global Security or for Physical Securities,
the principal amount of Securities represented by such Global Security shall be
reduced accordingly and all such changes to such Global Security shall be
reflected on the books and records of the Trustee, by the Trustee to reflect
such reduction.
(i) General Provisions Relating to All Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Securities and,
following the occurrence of one or more of the events specified in Section
2.6(a), Physical Securities upon a written order signed by an Officer of the
Company or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any stamp or transfer tax or similar governmental charge
payable in
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connection therewith (other than any such stamp or transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.8, 3.8, 4.11 and 4.15 hereof).
(iii) All Global Securities and Physical Securities issued upon any
registration of transfer or exchange of Global Securities or Physical
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Physical Securities surrendered upon such registration
of transfer or exchange.
(iv) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of the mailing of the notice of
redemption of Securities and ending at the close of business such mailing,
(B) to register the transfer of or to exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part or (C) to register the transfer of or to
exchange a Security between a record date and the next succeeding Interest
Payment Date.
(v) Prior to due presentment for the registration of a transfer of any
Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and
interest on such Securities and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vi) The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under
this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among
Participants or beneficial owners of interests in any Global Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.7 Replacement Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall
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authenticate and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be reasonably required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, having endorsed
thereon and bearing a number not contemporaneously outstanding.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute and, upon Company Order, the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued, and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable
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delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations and like
tenor. Until so exchanged the temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities.
SECTION 2.9 Cancellation.
All Securities surrendered for payment, redemption or registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceledcancelled by it. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceledcancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities canceledcancelled as provided in
this Section, except as expressly permitted by this Indenture. All
canceledcancelled Securities held by the Trustee shall be returned to the
Company.
SECTION 2.10 Defaulted Interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
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arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Company shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
prior to the date of the proposed payment. The Company shall promptly
notify the Trustee of such Special Record Date and, in the name and at the
expense of the Company, the Trustee shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than five Business Days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid not later than the fifteenth day after
such Special Record Date to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date.
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of
payments shall be deemed practicable by the Trustee.
SECTION 2.11 CUSIP or CINS Number.
The Company in issuing the Securities may use a "CUSIP" or "CINS"
number, and if so, such CUSIP or CINS number shall be included in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP or CINS number printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers printed
on the Securities. The Company will promptly notify the Trustee of any change in
the CUSIP or CINS number.
SECTION 2.12 Payments of Interest.
(a) The Holder of a Physical Security at the close of business on the
Regular Record Date with respect to any Interest Payment Date shall be entitled
to receive the interest and Additional Interest, if any, payable on
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such Interest Payment Date notwithstanding any transfer or exchange of such
Physical Security subsequent to the regular 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 or Additional Interest due on such Interest Payment
Date, in which case such Defaulted Interest and Additional Interest, if any,
shall be paid in accordance with Section 2.10; provided that, in the event of an
exchange of a Physical Security for a beneficial interest in any Global Security
subsequent to a Regular Record Date or any Special Record Date and prior to or
on the related Interest Payment Date or other payment date under Section 2.10,
any payment of the interest and Additional Interest payable on such payment date
with respect to any such Physical Security shall be made to the Person in whose
name such Physical Security was registered on such record date. Payments of
interest on the Global Securities will be made to the Holder of the Global
Security on each Interest Payment Date; provided that, in the event of an
exchange of all or a portion of a Global Security for Physical Security
subsequent to the Regular Record Date or any Special Record Date and prior to or
on the related Interest Payment Date or other payment date under Section 2.10
any payment of interest or Additional Interest payable on such Interest Payment
Date or other payment date with respect to the Physical Security shall be made
to the Holder of the Global Security.
(b) The Trustee shall pay interest and Additional Interest, if any, to
DTC, with respect to any Global Security held by DTC, on the applicable Interest
Payment Date in accordance with instructions received from the Company at least
five Business Days before the applicable Interest Payment Date. The Company
shall deliver such instructions in the form of an Officers' Certificate setting
forth Additional Interest in the aggregate and per $1,000 principal amount of
Securities to be paid on such Interest Payment Date.
SECTION 2.13 Outstanding Securities.
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding. A
Security does not cease to be outstanding because the Company or one of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee
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receives proof satisfactory to it that the replaced Security is held by a bona
fide purchaser.
If the Paying Agent holds on a redemption date or Maturity Date money
sufficient to pay the principal of, and interest on Securities payable on that
date, then on and after that date such Securities cease to be outstanding and
interest on them ceases to accrue.
SECTION 2.14 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Subsidiary or any of their respective Affiliates shall be
disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded.
The Trustee may require an Officers' Certificate listing securities
owned by the Company, any Subsidiary or any of their respective Affiliates.
ARTICLE III
REDEMPTION OF SECURITIES
SECTION 3.1 Right of Redemption.
The Securities may be redeemed at the election of the Company as
provided by the terms of the Securities, as a whole or from time to time in
part, at the times and at the Redemption Prices specified in the form of
Security set forth in Exhibit A together with any applicable accrued interest to
the Redemption Date.
SECTION 3.2 Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by the Securities or any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 3.3 Election To Redeem; Notice to Trustee.
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The election of the Company to redeem any Securities pursuant to
Section 3.1 shall be evidenced by a Board Resolution of the Company delivered to
the Trustee. The Company shall, at least 30 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee) notify the Trustee of such Redemption Date and of the principal amount
of Securities to be redeemed.
SECTION 3.4 Selection by Trustee of
Securities To Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee, from all outstanding
Securities not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $1,000 or any integral multiple thereof) of the
principal amount of Securities of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and the Registrar in
writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, all provisions relating to the
redemption of Securities shall relate, in the case of any Securities redeemed or
to be redeemed only in part, to the portion of the principal amount of such
Securities which has been or is to be redeemed.
SECTION 3.5 Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the outstanding Securities are to be redeemed, the
identification including CUSIP
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numbers, (and, in the case of partial redemption, the principal amounts) of the
particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that, unless the Company
shall default in the payment of the Redemption Price and any applicable accrued
interest, interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election 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.
SECTION 3.6 Deposit of Redemption Price.
On or prior to 10:00 a.m. New York City time on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent an amount of
money sufficient to pay the Redemption Price of and accrued interest on all the
Securities which are to be redeemed on that date.
SECTION 3.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any applicable
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Paying Agent at the Redemption Price, together
with any applicable accrued interest to the Redemption Date.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) and
accrued interest on such unpaid principal shall, until paid, bear interest from
the Redemption Date at the rate provided by the Security.
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SECTION 3.8 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE IV
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.
An installment of principal or interest shall be considered paid on the
date due if the Trustee or Paying Agent (other than the Company or any
Subsidiary of the Company or any Affiliate of any thereof) holds on such date by
10:00 a.m., New York City time, immediately available funds designated for and
sufficient to pay such installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest, in each case at the rate per annum specified in the
Securities, to the extent lawful.
SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, 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 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
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and demands may be made or served at the address of the Trustee set forth in
Section 10.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities 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 Borough of
Manhattan, the City of New York, 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.
The Company hereby initially designates the offices of the Trustee as
set forth in Section 10.2 as an agency of the Company in accordance with Section
2.3.
SECTION 4.3 Corporate Existence.
Subject to Article V hereof, the Company shall do or cause to be done,
at its own cost and expense, all things necessary to preserve and keep in full
force and effect the corporate existence and rights (charter and statutory),
licenses and/or franchises of the Company, provided that the Company shall not
be required to preserve any such right, license or franchise, if in the
reasonable and good faith judgment of the Board of Directors of the Company (i)
such preservation or existence is not desirable in the conduct of business of
the Company and (ii) the loss of such right, license or franchise is not adverse
in any material respect to the Holders or to the Company or the ability of the
Company to satisfy its obligations hereunder.
SECTION 4.4 Limitation on Business.
The Company (a) shall continue, and shall cause each Material AES
Entity to continue, to engage in business of the same general type as now
conducted by the Company and its Restricted Subsidiaries and (b) shall continue,
and shall cause each Material AES Entity to continue, to operate its and their
respective businesses on a basis substantially consistent with the policies and
standards of the Company or such Material AES Entity as in effect on the Closing
Date.
SECTION 4.5 Limitation on Restricted Subsidiary
Investments and Mergers.
The Company shall not permit any Restricted Subsidiary with any direct
or indirect interest in a Power
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Supply Business to make any Investment in, or to consolidate or merge with, any
other Person with a direct or indirect interest in any other Power Supply
Business or any Unrelated Business. In addition, the Company will not permit any
Restricted Subsidiary with any direct or indirect interest in any Unrelated
Business to make any Investment in, or to consolidate or merge with, any other
Person with a direct or indirect interest in any Power Supply Business or any
other Unrelated Business. The Company's obligation to comply with this covenant
shall terminate if and when the Securities become Investment Grade.
The foregoing restrictions shall not apply to any Intermediate Holding
Company; provided that (i) each such Intermediate Holding Company's direct and
indirect interest in any Power Supply Business or Unrelated Business shall be
limited to the ownership of Capital Stock or Debt obligations of a Person with a
direct or indirect interest in such Power Supply Business or Unrelated Business;
(ii) no Intermediate Holding Company shall incur, assume, create or suffer to
exist any Debt (including any Guarantee of Debt) other than Debt to the Company
or Debt permitted under clauses (iii), (viii) and (xi) of Section 4.9(b); and
(iii) no Lien shall exist upon any assets of such Intermediate Holding Company
whether now or hereafter acquired, except for Liens upon the Capital Stock of a
Restricted Subsidiary of an Intermediate Holding Company securing Debt of such
Restricted Subsidiary and Liens securing Debt permitted under clauses (iii) and
(xi) of Section 4.9(b).
SECTION 4.6 Compliance Certificates.
The Company shall 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 TIA.
SECTION 4.7 Reports.
So long as any Security is outstanding, the Company shall file with the
SEC the annual reports, quarterly reports and the information, documents and
other reports required to be filed by the Company with the SEC pursuant to
Sections 13 and 15(d) of the Exchange Act, whether or not the Company has or is
required to have a class of securities registered under the Exchange Act, at the
time it is or would be required to file
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the same with the SEC and within 15 days after it is or would be required to
file such reports, information or documents with the SEC shall mail such
reports, information and documents to the Holders at their addresses set forth
in the Register of Securities maintained by the Registrar and the Trustee. The
Company also shall comply with the other provisions of TIA (0) 314(a). Delivery
of such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
SECTION 4.8 Limitation on Debt.
(a) The Company shall not Incur any Debt, including Acquisition Debt,
unless after giving effect to the Incurrence of such Debt and the receipt and
application of the proceeds therefrom, the Fixed Charge Ratio of the Company
would be greater than 2 to 1. The Company's obligation to comply with this
covenant will terminate if and when the Notes become Investment Grade.
(b) Notwithstanding the foregoing, the Company may Incur each and all
of the following:
(i) Debt under or in respect of the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed $600
million;
(ii) Debt issued in exchange for, or the proceeds of which are used to
refinance, outstanding Securities or other Debt of the Company in an amount
(or, if such new Debt provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof,
with an original issue price) not to exceed the amount so exchanged or
refinanced (plus accrued interest, premium, if any, and fees and expenses
related to such exchange or refinancing); provided that (A) the date of any
scheduled payment of principal by way of sinking fund, mandatory redemption
or otherwise (including defeasance) on any Debt so refinanced or exchanged
otherwise due after the final scheduled Maturity Date of the Securities
shall not occur prior to such Maturity Date as a result of such exchange or
refinancing and (B) new Debt the proceeds of which are used to exchange or
refinance the Securities or other Debt of the Company that is subordinated
in right of payment to the Securities shall only be permitted under this
clause (ii) if (x) in case the Securities are exchanged or refinanced in
part,
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such new Debt, by its terms or by the terms of any agreement or instrument
pursuant to which such Debt is issued, is expressly made pari passu with,
or subordinate in right of payment to, the remaining Securities, (y) in
case the Debt to be exchanged or refinanced is subordinated in right of
payment to the Securities, such new Debt, by its terms or by the terms of
any agreement or instrument pursuant to which such Debt is issued, is
expressly made subordinate in right of payment to the Securities, at least
to the extent that the Debt to be exchanged or refinanced is subordinated
in right of payment to the Securities and (z) in case the Securities are
exchanged or refinanced in part or the Debt to be exchanged or refinanced
is subordinated in right of payment to the Securities, as of the date the
new Debt is Incurred, the Average Life of the new Debt shall be equal to or
greater than the Average Life of the Securities or Debt to be exchanged or
refinanced;
(iii) Debt of the Company to any of its Consolidated Subsidiaries,
except that any transfer of such Debt by a Consolidated Subsidiary (other
than to another Consolidated Subsidiary) will be deemed to be an Incurrence
of Debt; provided that such Debt is expressly subordinated in right of
payment to the Securities; and
(iv) Debt in an aggregate principal amount not to exceed $50 million at
any one time outstanding.
(c) For purposes of determining any particular amount of Debt under
this Section 4.8, Guarantees of, or obligations with respect to letters of
credit supporting, Debt otherwise included in the determination of such
particular amount shall not be included. For purposes of determining compliance
with this Section 4.8, (A) in the event that an item of Debt meets the criteria
of more than one of the types of Debt described in the above clauses, the
Company, in its sole discretion, shall classify such item of Debt and only be
required to include the amount and type of such Debt in one of such clauses and
(B) the amount of Debt issued at a price that is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in conformity with GAAP.
SECTION 4.9 Limitation on Restricted ____________________
Subsidiary Debt.
(a) The Company shall not permit any Restricted Subsidiary to Incur,
directly or indirectly, any Debt, including Acquisition Debt. The Company's
obligation to comply with this covenant will terminate if and when the
Securities become Investment Grade.
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(b) Notwithstanding the foregoing, each and all of the following Debt
may be Incurred by a Restricted Subsidiary:
(i) Debt outstanding as of the Closing Date;
(ii) Debt Incurred for any purpose (including without limitation the
purposes set forth in clause (iii) below) to the extent of the amount
thereof that is also Debt of the Company and is permitted under Section 4.8;
(iii) Debt Incurred to finance the development, acquisition,
construction, maintenance, working capital requirements in the ordinary
course of business consistent with past practice or operation of a Power
Supply Business or Unrelated Business in which the Company or any Restricted
Subsidiary has a direct or indirect interest; provided that (a) such Debt
shall be permitted under this clause (iii) only to the extent of the amount
thereof which (x) is Non-Recourse to the Company and (y) is Non-Recourse to
any other Restricted Subsidiary of the Company other than Restricted
Subsidiaries which represented less than 33% of the Consolidated EBITDA of
the Company for the Reference Period, and (b) upon the commencement of
commercial operations of such Power Supply Business or, in the case of an
acquisition of such Power Supply Business or Unrelated Business, upon the
date of such acquisition, the Company directly or through its Restricted
Subsidiaries either (x) controls, under an operating and management
agreement or otherwise, the day to day management and operation of the Power
Supply Business or Unrelated Business so financed or (y) has significant
influence over the management and operation of such Power Supply Business or
Unrelated Business;
(iv) Debt issued in exchange for, or the proceeds of which are used to
refinance, outstanding Debt of such Restricted Subsidiary otherwise
permitted under the Indenture in an amount (or, if such new Debt provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration thereof, with an original issue price)
not to exceed the amount so exchanged or refinanced (plus accrued interest,
premium, if any, and fees and expenses related to such exchange or
refinancing plus any principal amounts previously repaid); provided that (a)
the new Debt shall be Non-Recourse to the Company to the same extent as the
Debt to be exchanged or refinanced, (b) if such Restricted Subsidiary has a
direct or indirect interest in any Power Supply Business or Unrelated
Business, the new Debt shall be Non-Recourse to any other Restricted
Subsidiary of the Company other than Restricted Subsidiaries which
represented less than 33% of the Consolidated EBITDA of the Company for the
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Reference Period, (c) the date of any scheduled payment of principal by way
of sinking fund, mandatory redemption or otherwise (including defeasance)
on any Debt so refinanced or exchanged otherwise due after the final
scheduled Maturity Date of the Securities shall not occur prior to such
Maturity Date as a result of such exchange or refinancing and (d) if the
new Debt refinances principal amounts previously repaid, (x) such new Debt
shall be permitted only if on the date such new Debt is Incurred, the
Company could incur at least $1 of Debt under Section 4.8(a) and (y) the
proceeds from such new Debt are not to be used to make any Restricted
Payments;
(v) Guarantees of Debt of the Company under the Bank Credit Agreement;
(vi) Debt Incurred to support the performance obligations of a
Restricted Subsidiary engaged in providing construction management or
operating services to a Power Supply Business; provided that (a) such Debt
shall be permitted under this clause (vi) only to the extent of the amount
thereof which is Non-Recourse to the Company and is Non-Recourse to any
other Restricted Subsidiary of the Company other than Restricted
Subsidiaries which represented less than 33% of the Consolidated EBITDA of
the Company for the Reference Period, and (b) upon the commencement of
commercial operation of such Power Supply Business or in the case of an
acquisition of such Power Supply Business, upon the date of such
acquisition, the Company directly or through its Restricted Subsidiaries
either (x) controls, under an operating and management agreement or
otherwise, the day to day management and operation of such Power Supply
Business or (y) has significant influence over the management and operation
of such Power Supply Business;
(vii) Debt in an aggregate amount for all Restricted Subsidiaries at
any one time outstanding of not more than $50 million Incurred to finance
the on-going operation, but not any expansion or improvement, of a Power
Supply Business or Unrelated Business in which such Restricted Subsidiary
has a direct or indirect interest; provided that such Debt shall be
permitted under this clause (vii) only to the extent it is Non-Recourse to
the Company and to any other Restricted Subsidiary of the Company other than
Restricted Subsidiaries which represented less than 33% of the Consolidated
EBITDA of the Company for the Reference Period;
(viii) Debt of any Restricted Subsidiary of the Company owed to (A) the
Company or (B) any Restricted Subsidiary of the Company;
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(ix) Debt in respect of Currency Agreements or Interest Rate
Agreements;
(x) Debt that is Non-Recourse to the Company and Non-Recourse to any
other Restricted Subsidiary of the Company other than Restricted
Subsidiaries which represented less than 33% of the Consolidated EBITDA of
the Company for the Reference Period, only to the extent that the proceeds
of such Debt are received by the Company or an Intermediate Holding Company
as a result of such proceeds being used to pay dividends or make
distributions on the Capital Stock of such Restricted Subsidiary and any
other Restricted Subsidiary in the chain of ownership between the Company or
such Intermediate Holding Company and such Restricted Subsidiary;
(xi) Acquisition Debt and Debt incurred to finance the acquisition of a
Power Supply Business; provided that such Acquisition Debt and other Debt is
Non-Recourse to the Company or any Person that was a Restricted Subsidiary
of the Company immediately prior to such Incurrence; and provided further
that where any Debt is incurred to finance the acquisition of more than one
Power Supply Business, all such acquisitions shall have occurred within 180
days of each other; and
(xii) Debt of the type described in clause (iii) of the definition
thereof the Incurrence of which causes a corresponding reduction in any debt
service or other similar cash reserve required to be maintained in
connection with any Debt of such Restricted Subsidiary permitted by clause
(iii) above and (to the extent that the same constitutes a refinancing of
Debt permitted under such clause (iii)), clause (iv) above, in each case,
only to the extent that the proceeds from such reserve reduction are
received by the Company or an Intermediate Holding Company as a result of
such proceeds being used to pay dividends or make distributions on the
Capital Stock of such Restricted Subsidiary and any other Restricted
Subsidiary in the chain of ownership between the Company or such
Intermediate Holding Company and such Restricted Subsidiary.
(c) For purposes of determining compliance with this Section 4.9, (A)
in the event that an item of Debt meets the criteria of more than one of the
types of Debt described in the above clauses, the Company, in its sole
discretion, shall classify such item of Debt and only be required to include the
amount and type of such Debt in one of such clauses and (B) the amount of Debt
issued at a price that is less than the principal amount thereof shall be equal
to the amount of the
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liability in respect thereof determined in conformity with GAAP.
SECTION 4.10 Limitation on Additional Tiers of
Senior Subordinated Debt.
The Company shall not Incur or suffer to exist any Debt, other than
Debt evidenced by the Securities, that is subordinate in right of payment to any
Senior Debt unless such Debt, by its terms or the terms of the instrument
creating or evidencing it, is pari passu with, or subordinate in right of
payment to, the Securities; provided that any Debt of the Company or any of its
Restricted Subsidiaries which is outstanding on the Closing Date shall be
excluded from the operation of this covenant.
SECTION 4.11 Change of Control.
(a) Upon a Change of Control, each Holder of the Securities shall have,
subject to Article XI, the right to require that the Company repurchase such
Holder's Securities at a repurchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase in accordance with Section 4.11(b) hereof.
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder of the Securities at their last registered
addresses with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities at a
repurchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (the "Change
of Control Offer");
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control);
(3) the repurchase date (which shall be not earlier than 30 days or
later than 60 days from the date such notice is mailed) (the "Repurchase
Date");
(4) that any Security not tendered will continue to accrue interest;
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(5) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Repurchase Date;
(6) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Repurchase Date;
(7) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day (or such shorter periods as may be required by applicable law)
preceding the Repurchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Securities the Holder
delivered for purchase, and a statement that such Holder is withdrawing his
election to have such Securities purchased; and
(8) that Holders which elect to have their Securities purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered.
(c) On the Repurchase Date, the Company shall:
(i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit by 10:00 a.m., New York City time, with the Trustee
money sufficient to pay the purchase price of all Securities or
portions thereof so tendered; and
(iii) deliver or cause to be delivered to the Trustee Securities
so accepted together with an Officers' Certificate identifying the
Securities or portions thereof tendered to the Company.
The Trustee shall promptly mail to the Holders of the Securities so
accepted payment in an amount equal to the purchase price, and promptly
authenticate and make available for delivery to such Holders a new Security in a
principal amount equal to any unpurchased portion of the Security surrendered.
The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Repurchase Date.
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The Company shall comply with all applicable tender offer rules,
including without limitation, Rule 14e-1 under the Exchange Act, in connection
with a Change of Control Offer.
SECTION 4.12 Limitation on Transactions
with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly enter into any transaction (including,
without limitation, the sale, purchase or lease of any assets or properties or
the rendering of any services) involving aggregate consideration in excess of $5
million with any Affiliate (other than a Person that constitutes an Affiliate
solely because of the Company's or a Subsidiary of the Company's control of such
Person except for any Unrestricted Subsidiary) or holder of 5% or more of any
class of Capital Stock of the Company except for transactions (including,
subject to Section 4.13, any loans or advances by or to, or Guarantee on behalf
of, any Affiliate or any such holder) made in good faith the terms of which are
fair and reasonable to the Company or such Restricted Subsidiary, as the case
may be, and are at least as favorable as the terms which could be obtained by
the Company or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's-length basis with Persons who are not such a holder
or Affiliate; provided that any such transaction shall be conclusively deemed to
be on terms which are fair and reasonable to the Company or any of its
Restricted Subsidiaries and on terms which are at least as favorable as the
terms which could be obtained on an arm's-length basis with Persons who are not
such a holder or Affiliate if such transaction is approved by a majority of the
Company's directors (including a majority of the Company's independent
directors); and provided further, that with respect to the purchase or
disposition of assets of the Company or any of its Restricted Subsidiaries
having a net book value in excess of $15 million, in addition to approval of its
Board of Directors, the Company shall obtain a written opinion of an Independent
Financial Advisor stating that the terms of such transaction are fair to the
Company or its Restricted Subsidiary, as the case may be, from a financial point
of view; and provided further that the fairness, reasonableness and arm's-length
nature of the terms of any transaction which is part of a series of related
transactions may be determined on the basis of the terms of the series of
related transactions taken as a whole. This Section 4.12 shall not apply to (a)
transactions between the Company or any of its Restricted Subsidiaries and any
employee of the Company or any of its Restricted Subsidiaries that are approved
by the Board of Directors or any committee of the Board of Directors consisting
of the Company's independent directors, (b) the payment of reasonable and
customary regular fees to directors of the Company or a Restricted Subsidiary,
(c) any transaction
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between the Company and any of its Consolidated Subsidiaries or between any of
its Consolidated Subsidiaries, (d) any Permitted Payment and any Restricted
Payment not otherwise prohibited by Section 4.13 or (e) the provision of general
corporate administrative, operating and management services, including, without
limitation, procurement, construction engineering, construction administration,
legal, accounting, financial, money management, risk management, personnel,
administration and business planning services, in each case, in the ordinary
course.
SECTION 4.13 Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, make any Restricted Payment if after giving effect
to such Restricted Payment:
(a) an 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;
(b) the Company could not Incur at least $1 of Debt under Section
4.8(a); or
(c) the aggregate amount expended by the Company and its Restricted
Subsidiaries for all Restricted Payments (the amount of any single or
related series of Restricted Payments so expended or distributed, if in
excess of $15 million and other than in cash, to be determined in good faith
by the Board of Directors, as evidenced by a Board resolution) after April
1, 1997 shall exceed the sum of:
(1) 50% of the Net Income of the Company and its Consolidated
Subsidiaries for the period (taken as one accounting period) beginning
on April 1, 1997 and ending on the last day of the fiscal quarter for
which financial information is available immediately prior to the date
of such calculation; provided that if Net Income for such period is
less than zero, then minus 100% of such net loss; plus
(2) the aggregate net proceeds (including the fair market value of
proceeds other than cash, as determined in good faith by the Board of
Directors, as evidenced by a Board Resolution if the fair market value
of such non-cash proceeds is in excess of $15 million) received by (A)
the Company from and after April 1, 1997 from the issuance and sale
(other than to a Restricted Subsidiary) of its Capital Stock (excluding
Redeemable Stock, but including Capital Stock other than Redeemable
Stock issued upon
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conversion of, or in exchange for, Redeemable Stock or securities
other than its Capital Stock), and warrants, options and rights to
purchase its Capital Stock (other than Redeemable Stock), but
excluding the net proceeds from the issuance, sale, exchange,
conversion or other disposition of its Capital Stock convertible
(unless solely at the option of the Company) into (x) any security
other than its Capital Stock or (y) its Redeemable Stock or (B) a
Finance Subsidiary of the Company from and after April 1, 1997 from
the issuance and sale (other than to the Company or a Restricted
Subsidiary) of its Qualified Capital Stock; plus
(3) to the extent not included in clause (1) above, the net
reduction in Investments of the type specified in clauses (iv) through
(vi) of the definition of Restricted Payment resulting from payments of
interest on Debt, dividends, repayments of loans or advances, or other
transfers of assets to the Company or other Person that made the
original Investment from the Person in which such Investment was made
or resulting from the sale or disposition of the Investment or other
return of the amount of the Investment or from the redesignation of any
Unrestricted Subsidiary as a Restricted Subsidiary; provided that such
payment, for purposes of the calculation to be made pursuant to this
clause (3), shall not exceed the amount of the original Investment;
plus
(4) any amount previously included as a Restricted Payment on
account of an obligation by the Company or any Restricted Subsidiary to
make a Restricted Payment which has not actually been made by the
Company or any Restricted Subsidiary and which is no longer required to
be paid by the Company or any Restricted Subsidiary; plus
(5) $502 million;
provided that the foregoing clause (c) shall not prevent the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration without violation of the
provisions of this Section 4.13.
For purposes of clause (c)(2) above, the aggregate net proceeds
received by the Company (x) from the issuance of its Capital Stock upon the
conversion of, or exchange for, securities evidencing Debt of the Company, shall
be calculated on the assumption that the gross proceeds from such issuance
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are equal to the aggregate principal amount (or, if discount Debt, the accreted
principal amount) of the Debt evidenced by such securities converted or
exchanged and (y) upon the conversion or exchange of other securities of the
Company shall be equal to the aggregate net proceeds of the original sale of the
securities so converted or exchanged if such proceeds of such original sale were
not previously included in any calculation for the purposes of clause (c)(2)
above plus any additional sums payable upon conversion or exchange.
The Company's obligation to comply with this covenant shall terminate
if and when the Securities become Investment Grade.
If an Investment which the Company or any Restricted Subsidiary is
obligated to make either in part from time to time or in whole in the future is
fixed in amount by the agreement setting forth such obligation, for purposes of
determining whether such Investment is a Restricted Payment permitted under this
Section 4.13 or is a Permitted Payment, the Investment shall be deemed to have
been made only once, in the amount so fixed, at the time the obligation first
arises (and not when payments in respect thereof are later made). If an
Investment which the Company or any Restricted Subsidiary is obligated to make
either in part from time to time or in whole in the future is not fixed in
amount by the agreement setting forth such obligation, for purposes of
determining whether such Investment is a Restricted Payment permitted under this
Section 4.13 or is a Permitted Payment, the Investment shall be deemed to have
been made at the time the obligation first arises in an amount to be determined
in good faith by the Board of Directors, as evidenced by a Board Resolution, and
any actual payments in respect of such Investment shall be deemed to be
Investments made on the date of payment thereof. Subject to the terms of clause
(v) of the definition of Permitted Payments, such later Investments may be
Permitted Payments.
SECTION 4.14 Limitation on Dividend and other
Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary, (ii) make payments in
respect of any Debt owed to the Company or any other Restricted Subsidiary,
(iii) make loans or advances to the Company or any other Restricted Subsidiary
or (iv) transfer any of its Property to
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the Company or any other Restricted Subsidiary. The Company's obligation to
comply with this covenant will terminate if and when the Securities become
Investment Grade.
This Section 4.14 shall not restrict or prohibit any encumbrances or
restrictions existing: (i) in connection with the Incurrence of any Debt
permitted under clauses (iii), (vi), (vii), (x) or (xi) of Section 4.9(b) or
with respect to any portion thereof that is also Debt of the Company and
permitted under Section 4.8; provided that such encumbrances or restrictions are
required in order to effect such financing and are not materially more
restrictive, taken as a whole, on the ability of the applicable Restricted
Subsidiary to make the payments, distributions, loans, advances or transfers
referred to in clauses (i) through (iv) of the preceding paragraph than
encumbrances and restrictions, taken as a whole, customarily accepted (or, in
the absence of any industry custom, reasonably acceptable) in substantially
non-recourse project financing, (ii) in connection with the execution and
delivery of an electric power or thermal energy purchase contract to which such
Restricted Subsidiary is the supplying party or other contracts with customers,
suppliers and contractors to which such Restricted Subsidiary is a party and
where such Restricted Subsidiary is engaged in the development, construction,
acquisition or operation of a Power Supply Business; provided that such
encumbrances or restrictions are required in order to effect such contracts and
are not materially more restrictive, taken as a whole, on the ability of the
applicable Restricted Subsidiary to make the payments, distributions, loans,
advances or transfers referred to in clauses (i) through (iv) in the preceding
paragraph than encumbrances and restrictions, taken as a whole, customarily
accepted (or, in the absence of any industry custom, reasonably acceptable) in
substantially non-recourse project financing, (iii) in connection with the
Incurrence of any Debt permitted under clause (iv) of Section 4.9(b), provided
that such encumbrances or restrictions taken as a whole are not materially more
restrictive on the ability of the applicable Restricted Subsidiary to make the
payments, distributions, loans, advances or transfers referred to in clauses (i)
through (iv) in the preceding paragraph than those that are then in effect,
taken as a whole, in connection with the Debt so exchanged or refinanced, (iv)
in connection with the Bank Credit Agreement and the project financing, electric
power and thermal energy purchase arrangements and other contracts with
customers, suppliers and contractors in effect on the Closing Date, including
extensions, refinancings, renewals or replacements thereof, (v) pursuant to
customary non-assignment provisions in leases, (vi) pursuant to restrictions
imposed pursuant to any stock purchase or asset purchase agreement pending the
consummation of the transactions contemplated thereby, (vii) in connection with
any Acquisition Debt, provided that such encumbrance or restriction was not
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incurred in contemplation of the obligor becoming a Restricted Subsidiary of the
Company, which encumbrance or restriction is not applicable to any Person, or
the Property or assets of any Person, other than the Person, or the Property or
assets, acquired, (viii) customary restrictions on transfers of Property subject
to a Lien which could not materially adversely affect the Company's ability to
satisfy its obligations under the Indenture and the Securities or (ix)
provisions contained in agreements or instruments relating to Debt which
prohibit the transfer of all or substantially all of the assets of the obligor
thereunder unless the transferee shall assume the obligations of the obligor
under such agreement or instrument, in each case; provided that, in the case of
clause (iv) above, such encumbrances and restrictions, taken as a whole, in any
such extensions, refinancings, renewals or replacements are not materially more
restrictive on the ability of the applicable Restricted Subsidiary to make the
payments, distributions, loans, advances or transfers referred to in clauses (i)
through (iv) in the preceding paragraph than those encumbrances or restrictions
taken as a whole in effect immediately before such extension, refinancing,
renewal or replacement. This Section 4.14 shall not prevent the Company from
granting any Liens not expressly prohibited hereby.
SECTION 4.15 Limitation on Asset Dispositions.
(a) The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to make, any Asset Disposition unless the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of each such Asset Disposition at least equal to the fair market value of
the shares or assets sold or otherwise disposed of (such amounts in excess of
$50 million determined in good faith by the Board of Directors, as evidenced by
a Board Resolution) and either (i) not less than 75% of the consideration
received by the Company (or such Restricted Subsidiary, as the case may be) is
in the form of cash or property or assets used or useful in a Power Supply
Business or Capital Stock of a Person primarily engaged in a Power Supply
Business, provided that any note or other obligation received by the Company (or
such Restricted Subsidiary, as the case may be) that is converted into cash
within 180 days of such Asset Disposition and any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary that are assumed by the transferee of any
such assets shall be deemed to be cash for purposes of this clause (i), and (ii)
first, the Net Cash Proceeds of such Asset Disposition are applied within 90
days from the later of the date of such Asset Disposition or the receipt of Net
Cash Proceeds related thereto, to the payment of the principal of, premium and
interest on any Senior Debt of the Company (including to cash collateralize
letters of credit) and, in
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connection with any such payment, any related loan commitment, standby facility
or the like shall be permanently reduced in an amount equal to the principal
amount so repaid and second, to the extent such Net Cash Proceeds are not
required by the lenders, or the terms, of the Senior Debt to be applied in
accordance with the foregoing or, if after being so applied there remain Net
Cash Proceeds, then at the Company's election, such Net Cash Proceeds are either
(x) invested in the business or businesses of the Company or any of its
Restricted Subsidiaries consistent with Section 4.4; provided that such
investment is made within 365 days from the later of the date of such Asset
Disposition or the receipt of the Net Cash Proceeds related thereto or (y)
applied to the payment of any Senior Debt of the Company or Debt of any
Restricted Subsidiary or any Consolidated Subsidiary (other than Debt owed to
the Company or another Restricted Subsidiary), and, in connection with any such
payment, any related loan commitment, standby facility or the like shall be
permanently reduced in an amount equal to the principal amount so repaid;
provided that such Net Cash Proceeds are so applied within three months after
the expiration of the 365-day period referred to in clause (x) above or (z)
applied to make a tender offer (the "Offer") to purchase Securities and other
Debt of the Company from time to time outstanding with similar provisions
requiring the Company to make an offer to purchase or to redeem such Debt with
the proceeds from assets sales, pro rata in proportion to the respective
principal amounts (or accreted values in the case of Debt issued with an
original issue discount) of the Securities and such other Debt then outstanding
at a purchase price of 100% of their principal amount (or accreted value in the
case of Debt issued with an original issue discount), plus accrued interest
(subject to proration in the event of oversubscription in the manner set forth
below). Notwithstanding the foregoing, to the extent that any or all of the Net
Cash Proceeds of any Foreign Asset Disposition are prohibited or delayed by
applicable local law from being repatriated to the U.S., the Company (or such
Restricted Subsidiary, as the case may be) shall not be required to apply the
portion of such Net Cash Proceeds so affected in accordance with clause (ii)
above (other than to repay Debt of the Restricted Subsidiary making such Asset
Disposition or Debt of a Consolidated Subsidiary of the Company, in each case as
contemplated by clause (ii) above and to the extent the prohibition or delay on
repatriation is not applicable to such repayment and such repayment is not in
violation of the terms of any Senior Debt) (the Company hereby agreeing to cause
the applicable Restricted Subsidiary to promptly take all actions required by
the applicable local law to permit such repatriation); provided that once such
repatriation of any such affected Net Cash Proceeds is permitted under the
applicable local law, such repatriation will be immediately effected and such
repatriated Net Cash Proceeds will be applied in the manner set forth in this
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Section 4.15. To the extent that dividends or distributions of any or all of the
Net Cash Proceeds of any Foreign Asset Disposition would result in a tax
liability greater than that which would be incurred if such Net Cash Proceeds
were not so dividended or distributed, the Net Cash Proceeds so affected may be
retained by the applicable Restricted Subsidiary for so long as such adverse tax
liability would continue to be incurred.
Notwithstanding anything in this covenant to the contrary, the Company
and any Restricted Subsidiary may make the following Asset Dispositions:
(i) a disposition resulting from the bona fide exercise by governmental
authority of its claimed or actual power of eminent domain;
(ii) a realization upon a security interest;
(iii) any Permitted Payment or Restricted Payment that is permitted
hereunder; or
(iv) any sale, transfer, conveyance, lease or other disposition of the
Capital Stock or Property of a Restricted Subsidiary pursuant to the terms
of any power sales agreement or steam sales agreement or other agreement or
contract related to the output or product of, or services rendered by, a
Power Supply Business as to which such Restricted Subsidiary is the
supplying party; provided that to the extent the Company or any Restricted
Subsidiary receives any cash consideration in connection with such Asset
Disposition, the Net Cash Proceeds from such Asset Disposition shall be
applied in accordance with clause (ii) of this Section 4.15.
(b) If the aggregate purchase price of Securities and other Debt
tendered pursuant to an Offer made pursuant to clause (ii)(z) clause (a) above
is less than the Net Cash Proceeds allotted to the purchase of the Securities
and other Debt, the Company may use the remaining Net Cash Proceeds for general
corporate purposes. The Company will not be required to comply with the
provisions of clause (ii) in the first paragraph of this Section 4.15 if the Net
Cash Proceeds from one or more Asset Dispositions occurring on or after the date
of the Indenture are less than $40 million in any one fiscal year. Any lesser
amounts so carried forward and cumulated need not be segregated or reserved and
may be used for general corporate purposes.
(c) (i) Promptly, and in any event within 30 days from the Asset
Disposition and the receipt of the Net Cash Proceeds as to which the Company
must make an Offer, the
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Company shall be obligated to deliver to the Trustee and send, by first-class
mail to each Holder of Securities, a written notice stating that:
(A) an Asset Disposition has occurred and that such Holders may tender all
or any portion of their Securities pursuant to the Offer in integral
multiples of $1,000 principal amount, at the applicable purchase price;
(B) any Security not tendered or accepted for payment will continue to
accrue interest;
(C) any Security accepted for payment pursuant to the Offer shall cease to
accrue interest after the Purchase Date (as defined below); and
(D) holders of Securities will be entitled to withdraw their election in
the manner described in clause (iii) of this Section 4.15(c).
The notice shall specify a purchase date not less than 30 days nor more than 60
days after the date of such notice (the "Purchase Date"), shall include all
instructions and materials necessary to enable each holders of Securities to
tender Securities pursuant to the Offer and shall contain information concerning
the business of the Company which the Company in good faith believes will enable
such holder to make an informed decision (which at a minimum will include (1)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report, other than Current Reports
describing other asset dispositions otherwise described in the offering
materials (or corresponding successor reports or reports otherwise required to
be delivered to holder of Securities if the Company is no longer filing reports
pursuant to the Securities Exchange Act of 1934), (2) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (3) if material, appropriate pro forma financial information).
(ii) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (A) the amount of the Offer (the "Offer
Amount"), (B) the allocation of the Net Cash Proceeds pursuant to which such
Offer is being made and (C) the compliance of such allocation with the
provisions of this Section 4.15. Not later than one Business Day prior to the
Purchase Date, the Company shall also irrevocably deposit with the Trustee or
with the Paying Agent (or, if the Company is acting as its own
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Paying Agent, segregate and hold in trust) in immediately available funds an
amount equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section 4.15. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee the Securities or portions thereof which have been properly tendered to
and are to be accepted by the Company. The Trustee or the Paying Agent (if any),
or the Company if acting as its own Paying Agent, shall, on the Purchase Date,
mail or deliver payment to each tendering Holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Securities
delivered by the Company to the Trustee or the Paying Agent (if the Company is
not acting as its own Paying Agent) is less than the Offer Amount, the Trustee
or the Paying Agent, as the case may be, shall deliver the excess to the Company
immediately after the expiration of the Offer Period.
(iii) Any holder of Securities electing to have his Securities
purchased will be required to surrender such Securities, with an appropriate
form duly completed, to the Trustee at the address specified in the notice by
the close of business at least one Business Day prior to the Purchase Date.
Holders of Securities will be entitled to withdraw their election if the Trustee
or Paying Agent (if any) receives not later than the close of business on the
Business Day prior to the Purchase Date a facsimile transmission or letter
setting forth the name of the Holder and a statement that such Holder is
withdrawing his election to have all or a portion of his Securities purchased.
If at the expiration of the Offer Period the aggregate principal amount of
Securities surrendered by holders of Securities exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(iv) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section 4.15. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, or the Company if acting as its own Paying Agent,
mails or makes available for delivery payment therefor to the surrendering
Holder.
(d) In the event the Company is unable to purchase Securities from
Holders thereof in an Offer because such
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purchase is prohibited by any provision of applicable law, the Company need not
make an Offer. The Company shall then be obligated to use such Net Cash Proceeds
in accordance with clause (i)(B)(x) or (y) of this Section 4.15(c).
(e) Whenever Net Cash Proceeds are received by the Company, and prior
to the allocation of such Net Cash Proceeds pursuant to this Section 4.15, such
Net Cash Proceeds shall be set aside by the Company in a separate account
pending allocation.
The Company will comply with all applicable tender offer rules,
including without limitation Rule 14e-1 under the Exchange Act, in connection
with an Offer under the provisions of this covenant.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Merger, Consolidation, Etc.
The Company shall not consolidate with, merge with or into, or transfer
all or substantially all of 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 Securities and this
Indenture; (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; (iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or the surviving entity would be able to incur at least
$1 of Debt under Section 4.8(a) and (iv) the Company or such Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with this provision of this Indenture and that all conditions
precedent in this Indenture relating to such transaction have been satisfied.
Notwithstanding the foregoing, clause (iii) of the preceding sentence shall not
prohibit a transaction, the principal purpose of which is (as
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determined in good faith by the Board of Directors as evidenced by a Board
Resolution) to change the state of incorporation of the Company, and such
transaction does not have as one of its purposes the evasion of the limitations
imposed by this covenant.
SECTION 5.2 Successor Entity Substituted.
Upon any consolidation or merger, or any conveyance, lease or transfer
of all or substantially all of the assets of the Company in accordance with
Section 5.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer 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; and thereafter (except in the case
of a sale, assignment, transfer, conveyance, lease or other disposition) the
Company shall be discharged from all obligations and covenants under this
Indenture and the Securities.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.
An Event of Default, wherever used herein, shall occur with respect to
the Securities if:
(a) the Company defaults in the payment of all or any part of
principal, the Change of Control purchase price or premium, if any, on any
Security when the same becomes due and payable at maturity, upon acceleration,
redemption, mandatory repurchase, or otherwise;
(b) the Company defaults in the payment of interest on any Security
when the same becomes due and payable, and such default continues for a period
of 30 days;
(c) an event of default, as defined in any indenture or instrument
evidencing or under which the Company or any Significant Subsidiary has at the
date of this Indenture or shall hereafter have outstanding any Debt, shall
happen and be continuing and either
(i) such default results from the failure to pay the principal of such
Debt in excess of $50 million at final maturity of such Debt or
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(ii) as a result of such default, the maturity of such Debt shall have
been accelerated so that the same shall be or become due and payable prior
to the date on which the same would otherwise have become due and payable,
and such acceleration shall not be rescinded or annulled within 60 days and
the principal amount of such Debt, together with the principal amount of any
other Debt of the Company or any Significant Subsidiary in default, or the
maturity of which has been accelerated, aggregates $50 million or more;
provided that such default shall not be an Event of Default if such Debt is
Debt of a Significant Subsidiary, is Non-Recourse to the Company in respect
of the amounts not paid or due upon acceleration and the Company could, at
the time of default, incur at least $1 of Debt under Section 4.8(a); and
provided, further, however that, subject to the provisions of Sections 7.1
and 7.2, the Trustee shall not be charged with knowledge of any such default
unless written notice thereof shall have been given to the Trustee by the
Company, by the holder or an agent of the holder of any such Debt, by the
trustee then acting under any indenture or other instrument under which such
default shall have occurred, or by the Holders of not less than 25% in the
aggregate principal amount of the Securities at the time outstanding;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture with respect to the
Securities or under the Securities and such default or breach continues for a
period of 60 consecutive days after written notice, specifying such failure and
demanding that the Company remedy the same, shall have been given by registered
mail, return-receipt requested to the Company by the Trustee or by the Holders
of 25% or more in aggregate principal amount of the Securities;
(e) one or more judgments or orders shall be entered by a court against
the Company or any Significant Subsidiary for the payment of money in an amount
which, individually or in the aggregate exceeds $50 million (excluding the
amount thereof covered by insurance or by a bond written by third parties but
treating any deductibles, self insurance or retentions as not so covered by
insurance) and which judgments or orders shall not be discharged or waived, and
shall remain outstanding and there shall be any period of 60 consecutive days
following entry of such judgment or order in excess of $50 million or the
judgment or order which causes the aggregate amount to exceed $50 million during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, that such a judgment or
order shall not be an Event of Default if such judgment or order is against a
Significant Subsidiary and does not require any payment by the
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Company and the Company could, at the expiration of the applicable 60 day
period, incur at least $1 of Debt under Section 4.8;
(f) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Company or any of its Material
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency,
or other similar law now or hereafter in effect, (ii) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official of
the Company or any of its Material Subsidiaries or for all or substantially all
of the property and assets of the Company or any of its Material Subsidiaries or
(iii) the winding up or liquidation of the affairs of the Company or any of its
Material Subsidiaries and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(g) the Company or any of its Material Subsidiaries (i) 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, (ii) 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 Material
Subsidiaries or for all or substantially all of the property and assets of the
Company or any of its Material Subsidiaries or (iii) effects any general
assignment for the benefit of creditors.
SECTION 6.2 Acceleration.
(a) If an Event of Default (other than an Event of Default specified in
clauses (f) or (g) of Section 6.1 that occurs with respect to the Company)
occurs with respect to the Securities and is continuing under this Indenture,
then, and in each and every such case either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Securities then outstanding
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 Securities to be immediately due and payable. Upon a declaration
of acceleration, such principal of, and accrued interest shall be immediately
due and payable.
(b) If an Event of Default specified in clauses (f) or (g) of Section
6.1 occurs with respect to the Company, the principal of, and accrued interest
on the Securities then outstanding shall ipso facto become and be immediately
due and payable, subject to the prior payment in full of all Senior
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Debt, 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 Securities may, by written notice to the Company and to the Trustee,
waive all past defaults with respect to the Securities and rescind and annul a
declaration of acceleration with respect to the Securities and its consequences
if (i) all existing Events of Default applicable to the Securities, other than
the nonpayment of the principal of, Change in Control purchase price or premium,
if any, and interest on the Securities 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.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities 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, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.2, 6.7 and 9.2, the Holders of, in the aggregate,
at least a majority in principal amount of the then outstanding Securities by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default or Event of Default specified in Section 6.1(a)
or (b) or a Default or Event of Default in respect of any provision hereof which
cannot be modified or amended without the consent of the Holder so affected
pursuant to Section 9.2. When a Default or Event of Default is so waived, it
shall be deemed cured and cease to exist; 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.
The Holders of at least a majority in aggregate principal amount of the
outstanding the Securities may direct
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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 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 of the 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 the Securities.
SECTION 6.6 Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(a) the Holder has previously given to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
then outstanding Securities make a written request to the Trustee to pursue a
remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any costs,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and offer of indemnity; and
(e) during such 60-day period the Holders of at least a majority in
aggregate principal amount of the then outstanding Securities do not give the
Trustee a direction which is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in the Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.
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SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities for
the whole amount of principal and accrued interest remaining unpaid, together
with interest overdue on principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the Interest Rate and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to 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 the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders allowed in any judicial proceedings relative to the
Company or any of its Subsidiaries (or any other obligor upon the Securities),
its creditors or its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder 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 for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Securityholder 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 Priorities.
If the Trustee collects any money pursuant to this Article VI, it
shall, subject to the provisions of Article XI hereof, pay out such money in the
following order:
First: to the Trustee for amounts due under Section 7.7;
Second: subject to Article XI, to Holders for interest accrued on the
Securities, ratably, without preference or
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priority of any kind, according to the amounts due and payable on the
Securities for interest; and
Third: subject to Article XI, to Holders for principal amounts owing
under the Securities, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11 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, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7, or a suit by any Holder, or group of Holders,
holding in the aggregate more than 10% in principal amount of the outstanding
Securities.
SECTION 6.12 Rights and Remedies Cumulative.
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 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 6.13 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security 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.
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SECTION 6.14 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 case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer of
the Trustee has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically set
forth in this Indenture or the TIA and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificate or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine such certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for
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its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received
by it pursuant to Sections 6.2, 6.4 and 6.5.
(d) 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 if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) 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.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any document reasonably believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled during normal business hours and upon
reasonable
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advance notice to the Company to examine the books, records and premises of the
Company, personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting with respect to any
matter contemplated by this Indenture, it may require an Officers' Certificate
or an Opinion of Counsel, which shall conform to the provisions of Section 10.5.
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.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent (other than the
negligence or willful misconduct of an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith and without negligence which it reasonably believes to be
authorized or within its rights or powers conferred upon it by this Indenture or
the TIA.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Securities and this Indenture.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, or
its Subsidiaries and Affiliates with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
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SECTION 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture, or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and a Responsible Officer of the Trustee receives
written notice of such Default or Event of Default, the Trustee shall mail to
each Securityholder notice of the Default or Event of Default within 90 days
after the occurrence thereof in accordance with TIA (0) 313(c). Except in the
case of a Default or an Event of Default in payment of principal of or interest
on any Security, including on acceleration, and the failure to make payment when
required by Section 4.11, and except in the case of a failure to comply with
Article V hereof, the Trustee may withhold the notice to the Securityholders for
a period not to exceed 60 days if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
To the extent required by TIA (0) 313(a), within 60 days after July 1
of each year commencing with 1998 and for as long as there are Securities
outstanding hereunder, the Trustee shall mail to each Holder the Company's brief
report dated as of such date that complies with TIA (0) 313(a). The Trustee also
shall comply with TIA (0) 313(b) and TIA (0) 313(c) and (d). A copy of such
report at the time of its mailing to Securityholders shall be filed with the
SEC, if required, and each stock exchange, if any, on which the Securities are
listed.
The Company shall promptly notify the Trustee if the Securities become
listed on any stock exchange and the Trustee shall comply with TIA (0) 313(d).
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee, the Paying Agent and the
Registrar from time to time such compensation as shall be agreed in writing with
the Company from time to time for their respective services rendered hereunder.
The Trustee's, the Paying Agent's and the Registrar's compensation shall not be
limited by any law in regard to the compensation of a trustee of an express
trust. The Company shall reimburse
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the Trustee, the Paying Agent and the Registrar upon request for all reasonable
out-of-pocket disbursements, expenses and advances (including reasonable fees
and expenses of counsel) incurred or made by each of them in connection with
entering into this Indenture and the performance of its duties under this
Indenture, in addition to the compensation for their respective services under
this Indenture. Such expenses shall include the reasonable compensation,
out-of-pocket disbursements and expenses of the Trustee's, the Paying Agent's
and the Registrar's agents and counsel.
The Company shall indemnify the Trustee, the Paying Agent and the
Registrar for, and hold each of them harmless against, any and all claims,
demands, expenses (including but not limited to attorneys' fees and expenses),
loss or liability incurred by each of them arising out of or in connection with
the acceptance or administration of this Indenture and their respective duties
hereunder. Each of the Trustee, the Paying Agent and the Registrar shall notify
the Company promptly of any claim asserted against it for which it may seek
indemnity. However, failure by the Trustee, the Paying Agent or the Registrar to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee, the Paying Agent or the Registrar
through the Trustee's, the Paying Agent's or the Registrar's, as the case may
be, own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, each
of the Trustee, the Paying Agent and the Registrar shall have a lien prior to
the Securities on all money or property held or collected by it, in its capacity
as Trustee, Paying Agent or Registrar, as the case may be, except money or
property held in trust to pay principal of or interest on particular Securities.
When any of the Trustee, the Paying Agent and the Registrar incurs
expenses or renders services after an Event of Default specified in Section
6.1(f) or (g) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any Bankruptcy Law. The
provisions of the Section shall survive the termination of this Indenture.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and
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may appoint a successor Trustee with the Company's consent which consent shall
not be unreasonably withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7), the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 25% in principal amount of then outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
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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, provided such corporation or national banking association
shall be otherwise qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (0) 310(a)(1) and (2). There shall at all times be a Trustee
hereunder which shall be a Person that is eligible pursuant to the TIA to act as
such and has combined capital and surplus of at least $150,000,000. If such
Person publishes reports of condition at least annually, pursuant to law or to
the requirements of any supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The Trustee shall comply with TIA (0) 310(b),
provided that there shall be excluded from the operation of TIA (0) 310(b)(1)
any indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding if
the requirements for such exclusion set forth in TIA (0) 310(b)(1) are met. The
provisions of TIA (0) 310 shall apply to the Company, as obligor of the
Securities.
SECTION 7.11 Preferential Collection of
Claims Against Company.
The Trustee shall comply with TIA (0) 311(a), excluding any creditor
relationship listed in TIA (0) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (0) 311(a) to the extent indicated therein. The
provisions of TIA (0) 311 shall apply to the Company as obligor on the
Securities.
ARTICLE VIII
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 outstanding hereunder (other
than Securities which
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have been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.7) 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 theretofore authenticated (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.7) or (c) (i) all the securities 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 (other than those Securities which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as provided in Section
2.7) not theretofore delivered to the Trustee for 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, then this Indenture shall cease to be of further effect with respect
to Securities (except as to (i) rights of registration of transfer and exchange
of Securities, 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), (iv)
the rights, obligations and immunities of the Trustee hereunder and (v) the
rights of the Securityholders 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 Securities; 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
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thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Securities.
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
XI 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.
SECTION 8.3. Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture
with respect to the Securities, all moneys then held by any paying agent under
the provisions of this Indenture with respect to the 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 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 Securities or such paying agent, and the Holder
of the Security 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
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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 (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 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:
(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, (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 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 the
principal of, premium, if any, and each installment of interest on the
outstanding Securities on the due dates thereof or earlier redemption;
(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 or a change in applicable federal
income tax law or related treasury regulations after the date of this
Indenture or (y) a
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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 Securities by Article XI hereof; and
(E) if at such time the Securities are listed on a national
securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Securities 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 V or Sections 4.5 through 4.15 and clauses (c) and (e)
of Section 6.1 shall not be deemed to be an Event of Default, 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 and this Indenture with
respect to the Securities, (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 under agreements satisfactory to
the Trustee), as the case may be, of any payment referred
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to in 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 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;
(B) the Company has delivered to the Trustee (i) an Opinion of
Counsel to the effect that Holders of Securities 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;
(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 XI hereof; and
(E) if at such time the Securities are listed on a national
securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Securities will not be
delisted as a result of such deposit, defeasance and discharge.
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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 this Article VIII; 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 IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
resolutions of its Board of Directors (copies of which shall be delivered to the
Trustee) and the Trustee may amend, waive or supplement this Indenture or the
Securities without notice to or consent of any Holder for any of the following
purposes:
(a) to cure any ambiguity, defect or inconsistency in the Indenture,
provided that such amendments or supplements do not adversely affect the
interests of the Holders in any material respect;
(b) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(c) to comply with any requirements of the SEC under the TIA;
(d) to evidence the succession in accordance with Article V hereof of
another Person to the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities;
(e) to evidence and provide for the acceptance of appointment hereunder
by a separate or successor Trustee with respect to the Securities; or
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(f) to make any other change that does not materially and adversely
affect the rights of any Holder;
provided, however, that in making such change, the Trustee may rely upon an
Opinion of Counsel stating that such change does not adversely affect the rights
of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this Section 9.2, the
Company, when authorized by resolution of its Board of Directors (copies of
which shall be delivered to the Trustee) and the Trustee may amend or supplement
this Indenture, the Securities with the written consent of the Holders of at
least a majority in principal amount of the Securities then outstanding. Subject
to Section 6.7 and the provisions of this Section 9.2, the Holders of, in the
aggregate, at least a majority in principal amount of the then outstanding
Securities affected may waive compliance by the Company with any provision of
this Indenture, the Securities without notice to any other Securityholder.
However, without the consent of each Securityholder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, may not:
(a) reduce the principal amount of Securities the Holders of which must
consent to an amendment, supplement or waiver of any provision of or with
respect to this Indenture or the Securities; or
(b) reduce the principal amount of, premium, if any, or interest, on
any Security; or
(c) change the Stated Maturity of or any installment of interest on,
any Security; or
(d) make the principal of, or interest on, any Security payable in
money other than as provided herein, or
(e) make any change in provisions relating to waivers of defaults, the
ability of Holders to enforce their rights under this Indenture or in the
matters discussed in clauses (a) through (h); or
(f) adversely affect the ranking of the Securities this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form
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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 mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. 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.
Notwithstanding the foregoing, no amendment shall modify any provision of this
Indenture so as to affect adversely the rights of any holder of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness to the benefits of
the subordination provisions under this Indenture without the consent of such
holder.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same debt
as the consenting Holder's Security, 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 his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
the amendment, supplement or waiver becomes effective. Notwithstanding the
above, nothing in this paragraph shall impair the right of any Securityholder
under (0) 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver which record date shall be at least 10 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the second and third sentences of the immediately preceding
paragraph, those Persons who were 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 Holders after such record date. Such
consent shall be effective only for actions taken within 90 days after such
record date.
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After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder unless it makes a change described in any of clauses
(a) through (h) of Section 9.2. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee shall (in accordance with the specific written direction of the
Company) request the Holder of the Security to deliver it to the Trustee. The
Trustee shall (in accordance with the specific direction of the Company) place
an appropriate notation on the Security about the changed terms and return it to
the Holder. 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 that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.6 Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article IX if the amendment, supplement or waiver does not
adversely affect the rights, duties or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing any amendment, supplement or
waiver, the Trustee shall be entitled to receive, if requested, an indemnity
reasonably satisfactory to it and to receive, and shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of any amendment, supplement or waiver authorized pursuant to this
Article IX is authorized or permitted by this Indenture and that it constitutes
the legal, valid and binding obligation of the Company and subject to the
customary exceptions.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.
The provisions of TIA (0)(0) 310 through 317 that impose duties on any
person (including the provisions automatically deemed included unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
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If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by the above paragraph, the imposed duties shall control.
SECTION 10.2 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail or by telecopier, followed
by first-class mail, or by overnight service guaranteeing next-day delivery,
addressed as follows:
(a) if to the Company:
The AES Corporation
1001 North 19th Street
Suite 2000
Arlington, Virginia 22209
Attention: General Counsel
Telecopier Number: (703) 528-4510
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Richard D. Truesdell, Jr.
Telecopier Number: (212) 450-4800
(b) if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopier Number: (212) 815-5915
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder, including any
notice delivered in connection with TIA (0) 310(b), TIA (0) 313(c), TIA (0)
314(a) and TIA (0) 315(b), shall be mailed to such Holder, first-class postage
prepaid, at his address as it appears on the registration books of the Registrar
and shall be sufficiently given to such Holder if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its
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sufficiency with respect to other Securityholders. Except for a notice to the
Trustee, which is deemed given only when received by an officer in the corporate
trust department of the Trustee, if a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the addressee receives
it. In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 10.3 Communications by Holders with
Other Holders.
Securityholders may communicate pursuant to TIA (0) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (0) 312(c).
SECTION 10.4 Certificate and Opinion of Counsel
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 at the
request of the Trustee (a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee 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 (which officer signing
such certificate may rely, as to matters of law, on an Opinion of Counsel), (b)
an Opinion of Counsel in form and substance reasonably satisfactory to the
Trustee stating that, in the opinion of counsel, all such conditions have been
complied with (which counsel, as to factual matters, may rely on an Officers'
Certificate) and (c) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee that
complies with TIA (0) 314(c).
SECTION 10.5 Statements Required in Certificate
and Opinion of Counsel.
Each certificate and Opinion of Counsel with respect to compliance with
a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or rendering
such Opinion of Counsel has read such covenant or condition;
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(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of 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
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.6 Rules by Trustee, Paying Agent,
Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Securityholders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
SECTION 10.8 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE
SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. THE COMPANY AGREES
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE
SECURITIES.
SECTION 10.9 No Recourse Against Others.
A trustee, director, officer, employee, stockholder or beneficiary, as
such, of the Company shall not have any liability for any obligations of the
Company under the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Security
holder by accepting a Security waives and releases all such liability.
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SECTION 10.10 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 10.11 Counterparts.
The parties may sign any number of counterparts of this Indenture. Each
such counterpart shall be an original, but all of them together represent the
same agreement.
SECTION 10.12 Severability.
In case any provision in this Indenture or 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,
and a Holder shall have no claim therefor against any party hereto.
SECTION 10.13 Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 10.14 No Adverse Interpretation
of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.15 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture or the Securities.
SECTION 10.16 Independence of Covenants.
All covenants and agreements in this Indenture and the Securities shall
be given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant
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shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
ARTICLE XI
SUBORDINATION OF SECURITIES
SECTION 11.1 Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities 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, Change of Control purchase
price, 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, Change of Control purchase
price, 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
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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 in accordance with its terms,
before any payment is made on account of the Principal of, Change of Control
purchase price, 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
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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, 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 V 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 V. Nothing in this
Section shall apply to claims of, or payments to, the Trustee under or pursuant
to Article VII, 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;
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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 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
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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 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 III 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
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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 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.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
THE AES CORPORATION,
as Issuer
By:
---------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: ---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
(FORM OF FACE OF SECURITY)
No. [ ] $ CUSIP NO.:
8 3/8% SENIOR SUBORDINATED NOTE DUE 2007
THE AES CORPORATION promises to pay
to [ ] or registered assigns the
principal sum of[ ] Dollars on
August 15, 2007.
Interest Payment Dates: February 15, August 15 and at maturity
Record Dates: February 1 or August 1 as the case may be, next preceding such
Interest Payment Date
By:
---------------------------------
Authorized Signature
By:
---------------------------------
Authorized Signature
Dated: July 17, 1997
Certificate of Authentication
This is one of the 8 3/8% Senior Subordinated Notes due 2007 referred
to in the within-mentioned indenture.
The Bank of New York, as Trustee
By: ---------------------------------
Authorized Signatory
A-1
<PAGE>
THE AES CORPORATION
8 3/8% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. THE AES CORPORATION, a Delaware corporation (the
"Company," which definition shall include any successor thereto in accordance
with the Indenture (as defined below)), promises to pay, until the principal
hereof is paid or made available for payment, interest on the principal amount
set forth on the reverse side hereof at a rate of 8 3/8% per annum. Interest on
the Securities will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from July 17, 1997
through but excluding the date on which interest is paid. Interest shall be
payable in arrears on February 15, August 15 and at the stated maturity (each an
"Interest Payment Date"), commencing February 15, 1998. Interest will be
computed on the basis of a 360 day year of twelve 30 day months.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on February 1 and August 1 next preceding
the Interest Payment Date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal, premium, if any,
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. At the Company's option,
interest may be paid by check mailed to the registered address of the Holder of
this Security.
3. Paying Agent and Registrar. Initially, The Bank of New York (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-Registrar without notice. Neither the Company nor
any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
4. Indenture. The Company issued the Securities under an Indenture
dated as of July 17, 1997 (the "Indenture") between the Company and the Trustee.
This Security is one of an issue of Securities of the Company issued under the
Indenture. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (0)(0) 77aaa-77bbbb) as amended from time to time. The Securities
are subject to all such terms, and Securityholders are referred to the Indenture
and such Act for a statement of them.
A-2
<PAGE>
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Indenture. The Securities are general unsecured obligations of the
Company subordinated in right of payment to all Senior Debt of the Company,
limited in aggregate principal amount to $325,000,000. The Indenture limits,
among other things, the ability of the Company and its Restricted Subsidiaries
to incur certain Debt; pay dividends and make other distributions; make certain
investments; engage in unrelated businesses; dispose of certain Assets; engage
in transactions with certain Affiliates; and merge with or into another entity.
The limitations are subject to a number of important qualifications and
exceptions. The Company must report to the Trustee annually whether it is in
compliance with the limitations contained in the Indenture.
5. Optional Redemption.
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time on or after August 15 ______________,
2002, as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount): If
redeemed during the 12-month period beginning on or after August 15___________
of the years set forth below,
Redemption
Year Price
- ---- ----------
2002 104.188_______
___%
2003 102.094_______
___%
and after August 15, 2004 at a Redemption Price equal to 100% of the principal
amount, together in the case of any such redemption with accrued interest to the
Redemption Date.
In addition prior to August 15, 2000, in the event that the Company
consummates one or more offerings of its Qualified Capital Stock, the Company
may at its option, use all or a portion of the proceeds therefrom to redeem up
to 33% of the original aggregate principal amount at maturity of the Securities
at a cash redemption price equal to 108.375% of the principal amount thereof,
plus accrued and unpaid interest thereon through the date of repurchase;
provided that at least $100 million of the original aggregate principal amount
of the Securities remains outstanding thereafter.
6. Offers to Purchase. Section 4.11 of the Indenture provides upon the
occurrence of a Change of Control and subject to further limitations contained
therein, the
A-3
<PAGE>
Company shall make an offer to purchase the Securities in accordance with the
procedures set forth in the Indenture.
7. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Security or portion of a Security selected for
redemption, or transfer or exchange any Securities for a period of 15 days
before the mailing of a notice of redemption of Securities to be redeemed.
8. Persons Deemed Owners. The registered holder of a Security may be
treated as the owner of it for all purposes.
9. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company at its written request. After that, Holders entitled to the
money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another Person.
10. Amendment, Supplement, Waiver. The Company and the Trustee may,
without the consent of the holders of any outstanding Securities, amend, waive
or supplement the Indenture, the Securities for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
maintaining the qualification of the Indenture under the Trust Indenture Act of
1939 or making any other change that does not adversely affect the rights of any
Holder. Other amendments and modifications of the Indenture or the Securities
may be made by the Company and the Trustee with the consent of the Holders of
not less than a majority of the aggregate principal amount of the outstanding
Securities, subject to certain exceptions requiring the consent of the Holders
of the particular Securities to be affected.
11. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Securities and the Indenture and the
transaction complies with the terms of Article V of the Indenture, the
predecessor corporation, subject to certain exceptions, will be released from
those obligations.
12. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(f) or (g) of
the Indenture
A-4
<PAGE>
with respect to the Company) occurs and is continuing, then the holders of not
less than 25% in aggregate principal amount of the outstanding Securities may,
or the Trustee may, declare the principal of, premium, if any, plus accrued
interest, if any, to be due and payable immediately. If an Event of Default
specified in Section 6.1(f) or (g) of the Indenture with respect to the Company
occurs and is continuing, the principal of, premium, if any, and accrued
interest on all of the Securities shall ipso facto become and be immediately due
and payable subject to the prior payment in full of Senior Debt without any
declaration or other act on the part of the Trustee or any Holder.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
default (except a default in payment of principal or interest or a failure to
comply with Article V of the Indenture) if it determines that withholding notice
is in their interests. The Company must furnish an annual compliance certificate
to the Trustee.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
14. No Recourse Against Others. A director, officer, employee,
stockholder or beneficiary, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of, such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
15. Defeasance. The Indenture contains provisions (which provisions
apply to this Security) for defeasance at any time of (a) the entire
indebtedness of the Company or this Security and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance by the Company with certain conditions set forth therein.
16. Authentication. This Security shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Security.
17. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as:
A-5
<PAGE>
TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
18. Subordination. The Company's payment of principal of, premium, if
any, and interest on the Securities is subordinated in right of payment, to the
extent and in the manner provided in Article XI of the Indenture, to the prior
payment in full of the Senior Debt of the Company. Each Holder of the
Securities, by his acceptance hereof, covenants and agrees that all payments of
the principal of, premium, if any, and interest on the Securities by the Company
shall be subordinated in accordance with the provisions of Article XI of the
Indenture, and each Holder accepts and agrees to be bound by such provisions.
19. GOVERNING LAW. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Requests may be made to:
THE AES CORPORATION
1001 North 19th Street, Suite 2000
Arlington, Virginia 22209
Telephone: (703) 522-1315
Telecopy: (703) 528-4510
Attention: General Counsel
A-6
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
_______________________________________________________________________________
(Insert assignee's social security or tax ID number)___________________________
________________________________________________________________________________
________________________________________________________________________________
_____________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
_____________________________
_____________________________
Date: _______________________
Your signature:
_____________________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:____________________________________________________________
<PAGE>
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 4.11 or 4.15 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the Company
pursuant to Section 4.11 or 4.15 of the Indenture, state the amount: $
Date:________________________
Your signature:
_____________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:___________________________________________________
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
The AES Corporation
1001 North 19th Street, Suite 2000
Arlington, Virginia 22209
Attention: General Counsel
[Name and Address of Registrar]
Re: 8 3/8% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of July 17, 1997
(the "Indenture"), between The AES Corporation (the "Issuer") and The Bank of
New York, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to transfer the
Security[s] specified in Annex A hereto in the principal amount of $___ in such
Security[s] (the "Transfer"), to ________ (the "Transferee"), as further
specified in Annex A hereto. In the event that Transferor holds Physical
Securities, this Certificate is accompanied by one or more certificates
aggregating at least the principal
B-1
<PAGE>
amount of Securities proposed to be Transferred. In connection with the
Transfer, the Transferor hereby certifies that:
1. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE 144A GLOBAL SECURITY.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
Security will be subject to the restrictions on transfer enumerated in the
Securities Act Legend and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S GLOBAL
SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is
B-2
<PAGE>
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 904(b) of Regulation S under the Securities Act and (iii) the transaction
is not part of a plan or scheme to evade the registration requirements of the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the Security will be subject to the restrictions on
Transfer enumerated in the Securities Act Legend printed on the Regulation S
Global Security and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
PHYSICAL SECURITY PURSUANT TO RULE 144A OR REGULATION S. One or more of the
events specified in Section 2.6(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and
B-3
<PAGE>
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144A under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 1 above; or
(b) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 904 under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 2 above.
4. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED GLOBAL
SECURITY The Transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture, and the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transfer Securities will no
longer be subject to the restrictions on transfer enumerated in the Securities
Act Legend and in the Indenture and the Securities Act.
B-4
<PAGE>
5. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE PHYSICAL GLOBAL SECURITY
THAT DOES NOT BEAR THE SECURITIES ACT LEGEND One or more of the events specified
in Section 2.6(a) of the Indenture have occurred and the Transfer is being
effected pursuant to and in accordance with Rule 144 under the Securities Act
and in compliance with the transfer restrictions contained in the Indenture, and
the restrictions on transfer contained in the Indenture and the Securities Act
Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred Securities will no longer be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Guarantors.
----------------------------------
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
Dated:_________________
B-5
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] Interests in the
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CINS _____).
(b) oPhysical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) [ ] Interests in the:
(i) o144A Global Security (CUSIP _____), or
(ii) oRegulation S Global Security (CINS _____), or
(iii) oUnrestricted Global Security (CUSIP _____); or
(b) [ ] Physical Securities that bear the Securities Act Legend;
(c) [ ]Physical Securities that do not bear the Securities Act Legend;
B-6
<PAGE>
in accordance with the terms of the Indenture.
B-7
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
The AES Corporation
1001 North 19th Street, Suite 2000
Arlington, Virginia 22209
Attention: General Counsel
[Name and Address of Registrar]
Re: 8 3/8% Senior Subordinated Notes due 2007
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of July 17, 1997
(the "Indenture"), between The AES Corporation (the "Issuer") and The Bank of
New York, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
__________, (the "Holder") owns and proposes to exchange the
Security[s] specified herein, in the principal amount of $___ in such
Security[s] (the "Exchange"). In the event Holder holds Physical Securities,
this Certificate is accompanied by one or more certificates aggregating at least
the principal amount of Securities proposed to be Exchanged.
C-1
<PAGE>
In connection with the Exchange, the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED PHYSICAL SECURITIES OR INTERESTS IN THE INITIAL GLOBAL
SECURITY FOR PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND OR
UNRESTRICTED GLOBAL SECURITIES
(a [ ] CHECK IF EXCHANGE IS FROM INITIAL GLOBAL SECURITIES TO THE
UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Holder's
Initial Global Security to the Unrestricted Global Security in an equal
principal amount, the Holder hereby certifies (i) the Unrestricted Global
Securities are being acquired for the Holder's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Initial Global Securities and pursuant to and in
accordance with the Securities Act of 1933, as amended (the "Securities Act")
and (iii) the restrictions on transfer contained in the Indenture and the
Securities Act Legend are not required in order to maintain compliance with the
Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL SECURITY. In connection with the Holder's
Exchange of Restricted Physical Securities for Interest in the Unrestricted
Global Security, (i) the Interest in the Unrestricted Global Security are being
acquired for the Holder's own account without transfer,
C-2
<PAGE>
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Physical Securities and pursuant to and in
accordance with the Securities Act and (iii) the restrictions on transfer
contained in the Indenture and the Securities Act Legend are not required in
order to maintain compliance with the Securities Act.
(C) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO
PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND. In connection
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act Legend
are being acquired for the Holder's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events specified
in Section 2.6(a) of the Indenture have occurred.
2. [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO INTERESTS IN
AN INITIAL GLOBAL SECURITY. In connection with the Exchange of the Holder's
Restricted
Physical Security for interests in the Initial Global Security in the [CHECK
ONE] [ ] 144A Global Security, [ ] Regulation S Global Security, with an equal
principal amount, (i) the interests in the Initial Global Security are being
acquired for the Holder's own account without transfer and (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Restricted Physical Security and pursuant to and in accordance with the
Securities Act. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Initial Global Security issued will be subject
to the restrictions on transfer enumerated in the Securities Act Legend printed
on the Initial Global Securities and in the Indenture and the Securities Act.
C-4
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
---------------------------------
[Insert Name of Holder]
By:
---------------------------------
Name:
Title:
Dated:_________________
C-5
Davis Polk & Wardwell
450 Lexington Ave.
New York, NY 10017
(212) 450-4000
August 8, 1997
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Ladies and Gentlemen:
We have acted as special counsel to The AES Corporation (the "Company") in
connection with the Company's offer (the "Exchange Offer") to exchange its 8
3/8% Senior Subordinated Exchange Notes (the "New Notes") for any and all of its
outstanding 8 3/8% Senior Subordinated Notes (the "Old Notes").
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary or advisable for the
purpose of rendering this opinion.
Upon the basis of the foregoing, we are of the opinion that the New Notes,
when executed, authenticated and delivered in exchange for the Old Notes in
accordance with the Exchange Offer will be valid and binding obligations of the
Company enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware.
<PAGE>
The AES Corporation 2 August 8, 1997
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Exchange Offer. We also consent to the
reference to us under the caption "Legal Matters" in the Prospectus contained in
such Registration Statement.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by or furnished to any other person without our prior written consent except
that the Bank of New York, as Exchange Agent for the Exchange Offer may rely
upon this opinion as if it were addressed directly to it.
Very truly yours,
/s/ Davis Polk & Wardwell
EXHIBIT 12.1
THE AES CORPORATION AND SUBSIDIARIES
CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- --------------
IN THOUSAND, UNAUDITED 1992 1993 1994 1995 1996 1997
------- -------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
As defined:
Income from continuing operations before income taxes ... $ 65 $ 89 $ 142 $ 164 $ 185 $ 56
Adjustment for undistributed Income...................... (3) (11) (12) (14) (36) (16)
Distributions from affiliates............................ -- -- 6 17 16 --
Interest expense......................................... 97 125 122 122 138 42
Depreciation of previously capitalized interest ......... 4 4 4 4 4 1
Net amortization of issuance costs....................... 3 3 4 5 6 2
------- -------- ------- ------- ------- --------------
Earnings................................................. $ 166 $ 210 $ 266 $ 298 $ 313 $ 85
======= ======== ======= ======= ======= ==============
Interest expensed and capitalized amounts (including
construction related fixed charges)...................... $ 118 $ 127 $ 124 $ 132 $ 165 $ 54
Net amortization of issuance costs (including
capitalized amounts)..................................... 3 3 4 5 6 2
------- -------- ------- ------- ------- --------------
Fixed charges............................................ $ 121 $ 130 $ 128 $ 137 $ 171 $ 56
======= ======== ======= ======= ======= ==============
Ratio of earnings to fixed charges....................... 1.37x 1.62x 2.08x 2.18x 1.83x 1.52x
Pro forma................................................ $ 148 $ 39
Income from continuing operations before income taxes ... (85) (20)
Adjustment for undistributed income...................... 16 --
Distributions from affiliates ........................... 240 66
Interest expense......................................... 4 1
Depreciation of previously capitalized interest ......... 6 2
------- --------------
Net amortization of issuance costs....................... 329 88
======= ==============
Earnings................................................. $ 267 $ 78
Interest expensed and capitalized amounts (including
construction related fixed charges)...................... 6 2
------- --------------
Net amortization of issuance costs (including
capitalized amounts)..................................... $ 273 $ 80
======= ==============
Fixed charges............................................ 1.21x 1.10 x
</TABLE>
INDEPENDENT AUDITORS' CONSENT
EXHIBIT 23.1
We consent to the use in this Registration Statement of The AES Corporation on
Form S-4 of our report dated January 30, 1997, except for the penultimate
paragraph of Note 6 as to which the date is March 13, 1997, and Note 13, as to
which the date is June 30, 1997, appearing in the Prospectus, which is part of
this Registration Statement, and of our report dated January 30, 1997 relating
to the financial statement schedules incorporated by reference in the
Registration Statement. We also consent to the reference to us under the heading
"Experts" in the Prospectus.
/s/ Deloitte & Touche LLP
Washington, DC
August 8, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-4 of The AES
Corporation of our report dated February 28, 1997 relating to the financial
statements of Companhia Energetica de Mina Gerais - CEMIG as at and for the
years ended December 31, 1996 and 1995 prepared in accordance with accounting
principles generally accepted in Brazil, which appears in the Item 7 on Form 8-K
of The AES Corporation dated July 16, 1997 and to the reference to us under the
heading "Experts" in the Prospectus which is part of such Registration
Statement.
/s/ Price Waterhouse
Auditores Independentes
Belo Horizonte, MG-Brazil
August 8, 1997
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------
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 no.)
1001 North 19th Street
Arlington, Virginia 22209
(Address of principal executive offices) (Zip code)
----------------------
8 3/4% Senior Exchange Notes due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
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.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 6th day of August, 1997.
THE BANK OF NEW YORK
By:/s/ Walter N. Gitlin
------------------------
Name: Walter N. Gitlin
Title: Vice President
-4-
<PAGE>
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1997, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
in Thousands
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 8,249,820
Interest-bearing balances .......... 1,031,026
Securities:
Held-to-maturity securities ........ 1,118,463
Available-for-sale securities ...... 3,005,838
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 32,895,077
LESS: Allowance for loan and
lease losses .............. 633,877
LESS: Allocated transfer risk
reserve........................ 429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts ...... 1,715,214
Premises and fixed assets (including
capitalized leases) ................ 684,704
Other real estate owned .............. 21,738
Investments in unconsolidated
subsidiaries and associated
companies .......................... 195,761
Customers' liability to this bank on
acceptances outstanding ............ 1,152,899
Intangible assets .................... 683,503
Other assets ......................... 1,526,113
-----------
Total assets ......................... $54,746,131
===========
LIABILITIES
Deposits:
In domestic offices ................ $25,614,961
Noninterest-bearing ...... 10,564,652
Interest-bearing ......... 15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,103,615
Noninterest-bearing ......... 560,944
<PAGE>
Interest-bearing ......... 14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase. 2,093,286
Demand notes issued to the U.S.
Treasury ........................... 239,354
Trading liabilities .................. 1,399,064
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,075,092
With remaining maturity of more than
one year ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,160,012
Subordinated notes and debentures .... 1,014,400
Other liabilities .................... 1,840,245
-----------
Total liabilities .................... 50,560,708
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (19,449)
Cumulative foreign currency transla-
tion adjustments .................. (13,034)
-----------
Total equity capital ................ 4,185,423
-----------
Total liabilities and equity
capital ........................... $54,746,131
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
---
Alan R. Griffith |
J. Carter Bacot - Directors
Thomas A. Renyi |
---
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
8 3/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
8 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
THE AES CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00P.M.,
NEW YORK CITY TIME ON SEPTEMBER __, 1997
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY THE AES CORPORATION
EXCHANGE AGENT:
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section,
Attention: Reorganization Section, or for Information Call: Odell Romeo
Odell Romeo
(212) 815-6337
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated August __, 1997
(the "Prospectus") of The AES Corporation (the "Company") which, together with
this Letter of Transmittal (the "Letter of Transmittal"), describes the
Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of
a new series of 8 3/8% Senior Subordinated Exchange Notes due 2007 (the "New
Notes") for each $1,000 in principal amount of outstanding 8 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes"). The terms of the New Notes are
identical in all material respects (including principal amount, interest rate
and maturity) to the terms of the Old Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the offering of the New Notes will
have been registered under the Securities Act of 1933, as amended and,
therefore, the New Notes will not bear legends restricting the transfer thereof.
The undersigned has checked the appropriate boxes below and signed this Letter
of Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE
CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OR TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- --------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) AMOUNT PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY NOTES* TENDERED**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHARES
- ------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by Old Notes. See Instruction
2.
<PAGE>
This Letter of Transmittal is to be used either if certificates for Old Notes
are to be forwarded herewith or if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" in the Prospectus. Delivery of documents to
a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Unless the context requires otherwise, the term "Holder" for purposes of this
Letter of Transmittal means any person in whose name Old Notes are registered on
the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder or any person whose Old Notes
are held of record by DTC who desires to deliver such Old Notes by book-entry
transfer at DTC.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures."
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY
TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------
---------------------------------------------------------------------------
The Depository Trust Company
Account Number
------------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
---------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
---------------------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number
------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
---------------------------------------------------------------------------
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order or, the Company all right, title and interest in
and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that said Exchange Agent acts as the agent
of the undersigned in connection with the Exchange Offer) to cause the Old Notes
to be assigned, transferred and exchanged. The undersigned represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the Old Notes and to acquire New Notes issuable upon the exchange of
such tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Old Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Old Notes or transfer ownership of such Old Notes on the
account books maintained by the Depository Trust Company.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer." The undersigned recognizes
that as a result of these conditions (which may be waived, in whole or in part,
by the Company), as more particularly set forth in the Prospectus, the Company
may not be required to exchange any of the Old Notes tendered hereby and, in
such event, the Old Notes not exchanged will be returned to the undersigned at
the address shown below the signature of the undersigned.
By tendering, each holder of Old Notes represents to the Company that (i) the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is such holder, (ii) neither the holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the holder is not a
broker-dealer or is a broker-dealer but will not receive new Notes for its own
account in exchange for Old Notes, neither the holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Act"). If the tendering holder is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that the Old Notes to be exchanged for the
New Notes were acquired by it as a result of market-making activities or other
trading activities, and acknowledges that it will deliver a prospectus meeting
the requirements of the Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Old Notes may be withdrawn
at any time prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old Notes and
any Old Notes delivered herewith but not exchanged, in each case registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
<PAGE>
- --------------------------------------------------------------------------------
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 199_
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith or, if the Old
Notes are held of record by DTC, the person in whose name such Old Notes are
registered on the books of DTC. If signature by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER TO EXCHANGE
8 3/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
8 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
THE AES CORPORATION
Registered holders of outstanding 8 3/8% Senior Subordinated Notes due 2007 (the
"Old Notes") who wish to tender their Old Notes in exchange for a like principal
amount of 8 3/8% Senior Subordinated Exchange Notes due 2007 (the "New Notes")
and, in each case, whose Old Notes are not immediately available or who cannot
deliver their Old Notes and Letter of Transmittal (and any other documents
required by the Letter of Transmittal) to The Bank of New York (the "Exchange
Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery
or one substantially equivalent hereto. This Notice of Guaranteed Delivery may
be delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight delivery) or mail to
the Exchange Agent. See "The Exchange Offer Guaranteed Delivery Procedures" in
the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
BY MAIL:
THE BANK OF NEW YORK
101 BARCLAY STREET, 7E
NEW YORK, NY 10286
Attn: Odell Romeo
By Overnight Courier or
by Hand:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attn: Odell Romeo
Reorganization Section
BY FACSIMILE:
(212) 815-6339
CONFIRM BY TELEPHONE:
(212) 815-6337
Delivery of this Notice of Guaranteed Delivery to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If
a signature on Letter of Transmittal is required to be guaranteed by an Eligible
Institution, such signature guarantee mush appear in the applicable space
provided on the Letter of Transmittal for Guarantee of Signatures.
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Note to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office, branch, agency or
correspondent in the United States, hereby guarantees to deliver to the Exchange
Agent at one of its addresses set forth above, the certificates representing the
Old Notes, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of Transmittal within five New York
Stock Exchange, Inc. trading days after the date of execution of this Notice of
Guaranteed Delivery.
Name of Firm:
- ---------------------------------- ---------------------------------------
(Authorized Signature)
Address:
--------------------------- Title:
--------------------------------
- ----------------------------------
(Zip Code) Name:
---------------------------------
(Please type or print)
Area Code and Telephone Number:
- ---------------------------------- Date:
---------------------------------
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER OF PARTICIPANT FROM OWNER
OF
THE AES CORPORATION
8 3/8 Senior Subordinated Notes due 2007
TO REGISTERED HOLDER AND/OR PARTICIPANT OF THE BOOK-ENTRY TRANSFER FACILITY:
The undersigned hereby acknowledges receipt of the Prospectus dated August, ,
1997 (the "Prospectus") of The AES Corporation, a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meaning as
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 8 3/8% Senior Subordinated Notes due 2007
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
[ ] To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, (if any):
$ of the 8 3/8% Senior Subordinated Notes due 2007
[ ] NOT to TENDER any Old Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make, on
behalf of the undersigned (and the undersigned, by its signature below, hereby
makes to you), the representation and warranties contained in the Letter of
Transmittal that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations, that (i) the New Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the undersigned, (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes, (iii) if the undersigned is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the undersigned nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the undersigned nor any such person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act"). If the undersigned is a broker-dealer (whether
or not it is also an "affiliate") that will receive New Notes for its own
account in exchange for Old Notes, it represents that such old Notes were
acquired as a result of market-making activities or other trading activities,
and it acknowledges that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, the undersigned is not deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
---------------------------------------------------
Signature(s): ------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address: -----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
- --------------------------------------------------------------------------------
Date:
-------------------------------------------------------------------------
EXHIBIT 99.4
OFFER TO EXCHANGE
8 3/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
8 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
THE AES CORPORATION
To Our Clients:
We are enclosing herewith a Prospectus, dated August __, 1997, of The AES
Corporation (the "Company"), a Delaware corporation, and a related Letter of
Transmittal (which together constitute the "Exchange Offer") relating to the
offer by the Company to exchange its 8 3/8% Senior Subordinated Exchange Notes
due 2007 (the "New Notes"), pursuant to an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its issued and outstanding 8 3/8% Senior Subordinated Notes due 2007
(the "Old Notes") upon the terms and subject to the conditions set forth in the
Exchange Offer.
PLEASE NOTE THAT THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER __, 1997, UNLESS EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Old Notes held by us for your account. A tender of such Old Notes
can be made only by us as the record holder and/or participant in the book-entry
transfer facility and pursuant to your instructions. The Letter of Transmittal
is furnished to you for your information only and cannot be used by you to
tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the Old
Notes held by us for your account pursuant to the terms and conditions of the
Exchange Offer. We also request that you confirm that we may on your behalf make
the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will represent
to the Company that (i) the New Notes acquired in the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is such holder, (ii) neither the holder of the
Old Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the holder
is not a broker-dealer or is a broker-dealer but will not receive New Notes for
its own account in exchange for Old Notes, neither the holder nor any such other
person is engaged in or intends to participate in a distribution of the New
Notes and (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended. If the tendering holder is a broker-dealer (whether or not it is also
an "affiliate") that will receive New Notes for its own account in exchange for
Old Notes, we will represent on behalf of such broker-dealer that the Old Notes
to be exchanged for the New Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledge on behalf
of such broker-dealer that it will deliver a prospectus meeting the requirements
of the Act in connection with any resale of such New Notes. By acknowledging
that it will deliver and by delivering a prospectus meeting the requirements of
the Act in connection with any resale of such New Notes, the undersigned is not
deemed to admit that it is an "underwriter" within the meaning of the Act.
Very truly yours,
EXHIBIT 99.5
OFFER TO EXCHANGE
8 3/8% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
8 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
THE AES CORPORATION
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by The
AES Corporation (the "Company"), a Delaware corporation, to exchange its 8 3/8%
Senior Exchange Notes due 2007 (the "New Notes"), pursuant to an offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 8 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus, dated August __, 1997, and the
related Letter of Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated August __, 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany
the instruction form referred to above, for obtaining such client's
instruction with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER __, 1997, UNLESS EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will represent
to the Company that (i) the New Notes acquired in the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is such holder, (ii) neither the holder of the
Old Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the holder
is not a broker-dealer or is a broker-dealer but will not receive New Notes for
its own account in exchange for Old Notes, neither the holder nor any such other
person is engaged in or intends to participate in a distribution of the New
Notes and (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended. If the tendering holder is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes, you will represent on behalf of
such broker-dealer that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities, and acknowledge on behalf of such broker-dealer that it will deliver
a prospectus meeting the requirements of the Act in connection with any resale
of such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Act in connection with any resale of
such New Notes, the undersigned is not deemed to admit that it is an
"underwriter" within the meaning of the Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner contains an authorization by the beneficial owners of the
Old Notes for you to make the foregoing representations.
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The Company will not pay any fee or commission to any broker or dealer or to any
other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Offer. The Company will pay
or cause to be paid any transfer taxes payable on the transfer of Old Notes to
it, except as otherwise provided in Instruction 4 of the enclosed Letter of
Transmittal.
Additional copies of the enclosed material may be obtained from the Bank of New
York.
Very truly yours,
THE AES CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF THE AES CORPORATION OR THE BANK OF NEW YORK OR AUTHORIZE YOU TO USE ANY
DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE OFFER
OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
